Category: Archive

Despite its troubles, Hewitt Associates is prospecting for new business, but now it’s a bit older and wiser.

That was the message given by Mike Wright, global HRO sales co-leader at Hewitt Associates, during his presentation last month at the Conference Board’s 2006 Human Resource Outsourcing Conference in Chicago.

In his speech, Wright shared lessons the organization has learned as a result of an extensive review of its HRO business during the summer. In the past few months, the company has struggled to implement deals.

“I come to you pretty humbly this morning,” Wright told attendees, noting the troubles the company has had.

Wright emphasized the importance of constant communication between providers and their clients. “In the past when we have had problems, our tendency was to put up barriers, put our heads down and figure out what’s going on,” he said. Now Hewitt is working to include clients in the process more. This includes having customers visit its service centers and offer ideas on how to address problems.

Aligning goals and expectations is another crucial step for HRO deals to be successful, Wright said. For Hewitt, that means meeting the set goals in the service level agreements. But sometimes, Hewitt has found that a year after it has signed a deal with a buyer and taken over the HR processes, the buyer’s employees who were handling those processes are still with the company.

“And then the buyer asks us why we haven’t met certain cost reductions,” he said. “I’m not trying to pass the buck; Hewitt has to meet its expectations, but this has been an issue,” he told Workforce Management after his presentation. To address the issue, Hewitt is adding language in its contracts to make sure buyers eliminate the positions that are made redundant because of outsourcing.

Probably the biggest lesson learned for Hewitt is that the “lift and shift” model, whereby it would just take over a buyer’s HR processes and attempt to do them cheaper, doesn’t work, Wright said.

For those clients and prospects who want Hewitt to take over their operations and run it more cheaply, Wright said there may be other providers to do that, “but it’s not us.”

At the same time, Hewitt is moving away from a completely customized approach and is talking to clients about adopting standards. For clients resistant to that, Hewitt tries to get them to think “What is the value added by customizing these processes?” Wright said. It doesn’t necessarily make sense to customize payroll and benefits administration, he said.

Hewitt and other providers have a challenge ahead of them as they attempt to educate buyers about the advantages of using a “one to many” model, analysts say.

“They are going to have to go into the economic tradeoff discussion,” says Michel Janssen, an analyst at the Hackett Group, an Atlanta-based consulting firm. “Until now the conversation around HRO has not been a two-way dialogue; it’s been all ‘Yes, we can do that.’ ”

One way for providers to pitch the one-to-many model is to emphasize that by doing so, they will become “a repository of best practices of several large clients,” says Andy Anderson, an attorney in the Chicago office of Morgan, Lewis & Bockius.

“It’s more than just cost and simplification,” he says. “If you can take advantage of that as a buyer, you should at least consider it.”

—Jessica Marquez

Event: Pensions & Investments’ Seventh Annual West Coast Defined Contribution Conference

Date: October 8-10, 2006, the Fairmont Hotel, San Francisco

What: Pensions & Investments’ Defined Contribution Conferences allow investment providers, employers and consultants to get together and discuss the big issues and trends affecting the industry. With the recent pension reform—and more than 400 attendees, the biggest turnout ever—there was a lot for everyone to learn and discuss.

Conference info: For more information, go to www.pionline.com.

Day 2—Tuesday, October 10

Theme of the conference: Many speakers throughout the show talked about how the conversation around getting employees prepared for retirement has changed over the years. In a panel discussion about the use of managed accounts in 401(k) plans, Christopher Jones, chief investment officer at Financial Engines, says that at past conferences, speakers focused more on how to get employees engaged.

“Today the conversation is shifting away from 401(k) plan sponsors requiring individual responsibility of participants,” he says. While employers still give 401(k) participants the opportunity to be responsible for their retirement savings, they also are more focused on designing 401(k) plans that will take care of it for them.

In a separate panel discussion, Dena Regan, global benefits manager at Santa Rosa, California-based JDSU, discussed the difficult position many employers are in when trying to communicate to employees about the importance of saving for retirement.

