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Posted on April 8, 2005June 29, 2023

State of the Sector Relocation

Relocation is undergoing a revival. As the economy warms up, companies are focusing new attention on services for transferees and new hires–and are demanding more from relocation providers.



    Kevin Kelleher, president and CEO of Cendant Mobility, one of the nation’s largest relocation companies, says he sees a dramatic escalation of the range of services clients want. They are driven by the pressure to control costs and increase productivity, by the trend toward full outsourcing for relocation and by global expansion.


    “Smaller companies, who had not previously been major players in the outsourcing trend, are moving increasingly to outsource services as well,” he notes.


    At Primacy Relocation, another of the nation’s largest relocation firms, traditional offerings are being supplemented by new services such as immigration law, repatriation and cross-cultural counseling. 


    “We are often asked to support expatriate transferees the whole time they are on their assignments, not just getting them there and getting them back,” says Primacy CFO Michelle Vallejo, a former member of the board of directors of Worldwide ERC, a leading relocation trade group in Washington, D.C.


    As a result of a stronger economy, the number of people who are being transferred by their company increased about 15 percent last year, says Cris Collie, executive vice president of Worldwide ERC.


    However, firms are outsourcing more of their relocation services for a variety of reasons other than sheer volume: In the wake of staffing cuts, human resource departments have fewer dedicated relocation specialists.


    Other factors–ranging from globalization to increased security concerns following 9/11–require relocation specialists to have a depth of knowledge that most firms can’t maintain in-house. And as companies grapple with increased government scrutiny, a greater desire to cut costs and more demands from savvy workers, relocation has simply become more complex.


    “If an employee has been moved before and is being recruited by another company, they want all the bells and whistles, from home buyouts to bonuses if they sell their home themselves,” says Jo Lay, vice president of relocation for Coldwell Banker Residential Brokerage.


    All this has caused relocation firms to be more attuned to the needs of individual transferees. For example, one employee may need assistance with pet boarding during home-finding trips while another needs support in finding fitness facilities, education centers and networking opportunities in the new community.


    “Traditionally, companies were offering a home sale program and spousal assistance to a married person moving an entire family to a new location,” says David Motherwell, COO of domestic relocation for Sirva Relocation. “Increasingly, we are seeing more single transferees or those who rent rather than own a home.”


    There are at least three different types of companies that use the word “relocation” in their name–brokers, movers and third-party relocation providers that consult and administer employers’ relocation benefit programs. Relocation services can range from real estate appraisers to providers of temporary housing and rental furniture to security companies and immigration attorneys.


    “Some companies may see relocation services as commodities, especially if their procurement department is driving the selection process,” Motherwell says. “The challenge is to educate companies that, unlike a commodity environment, the majority of expenses associated with relocating employees is not reduced by volume.”


    Increasingly, relocation companies are taking over from human resources departments more of the core duties involved in moving workers. Organizations are being pushed toward “single sourcing” for expatriate administration because of the legal ramifications of Sarbanes-Oxley.


    Cendant Mobility, for instance, has seen a 61 percent increase in the number of companies seeking full expatriate administration services.


    Weichert Relocation Resources Inc. in Norwell, Massachusetts, now often tracks all relocation and assignment expenses over the entire period that an employee is abroad. Some of the payments made to the employee during that time are treated as income, and some are not. WRRI calculates this information according to the tax laws of both the departure and destination countries and uploads it into the company’s payroll system.


    Relocation services are changing because of the dramatic growth in emerging countries such as Russia, India and China. As growth continues, companies and their transferring employees face new challenges in terms of policy and compensation structures.


    Kelleher says human resources executives are paying more attention to relocation services because of the “stealth expatriate” phenomenon. Such an employee is sent on assignment without the knowledge or participation of human resources. That can place a company at risk for visa, tax and work permit compliance problems.


    In a recent survey sponsored by Cendant Mobility and Worldwide ERC, 78 percent of respondents either confirmed or suspected that they had stealth expats in their organizations, although an overwhelming majority–83 percent–did not have systems in place to track them.


