Category: Archive

Avaya, a telecommunications firm in Basking Ridge, N.J., focuses on designing, building, deploying, and managing networks and serves more than 1 million businesses worldwide, including more than 90 percent of Fortune 500, nonprofit agencies and the U.S. government. When the company was spun off from Lucent Technologies in 2000, Avaya inherited Convergys as an HR BPO provider. Avaya wanted to grow its business globally, but at the time, Convergys only had U.S. services. As often happens during restructurings, Avaya decided the provider they inherited would not meet its global needs and decided that bringing its HR process in-house would be less expensive and more productive. So Avaya and Convergys parted ways.

The spin-off required Avaya to implement a new Enterprise Resource Planning (ERP) system in 90 days (Avaya selected SAP), and to establish the appropriate technical infrastructure to support a global workforce and the most effective mix of regional and local HR operations. Bottom line: the organization needed to get a global human resources function up and running quickly.

Avaya’s HR department added headcount and decided to create a self-service structure, intended to better serve its workforce while allowing HR to focus on more strategic initiatives. But the company quickly learned it did not have the tools and processes in place to deploy a self-service tool.

It didn’t take long to realize that HR BPO was the solution Avaya needed after all. But with 20,000 employees in 52 countries, Avaya still needed a global provider. Steve Melamed, Avaya’s Vice President for Global HR Operations contacted Convergys to renew a partnership for a shared services strategy because Convergys had proven during work with Lucent that it had the tools and processes to implement an effective solution. Another factor in the decision was that since the parting, Convergys had taken steps toward becoming a global provider.

Melamed met with Karen Bowman, president of Convergys Employee Care. The two companies worked together to accomplish the goals of both organizations. Convergys purchased the global HR Service Center footprint Avaya had created on its own, and the two entered into a multi-country, multi-language outsourcing contract. Convergys had the HR BPO expertise Avaya was lacking and provided tools such as business intelligence, case management and priority-setting for successful migration.

Setting and adhering to clear objectives and working collaboratively was key for success, Melamed said. Avaya goals: to increase data accuracy, deliver data faster and more cost-effectively, using an efficient self-service model. The organizations agreed to target self-service for 70 percent of service-center transactions over the life of the five-year agreement. In addition, Avaya looked to Convergys to reduce HR transactions and costs, leverage internally built systems and operations, manage its disparate worldwide workforce and drive increased value through measurable HR services.

As it turned out, Avaya reached its goals before the two-year mark. Even more impressive, year-to-year savings were approximately $2 million, in addition to the streamlined employee life cycle workflow and reduced correction processing. Getting there is a credit to Convergys’ building a tailor-solution that met the client’s needs. “If you don’t make the right up-front moves in an HR BPO deal, mistakes keep happening,” Melamed said.

First, the organizations clearly defined “governance”—which party would be responsible for what, with a clear decision-making process. Melamed mused, “It’s rare to find a partner who will sign up for clearly articulated cost reductions, but we found one.” In fact, Convergys agreed to an often-unheard-of stipulation: Convergys loses the contract if it fails to meet SLAs in even one global region.

With its work cut out, Convergys didn’t rely on standard customer-service metrics—such as average time-to answer calls—as measures of success. Instead, Convergys entered into SLAs based on quality provided locally. For example, how quickly a key transaction can be closed or whether new-hire letters are sent out within 24 hours – as well as guaranteed service levels and response times.

Convergys HR Business Process Outsourcing (BPO) experts focused on redesigning processes to improve case handling and service response times, lower costs, and utilize existing software and technology to maximize the value of previous investments in SAP and other technologies.

They also recommended the application of best-practice methodologies to further streamline operations and gain greater efficiencies, including acquisition of Avaya’s global HR operations network of employee service operations serving Europe, the Middle East, Africa, and Asia Pacific and reorganizing them into global shared service centers; and assumption of vendor management responsibilities to deliver improvements in cost, efficiency and quality.

Convergys worked with Avaya to consolidate processes and systems in global service centers supporting 15,000 Avaya associates in 52 countries in more than 20 languages and with a high degree of HR service consistency. HR services delivered include recruiting and staffing, HR administration, payroll, benefits solutions and learning solutions, including e-learning.