“Yes, we know that we have 25-year-olds who are 100 percent invested in stable value,” she says, noting that with such conservative investments it’s unlikely that these employees will have enough saved for retirement. “But who am I to say to someone, ‘Yes, I understand you are living paycheck to paycheck, but you really need to save for retirement.’ “

Dearth of data: One of the key challenges facing managed account providers is getting data from the participants, admitted Kevin Crain, director of integrated product management at Merrill Lynch Retirement Group, speaking on a panel about the role of managed accounts in 401(k) plans. When employees are automatically enrolled into a managed account, this can pose a greater challenge for the providers, according to the panelists.

Merrill Lynch addresses the problem by using the Web and paper-based statements to show investors their personalized portfolios, Crain says. “That personalized statement usually draws people in,” he says.

Similarly, Financial Engines collects information from the 401(k) plan’s record keeper and uses that to customize a portfolio. The company will e-mail the participant with information about the portfolio. When employees see the information that Financial Engines has about them, they will usually speak up about their spouse’s assets or other assets they have outside the plan, Jones says.

Risk, not merely returns: Employers shouldn’t just look at investment returns when they are choosing an investment provider for their 401(k) plans. That was the piece of advice that Ed Haldeman, president and CEO of Putnam Investments, told attendees in his keynote address Tuesday morning. “Plan sponsors need to focus on risk efficiency and not just on high returns,” he says. He noted that finding investment options with strong returns is just one challenge that plan sponsors face.

But finding investment options with a suitable amount of risk also should be a goal for companies, Haldeman says. Just like defined-benefit plan sponsors maintain a strong focus on risk, defined-contribution plan sponsors must think the same way, he says.

“From an investment management perspective, the switch from defined benefit to defined contribution simply means a change in plan structure,” he says.

Bad analogy: In what may not have been the best analogy to make—given that almost everyone in the room was about to board a plane to return home—Kelli Hueler, president and founder of Hueler Cos., compared individuals saving for retirement to planes flying and taking off.

While most people are concerned that there will be a fatal accident during departure, that’s rare because all the engines are up and running, leaving little room for error. In fact, it’s the landing that tends to be the problem, she says, noting that 46 percent of fatal accidents on planes occur at landing. Similarly, it’s usually when employees retire from their companies that they are left on their own, and many find that they don’t know how to manage their savings so that they have enough to live on for retirement.

—Jessica Marquez

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Day 1—Monday, October 9

Pension reform ponderings: Kicking off the conference, Jamey Delaplane, a partner at Davis & Harman, talked about how the recent Pension Protection Act, while a step in the right direction, has resulted in more questions than answers for employers.

For employers with defined-benefit plans, the reform only created more volatility and unpredictability, he said. As a result, more companies with defined-benefit plans are looking for ways to resolve their liability issues, Delaplane says.

Even employers with 401(k) plans are left having to interpret much of the legislation, Delaplane says. For example, the reform gives the OK for employers to automatically enroll their 401(k) participants into investment options that the Department of Labor says are acceptable. But the guidelines are still just a proposal, Delaplane noted. As a result, many plan sponsors are wondering if they have to wait for the guidelines to be finalized.

The Pension Protection Act also mandates that employers can maintain a 90-day period by which employees who have been automatically enrolled into the company’s 401(k) plan can ask for their money back.

“HR folks are calling me up and asking, ‘What do I do if an employee wants to withdraw from the plan on the 91st day?’ ” Delaplane says.

As a result, companies are examining other options outside of the 90-day window.

What to look out for: Delaplane also shared his thoughts on future pieces of legislation he expects to become hot issues over the next several months. These include:

• An automatic IRA proposal—which would require employers that do not have a 401(k) or defined-benefit plan to automatically enroll employees into an IRA, in which only the participants would make contributions. “This would put huge responsibilities on employers” regarding communications and notifications to employees, Delaplane says.
  
  
• Mandating auto enrollment and automatic increases of 401(k) plan contributions.
  