    Increased outsourcing relocation is also being fueled by greater corporate governance scrutiny and a realization that human resources and payroll should concentrate on their core expertise, which does not typically include moving people.


    “It’s a matter of risk management, since companies can look to providers like us to be responsible for making sure everything is done right,” says Ellie Sullivan, director of consulting services for WRRI.


Workforce Management, April 2005, pp. 49-50 — Subscribe Now!

Posted on April 6, 2005July 10, 2018

Stellar Reviews for Brookshire at Eddy Awards

Brookshire grocery co. sent its employees to the movies to help them better plan their retirements. Using the slogan “We’re planning a blockbuster … and you’re the star” to launch its in-house defined-contribution investment program, the company mailed new employees faux movie ads featuring hits such as “Mission: Possible.” Employees who did not opt into the retirement plans were invited to the “Night of the Living Defaulted.” But help was always close at hand with “The Maximator … He’s back … to help you save for your future.”

The creative campaign, prepared with help from MFS Retirement Services, won Texas-based Brookshire first-place honors in the initial education category for corporate plan sponsors at the annual Eddy Awards, sponsored by Pensions & Investments and Workforce Management. The competition recognizes corporate, public and union defined-contribution plan sponsors for the best and most effective investment education programs in several categories.


Successful defined-contribution investment education hinges on branding and the ability to deliver powerful investment education messages in a creative way that ties back to the plan sponsor, rather than the service provider, according to the competition’s judges. Twenty-one Eddy Awards were given to 19 companies at the conclusion of the two publications’ Defined Contribution/401(k) Conference in Miami. Starwood Hotels & Resorts Worldwide Inc. won two first-place trophies. Smithfield Foods Inc. won two third-place awards.


Phillips-Van Heusen Corp. won the category for companies with fewer than 5,000 employees. “The World Series of Retirement” was a special project that celebrated 401(k) Day. The campaign included an invitation/raffle ticket for “Section 401, Row K” and baseball cards featuring Johnny Benchmark, Barry Stocks and Bonds and Sammy So-So Saver. Company officials turned the headquarters’ atrium into a baseball diamond, where concession goodies included Baby Ruth candy bars, Dubble Bubble gum and popcorn.


Tammie Palchanes, corporate manager of retirement plans at Phillips-Van Heusen, says the idea came from service provider Strong Retirement Plan Services, which is now part of Wells Fargo Retirement Plan Services. “When your record keeper goes to the trouble of providing a great idea, it’s up to the plan sponsor to take the idea and run with it,” Palchanes says.


The judges also recognized entries devoted to training trainers instead of educating participants. Starwood took top honors for its use of a deck of oversized cards to help to train district human resources managers at each hotel. The education cards contained answers to questions frequently asked by participants. Plan promotion cards suggested ways to promote the 401(k) plan. A wild card gave managers who came up with promotion ideas a chance to win a Palm Pilot.


“We needed the directors of human resources to understand the plan for us and to champion it for us. And we wanted to make it fun for them,” said Frank Shanny, Starwood’s benefits manager.


For a complete list of Eddy Award winners, go to workforce.com/eddys.


—Phyllis Feinberg


 

Posted on April 6, 2005July 10, 2018

Voluntary Benefits Go by the Wayside Amid an Uncertain Economy

The world of voluntary benefits has choices ranging from coverage for human organ transplants to physical exams for pet canaries. And it appears to have more than a few contradictions, too. When it’s time to decide on the benefits, employers and employees seem to experience a disconnect–not with each other but with their own intent and action.



    Human resources professionals herald the array of such benefits–ones workers pay for entirely or partially–as a way to boost the trifecta of recruitment, retention and productivity. But the percentage of companies offering benefits overall remained flat from 2003 to 2004, according to the 2004 Benefits Survey Report from the Society of Human Resource Management. And three significant categories of voluntary benefits–disability, long-term care and supplemental health accident insurance–declined in employer participation during that time. The share of employers offering long-term disability insurance dropped from 88 percent to 84 percent–down from 91 percent in 2002. Long-term care slid from 47 percent to 38 percent, while supplemental accident dropped from 49 percent to 42 percent, the survey found.


