Most business owners and managers can’t wait until fall rolls around. With the distractions of summer in the past, employees can turn their undivided attention back to productive work. But for an ever-growing segment of the workforce, fall marks the beginning of one of the most distracting periods of the year: football season—and more specifically, fantasy football season.
Sports have long been a distraction for much of the workforce, but the advent of the Internet and the prevalence of e-mail communications have led to a mushrooming of this trend. Twenty years ago, the worst an employer would probably face is water-cooler talk about the weekend’s games on Monday morning, and a Super Bowl pool in late January.
Now, however, employers have to worry about employees using work time and company computers to manage their fantasy football teams throughout the week. How worried should employers be? And what can be done about it?
The main concern for employers is the loss of productivity caused by football-related activities. (Now that Congress has made offshore gambling Web sites illegal under federal law, the issue of their use in the workplace warrants an article all its own.)
It has been estimated that 20 million to 40 million American workers played fantasy football in 2005, and the number was expected to rise for the 2006 season. These same reports estimate that the average fantasy football participant spends about one hour each workweek on this pastime. While each workplace may see varying effects, the total impact on the national economy is said to be about $1.1 billion each week from September through January.
Employers have some choices in how to deal with fantasy football. They can decide to take a hard-line “old school” approach, or they can try to be more flexible and accommodate their employees’ fixation.
Employers, of course, have the right to strictly enforce a non-recreational Internet use policy and monitor employee usage to ensure that workers stick to work while at their desks. Employers have every right to expect employees to devote 100 percent of their energies to the job during working hours and, as long as they act consistently, can fire employees who play fantasy sports instead of working.
Hard-line employers can rule with an iron fist if they choose, but they will want to make sure that these expectations are clearly spelled out in written company policies distributed to all employees—and that should include top management.
However, a newer breed of employer recognizes that workers will inevitably spend some time surfing the Internet, or using it to handle personal business.
According to this philosophy, you shouldn’t be so worried about the estimates of work time lost to fantasy football. Employees rarely spend their entire 40-hour workweeks strictly on work. If they aren’t participating in fantasy football, they would be wasting work time doing something else. And while flexible employers still prohibit the viewing of offensive Web sites, they ignore fantasy football activity so long as work objectives are being met. This kinder, gentler manager might even encourage team-building and company morale by starting a company fantasy football league.
An employer who wants to find a middle ground might limit employees’ personal Internet use while at work, using restrictive software to either limit their time to two hours per week or allow access only to certain Web sites.
Either way, companies should decide how to handle the current football season so that it can be addressed in a consistent manner, and should outline their expectations clearly for all employees.
Report Cites Poor Working Conditions in India’s Call Centers
A new report conducted by the Communications Workers of America and worker organizations in India shows that being a call center rep in India might not be all that it’s cracked up to be.
As more multinational companies have moved call-center work to India in recent years, they have portrayed these jobs as high-paying, well-respected professional positions for India’s workers.
That might be true, but these workers are under much more stress than their U.S. counterparts, according to the report, titled “Bi-National Perspective on Offshore Outsourcing: A Collaboration Between Indian and U.S. Labour.”
The report’s publication highlights the direction that the Communications Workers of America is going as it attempts to stem the tide of employers moving call-center work to India, observers say. Multinational companies would be wise to pay attention to the arguments the report makes, says Gary Chaisson, a professor at Clark University.
The report, published Tuesday, October 17, is based on surveys of 230 Indian call center reps at Accenture, Convergys and Wipro. The Communications Workers of America worked with three Indian organizations to gather the information: the New Trade Union Initiative, the Young Professionals Collective and Jobs With Justice.
The surveys found that nearly 40 percent of call center workers are paid 15,000 rupees a month, or $318. Call center reps in India typically are 20 to 25 years old.
“This is a good salary for young Indian workers,” Anannya Bhattacharjee, international organizer for Jobs With Justice, said during a conference call about the report’s findings.
But the levels of stress that these workers are facing are very high, she said. Half of the respondents said they work overtime, with most of them working extra hours one to three days a week.
Often, call center reps in India are working 48 to 54 hours a week, according to the report.
The study gauged work intensity by measuring the number of calls an employee took each day and the total amount of time per day that a worker spent taking calls. Based on that formula, the study found that the average Indian call center employee serves 180 customers per day, compared with 75 customers per day for U.S. call center reps.
As a result, these employees are facing a worker intensity level of 81 percent to 84 percent, far above the 50 percent that the authors deem as “reasonable.”
At one of the firms where work intensity averaged 80 percent, more than 70 percent of the call center reps say they would welcome union representation, Bhattacharjee says.