  
• The establishment of default distributions so that when employees retire, a portion of their income would automatically default into some type of annuity offering. As the baby boomers retire, Delaplane says that the issue of retirement income will become more prevalent in debates on Capitol Hill and, as a result, “the big battle we have yet to have is do we require default distributions” after retirement.

Moral dilemmas: Speaking on a panel about how to incorporate new practices to meet employees’ retirement needs, plan sponsors debated on how much hand holding to give 401(k) participants. Tony Cost, vice president of HR at Silgan Containers, wants a “cradle-to-the-grave approach” to offering financial advice to employees. The company is discussing tapping into a financial advisory network to give face-to-face advice to its 6,000 employees.

Fellow panelist Cindy Conway, group director of compensation and benefits at Cadence Design Systems, said her company opts for online advice and education, with some face-to-face seminars on specific topics. For example, the company recently held a seminar for parents of children with special needs.

At the other end of the spectrum, Mel Fleeman, manager of retirement plans at Tetra Tech, said that his employees don’t like it when the company tries to hold their hands. “We find that the usage of advice is so low that it’s not worth the expense,” he says.

And with 300 locations across the country and many employees who are construction workers, offering face-to-face advice doesn’t seem logical, Fleeman says.

But when asked later about the costs of increasing participation in the 401(k) plan, Fleeman shared his other concerns about raising 401(k) participation: added costs.

Tetra Tech is not alone with this moral dilemma, Martha Tejera of retirement consulting firm Tejera & Associates told Workforce Management, following the panel discussion. Many employers realize the need to help their employees save enough for retirement, but are worried about the costs of maintaining large 401(k) plans, she says.

– Jessica Marquez

Andrew McKelvey, longtime chairman and CEO of Monster Worldwide, announced his resignation today (Monday, October 9) amid questions about backdating of stock options at the company and speculation about his health.

McKelvey is being succeeded by William Pastore, a relative newcomer to the job board industry who joined the company as COO in October 2002. Pastore was promoted to president and COO in February.

In July, Monster disclosed that it might need to restate its 2005 financial results and results for and earlier years to account for stock option costs. In September, the company suspended its general counsel.

There has also been speculation about McKelvey’s health. He was hospitalized in March with pneumonia.

“At this stage in my life, I simply can no longer dedicate the number of hours required by Monster’s rapid global growth and the additional demands of time associated with the ongoing historical stock option grant review,” McKelvey said in a statement announcing his resignation. “I believe that these managerial changes will assist the company in addressing the challenges that it faces today. Monster’s continued growth and success have always been, and remain, my number one priority.”

McKelvey is 71 and has been at the company for 39 years, according to Katherine Burns, global communications manager for Monster Worldwide in New York. He will remain on the company’s board of directors, where he has been elected as chairman emeritus.

Pastore was en route to a satellite office in Maynard, Massachusetts, on Monday and could not be reached for comment. Prior to Monster, Pastore worked at Cigna Healthcare in various areas, including, operations, sales and marketing, technology and customer services. He also held several leadership posts at Citibank, where he worked for almost 25 years. For now, Pastore’s COO position will not be filled.

The company tapped Pastore for the top job because of his ability to materialize strategic concepts, according to Burns. He was one of the driving forces behind several of Monster’s recent key projects, including its international expansion into Mexico and its alliance with Philadelphia Media Holdings, which led to the launch of a co-branded job portal for the Philadelphia market.

“We want to grow globally but become local at the same time,” Burns says.

Monster is already dabbling in some very interesting projects and will probably stay the course, according to Peter Weddle, CEO of Weddle’s, a research and consulting practice based in Stamford, Connecticut.

Monster has 90 percent brand recognition, Burns says. In addition, the company has more than 61 million job seekers worldwide and a résumé database with approximately 52 million résumés. During the third quarter, Monster generated $206.8 million in revenue, up 31 percent from the same period a year earlier.