    Employees seem to act as ambivalently as employers. More than 70 percent cited loss of income as their No. 1 financial concern in the MetLife Study of Employee Benefits Trends, which polled employees and employers in the third quarter of last year.


    Simply put, employees worry that they might not be able to pay their bills if they lose their jobs, but many do nothing to protect their income–40 percent said they had no disability insurance. They value vacations more, reflecting perhaps the need to balance the demands of work and life, rather than indicating irresponsibility, a MetLife marketer says. Sixty-four percent of workers ranked paid vacations ahead of disability–at 26 percent–in importance.


    What’s wrong with this picture? The uncertain economy is one culprit. “Given the current economic environment, employers are focusing more on the core benefits to keep them competitive and control cost increases for them and their employees,” says Edward M. Pudlowski, a senior manager in the Dallas office of Ernst & Young. “Voluntary benefits are not getting as much play. In terms of the overall interest there was in the mid- to late ‘90s, there’s less focus on that area now.”


    The survey results are also understandable when viewed in a broader context, says Wayne Brockbank, clinical professor of business at the University of Michigan’s Ross School of Business. “In an era where every company is under both domestic and global pressures to be more productive, they have to continually ask themselves, ‘What investment dollars in any resource are getting the greatest return?’ “


    Another reason for the stabilization of voluntary benefits is today’s labor market, says Brockbank, co-director of Human Resource Education at the business school and director of its Center for Strategic Human Resource Leadership. “Benefits across the board play an important role in obtaining employees, but right now we’re in a relatively soft labor market,” he says. “Someday in the near or distant future, there will again be a tight labor market, and then the benefits will become relatively more important.”


Employee misconceptions
    Insufficient employee education also comes into play. Only 40 percent of employees–and 29 percent of those ages 21 to 30–understand which benefits best meet their needs, according to the MetLife study. Some underestimate employers’ contributions. One example, though not for a voluntary benefit: 28 percent of workers believed employers pay less than $1,000 a year toward their health insurance.


    “It was a big ’Wow–unbelievable!’ ” says Beth Hirschhorn, chief marketing officer for MetLife in New York. She recalls that when company president and chief operating officer C. Robert Henrikson announced the finding at a symposium with corporate clients, a hush swept the room, followed by a buzz of conversations.


    The average cost to employers for health insurance is actually more than $7,000 annually for family coverage and more than $3,000 for an individual, Hirschhorn says.


    The survey underscores the need for employers and the benefits industry to better communicate the value of what they’re delivering, she says. “We may offer a diverse and robust set of benefits, but when we do, the value is not being received.”


    In the MetLife survey, employers ranked the objectives of benefits in this order: controlling health and welfare costs, retaining workers, increasing job satisfaction, increasing productivity, attracting workers and reducing HR administrative costs. Offerings today range from short- and long-term disability to accidental death; life insurance; specified health events, such as heart attack, stroke and coma; auto and homeowner insurance; legal services; and pet health insurance. Among those selections, life insurance premiums have seen the biggest increases because they rise with inflation and the cost of living.


    Despite many pretax advantages for employers and workers, some say the impact of voluntary benefits on the bottom line can be difficult to measure. “We’ve tried to capture it, but it’s just not out there,” says Lance Osborne, vice president of field force development at Aflac in Columbus, Georgia.


    Few studies have been done on benefits’ return on investment, Brockbank says, but employers have several straightforward ways of determining it. They can compare productivity before and after workers have benefits, and they can review sales, revenue and cash flow.


Growth areas
    Aflac, a Fortune 500 company, writes voluntary insurance policies for more than 300,000 payroll accounts. Its 2004 revenues were $13.3 billion, a 16 percent increase from 2003, with “a slight increase of 5 percent in new sales in 2004 over 2003,” Osborne says.


