Category: Archive

Europe.

The November 23 “green paper,”  “Modernising Labour Law to Meet the Challenges of the 21^st Century,” discusses the need to establish some uniformity in the European Union member countries’ labor policies.

The Commission wants to find a compromise between the need for flexibility in labor law and the promise of security to its workers, the paper says.

“European labour markets face the challenge of combining greater flexibility with the need to maximize security for all,” according to the paper. “The drive for flexibility in the labour market has given rise to increasingly diverse contractual forms of employment,” which result in added costs and administrative burdens on employers, the report says.

In particular, the paper discusses the need to clarify the role and treatment of temporary workers and full-time workers.

Legislation in this area could significantly affect HRO providers and staffing firms, analysts say.

“The paper focuses a great deal on ‘non-standard labor contracts,’ which could have implications for temporary labor and outsourced labor,” says Tim Palmer, HR practice leader in the London office of EquaTerra.

While the paper doesn’t offer specific proposals, it does pose several questions for companies to consider, and multinational companies and HRO providers should take the opportunity to make their views known, analysts say.

“It would make perfect sense for HR outsourcers to get involved in these discussions because any harmonization of labor law is going to have significant impact on how they manage their workforce processes throughout Europe,” says Helen Neale, business process outsourcing analyst in the London office of consulting firm NelsonHall.

In Palmer’s opinion, the paper is somewhat limited in its focus. “There are many other issues that could be addressed,” he says. For example, multinational companies and HRO providers would benefit greatly from some standardization in how severance is treated and how companies consult with work councils, he says. Currently there is no uniformity in how these issues are handled by companies, which makes it very difficult for an HRO provider that works with several clients in Europe.

“I suspect HRO providers would want to have this paper expanded to look at other elements of the labor law,” he says.

But although HRO providers should get involved in these discussions, they shouldn’t expect things to change anytime soon, says Simeon Spencer, partner and head of the labor and employment practice in the London office of Morgan, Lewis & Bockius.

The Commission states it hopes to have an outline set of common principles by the end of 2007. But Spencer says that given the bureaucracy involved with the EU he would be surprised to see any legislation within the next two years.

“Executives excited about this proposal will probably be retired and enjoying a barbecue and a martini by the time this happens,” he says.

—Jessica Marquez

Dear Overcome:

Making sure employees’ work activities support corporate strategies is critical to reaching your business goals. It allows you to make appropriate compensation and promotion decisions and to encourage and develop the talent your company needs to meet new demands and challenges. Regular performance appraisals enable individual employees to enhance their skills that lead to personal and professional growth. The result is a workforce that shows greater motivation and commitment.

 

Various techniques and formats exist to measure performance, as well as spinoffs on traditional models.

 

Self-appraisals
Pros:
a) Employees feel they have a voice in the process.
b) Provides ability to report progress toward goals, including challenges and roadblocks.

 

Cons:
a) Individuals tend to rate themselves harder.
b) Individuals may feel that managers do not know what they are doing.

 

360-degree feedback
Pros:
a) Facilitates open communication.
b) Employees who work together are more likely to understand the objectives of the work and any challenges it presents.
c) Enables all individuals involved with the employee to rate performance (supervisor, employees, customers, other departments, etc.).
d) Should be used for developmental purposes, not for compensation or promotion.

 

Cons:
a) Training is required to explain how to give constructive feedback and its purpose and objectives.
b) Requires a significant amount of trust. The organization must be mature enough to manage the process and avoid conflicts of interests between employees.

 

Management by objectives
Pros:
a) Allows management to focus on achievable results by matching goals against an employee’s job objectives.
b) Includes ongoing tracking and feedback in the process of reaching goals.
c) Expectations are set for each job prior to performance, with regular coaching to help employees meet (or exceed) expectations.
d) The focus is on results, not the work activities.

 

Cons:
a) Time-consuming for managers to constantly evaluate employees, potentially taking them away from doing their own work.”b) Tends to underemphasize the importance of the work environment or the context in which the goals were set.