–Gina Ruiz

Only one of the 29 cases on the U.S. Supreme Court 2006-2007 docket so far involves a labor law issue, but depending on how the court rules, it could wind up substantially costing employers.

The justices have agreed to hear a pay discrimination dispute that could put companies on the hook for salary decisions made over the course of a generation. In a suit against the Goodyear Tire & Rubber Co., Lilly Ledbetter, a floor manager supervising tire production at a plant in Gadsden, Alabama, alleges that the company paid her and her female colleagues less than it paid men.

She filed a sex discrimination charge with the Equal Employment Opportunity Commission in March 1998. She took early retirement and sued Goodyear in November 1999. The statute of limitations under Title VII is 180 days.

For Ledbetter, that means the last instance of discrimination would have occurred within 180 days of the paycheck at the heart of the allegation. A trial court, however, allowed Ledbetter to present evidence of discrimination going back to 1979, eventually resulting in a $3.5 million award against Goodyear.

But the U.S. Court of Appeals for the 11th Circuit in Atlanta ruled in August 2005 that Ledbetter could only go back to her last regular salary review to allege bias. If the Supreme Court affirms the trial court’s position, companies could face huge liabilities.

“It significantly raises the stakes in pay discrimination cases because potential damages go through the roof,” says Glenn Patton, a partner in the labor and employment practice of Alston & Bird in Atlanta.

It would be especially difficult for an employer to respond to a pay discrimination action that spans decades because of the obstacles related to gathering evidence, Patton says.

Unlike hiring and promotion decisions, which often hinge on the evaluation of specific job criteria and the candidate’s background, raises tend to be distributed in a more intuitive way. The difference between a 3 percent raise and a 5 percent increase may be based on a manager’s gut feeling about performance.

When those decisions are made for hundreds of employees every year, the precise reasoning for each one may fade. In fact, over many years, the employee could have several managers and the company’s executive leadership could turn over many times, says Roy Englert, a Washington, D.C., lawyer.

“It’s almost an impossibility of proof,” Patton adds. “Compensation is not some­thing that is widely known or discussed in a workforce.”

That kind of secrecy is also an obstacle for plaintiffs, who might find it difficult to prove a pay discrimination case within the 180-day window because there can be so little concrete evidence.

Yet a company may find itself having to justify hundreds of pay decisions. “It’s almost never-ending,” says Shane Brennan, labor and employment counsel at the National Chamber Litigation Center. “What is the point of having a statute of limitations if there is no closure at all?”

Lifting time limits would mean the alleged sins of a previous management team, or single former manager, may be borne by a company that is not committing discrimination.

“What is the most conscientious employer to do if an employee can come in after the fact?” Englert says.

–Mark Schoeff Jr.

Event: Human Resource Executive’s Ninth Annual HR Technology Conference & Exposition

Date: October 4-6, 2006, Navy Pier, Chicago

What: Described by its organizers as “the world’s leading conference on all aspects of technology for HR executives and professionals,” the HR Technology Conference brings together 200-plus technology vendors in the exhibit hall and a wide variety of technology-related seminars and speakers.

Conference info: For more information about the HR Technology Conference

Conference Notes, Day 3—Friday, October 6

Free speech? There is a certain tone and patter to most trade shows and conferences. In fact, there is such a sameness that sometimes the only differences are the quality of the speakers, the venue and maybe some of the parties and after-hours events. The HR Technology Conference generally followed normal conference style and was, for the most part, a pretty typical gathering.

But, there were a couple odd things:

• Trying to squelch a presenter’s comments because they might undercut another conference the show’s organizer is putting on. During the industry analyst panel on Day 2, the moderator urged panelist Naomi Lee Bloom, managing partner of Bloom & Wallace, not to say too much in response to a question about business process outsourcing, and instead, to “just tease the audience” so people would want to come and hear what she has to say on the subject at the HRO World conference in New York City next spring.
  