    Mirroring the survey finding, sales of long-term coverage have dipped at the company, Osborne says. “It’s a great product and very much needed, but we haven’t really found a way to market it in the work site. It’s a much more complicated buying process with lots of education and choices.”


    Short-term disability sales, however, are increasing, while accident coverage has seen the most growth, he says. “We introduced it in 1988, and today it’s surpassed cancer, which is our No. 3” benefit, Osborne adds.


    Transportation benefits are another fast-growing area, says Pudlowski at Ernst & Young. “It’s used to pay for public transportation or parking, basically on a pretax basis.”


    Pet health insurance barely registered on the SHRM radar. Only 3 percent of employers offer it, though its survey sample was small and self-selected; 459 employers responded to an e-mailed questionnaire.


    But Veterinary Pet Insurance, based in Brea, Calif., has seen revenue climb from $15 million to $100 million over a five-year period ending in 2004, with voluntary benefits accounting for 15 percent of that, says Bill Gorman, group sales manager of national accounts. “We’ve had huge growth–huge–and we anticipate growing.”


    Employees in group plans receive a 5 percent discount on policies, which cost $15 to $30 a month, depending on the pet’s age. The typical customer is a woman 30 to 50 years old with a family income of $75,000, Gorman says. “People have a tighter bond today with their pets,” he adds.


    Many customers are hospital employees. “The reason is that I think they understand medicine,” Gorman says. “They understand cost. They’re in stressful positions” and may have pets to relieve stress.


Size matters
    Valero Energy Corp., a Fortune 500 refining company based in San Antonio with expected revenues of $55 billion, offers a menu of voluntary benefits typical of large companies. Offerings include vision, legal services, cancer coverage, long-term care, and auto and home insurance. With a workforce of 20,000, the company’s employees are in a variety of life stages, says Mary Rose Brown, senior vice president of corporate communications. “Our plan allows young families, single parents, couples, empty nesters, etc., all the ability to choose a plan that is applicable for the phase of life they are currently in,” she says.


    The greatest participation is in traditional medical and dental coverage. “The benefits that seem to be the least popular are the supplemental plans like the legal plan and long-term care,” Brown says. “Employees who have taken advantage of benefits appreciate them, but the plans aren’t as popular as some of its other offerings like vision care.”


    Like other employers, Valero has seen the biggest increase in the cost of medical and prescription coverage, but its size gives it an advantage in other areas. “As Valero becomes larger and our buying power is greater, we are able to see some cost decrease in group plans such as group term life,” Brown says.


    Looking ahead, Aflac’s Osborne predicts that growth for the benefits industry will come from diversified products. “You’ll see more and more different types, based on consumer needs,” he says. Web enrollments will increase, and small companies will look to benefit carriers for employee education, Osborne adds.


    One in five employers in the MetLife survey said their most important benefits strategy was to provide a wider assortment of voluntary benefits. Many employees–34 percent, with the greatest interest among young workers–also want more. Additional benefits boost morale, industry observers agree, but contrary to conventional wisdom, they don’t necessarily provide a competitive edge, Ernst & Young’s Pudlowski says. Pensions, however, play an important role.


    As for helping retention, many other factors influence why an employee stays or leaves. “Benefits are usually third or fourth on the list,” Pudlowski says. “As we do exit interviews with employees, one of the top things we find is that it has to do mostly with salaries. After that, it’s their work environment, the culture.” There is also a very human, often unpredictable dynamic: “How well they get along with their managers.” Too bad there’s no insurance for that.


Workforce Management, April 2005, p. 68-69 — Subscribe Now!

Posted on April 4, 2005June 29, 2023

View the 2006 Optimas Awards

The 2006 reception and ceremony were held at the Michelangelo hotel in New York City on March 23.

This year’s Optimas Awards winners are exceptional business people with big ideas that achieved bottom-line business results. Click here for more information on our winners and the Workforce Management Optimas Awards.



   


The Workforce Management Optimas Awards winners enjoy a casual networking luncheon and extremely popular and valuable executive roundtable discussions where current workforce obstacles and innovative solutions are discussed. The day concludes with a reception and the Optimas Awards ceremony.