“This report shows that there is a need for unions in the call centers,” says Vinod Shetty, secretary of the Young Professionals Collective, an India-based group focused on organizing call center workers in India. “The general impression has been that these workers are unpaid, but this report shows that there is a need among the workers for a union.”
The Communications Workers of America and other groups plan to use the report to raise awareness around the working conditions of India’s call center representatives, says Annie Hill, vice president of the CWA.
“Call center workers in India, the U.S. and other countries are facing similar problems,” she says. “Workers are up against employers who only want to pay the lowest possible labor cost no matter what the work is.”
Survey Highlights the Nation’s Safest Hospitals, Points Out Gaps in Patient Care
A group backed by some of the nation’s largest employers has published its first rankings of the country’s top hospitals for patient safety in a survey that also highlights major gaps in patient safety.
More than 1,200 of the approximately 5,500 hospitals nationwide responded to the survey conducted by the Leapfrog Group, an employer-led coalition founded in 2000 by the Business Roundtable. The group, whose members include General Electric, GM, IBM and Boeing, developed a list of 30 “safe practices” it says hospitals should follow to reduce preventable hospital errors.
Employers have become increasingly concerned over the amount of money they waste on hospitals where not enough is done to prevent life threatening, costly medical errors.
If non-rural hospitals in the U.S. followed the group’s safety guidelines, such as physicians’ use of computers to avoid mistakes resulting from illegibly or incorrectly written prescriptions, the lives of 65,000 people could be saved annually, the groups says. The U.S. health care system would in turn save $41.5 billion annually, savings that would eventually come back to employers.
The safest hospital, by Leapfrog’s standards, is Akron General Medical Center in Ohio. The also list includes such notable hospitals as Brigham and Women’s Hospital in Boston (No. 5) and Cedars-Sinai Medical Center in Los Angeles (No. 7.) The top-ranked children’s hospital is Children’s Hospital in Columbus, Ohio.
Among the positive findings by the group: Ninety percent of hospitals have procedures in place to avoid operating on the wrong part of a patient’s body, and 80 percent of hospitals require a pharmacist to review medication orders before medicine is given to patients.
But the hospitals failed to implement a number of other safety measures, the study reports. More than 90 percent of hospitals do not use computers to enter physicians’ orders. Nearly all hospitals failed to meet the standards for performing two high-risk surgeries: coronary artery bypass surgery and abdominal aortic aneurysm repair.
Half of the hospitals do not have procedures to make sure the hospital has enough nurses. Thirty percent do not meet the group’s standards for preventing malnutrition in patients, and a similar percentage of hospitals do not vaccinate their health care workers against the flu.
The hospitals in the report serve 56 percent of Americans, but some of the most prestigious hospitals in major cities chose not to participate. Chicago’s two most prestigious hospitals, the University of Chicago Hospitals and the University of Illinois Medical Center at Chicago, did not participate; nor did the region’s largest public hospital, Cook County Hospital.
“It’s unfortunate that they haven’t released their progress on meeting patient safety measures,” says Larry Boress, resident of the Midwest Business Group on Health, whose organization is a Leapfrog Group member.
A spokesman for the University of Chicago Hospitals, John Easton, said the hospital did not participate because its $70 million computerized physician order entry system, a five-year project designed to prevent prescription errors, was not yet complete. The hospital system would likely participate next year.
Though the patient safety measures are supported by purchasers of health care, including the Centers for Medicare and Medicaid Services, the largest single purchaser of health care in the country, hospitals have openly worried that the measures developed from health-services research studies do not translate well into real-world medical situations.
Hospitals have also said labor shortages facing the nursing industry and the overall high expense of compliance make it difficult to follow the Leapfrog Group’s voluntary safe-practices guidelines.
Boress says 60 percent of hospitals in Illinois did not participate in the survey. In the 31 regions of the U.S. where Leapfrog targets hospitals for participation, 56 percent of urban, general acute-care hospitals responded.
Leapfrog Group plans to continue its survey on an annual basis.
Firms Walk Fine Line With ‘High-Potential’ Programs
A few years ago, IBM’s system for grooming future executives had a bug. The computer industry giant found that at times, people nominated into its “executive resources” program were languishing there for more than five years without landing promotions.
So last year, Big Blue put a limit on the leadership development program, which involves training and career consultation. Only those individuals deemed likely to move into the executive ranks within 18 months are now eligible, says Karen Calo, IBM’s vice president of global talent.
Calo says some feelings may have been bruised when individuals were removed from the program. But IBM is working on another effort to focus attention and resources on a broader swath of the company’s standout performers.
“These are really good people we don’t want to lose,” Calo says.