  
• Chiding a presenter because her comments weren’t vendor-friendly. Again, during the Day 2 industry analyst panel, the same moderator chided Lisa Rowan of IDC when she suggested that “we need more (industry) consolidation because we have too many competitors” in the HR technology sector. The implication was that her comments would in some way have an impact on the number of exhibitors at future HR Technology Conferences.
  
  But Rowan stuck her guns on the need for industry consolidation, and was supported by Bloom, who agreed that there are just “too many vendors who don’t have a truly integrated suite (of products).” Bloom told the moderator: “Don’t worry. Next year there will be some new category with a whole new set of vendors.”

(Full disclosure: Human Resource Executive magazine, the organizer of the HR Technology Conference, competes against Workforce Management. But the panel-control techniques would be weird even if the magazine wasn’t a competitor.)

Friday breakout sessions: Friday was a short conference wrap-up day, so there was just one group of breakout sessions.

Loree Farrar, VP for global rewards at Yahoo, and Wally Smith, president and CEO of Enwisen, an HR communications company, gave a good look into how even a technology-based company like Yahoo had to go outside to find a vendor to better communicate the total rewards and benefits picture to its employees. By giving all the Yahoos a clearer presentation of the company’s contribution to their personal bottom lines, the company lowered voluntary turnover, increased 401(k) enrollment and even implemented some cost-sharing for medical in a positive way.

Friday keynote: Bloom wrapped up the conference with her talk “It’s the Technology, Stupid!” Her main point: If you are buying new technology for your company, be skeptical of the vendor’s sales pitch. She said you should trust what they say, but only with verification. “When someone says, ‘No problem, we can do that,’ your follow-up response should be, ‘Thank you. I’d like to see that.'” Research, testing, doing your homework and lots of questions are the only way to get the technology that best serves your needs, she said.

Bloom had a good speech and a great message, but it’s too bad she was scheduled to give it at the very end of the conference, when there were so few people left to hear it.

—John Hollon

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Conference Notes, Day 2—Thursday October 5, 2006

Morning general session, Day 2: The late-arriving early-morning crowd got to hear four analysts (Naomi Lee Bloom of Bloom & Wallace, Paul Hamerman of Forrester Research, Jim Holincheck of Gartner and Lisa Rowan of IDC) talk on industry tends in HR technology—particularly business process outsourcing. Some of the highlights:

• Early BPO deals have gone well, for the most part. Companies are generally happy with these deals, Rowan says, but there are some margin difficulties (profitability issues) for BPO providers due to the complexity of the deals, particularly with the early BPO deals. BPO deals will become more profitable for providers, but it will take time.
  
  
• Oracle has been doing good things lately with its Fusion and Applications Unlimited initiatives, according to Hamerman, particularly in the support of applications moving ahead without forcing an upgrade. He did say, however, that Oracle might be charging a bit too much for maintenance and risks losing customers to SAP or Lawson as a result.
  
  
• On technology being a “magic bullet” for HR, Bloom said: “Companies that have always done a good job without technology (in their HR practices) will find that technology will be a big help, but if you haven’t done a good job, there’s nothing on the showroom floor that will help.”
  
  
• Holincheck asked, “How does an industry survive where nobody is making money?” To change this, he says, the industry needs a standard set of services that BPO vendors and customers agree on, with a standard list of technologies below that.

The future for BPO? As Rowan put it: “We need more consolidation. We just have too many competitors.”

Industry shootout: On of the more interesting sessions is the “shootout” between vendors showing how their technology would solve a series of basic business problems given to all the vendors involved in the exercise, with the audience voting on which product performed the best.

The Thursday-morning session (“The First Integrated Performance & Learning Management Shootout”) drew another overflow crowd and matched Saba, Plateau Systems, Cornerstone on Demand and Knowledge Planet on building development goals and activities to support a performance plan, including job development and succession planning.

There were four different tests for the four companies to run through, and about halfway through the shootout it got a little confusing remembering what each company’s software had done. Still, it was an interesting side-by-side comparison of how well these performance management products work. The winner? It was Plateau Systems, although Cornerstone on Demand made a strong showing as well.