   

The Optimas award


   


(from left to right)
Todd Johnson, Publisher, Workforce Management, Bob Scally, Senior Editor, Online, Workforce Management, John Nicholas, Director of Employee Development at The J. M. Smucker Co.,Dr. Kevin D. Gazzara, Strategy & Design Program Manager at Intel,Bob Dortch, Sales Director & General Manager, Online, Workforce Management
   

(from left to right)
Lauren Kalb, Manager, Institutional
Marketing at MetLife,Elena Wu Casey, Assistant Vice President, Institutional Marketing at MetLife,
Jason Asch, Southeast Sales Manager, Workforce Management


   


Spending a few minutes with the latest issue of Workforce Management
   

(from left to right)
Carroll Lachnit, Executive Editor, Workforce Management, John Marino, Account Executive, The Marino Organization, Robert Barleta, Vice President, The Marino Organization, John Hollon, Editor,
Workforce Management
.


   


Ceremony attendees proudly displaying the Optimas Awards March 13 issue.
   

Workforce Management publisher, Todd Johnson opens the ceremony with a warm welcome to the Optimas Awards winners and ceremony attendees.


   


Ben Colvin, Chief Marketing Officer, Institutional Business representing Optimas Awards sponsor MetLife, delivers an inspiring introduction.
   

Paul Seymour, Vice President, Business Development at EmployBridge accepting the award for FINANCIAL IMPACT from Workforce Management editor, John Hollon.
 


   


Mary Anne McInnis, Senior Training Design Specialist at Randstad North America accepting the award for COMPETITIVE ADVANTAGE.
   


John Nicholas, Director of Employee Development at J.M. Smucker Co. accepting the award for
ETHICAL PRACTICE.

 


   


Kent Kirch, Global Recruiting Director for Deloitte Touche Tohmatsu accepting the award for GLOBAL OUTLOOK.


   


Dan Hilbert, Employment Manager at Valero Energy Corp. accepting the award for INNOVATION.

 


   


Bradley D. Belt, Executive Director at Pension Benefit Guaranty Corp. accepting the award for
MANAGING CHANGE.
   

Carroll Lachnit, Executive Editor, Workforce Management accepting the award for PARTNERSHIP on behalf of City of Scottsdale, who could not be in attendance.


   


Richard Lobo, Head of Employee Relations at Infosys Technologies accepting the award for SERVICE.


   

John Hollon accepting the award for VISION on behalf of UnitedHealth Group who could not be in attendance.


   


Kevin D. Gazzara, Strategy & Design Program Manager at Intel accepting the award for GENERAL EXCELLENCE.
   

(from left to right)
Todd Johnson, Publisher,Carroll Lachnit, Executive Editor,John Hollon, Editor,Bob Scally, Senior Editor, Online, Tonya Adams,
Marketing Manager


It’s an extraordinary day, and the best way to attend is to win! Visit Workforce.com to learn more about the Awards, and how to nominate your company’s achievements!

Posted on April 1, 2005July 10, 2018

Costco’s Appearance Crusade

In December, a four-year-long court battle came to an end when a U.S. Court of Appeals dismissed a $2 million religious discrimination lawsuit brought against Costco, the nation’s largest wholesale retailer, which logged some $47 billion in sales last year.



    The case, brought by West Springfield, Massachusetts, employee Kimberly Cloutier, was certainly not your average religious discrimination matter. Provoked by a change in the wholesaler’s dress code policy, it pitted facial piercings against professional appearance, and involved, among other things, an eyebrow ring and a small church that few people have ever heard of.


    Beneath this quirky legal matter is an underlying issue of growing concern to all employers: balancing an employee’s religious beliefs against the business interests of a company.


Piercings as religion
    The story began in 2001, when Costco revised its dress code to prohibit all facial jewelry, aside from earrings. Costco made this change in order to promote what the company considered a professional appearance, court records indicate. (Judy Vadney, Costco’s personnel director, declined to comment, citing the recent end of “very expensive litigation.”)