The evolution of IBM’s programs for rising stars illustrates a broader trend in leadership development. Efforts to identify and nurture “high potential” leaders can go awry, analysts say, in part because organizations can put that label on too many employees or miss good ones. At the same time, giving lots of corporate love to “high-pos” can turn off high performers not included in the programs and cause them to seek work elsewhere.
Striking the right balance when it comes to recognizing potential executives may be hard, but it’s vital, says leadership consultant Cara Capretta Raymond. Shrinking tenure among chief executives and a likely mass exodus of leaders in the near future mean companies should start to groom individuals ages 30 and younger for the CEO slot, says Capretta Raymond, vice president of strategy and intellectual property at Korn/Ferry International’s leadership development solutions unit.
“Who are your next CEOs?” Capretta Raymond asked in a presentation earlier this year. “About 50 percent of our top leaders are going to retire in the next five years.”
Mixed outcomes
High-potential leader programs can take a variety of shapes, and often include mentoring, competency development and rotating stints in a company’s key divisions. Such programs have grown in popularity over the past dozen years or so at Fortune 500 companies, says Jeff Cohn, managing partner at consulting firm Bench Strength Advisors. Factors behind their rise, he says, include companies’ desire to rely less on external hires, which often fail to fit in, and a growing body of research showing that leadership development can boost the bottom line.
The results of high-potential leader programs have been mixed, Cohn says. “Some did it right,” he says, “and a lot of them did it wrong.”
Cohn says companies can commit sins of omission and commission with high-po programs. It’s easy to leave out promising individuals because organizations often lack consistent ways of assessing leadership talent, he says. At the same time, Cohn says, if companies are tagging 10 percent or more of their managers as high-potential leaders, they are almost certainly wasting resources. “Once the percentage gets too high, you lose focus and squander capital,” he says. Capretta Raymond suggests narrowing high-potential programs down to 2 percent to 3 percent of rising stars.
IBM’s recent move is along these lines. The 330,000-employee company, which has about 5,000 leaders with titles of director and above, has relied on executives to nominate people into its executive resources program. But it became clear that sometimes solid performers were nominated as a reward rather than because of their legitimate near-term potential to become IBM executives, Calo says. The new 18-month rule is meant to help the executives make better choices. “This isn’t a science,” she says. “It’s a bit of an art.”
Some companies are steering clear of rising-star terminology altogether. Internet company Yahoo doesn’t call anyone a “high-po,” says Libby Sartain, the firm’s senior vice president of human resources. Sartain presents a scenario: You’ve found out that a colleague has been labeled high-potential: “Think of how you’d feel,” she says. “You’re going, ‘If he’s a high-po, and I don’t know I’m a high-po, does that mean I’m a low-po?’ “
What’s more, the definition of who would truly be high-potential leaders in a company can change dramatically based on the organization’s business goals, Sartain says. If an Internet company suddenly makes a foray into telecommunications, employees with a background in that industry become more valuable, she says.
Even so, Yahoo pays special attention to its stars. A few years ago, it conducted an exercise to determine who was crucial to the company. Co-founder Jerry Yang characterized that pool of talent as the people Yahoo wanted to “build a moat” around so they wouldn’t leave.
Sartain and crew adopted that language, and the Build a Moat program focuses on training and career development of select employees. The company also identifies people with leadership potential through performance reviews and an annual “talent calibration” session held by senior executives.
But when it comes to an executive training program offered by the firm, Yahoo again has an egalitarian streak. The program’s classes are open not only to individuals earmarked for possible advancement, but to other employees as well.
“High-pros” vs. “high-pos”
A new training initiative at consumer products company SC Johnson also looks beyond just budding leaders. SC Johnson, which makes products including Ziploc storage bags and Windex glass cleaner, launched a leadership skills program last year for the 300 or so “senior leaders” just below the top executive level. The general managers, product division heads and other participants include both individuals identified by the company as high-potentials as well as those without that designation.
Sherry Johnson Metz, SC Johnson’s director of global leadership development, says the firm thought it was important that all senior leaders get training in areas such as strategic and global thinking. To focus exclusively on high-potentials would be a mistake, she suggests.
“We want the talent at all levels of leadership to be high-performing,” Johnson Metz says. “Not everyone is going to be moving up in the organization. They may not want to.”
IBM also is looking to expand the range of standout employees who get particular attention. The company already has a mentorship program for budding leaders called NextGen, and a career-development program for up-and-coming technical employees who are headed to positions such as “IBM fellow” or “IBM distinguished engineer.”
The Top Talent program in the works might include both business managers and technical employees, Calo says. It is being designed for people who are high-performing but who are not ready to be considered for an executive post in the near term.