The results were clearly measurable. The client realized a savings of more than 30 percent each year. Responses were faster and more accurate, with 80 percent of cases closed with five days (compared to Avaya’s prior record of 50 percent closed within 10 days). The intelligence tools provided by Convergys allow Avaya to track efficiency of HR programs with greater precision and discover work force trends and patterns. And a less tangible, but equally important benefit: Convergys helped foster an HR self-service culture among employees.

Though a recent ruling by the California Supreme Court exposes employers to a greater risk of litigation by employees alleging sexual harassment, experts say most workplaces probably have cultures and practices in place that make such a suit unlikely.

The case, brought by two female employees of the state’s Department of Corrections, centered on favoritism doled out by their boss, a male prison warden. According to court documents, he had ongoing affairs with three women who reported to him at two different facilities. The three enjoyed special treatment in the workplace as a result.

The plaintiffs claimed that their careers suffered even though they were neither involved with the warden nor subject to his whims. They still presented evidence of discrimination, such as being passed over for promotion, and showed that they feared retaliation if they complained. In ruling for them, the justices overturned two lower courts’ decisions, finding that the conditions the women endured fit a pattern of sexual harassment and violated the state’s Fair Employment and Housing Act.

Christopher Kondon, a partner in the law firm Kilpatrick & Lockhart Nicholson Graham in Los Angeles, says the ruling is “firmly rooted in real damage to real people.” But he adds that the fact pattern in this case is uncommon in the modern workplace, meaning plaintiffs would likely have to show outlandish conditions in order to prevail. Moreover, the justices excluded isolated acts, which means an employee has to demonstrate a pattern of mistreatment to make a case.

The decision could influence how companies handle workplace relationships and frame fraternization policies. The law already permits companies to ban relationships between supervisors and their reports–something UPS does, for example, largely to deter any perception of special treatment. In the event that two people in management get involved, UPS protocol is for the relationship to end or for one party leave the company.

Kondon says reaction to the case in the business community has been mild thus far. An appeal appears unlikely anyhow in part because the U.S. Supreme Court probably would not take the case. “This is a conservative court when it comes to sexual harassment in the workplace,” says Arthur Silbergeld, a partner with Proskauer Rose in Los Angeles. He explains that the justices would be almost certain to bypass hearing arguments and let stand a law that, in the court’s view, promotes a just and orderly workplace by keeping a lid on inappropriate behavior.   

—Jonathan Pont

Below is the primary body of the e-mail sent December 17, 2004, from Wendy’s CEO Jack Schuessler to all employees regarding the conversion of stock options. Some Wendy’s-specific information has been removed from the letter by the company.
 

Dear Fellow Employees:

    In February, we informed you of a change in our equity (stock) compensation strategy as part of a larger initiative, which affected the WeShare Stock Option Plan.

    During the last several months, we have been working on the strategy for the replacement of stock options. Significant consideration was given to providing competitive total compensation with direct linkages to employee and brand performance. We also considered the current regulatory environment, expectations of our shareholders and our strategic goals and objectives. Another consideration was historic stock option exercise patterns–the vast majority of employees use their options to obtain cash.

    The stock option replacement strategy will deliver incentives in a more effective manner with cash. Cash incentives are not subject to stock market volatility and, therefore, carry less risk than stock options. Unlike stock options, cash incentives will not require vesting. In addition, cash incentives will effectively align payouts with business performance. All levels of management, professional and administrative employees will now be covered by an incentive plan, with rewards aligned directly to the business unit they support.

    In order to accomplish our incentive compensation strategy, we are implementing the following:

• We will expand the eligible participants in the Management Stock Incentive Plan (MSIP) to include restricted stock awards to employees in grades [x, y and z], effective with the 2005 award.

• Effective with the 2005 plan year, we will increase the bonus targets for employees who are in an existing incentive plan, and who are not eligible for restricted stock awards.

• We will also implement, effective at the beginning of 2005, a new incentive plan for eligible employees who are not currently in an incentive-eligible position.

    During the next few months, we will provide you with more information, including eligibility and participation terms, about the new incentive plan along with the changes to our existing incentive plans. We feel these changes strengthen our commitment to deliver competitive total compensation to our employees while allowing us to achieve our strategic objectives.

Sincerely,

Jack Schuessler
Chairman and Chief Executive Officer

LinkedIn, the two-year-old business networking Web site that members use to broaden their base of business contacts, has been a particular boon for recruiters, giving them access to a growing database of prospects. Now they’ll have to pay for the privilege: The Palo Alto, California-based company has implemented new fees for the features recruiters take advantage of the most.