    Kimberly Cloutier, a cashier and an employee since 1997, had numerous body piercings and tattoos on her upper arms. Soon after the new policy was disseminated, Cloutier’s supervisor informed her that she had to remove her facial piercings–in particular, her eyebrow ring, which she refused to do.


    At that point, Cloutier indicated that she was a member of the Church of Body Modification, and said that her eyebrow piercing was part of her religion.


    The Church of Body Modification, established in 1999, has about 1,000 members and encourages its adherents to “grow as individuals through body modification and its teachings” to “promote growth in mind, body and spirit.” It uses a Round Rock, Texas, post office box as its mailing address; several founding members are in Phoenix.


    The church urges its members to be “confident role models in learning, teaching and displaying body modification,” which includes piercing, tattooing, branding, cutting and body manipulation. Court records indicate that Cloutier interpreted this to mean that her piercings should be visible at all times, and believed that she was prohibited from removing or covering her facial jewelry. The conflict with Costco’s dress code was clear.


Religious diversity growing
    An employee’s religious beliefs often enter into the workplace, creating a sometimes awkward–if not potentially litigious–situation for employers, who are required by federal law not to discriminate on the basis of religion.


    While many employers are more familiar with employees’ requests for work-schedule changes to accommodate religious practice and beliefs, a growing number are becoming acquainted with complaints about dress codes on the basis of religion, says Patrick Kilker, an attorney at Eckert Seamans Cherin & Mellott LLC in Pittsburgh. More dress-code requests will come. “With growing religious diversity in this country, you can bet on these cases becoming more common,” he says.


    Many religions impose some sort of requirement upon their adherents in terms of appearance: Some require the growing of facial hair, for example, or the wearing of certain accoutrement, such as a Sikh turban, a Jewish yarmulke or a Muslim hijab, or head scarf. Other religions require certain markings, tattoos or, in the case of the Church of Body Modification, a whole host of practices that might interfere with a company’s dress code.


    These religiously motivated practices leave some companies with a dilemma as to how to accommodate an employee’s religious beliefs if they conflict with standards of grooming or appearance on the job.


Is it a hardship?
    The resolution of this dilemma is not entirely up to a company’s discretion. The law guides a company’s hand, says Patrick H. Hicks, managing partner at the Las Vegas office of the employment law firm Littler Mendelson LLP.


    According to the Civil Rights Act of 1964, “the employer has an obligation to reasonably accommodate an employee’s religious beliefs,” he says, which includes making allowances for an employee’s garb or appearance when it is influenced by religion. “But it’s not an absolute,” he adds. If an accommodation would create an “undue hardship” on the employer, the employer is not obliged to accommodate an employee’s religious beliefs.


    “Undue hardship” and “reasonable accommodation” are terms often sorted out in court, Hicks says. “These cases typically resolve themselves on a case-by-case, fact-by-fact basis. What might be an undue hardship for one company might not be an undue hardship for another. The exact same accommodation might be reasonable for one company and unreasonable for another,” he says.


Negotiations break down
    An employer’s first goal is to stay out of an expensive and uncertain court battle. The first step toward that goal is to strive for a reasonable accommodation that works for the individual employee. “Engage in an interactive process with the employee, ask what it is that the religion requires, and what the company can do to reasonably accommodate,” says Hicks.


    Employers can’t always get the reasonable accommodation they want. The court record shows that early conversations between Cloutier and Costco could not be considered productive.


    A supervisor instructed Cloutier to remove her facial jewelry. Cloutier refused, and the next day filed a religiousdiscrimination case with the Equal Employment Opportunity Commission. When she returned to work for her next shift, she met with the store manager. During that meeting, she suggested covering her eyebrow piercing with a flesh-colored bandage. The store manager rejected this suggestion, and told her to either remove the piercing or go home. She left.