Such efforts for great performers are wise, Capretta Raymond says. Companies with high-potential programs can neglect to create development plans for what she dubs “high-pros,” or “high professionals.” These are superior employees who may not be seen as future executives but are nonetheless crucial to a company. After all, the loss of a critical engineer or product manager can seriously set back a firm.
At the same time, Capretta Raymond says it is critical for organizations to pinpoint people who are CEO material and begin grooming them at a young age. She cites research that says CEO tenure is down to a median of five years and aging executives are going to be heading for the golf course in droves soon, leaving many top jobs open.
Ronan Knox, executive vice president of learning consultancy the Forum Corp., says programs for high-potentials should tie directly to a firm’s strategy, emphasize teamwork among rising stars and actively involve senior executives as both champions and coaches. In addition, the initiatives should shake up old beliefs and habits. Knox helped SC Johnson with its new program, which fostered fresh perspectives among leaders by having them work on projects in a Racine, Wisconsin, homeless shelter.
“What we don’t want is for people to say, ‘That which has brought me this far will carry me forward,’ ” he says.
Another key is plain-old patience, says Johnson Metz at SC Johnson. She has seen companies sour quickly on a high-potential when the individual ran into trouble in a new role. “The whole idea of stretch assignments is to learn and grow. Sometimes learning doesn’t look like 100 percent success,” she says.
Companies also can be tripped up as they decide whether or how to communicate high-potential status. Consultant Cohn says that making it public throughout a company who is in a program for up-and-comers is likely to breed internal competition. That may be right for firms where sparring is a healthy part of the corporate culture, he says, but wrong for more collaborative companies. “There is no one-size-fits-all,” he says.
On the surface, at least, the notion of a high-potential leader runs counter to one trend in management: the recognition that a heroic, decisive CEO may be less effective for a company than the overall leadership skills of the firm, including not only the CEO but also top lieutenants and even rank-and-file workers.
Cohn, though, says well-crafted programs for rising stars can shape people for this new era of leadership, teaching skills such as persuasion. “The right high-po program is always a good thing,” he says.
5 Questions For Sylvester Schieber—VP and Director of U.S. Benefits Consulting, Watson Wyatt Worldwide
Sylvester Schieber
VP and Director of U.S. Benefits Consulting
Watson Wyatt Worldwide
For more than 30 years, Sylvester Schieber has written articles and given testimony to Congress about the effects of the aging workforce on the U.S. retirement system. As he plans his own retirement, which is scheduled to begin at the end of September, Schieber spoke to Workforce Management staff writer Jessica Marquez.
Workforce Management: What do you think of the new pension reform?
Sylvester Schieber:I think it is good in that it defines the rules. There are some issues that remain potential problems. For example, to what extent can plans fall into underfunded status could be a problem. Also, some of the contribution credit rules might be too complex to manage and understand. But I don’t think that’s going to cause companies to move away from defined-benefit plans.
WM: Many people think that the legislation will make some companies freeze these plans. Why don’t you agree ?
Schieber: Employers put in pension plans in the first place not because they were enlightened or wanting to run social welfare institutions; they did it because it helped them to manage the exiting of their workforce at the end of their careers. Defined-contribution plans don’t tend to have those kinds of features. At some juncture, employers may come back to these plans in one shape or form.
WM: So do you think that some of the employers that have frozen their defined-benefit plans may return to them?
Schieber: I do believe some of the plans will be reopened, but it may take a while. Companies are going to discover that some share of their workforce doesn’t save enough or doesn’t perceive that they have saved enough to retire at the juncture when companies want them to retire.
WM: But what about the pending talent shortage that will force companies to retain these older workers?
Schieber: I still think employers will want to manage the retirement process of their workers. Defined-benefit plans need to be restructured to keep workers longer, from an affordability perspective. Today some employers are in a situation where total spending on their retirement package can be as much as 30 percent of payroll. It’s just too expensive. So employers will want workers around longer, but they still may want an orderly process for them to withdraw. We can’t afford to lose these workers as early as we have been losing them, and we can’t afford to pay their benefits.
WM: Do you think DC plans are sufficient to get people through retirement?
Schieber: They can, but it’s a tougher proposition. The new legislation does create more middle ground in the case for defined-contribution plans in that you can automatically enroll people. But some people don’t know how to invest their money, and some people are just unlucky. If you had invested 6 percent of your pay in stocks and retired at age 65 in 2000, you could have gotten a benefit that would have been 60 percent of your pre-retirement pay. But if you retired three years later, it would have only been 35 percent. People can make the right decisions all along the way, but they just get old at the wrong time.
Workforce Management, September 25, 2006, p. 8 — Subscribe Now!