Though the company hopes to be profitable by the first quarter of 2006 and already boasts a sizable job advertising segment, the move should help preserve the site’s reputation as a place to informally connect. Many members use LinkedIn to search for colleagues or find new professional opportunities, says company co-founder and vice president Konstantin Guericke. That has made the site a prime haunt for recruiters, some of whom go to extremes to fatten their own network. Not everyone appreciates getting requests for contact from strangers, especially if the connection goes beyond the “first degree” of a trusted colleague.

The new business accounts, priced at $15 and $50, will allow recruiters to contact as many as 10 people per month, but they won’t have to go through intermediaries. Rather, they’ll be able to search the entire network for prospects. They won’t be able to see contact information, however, only the details of professional experience the individual has posted. In addition to greater anonymity, LinkedIn has introduced a feedback function for users to report whether a recruiter’s query was useful. And users can opt out of the paid search, which removes them from the recruiters’ reach but continues to let members request an introduction with people in their contacts’ networks at no charge.

—Jonathan Pont

Susan DePhillips
Author of Corporate Confidential: What It Really Takes to Get to the Top

The former vice president for human resources at Ross Stores interviewed more than 50 senior executives for her book. Her research challenges the notion that it is possible to take advantage of employee-friendly programs such as flex hours and telecommuting to raise a family and still get to the top rung of corporate management. DePhillips, now working as a consultant, talked to Workforce Management staff writer Douglas P. Shuit.

Workforce Management: Why do think work/life balance programs should come with warnings for ambitious executives?

Susan DePhillips: Telecommuting and compressed workweeks for younger professionals send a subliminal message that it’s possible to take advantage of these programs and still get to the top. While there are exceptions, the top executives I interviewed say you can’t have it all. There are in fact trade-offs to be made between careers and family life. There is something to be said about being in the office day in, day out.

WM: Are stay-at-home husbands or full-time nannies the only solution for executive women who want to reach senior management?

DePhillips: I don’t know how women can do it all without some sort of support mechanism. It’s not a coincidence that the successful women I interviewed tend not to have children or married later in life. For many it was a conscious choice.

WM: Do you think that might change?

DePhillips: I am starting to see change. That’s because female executives have had such a hard row to hoe to get where they are. So they bring a special sensitivity to this issue and are paying attention to the plight of women in their organizations. But there are also women executives who had to pay their dues and expect others to do the same. That view is shared by both men and women executives. I wouldn’t bet on seeing a complete reversal.

WM: How did you see this issue when you were a human resources executive?

DePhillips: I probably fall into the group of those executives who think that, first, the work has to get done. There has to be a recognition that the work has to get done. What was most surprising to me in talking to the senior executives is the way they sort of lived and breathed their jobs. The executives I interviewed consistently said that their primary focus was on their job, rather than any personal agenda that they had.

WM: What role should workforce managers play in communicating the possible risks of taking advantage of benefits like telecommuting?

DePhillips: The problem is that if you are a younger professional and you don’t know any better, you might feel you can still take advantage of flex hours and telecommuting and still have a fast-track career path to the top. The HR profession should be telling employees the truth. They should be taking a harder look at every program or employee perk and really think through the message it sends about what the corporation really values and rewards. These are great perks, but they are not designed for the people who want to shoot for the top. These programs are really designed for the B and C players in an organization.

Workforce Management, September 2005 —Subscribe Now!

As health insurance premiums continue to soar, some small and midsize employers that may not otherwise be candidates for self-insurance are turning to hybrid health plans that blend self-funding with fully insured coverage.

    The programs are permitted under Section 105 of the Internal Revenue Code–the same section of U.S. tax law that the originators of the consumer-driven health plan concept used to develop health reimbursement arrangements.

    But instead of creating individual health reimbursement arrangements, these hybrid arrangements use a single, employer-controlled account to self-fund claims that fall below a high-deductible health plan purchased by the employer and above lower deductibles assumed by individual employees.

    As with health reimbursement arrangements, any funds remaining in Section 105 accounts at year’s end are carried over into subsequent years to pay future medical expenses. However, unlike health reimbursement arrangements, the balance in the Section 105 account is not allocated to individual employees; rather, the employer retains ownership and control of the account.