Most intriguing session: The afternoon session on “Hot New Technologies for HR” was even more crowded than most of the breakout seminars—probably because attendees wanted to see what these hot new technologies were. Unfortunately, the technologies they were talking about (podcasting and blogging) weren’t quite so hot or new (so much for truth in advertising), but the session was still informative, including:

• Using blogging as a recruiting tool. Steve Rothberg of Collegerecruiter.com called blogging a “powerful recruiting tool” for companies in telling prospective employees more about what they do inside after someone gets hired. He listed three rules for the success of any blog: 1) High-quality content; 2) Blogging frequently (better not do one than to do it on an infrequent schedule); and 3) Blogging regularly (once per week minimum, with three to four times per week being best).
  
  
• Video games as a marketing tool. Scott Randall of BrandGames talked about using custom video games to engage prospective employees and to use in training new employees. He pointed to Arrow Electronics’ use of a video game for would-be or new employees and how it helps to immerse them in the history and culture of Arrow.
  
  
• Video and podcasts for succession management and workforce development. David Fabianski of Pearson Performance Solutions showed examples of Pearson’s “50 Lessons” series, in which business leaders share their knowledge and wisdom in a brief video. The benefit? “We capture the essence of the human experience through storytelling,” Fabianski says.

—John Hollon

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Conference Notes, Day 1—Wednesday October 4, 2006

Show basics: The HR Technology Conference is a good one to attend if you want to maximize your exposure to HR technology in one fell swoop. With 213 booths in the exhibit hall, and somewhere in the neighborhood of 1,500 attendees, it’s one of the largest gatherings of people interested in HR technology. The seminars seem to be an especially big draw, with overflow crowds at just about every one we attended. They were broken up into five basic tracks:

• Strategic view
• Performance and compensation management
• HRMS, portals and self-service
• Recruiting
• Outsourcing

The structure of the seminars made it impossible for anyone to attend all of them, or even most of them, and the conference organizers made note of this by urging attendees to bring “more of your colleagues next year so you can cover them all.” Nice idea, but at a steep $1,345 per person to attend (early registration discounts were available), we’re not sure how many companies would take them up on that.

Keynote speaker, Day 1: Stanford Business School professor (and Business 2.0 columnist) Jeffrey Pfeffer talked about making evidence-based management work to move your business ahead. “In HR, as in life,” Pfeffer says, “we don’t always make decisions based on the facts.”

He went on to show how the failure to use evidence hurts companies in everything they do, from compensating executives and employees to growing and building the business. In fact, he pointed out that organizational decisions are often based on:

1. What senior leaders have done in the past and think has been effective–their “experience.”
2. What others are doing–casual benchmarking.
3. Ideology and belief–ideas about how things ought to work.

None of these lead to better decisions, according to Pfeffer, and he called for organizations to use more evidence-based management to make decisions. He gave described evidence-based management as:

• A way of thinking–the attitude of wisdom (knowing what you know and knowing what you don’t know) and being willing to act on the basis of what is known at the time while learning as you act.
• Being committed to “fact-based” and “evidence-based” action.
• Being committed to hearing and telling the truth.
• Treating your organization as an unfinished prototype—and having an experimenting/learning mind-set.
• Knowing what the theory and evidence are, and using them in formulating decisions and actions.
• A set of standards for evaluating information and making decisions.

More Pfeffer: He was particularly critical of the famous “forced ranking” system–used at GE and made famous by Jack Welch–that has managers “grade” all employees on a curve. The problem is that top performers receive outsized awards, lower performers get summarily dumped, and the middle group of workers is largely ignored. This does little, he says, to really improve the business or the overall performance of the employees.

Vendor angst: Elaine Orler of the Newman Group gave a highly amusing and informative breakout session on “When and How You Should Switch Recruiting Vendors.” Underlying the talk was her premise that “very rarely is it the right decision to switch vendors” because it is very expensive to switch platforms and re-establish a vendor new relationship. She gave three valid reasons for making a vendor switch:

1. The relationship is damaged beyond repair.
2. A consolidation of solutions or foundation platforms is needed.
3. The company needs a broader application footprint for future success.