Gray Matters … a Lot
A couple of weeks ago, at an event in Chicago called the Motivation Show, I attended a seminar titled “Reward & Recognition: Best Practices and Solutions That Work.” Little did I know it, but this session was a glimpse of the future—and it was a future I didn’t recognize.
The two speakers were the CEO and marketing director for a company that pitches reward solutions (prizes, travel and other such goodies) to businesses trying to find ways to better motivate and reward their workforce. What surprised me was that their presentation was all about how to reward and motivate Generation X and Generation Y employees, and that their idea of “best practices and solutions that work” in this area apparently included ignoring anyone in the workforce over the age of 40.
In other words, if you are a baby boomer (or beyond), there’s no need to reward or recognize you because you aren’t going to be around much longer anyway.
That kind of thinking runs counter to the premise of our cover story this week (“Face of the Future”), in which Workforce Management staff writer Ed Frauenheim challenges the conventional wisdom that America is heading for a huge labor shortage because of all the retiring boomers.
The story quantifies what I have been saying for some time: that the looming labor shortage is a lot of overblown rhetoric. There are a couple of reasons for this.
Reason No. 1: Boomers are unlikely to follow the neat and tidy retirement patterns of the past. For better or worse, members of the post-World War II generation have always done things their own way. Why would they be any different in retirement?
And that ties to Reason No. 2: People are living longer, healthier lives. Life expectancy in the U.S. has risen from around 50 in 1910 to 77.6 years today, according to the National Center for Health Statistics. Baby boomers will probably retire later than anticipated (if at all) and will be more likely to ease into a working retirement where they continue to work, but just not as much as before.
This doesn’t mean there won’t be shortages of people in some areas—for instance, in science- and math-driven fields like engineering or fast-growing sectors like health care and physical therapy—but rather, that the shortages will be in small pockets of the economy rather than across the board.
If you are a business executive or workforce management professional, one of your keys to future success will be keeping as many healthy, productive and experienced older employees on the job and in the workforce for as long as you can.
And forget about the longstanding practice of saving money by dumping veteran employees in favor of cheaper, younger talent. A new Conference Board survey of leaders from a consortium of business research organizations found that the incoming generation of young workers is “sorely lacking in much of the needed workplace skills,” both basic academic and more advanced applied skills. As the study concludes: “The future workforce is here—and it is ill-prepared.”
If you believe the Conference Board survey, keeping older workers in the workforce will increasingly become more of a business imperative because organizations will need those veterans to help mentor the younger generation of employees who don’t have all the required skills needed as they enter the workforce. Smart executives will realize that they need more good workers of all ages if they are going to continue to grow and succeed in our increasingly competitive global business environment.
That brings me back to my seminar in Chicago. The two guys who put on the reward and recognition session weren’t bad guys, just terribly shortsighted. They had a lot of interesting things to say, but missed the boat in failing to recognize that older workers are an important part of the workforce who are still going to be around—and need to be recognized and motivated—for some time to come.
Peter Drucker once said that the goal of a manager should be to “make productive the specific strengths and knowledge of each individual.” That’s true of all workers, today and tomorrow. If your business doesn’t have practices that focus on the motivation and productivity of the entire workforce, you’re missing the boat as well.
Private Concerns
Sue Hagen admits she had a few concerns about how going private would affect her company. As senior vice president of human resources at Dole Food Co., she was worried it would be harder to recruit and retain talent without the prestige of being a publicly traded company.
But chairman David Murdock’s reasons for going private were compelling. It was his dream to leave a legacy by refocusing on nutritional education and addressing obesity in the U.S.
To do so effectively, it would mean having a longer-term focus than a public company normally has, Hagen says.
“His vision didn’t exactly fit into a quarterly newsletter to shareholders,” she says. “These things wouldn’t have direct payback from a financial point of view, but it was his passion in life to do this.”
In March 2002, Murdock bought the 76 percent of common stock he did not already own, making Westlake Village, California-based Dole a private company. Murdock spent $2.5 billion, or $33.50 per share, to buy the Dole stock, which was then trading at $29.98 on the New York Stock Exchange. He also took on the company’s debt.
In the past few years an increasing number of publicly traded companies have gone private. The first wave hit in 2003 as a result of the Sarbanes-Oxley Act of 2002, which created a slew of costly compliance procedures for public companies in response to major accounting scandals at Enron and Worldcom. In 2003, 127 public companies went private, up from 92 in 1999, according to CapitalIQ, a New York-based provider of financial services information. The trend steadied in 2005, with 95 companies going private, but appears to be picking up this year. As of July 30, there had already been 86 of these transactions announced.
The reason for the acceleration is an increasing appetite among private equity investors. In the past few months, private investors have taken over a number of high-profile public companies, including hospital giant HCA and Philadelphia-based Aramark.