    While some health care financing experts welcome this approach as an alternative to traditional self-funding arrangements for some small and midsize employers, others warn that it may not be feasible for employers with poor claims experience.

    Still, advocates say the design is an innovative way for smaller employers to self-fund health care benefits.

    “What the 105 program does is basically take a self-funded concept that employers with 5,000 employees have been using and bring it down to smaller employers,” says Gregg Dennis, president of Investment Insurance Services, a benefits broker in Las Vegas.

    IIS, which has been selling the programs for five years in Nevada, recently introduced an affinity group version of the program for members of the Better Business Bureau of Southern Colorado. The broker also is opening offices to market the programs in Palm Springs and Sacramento, California.

How it works
    “Say an employer has a fully insured plan with a $250 calendar-year deductible, $20 office visit co-payments, 80/20 co-insurance in network, and a $1,500 out-of-pocket max. The employee sees no change in out of pocket. But the employer takes on a higher deductible and picks up the difference, less the employee coinsurance,” says Steve Hicks, regional manager for IIS in Colorado Springs, Colorado.

    The employer also continues to collect premiums from employees calculated at the lower deductible rate, leaving sums in excess of the high-deductible plan premiums in the Section 105 account to pay claims as they come in, he adds.

    Depending on the size of the deductible the employer is willing to assume, premium savings can range from 30 percent to 50 percent or more, Hicks says. Some of those savings, though, could be offset by the employer’s increased exposure to claims falling within the self-insured retention.

    For example, first-year premium savings amounted to 55 percent for the University of Nevada School of Medicine Multi-specialty Group Practice South in Las Vegas, according to Craig Seiden, fiscal officer.

    “We were getting double-digit increases annually,” he says. “Premiums reached over $300 per employee per month.”

    With the medical group picking up 100 percent of the tab for employee-only coverage for its 150 employees, that came to a sizable sum, he notes.

    But by switching from a $500 annual deductible plan to a $7,500 annual deductible plan, the medical group’s premiums fell enough that in the second year of the program the employer dropped its employees’ individual deductibles to $250 and added fully paid vision coverage, Seiden says. “Our savings to date exceed six figures,” he says, declining to be more specific.

    When told about this new twist on the use of Section 105 accounts, Tony Miller, president of Minneapolis-based Definity Health, the company that used the same part of the tax code to develop the HRA concept, welcomed this innovation in the health care financing marketplace.

    “We think it’s great that people are awakening to the opportunities created by Section 105,” he says. “This is an innovative concept in terms of setting the price point lower for the consumer in terms of deductible and buying reinsurance above that and having the employer run that Section 105 between those two layers. It’s an innovative way of actually taking advantage of that actuarial cost curve,” he says. “I’m a big fan in that it’s more innovation in the marketplace.”

    But while the switch to partial self-insurance so far is working for the University of Nevada School of Medicine, it may not be appropriate for all employers, Seiden says.

    “IIS helped us in getting the claims history from our current carrier on our employees. If you don’t have that, then you’re really flying blind, because you need to see what the risk is on your employees,” he says. “If you have an unhealthy employee population, it’s going to be unfavorable in terms of cost.”

    However, “you don’t necessarily need an entirely healthy employee base, but you need to have a mix, a balanced mix,” he adds.

Some are skeptical
    “I think it’s an idea that’s been tried before and, in general, has not been very successful,” says Bill Sharon, a senior vice president with Aon Consulting in Tampa, Florida. “If an employer wants to self-fund, those advantages can be accomplished through traditional self-funding arrangements, the purchase of stop loss and minimum premium plans.”

    A minimum premium plan is somewhat similar to the Section 105 approach in that the employer pays a premium to cover fixed administrative costs and the cost of excess coverage, and then pays the claims as they come in, up to the excess coverage attachment point, he says.

    Another skeptic, Eric Raymond, president of Corporate Synergies Group, a Mount Laurel, New Jersey-based employee benefits consulting firm, warns that good claims experience may not last for some employers.

    “When you first start a self-funded program, you have what’s called ‘the lag.’ The first few months, it’s artificially low. It takes a few months before anyone submits claims. So there’s a big, distorted savings up front,” he says.

    “The truth is, you have to fully analyze the options and the implications,” Raymond says. “There might be some examples that look fantastic. But insurance companies price it so they don’t lose money.”