    Several weeks passed, and while Cloutier awaited resolution of her EEOC claim, she was terminated via a letter, which cited her unexcused absences resulting from noncompliance with the dress code. The EEOC mediation process kept the parties in contact, however, and in August, Costco offered to let Cloutier return to work, wearing either a plastic retainer in her piercings to keep the holes from healing and closing, or a bandage over her jewelry.


    Although this was an accommodation that she had suggested earlier, Cloutier now refused. The court records show that Cloutier’s position was that “the proffered accommodations would be inadequate, because the (Church of Body Modification’s) tenets, as she interprets them, require her to display her facial piercings at all times. Replacing her eyebrow piercing with a plastic retainer, or covering it with a Band-Aid would thus contradict her religious convictions.” (By not accepting Cloutier’s initial offer of accommodation, Costco missed “a golden opportunity to avoid four years of litigation,” points out law firm Nixon Peabody in its analysis of the case.)


    Cloutier now maintained that the only reasonable accommodation would be to excuse her from Costco’s dress code, allowing her to wear her facial jewelry to work. Costco’s response: This would interfere with the company’s ability to maintain a professional image. Negotiations broke down.


Victory for employers
    If an accommodation can’t be reached with an employee, the next step is to clearly identify “the legitimate business interests the company is trying to preserve and protect,” says Hicks. The courts often give employers wide latitude in what is considered an undue hardship.


    Several cases, for example, have found that employers are not discriminating when they require an employee or job applicant to be clean-shaven, in order to maintain an image of cleanliness, or for safety matters. For instance, in a 1984 case against Chevron, a court decided that the company did not have to exempt a Sikh employee from a rule requiring that all machinists be clean-shaven, because the policy was based on the necessity of wearing a respirator with a gas-tight face seal.


    In Costco’s case, the business interest was in presenting a neat, clean professional appearance. The court decided that if it forced Costco to create an exception for Cloutier’s eyebrow ring and other piercings, it would create an undue hardship on the company.


    The court held the following: “It is axiomatic that, for better or for worse, employees reflect on employers. This is particularly true of employees who regularly interact with customers. … Even if Cloutier did not regularly receive any complaints about her appearance, her facial jewelry influenced Costco’s public image and, in Costco’s calculation, detracted from its professionalism. … Costco has made a determination that facial piercings, aside from earrings, detract from the ‘neat, clean, and professional image’ that it aims to cultivate. Such a business determination is within its discretion.”


    With that, Cloutier’s discrimination case ended.


    While this was a victory for Costco, and the case was hailed as a victory for employers seeking to balancedress codes against various religious claims, there are a couple of points to keep in mind, says Hicks. If Cloutier did not work as a cashier, but in a position where she did not interact with customers, Costco might have found it difficult to make the same argument against her facial jewelry.


    Second, Cloutier’s hard-line, no-compromise approach worked against her in court, says Kilker. The court cited several cases involving jewelry where employees have insisted that the only accommodation is exemption from a dress code policy. In one case, an employee wore a gold cross pin; in another, an employee took a vow to wear a graphic anti-abortion button for religious reasons.


    Courts take a dim view of the inflexibility of the employee’s stance. “We are faced with the … situation of an employee who will accept no accommodation short of an outright exemption from a neutral dress code. Granting such an exemption would be an undue hardship because it would adversely affect the employer’s public image,” the appeals court held. An employee that offers several accommodations, even if he or she is later rejected by the employer, might fare better in court, says Hicks.


    Finally, it’s important to note the grounds that the court did not decide on: whether Cloutier’s religious convictions were legitimate. First, courts are loath to determine the sincerity of an individual’s religious beliefs, Hicks says. Second, in the eyes of the EEOC, “it doesn’t take much to become a religion,” Kilker says.


    The EEOC, Kilker says, defines religion broadly to include moral or ethical beliefs as to what is right or wrong. “In order to constitute a religion, the employee’s belief must be sincere, and it must occupy a place in the employee’s life that is parallel to the place filled by God, in traditional religions,” he says. “That makes it a low threshold to establish that you are a member of a religion and that you need an accommodation so you can practice or observe that religion.”