She also gave three reasons that are NOT valid justifications to make a switch:

1. I liked the product used at my last company better.
2. We’ve changed our business model (again).
3. Another vendor promised me a better price.

Speaker you had to see to believe: Conference speakers are a diverse group, but even having said that, Day 1 lunch speaker Belle Halpern was one of a kind.

Halpern, founding partner of the Ariel Group, gave her lunch keynote on “Leadership Presence: Dramatic Techniques to Reach Out, Motivate and Inspire.” That sounds pretty tame, so imagine the audience’s surprise when Halpern came out singing her presentation. Yes, singing–along with piano accompaniment. Just call her “The Singing Consultant.”

She didn’t sing her entire presentation, of course, but Halpern’s unexpected and unconventional presentation style was jarring to much of the audience because it was like one of the old Bill Murray lounge singer skits on Saturday Night Live. Halpern probably had some good things to say about how you can create a greater presence to increase the impact of what you say, but the odd and unexpected singing made a lot of the audience bolt for the doors.

Said one attendee as she got up to leave: “This is absolutely the weirdest lunch speaker I’ve ever seen.” Or heard.

—John Hollon

A group of large employers, among them Wal-Mart, IBM and Microsoft, announced Wednesday, October 4, that they will no longer allow hospitals and doctors into their preferred provider networks if those medical providers do not meet a series of safety standards aimed at reducing costs and avoidable death and injury.

The large employers, who compose the board for the National Business Group on Health, will no longer pay for medical claims for avoidable medical errors, says Helen Darling, president of the Washington, D.C.-based group. Preventable medical errors lead to between 44,000 and 98,000 deaths each year and cost as much as $30 billion, a number that includes lost productivity.

While much of the information on the cost of medical errors came to light in 1999 with an Institute of Medicine report titled “To Err Is Human,” Darling says employers have grown frustrated with the lack of substantial progress.

“The health industry has worked on this the last five years, but they have not moved fast enough,” Darling says. “Costs keep going up, but care is not necessarily getting better.”

Darling urges all employers to follow the group’s guidelines. Employers should insist that their health plans negotiate contracts that force medical providers to follow established guidelines on patient safety in order to be included in the preferred provider networks, which form the basis of PPO and high-deductible plans.

There are two initiatives that have improved standards of care at both hospitals and within medical practices, and medical providers should become active in both to remain in an employer’s preferred provider network, Darling says. One is the 100,000 Lives Campaign, a program launched by the Institute for Healthcare Improvement to reduce avoidable hospital deaths; the other is the Surgical Care Improvement project, a set of standards intended to reduce surgical complications and deaths 25 percent by 2010.

Employers should also insist that doctors and hospitals adopt electronic medical records and personal health records for each patient, though no timetable was laid out for when that should happen and who would pay for it. Medial providers should “demonstrate a commitment” to such goals, Darling says.

If medical providers in an employer’s network do not make a commitment to improve patient safety, employers should insist the providers be kicked out of the preferred network. Because preferred networks rank doctors and pay those who rank higher more money, doctors have a financial incentive to follow improved standards of care, Darling says.

Despite the pronouncements, the program may not accomplish much, says Michael Millenson, a health care expert and author of Demanding Excellence, a seminal book on hospital safety. That’s because a majority of U.S. hospitals already adhere to the standards created by the 100,000 Lives Campaign. Despite employer demands for improved safety, many providers may already meet the standards to be set out by the National Business Group on Health.

“We have to get past the point where declarations of intent are sufficient,” he says.

The National Business Group on Health has 250 members, but Darling could not say whether all members would adopt the board’s call to action. Darling, who has met with the five major health plans to get their support, anticipates that the new preferred network standards will take effect on a rolling basis beginning in February 2007.

—Jeremy Smerd