 

A complete performance management program would consist of many of the above techniques in a frequent cycle. Continually reviewing an employee’s performance tends to increase accountability and organizational commitment while providing the chance to demonstrate productive behaviors to employees (not to mention aid their personal development). Continuous feedback gives you a chance to take corrective action on a more immediate basis.

 

Before implementing any of these evaluation methods, it’s imperative that you consider your company’s culture and business drivers, and determine which performance tools are suitable based on your business processes and technology infrastructure.

 

SOURCE: Tracy Martin, Knowledge Infusion, San Ramon, California, March 6, 2006.

 

LEARN MORE: Please see advice on how to combine different performance methods.

 

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Dear Evolving:

Rapid growth is a double-edged sword. On one side it implies increased business opportunities, rising market share and enhanced competitive advantage. On the other side, it can put a strain on your organization to achieve more goals. This strain can put pressure on internal initiatives including training, reward and recognition programs, and the performance management system.

Introducing a formal performance management system can be challenging, especially if your employees are used to a more informal system. People resist change unless they can see its benefit to them, and especially if they haven’t assisted in developing the new initiative. The more ownership people have of a system, the more of an impact it will have on goal attainment. Consider using the IMPACT acronym when establishing performance management:

• Investigate the pros and cons of the current system and build from there. There may be very strong elements of the current system that can be adapted to fit the new system. Take the best of the old system to maximize results in the new system.

• Manage work by creating daily opportunities for feedback. A formal performance management system must be supported by an informal system. Daily feedback demonstrates to people that their job is important and that management is interested in their success. It also enhances overall communication.

• Partner with employees to create the system. This may take longer, but the end result will be better. Employees will have a clearer perspective on their jobs/roles within the company as well as their connection to company goals.

• Accelerate performance by promoting benefits. Create momentum by helping employees see how performance management enables them to improve. Consider promoting these benefits in company newsletters or on intranets.

• Coach employees by focusing on their strengths. Your system is only as good as your delivery. If supervisors are not effective coaches, then don’t expect employees to be motivated to perform at high levels. Coaching requires a dedicated effort and should not be taken lightly.

• Target specific observable behaviors for performance. Every job function should have tangible results aligned with the business. Performance management systems need not be long and complicated. Keep it simple and focus on specific behaviors distinctive to each job, to get everyone driving toward the same end result.

A performance management system focuses light on the most important behaviors and results your organization wants achieve. When a company is growing rapidly, it is important to take a step back to ensure that internal initiatives match your business goals.

SOURCE: Dana Jarvis, human resources director,Snavely Forest Products, Pittsburgh, March 6, 2006. Jarvis also is an adjunct professor at Duquesne University.

LEARN MORE: Please read How to Move From a Paternalistic Culture to One That Measures Performance for another view. Also, how to combine different formats for appraisals.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Recruiting Brander Gets Feet Wet: Universum Communications Inc., an employer-branding firm based in Stockholm, Sweden, is acquiring recruitment firm WetFeet Inc. of San Francisco.
Click to read more. >>>

Health Care Consolidation: Health care software company Eclipsys Corp. of Boca Raton, Florida, has bought Phoenix-based Van Slyck & Associates, a provider of nursing staffing and productivity management services.
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IT Board Snapped Up: IT job site ComputerJobs.com of Atlanta has been acquired by JobServe.com, an Internet recruitment site in the U.K.
Click to read more. >>>

Vendor Roundup: News from Christian & Timbers, Beigbeder-CEO Search, Monster, PayPal, Workopolis, Talent Technology Corp and JobCentral.com.
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IT Board Snapped Up: IT job site ComputerJobs.com of Atlanta has been acquired by JobServe.com, an Internet recruitment site in the United Kingdom. Terms and conditions were not disclosed, although the transaction is expected to help JobServe expand into the U.S. It presently posts positions on job boards for the U.K. and Australia. ComputerJobs.com was launched in 1995 as an IT recruitment firm and claims to have helped more than 1.5 million people find jobs.