    Switching to a layered health program also is harder to administer, Sharon points out.

    “It’s more complicated administratively because you still have to figure out whether it’s a reimbursable claim between the $250 and the $5,000” or whatever deductible the employer has selected, he says. “It’s a cumbersome process as opposed to having the carrier do it all themselves.”

    Indeed, when the medical group’s employees use their health benefits, they first must file a claim with the insurer, which reviews it, and if it falls below the employer’s $7,500 deductible, it sends a zero-pay correspondence to both the employee and the provider, Seiden says.

    The employee would send this correspondence to the self-insured portion of the plan’s third-party administrator, Southern Nevada Benefit Administrators, which is a subsidiary of Investment Insurance Services. Then the claim is adjudicated and IIS receives an explanation of benefits and a check drawn on the Section 105 account, which the employer then forwards to the provider.

A few downsides
    Another downside to the arrangement is the fact that the plan technically is still a fully insured plan, making it subject to state benefit mandates, Dennis says. In addition, the plan is not individually underwritten, making it subject to general rate increases regardless of how good its claims experience may be, he adds.

    But because those future rate increases are based on a smaller premium to begin with, the annual rate increases will also be a fraction of what they had been, Dennis says.

    “Our clients are still going to get the same renewal increases,” he says, “but it’s on a number that was 50 percent less.”

From the August 22, 2005, issue of  Business Insurance. Written by Joanne Wojcik

After several years of sluggish hiring, the job market this year presented new college graduates more offers, higher salaries and bigger signing bonuses, harkening back to the go-go ’90s. And as the class of 2006 returns to campus optimistic about its job prospects, companies are sharpening their recruitment strategies, anticipating stiff competition.

“Employers are more confident about the economy and are looking to increase their hiring,” says Mark Smith, director of the career center at Washington University in St. Louis.

Newly minted graduates with bachelor’s degrees received an average of 18 percent more job offers compared with a year ago, according to WetFeet Research & Consulting. MBAs received 11 percent more.

“We kind of have recovered from the dot-com crash,” says Martin Shibata, director of career services at Cal Poly San Luis Obispo. “This was the first full year that I felt was back in full swing. Instead of hiring one or two students, companies were hiring five or 10 students. And students were getting multiple offers.”

Spots for career fairs this fall and slots for interviewing students on campus are filling up faster than in the past two academic years, says Susan Terry, director of Center for Career Services at the University of Washington.

New college graduates also received higher starting salaries than those offered a year earlier, according to the National Association of Colleges and Employers. The average starting salary for marketing graduates was $37,496, a 6.2 percent increase. The average for accounting graduates rose 5.3 percent to $43,269.

MBA salaries also rose. The average reached $90,652, the highest since 2001, according to the Graduate Management Admission Council.

And anecdotal evidence suggests that signing bonuses are rebounding.

Celia Harms, associate director of recruiting services for the MBA Career Management Center at the Stanford Graduate School of Business, says bonuses offered to the school’s graduates increased 33 percent, to a median of $20,000.

Employers are noticing the change in the tide. Taiwan Brown, manager of student sourcing and selection at Texas Instruments, says her company has noticed that candidates are receiving more offers. She expects competition for talent to stiffen in the coming year.

In response, some organizations are trying to build deeper relationships with students in hopes that students are more likely to accept an offer if they already feel at home there.

Booz Allen Hamilton will host more on-site visits for MBA students in top-tier programs, says Julie Martin, senior associate in recruiting services for the consulting firm. That’s in addition to offering mock interviews on campus workshops about résumé writing.

“We’ll practically be living on campus for six weeks,” she says.

The firm also will continue its “externship,” a program begun last year in which undergraduates spend a day shadowing a consultant.

Even companies where hiring hasn’t increased markedly are reviewing their college recruiting.

Dick Hoell, director of global workforce planning and staffing at Sun Microsystems, says his company’s hiring of new college graduates has remained steady in recent years. But Sun is “ratcheting up” its recruitment efforts, Hoell says, expanding the list of universities whose graduates it will target.

“It’s the bullish sense we have about Sun,” he says.

Bryant Ison, a product director at Johnson & Johnson involved in recruiting, says the best and the brightest always are in demand.

“No matter what kind of year it is,” Ison says, “the top students always have three or four offers.”

—Todd Henneman