“What’s driving this recent wave is that private equity is returning more than the stock market,” says Robert Keiser, senior research manager at Thomson Financial. Overall, the U.S. Private Equity Index, tracked by Cambridge Associates, gained 27 percent last year, compared with a 5 percent return for the Standard & Poor’s 500.
But executives at public companies being wooed by private equity investors have a lot of workforce management issues to think about before signing a deal, observers say. And more companies are thinking through these issues, says Hector Calzada, senior vice president at Houlihan Lokey Howard & Zukin, a Los Angeles-based investment banking firm.
“In the late ’90s, a lot of private investors came in and took a slash-and-burn approach, thinking they could do the same work with less people,” he says. “But after the tech boom and bust, more of these financial sponsors realize the sacrifice they make when they use the thinnest workforce possible. They are looking more long term.”
Public companies that go private have to think about the cultural issues the change evokes, as well as create a plan to communicate the changes to employees. On top of that, they often need to devise new ways to recruit and compensate workers.
“You have to have a good sense of your organization,” says Mark Suwyn, chairman and CEO of NewPage Corp., a Dayton, Ohio-based paper company. As an associate with New York private equity firm Cerberus Capital Management, Suwyn helped take NewPage private in May 2005.
Communication
Communicating with employees about what going private means was the biggest challenge for Hagen at Dole, given the size of its workforce. Dole has 60,000 employees in 90 countries speaking 13 languages.
“Even short, straightforward messages are complex and involved to communicate,” Hagen says.
For the two months after the change was announced, Hagen and her eight-person team worked with department heads to conduct a mass communication campaign that included small and large group meetings, e-mails, newsletters and the company’s intranet. Since only one-tenth of Dole employees work at computers on the job, Dole made sure its managers understood the change and communicated it to employees. “Managers would go out into the field and explain it to workers,” Hagen says.
Dole’s message centered on what it meant to be a private company instead of a public one, and reassured employees their benefits and compensation would not change, Hagen says.
Repetition was key, she says. After the first couple of months, Hagen and her team made sure to repeat the message so that employees felt at peace with the changes.
A company shouldn’t underestimate employee apprehension when it announces it’s going private, Suwyn says. “There are always lots of rumors about how horrible it’s going to be after the change is made,” he says. “It can be debilitating and employers need to address it.”
Suwyn knows something about how to bring those worries to the surface. At Louisiana Pacific, where he was CEO from 1996 to 2004, Suwyn developed a method to address employee concerns and make them feel like their voices were being heard. He made it a point to visit various mills and offices annually and invite employees to share their concerns and grievances, with the understanding that he was there to listen to them.
After each worker spoke up, Suwyn would thank the person and say, “Let me make sure I understand what you are saying,” and then repeat back the employee’s concerns.
“It’s an exercise to get employees to bring tough issues to the table,” he says. In many cases, supervisors would hear their employees’ grievances and respond immediately, or sometimes Suwyn would address them. Such interaction fosters employee buy-in, he says.
Suwyn has continued to use this technique effectively, both as an associate with Cerberus and more recently to help NewPage employees feel more comfortable with him as CEO of a now-private company.
Simply explaining to employees the benefits of being a private company also helps.
“It would behoove the HR executives to think about selling the employees on the positives of this kind of change,” says Jack Lord, a partner in the Orlando, Florida, office of Foley & Lardner. “It can be particularly attractive to entrepreneurial-spirited employees if you tell them that now the company can do what it wants without getting approval from shareholders,” he says.
Many barriers are removed when a company goes private, making it easier to get things done, says Jamie Hale, a consultant with Watson Wyatt Worldwide, which went public in 2000. “The ability to share information within the organization was much easier when we were private,” she says.
Taking away options
At Dole, changing compensation benefits wasn’t a big issue, since only a handful of executives had stock options. Those options were exchanged for cash. Then Hagen and her team created a long-term cash incentive program to compensate those executives.
But for companies that rely heavily on stock option grants, experts say going private can be a challenge. Companies must find a comparable substitute and communicate to employees how the new incentive plan works, says Paul Sanchez, global director for organization research and effectiveness at Mercer Human Resource Consulting.
There are ways companies can replace stock options and still get the same benefits, he says. Employers can offer performance-based cash grants that employees receive after the company achieves specific goals. Another option is creating a variable compensation model where employees can vest over time.
The key to offering such alternatives, not surprisingly, is in the communication, Sanchez says.
Also, cash compensation is more expensive, and companies need to be prepared for that, Lord says. “A stock option is a lot cheaper than one dollar,” he says.
The bigger implication of removing options is how it affects morale, observers say. “Employers need to make it clear that they don’t value their employees less and they are going to continue to pay them accordingly,” Lord says.