—Garry Kranz

Recruiting Brander Gets Feet Wet: Universum Communications Inc., an employer-branding firm based in Stockholm, Sweden, is acquiring recruitment firm WetFeet Inc. of San Francisco. WetFeet provides job search tools, research and other information to students via the Web. It is perhaps best known for its annual reports on the state of student recruiting, a guide used by Fortune 500 companies looking to hire top college graduates. Universum, with U.S. operations based in Philadelphia, said the merger strengthens its product portfolio, which aims to help companies create recruitment branding strategies. Terms were not disclosed.

—Garry Kranz

Private equity firms have been busy in 2006 acquiring companies with the hopes of flipping them in a few years in order to make a big profit.

But when it comes to HR outsourcing firms, it seems that private equity firms have stayed clear.

“A lot of the private equity investors we have spoken to haven’t quite convinced themselves that you can make money in this space,” says Stan Lepeak, managing director for research at EquaTerra, a Houston-based advisory firm.

As the market matures, private equity investors are becoming more comfortable with the idea of investing in this space, analysts say. Many industry experts predict there will be several high-profile private equity-backed deals in the HRO market in 2007.

“I think we will see at least one big private equity-backed merger in the HRO space in 2007,” says Phil Fersht, an analyst at Everest Group.

London and Dallas. But the valuations have been too high, he says.

Earlier this year there were talks among a number of private equity firms, such as Blackstone Group, Bain Capital and Texas Pacific Group, to acquire Affiliated Computer Services, but those discussions fell through.

But now as some companies see their valuations fall, private equity firms are wooing them.

Many cite Hewitt Associates as a prime target for private equity investors. Hewitt’s HRO business has been struggling during the past few quarters as it has had problems absorbing some of the big deals it has won.

The Lincolnshire, Illinois-based company recently announced that one of its biggest HRO clients, BP, is not renewing its contract. In the fourth quarter, earnings fell 43.3 percent to $22.9 million, or 21 cents per share, compared with $40.5 million, or 37 cents per share, a year earlier.

“Hewitt is obviously trading at a level below some of its peer group,” says Sean McCarthy, vice president in the investment banking division of RBC. “I’m sure there are private equity guys that are busy running the numbers [on a possible deal].”

An ideal situation for Hewitt would be if private equity firms came in and took the company private, analysts say. Hewitt went public in June 2002. The price of its offering was $19 per share. In early December, the stock, which is traded on the New York Stock Exchange, was hovering around $25 per share.

Going private could give Hewitt the opportunity to focus on fixing its business outside of Wall Street’s glare, analysts say.

“Hewitt’s major challenges right now are the overhead associated with being a public company and the distraction for trying to make quarter-to-quarter earnings goals,” Trowbridge says.

The company could be attractive to private equity investors given its strong brand name and customer base, Yankee Group analyst Jason Corsello says.

Hewitt spokeswoman Jennifer Frighetto declined to comment on whether the company is in talks with investors.

On a smaller scale, private equity firms also are taking a look at investing in privately owned mid-tier HR outsourcing providers, like payroll providers and professional employer organizations, which service employers with 500 and fewer employees, McCarthy says.

“If you are a CEO of a mid-tier benefits administrator, you probably are getting between five and 10 calls a week,” he says.

Jessica Marquez

The Securities and Exchange Commission, in a last-minute revision to executive compensation rules adopted in July, will allow companies to report the incremental value of stock-option grants year by year, rather than as a single dollar value of an executive’s total compensation.

The new rule, which was announced late on Friday, December 22, just before the Christmas weekend, came as a sad surprise to longtime advocates of greater compensation disclosure.

“The whole point of the disclosure rules is that the investor community wants to understand the compensation paid to executives,” Ann Yerger, the executive director of the Council of Institutional Investors told Workforce Management. “What the people, what the public, want is a snapshot of what this guy was paid during the year.”

The new change had been under consideration for some time since the commission adopted the compensation disclosure rules, an SEC spokesman said. That is in part because many companies had argued that it was difficult to put a single number on total compensation before the options are fully exercised.

Companies structure compensation so that executives earn their options over time. Thus, what an executive earns in a single year is not necessarily reflected in a total compensation figure. The new rule would, in theory, produce a number that would accurately reflect compensation for the year and how much it costs a company.

“The new disclosure requirements will be easier for companies to prepare and for investors to understand,” SEC chairman, Christopher Cox, said in a statement released with the rule change.

The rule is effective as soon as it is published in the Federal Register, the federal government’s daily publication for rules, proposed rules, and notices of federal agencies and organizations–possibly by the end of the year.  It will apply, however, to all proxy, information and registration statements filed on or after December 15, 2006.

The disclosure rules adopted by the SEC in July were meant to shed light on the total compensation enjoyed by executives and how much that compensation cost shareholders. The change will mean that companies will not have to disclose an executive’s estimated total stock compensation in a summary table on regulatory filings. Instead, only the value for the year being reported would be disclosed.

Those who oppose the latest change argue that the revised rule runs counter to the goal of giving individuals a full picture of an executive’s total compensation package.

“The issue here is that companies don’t want to disclose the full value of the rewards,” Yerger says. “They’ve won again and it’s a big step back for the SEC and investors.”

But SEC officials have said the revised rule, which will apply to chief executives, financial officers and the three other highest paid executives in an organization, would force the disclosure of compensation as it is in a given year, not as it might be in a 10-year period.

One irony of revised rule, Yerger says, is that companies and boards of directors, if not the individual investor, will still want to know the estimated total compensation of other executives. To do so, they will continue to be reliant on the army of compensation consultants who are adept at parsing regulatory filings and other indicators of an executive’s pay package.

“The good news is they will not be out of work,” Yerger says.

The SEC decided to forego the public comment period that customarily precedes rule changes so that companies could follow the new rule in their next SEC filings. Though a comment period will exist to allow people to express their views of the change, the rule already is final.

—Jeremy Smerd

U.S. district court judge says cash-balance pension plans discriminate against older employees.

The plans are age discriminatory because when an account balance is converted to a retirement annuity, “cash-balance plans are not age-neutral,” wrote Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York.

Judge Scheindlin’s ruling, handed down December 13, came in a suit filed against Citigroup Inc. by several employees of the New York-based financial services giant. Citigroup asked the court to dismiss the age discrimination charge and several other charges.

In her opinion, Scheindlin said when an account balance is converted to a retirement age annuity, younger workers are credited with more interest on their accounts.

“Therefore, as a matter of plain arithmetic, a greater value is added to a younger employee’s account than an older employee’s account,” she wrote.

As a result, an older worker receiving the same salary and with the same number of years of service will receive a smaller retirement benefit than a younger employee simply because he is older, according to the ruling.

Scheindlin’s decision comes about four months after the 7th U.S. Circuit Court of Appeals in Chicago ruled in a widely publicized decision involving IBM Corp. that the plans do not violate age discrimination law.

The appeals court ruled that the plans are not age discriminatory because the benefit credits provided to plan participants are age-neutral. Additionally, the difference in the accumulated benefit—expressed as a retirement annuity—results from the time value of money, which is not age discrimination, the appeals court said.

Since the appeals court ruling, two district court judges in other cash-balance-plan suits have rejected age discrimination charges, while two judges, including Scheindlin, have found the plans to be age discriminatory in their design.

The split in the courts shows that it will be some time before the age discrimination issue will be resolved, says Nancy Ross, a partner with McDermott, Will & Emery in Chicago.

Congress, though, as part of a broad pension funding reform bill it passed this summer, protects new cash-balance plans from age discrimination suits. That law, though, is not retroactive, leaving it to courts to resolve the issue for plans already established.

—Jerry Geisel

Jerry Geisel is a reporter for Business Insurance, a sister publication of Workforce Management.