Cultural issues
Executives also need to consider the cultural implications of going private, particularly since they won’t be under the same level of public scrutiny anymore.
“Private companies can find themselves in a heap of trouble by not following the same set of rules they did when they were public,” says Calzada at Houlihan Lokey Howard & Zukin.
It often requires more frequent communication and enforcement of compliance codes to “establish a culture of ethics,” he says.
In situations where a company is being taken over by private investors, management needs to make sure there is a sense of trust in the leaders of the organization, whether they are new or not. “HR managers need to understand the roles of executives in the new organization and communicate with employees,” says Hale at Watson Wyatt.
Management’s credibility can sometimes take a hit when private investors take over an organization. Even though they pledge to keep existing managers, employees may perceive that their leaders don’t have any control anymore and thus lose faith in them, she says. “If employees feel their leaders have lost credibility, it will affect their engagement and could increase turnover.”
Hagen says there weren’t any cultural ramifications for going private at Dole. Her concern about whether employees would view the company as less prestigious after becoming private also appears unfounded, she says.
“Recruiting and retaining employees has not been affected,” she says. When interviewing candidates, she talks about the things Dole is doing to encourage people to be healthy. She also emphasizes the decentralized structure of the organization, which allows employees to act independently.
“Today we have a different story to tell that still attracts people to Dole,” she says.
ADP Deal Highlights Rising Importance of Recruitment in HRO
ADP’s recent acquisition of VirtualEdge reflects the growing interest among employers to include recpruiting in their HRO deals.
On October 10, ADP Employer Services announced its acquisition of the Newton, Pennsylvania-based recruitment process outsourcer. Terms of the deal were not disclosed.
Roseland, New Jersey-based ADP already had tools to help its clients recruit hourly workers. Through this acquisition, the company will now be able to offer similar tools to recruit professional and contingent workers, says Jerry Thurber, general manager and division vice president at ADP.
“We got a lot of feedback from our clients that this was a missing element for us,” he says. “We felt VirtualEdge’s offering played to our sweet spot, which is those companies with 500 to 5,000 employees.”
ADP spent the past 18 months evaluating an acquisition, Thurber says. He declined to reveal any other companies that may have been considered.
More HRO providers will follow in ADP’s footsteps as a growing number of buyers are considering outsourcing some of their recruiting functionality, says Stan Lepeak, managing director of research for EquaTerra, an outsourcing consulting firm based in Houston.
“In the past, HRO contracts were more about payroll and benefits,” he says. “But now buyers want to add more strategic pieces to these deals.”
Traditionally, buyers did recruiting in-house or used temporary staffing firms for contract positions. But now, they are clearly looking to HRO providers to offer this service. “And they don’t want to go with just a point solution, they want recruiting to be part of a bigger HRO package,” he says.
While the VirtualEdge acquisition arms ADP with the capabilities to run the back-office elements of recruiting contingent and professional workers, ADP partners with recruitment process outsourcers to do the front-office work, Thurber says.
“We provide tools and some services behind the scenes, but we partner with RPO companies to physically locate candidates,” he says.
ADP has no immediate plans to purchase an RPO provider, Thurber says. But Lepeak doesn’t think companies like ADP will stick to the partnership relationship with RPO providers—particularly as more buyers look for full-service offerings.
“I think you will see partnerships more as a courtship to test out the offerings,” he says. “But in the longer term, I think the HRO providers will go for acquisitions.”
Businesses Urged to Use Purchasing Power to Help Control Medical Costs
U.S. Health and Human Services Secretary Michael Leavitt warned Thursday (October 12) that employers must use their purchasing power to create a health care marketplace that is more sensitive to price and quality—or face rising health care costs that will imperil the primacy of American business.
“There is no place on the economic leader board for a country that puts 25 to 30 percent of its gross domestic product into health care,” Leavitt told employers at the Midwest Business Group on Health in Chicago. Currently, the Health and Human Services Department calculates that 16 percent of American GDP is spent on health care.
“Unless we change something we will be eliminated from the competition,” Leavitt says. “It is very serious and requires change.”
Leavitt urged employers to join with the federal government’s commitment, made in August via an executive order signed by President Bush, that new contracts with medical providers and insurance carriers promote the use of standardized health information technology and foster greater transparency over the price and quality of health care.
He asked employers to get involved with six pilot projects that have been launched in six regions of the country. The projects—based in Boston, Indianapolis, Minneapolis, Phoenix, San Francisco and Madison, Wisconsin—are using claims data to develop standards that could eventually be used to create a benchmark of care for various ailments and then rate the performance of doctors and hospitals against that scale. Eventually, medical providers would be paid according to the quality of their services, as is the case for most goods and services in a functioning marketplace.
Federal health programs account for four out of every 10 people with health insurance. Leavitt says he is reaching out to the country’s 150 largest employers with 50,000 employees or more to get those companies involved in using the president’s executive order as a template in negotiating new contracts.
“When 40 percent of the market moves, it changes the market,” Leavitt says. “We want you to do that by creating an executive order of your own.”
Health and Human Services will conduct training sessions in Washington, D.C., on November 17 to help employers develop requests for proposals that specify how potential providers and carriers can comply with the goals of the executive order.
Job Board Association to Address Applicant Tracking Issues
The International Association of Employment Web Sites, which represents 850 job boards worldwide, wants to make sure its members get the credit they deserve for locating job applicants.
The trade association considers the issue of not receiving proper recognition for the candidates they funnel to recruiters to be one of the most serious challenges currently facing the job board industry. The organization, which has 100 managing members representing 850 job boards worldwide, has assembled a task force to address this issue.
The problem for many job boards stems from applicant tracking systems that don’t adequately trace job applicants to the original point where they discovered a vacancy, says Peter Weddle, executive director for the trade association. Being overlooked as an original point of hire can have serious bottom-line repercussions for job boards because companies use applicant tracking metrics to decide where they will spend their advertising money.
Ultimately, the industry would like for ATS providers to install “tracking tokens” in all of their software platforms, says Douglas Geinzer, president of online job board Recruiting Nevada and chair of the task force. Tracking tokens are software tags similar to Web browser cookies that can trace the activity of an Internet user and could be used to determine the original point of contract for a job applicant. Since this mechanism is automated, the margin of error would drop to zero percent, Geinzer explains.
The task force’s first goal is agreeing on a standard protocol for exchanging information between the job board industry and ATS providers.
“There are hundreds of ways of that one could do this,” Geinzer says. “We have to set a standard so that there is no confusion and everybody is on the same page.”
The 12-member task force has set January 1 as the deadline for which to agree upon a standard.
Under the current system, job seekers are responsible for identifying the original source of hire manually, using drop-down boxes when they apply for a vacancy on the Internet. According to Geinzer, this method can create faulty results because applicants can make mistakes for a variety of reasons, including confusion with the drop-down box or not being able to recall exactly the initial place where they discovered a job lead.
He points to a recent report conducted by job board peer AllRetailJobs.com that concluded using drop-down boxes to identify a source of hire could yield error margins of up to 83 percent. The study measured 60,000 applicants applying to AllRetailJobs.com using drop-down boxes.
“The results are alarming. Nearly five out of six candidates simply got it wrong,” says Don Firth, president and CEO of AllRetailJobs.com.
Kevin Wheeler, president of Global Learning Resources, says some of the clients in his consulting practice have received flawed data from ATS providers. This can be hazardous because misleading information could cause them to inadvertently make unwise decisions about where to advertise.
“There is a definite problem that needs to be addressed,” he says.
The task force will rally support from members of the trade association by raising awareness, through newsletters, the organization’s Web site and other forms of communication. Education will be a big component of these efforts, Geinzer says. Eventually, the task force will prompt its members to reach out to their clients—companies that use job boards to recruit candidates—so that they too can understand the dynamics at work and ultimately require ATS providers to enhance their software platforms.
Getting companies to put the pressure on ATS providers will be a key objective in making tracking tokens ubiquitous. The organization plans to craft prewritten letters that job boards can submit to their recruiting clients and that they in turn can send to the ATS providers.
“It is not just job boards that are negatively affected,” Geinzer says. “Companies are also getting information that is not 100 percent accurate.”
ATS systems play a critical goal in assessing return on investing. But unless job boards can prove they deliver a big bang for the buck, business growth could be stifled, Geinzer explains.
In terms of cost-effectiveness, job boards have a clear edge versus newspapers, saving recruiters 20 percent to 25 percent, according to Geinzer. Newspapers can charge $300 to $1,400 for a job advertisement, depending on the size. By contrast, online boards charge an average of $300 for unlimited space.
The task at hand now is for job boards to demonstrate the volume of hires that they bring to the table, Geinzer says. He estimates that 51 percent of hires come from job boards. Being able to give an accurate breakdown of which sites funnel in candidates will give recruiters a better idea of their return on investment.
Small job boards that don’t have a strong brand awareness are the biggest losers in this game. Candidates are more likely to identify a big job board like Monster as an original source of hire because that brand comes to mind more easily than less-well-known sites do.
Nevertheless, job boards are uniting in this cause because lack of proper identification fogs metrics and ultimately affects everybody, Geinzer explains.
“We are in this together,” he says.