    This means that employers shouldn’t get caught in the “is this really a religion game,” says Kilker, when confronted with an employee who is citing religious grounds for noncompliance with a dress code. “Generally, I would err on the side of attempting to accommodate someone’s religion, even if you have doubts that it would constitute a religion, in view of the EEOC’s broad interpretation of what a religion is,” he says.


    An attempt to accommodate won’t guarantee that employers stay out of court, but it’s a start.


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

Posted on April 1, 2005July 10, 2018

Lifecyle Funds Can Help Companies Mitigate Risk and Boost Employee Savings

M elenie Bloch does not like holding her employees’ hands. As the pension administrator for Univar USA Inc., she believes that her job is to educate workers about their options for retirement but not to make decisions for them.



    But when the chemical distribution company’s 401(k) plan provider, Fidelity Investments, launched a pilot program that would automatically sweep a percentage of employees’ pay into so-called lifecycle funds, Bloch didn’t hesitate to be one of the first to sign up her company. Lifecycle mutual funds periodically rebalance between stocks and bonds based on the investor’s retirement age, and for Bloch, “it was a no-brainer.”


    “It’s amazing to me that more people aren’t doing it,” she says.


    For Bloch and a growing number of 401(k) plan administrators, deciding whether to be a parent or teacher is becoming an increasingly fine line. On one hand, they don’t want employees to feel that they are being forced into financial decisions, but on the other hand, if employees aren’t signing up to participate in the 401(k), “it means they don’t understand the consequences of their inaction,” Bloch says.


    Univar, based in Kirkland, Washington, was one of the first companies to make lifecycle funds a default option in its 401(k) plan. It’s a trend that now is emerging as more executives decide that the risk of employees not having enough saved for retirement is more of a danger than the risk of them losing all of their money by investing in equity funds. Lifecycle funds seem to address both potential fears. As of January, 1,517 of Univar’s 3,200 plan participants were invested in lifecycle funds, 39 percent through the default.


    At any conference or meeting on retirement benefits, employers can be heard fretting about how their workers aren’t saving enough for retirement. Their concerns aren’t unfounded. According to a 2003 Hewitt Associates study, 49 percent of employees surveyed said they were contributing less or much less to their retirement savings than they probably need to.


    “Employers recognize that at this rate very few people are going to be able to retire at 65 and play golf,” says Martha Tejera, a principal at Mercer Human Resource Consulting. “You want people working because they want to, not because they have to. You don’t want people hanging around because they can’t afford to retire.”



“On autopilot”
    The adoption of automatic enrollment, by which employees are placed in a 401(k) plan and must opt out if they don’t want to participate, has partially solved this problem, but not entirely. Most workers just stay in the default option, which is usually a fund that invests so conservatively that it has little chance of providing them with enough savings for retirement. Sixty-seven percent of plans have money market or stable-value funds as their default option, according to Hewitt.


    This is where lifecycle funds come in. These investment portfolios, which are mutual funds that invest in a group of mutual funds, name the date of retirement and automatically adjust the balance of stocks and bonds as time passes and the employee gets closer to the date of retirement.


    “Employers just have to look at the employee’s birth date and put them in the right fund,” Tejera says. “It puts the whole thing on autopilot and they don’t have to rebalance.” In the past year, Putnam Investments, MassMutual Financial Group, Russell Investments and TIAA-CREF have launched these funds, joining the likes of Fidelity and T. Rowe Price, which have been in the market for years. Lifecycle funds, also known as target-date funds, were the most rapidly adopted automatic plan features last year, according to a Fidelity survey, which found that 1,200 employers added its lifecycle products in 2004.


    There is a problem with how employees use them, however. Some defeat the purpose of the funds by putting only a portion of 401(k) savings into them while also investing in other funds, says Lori Lucas, director of participant research at Hewitt Associates. That negates the automatic rebalancing feature of the funds. While 38 percent of 401(k) plans offer lifecycle funds and 37 percent of plan participants use these funds when they are available, only 13.2 percent of those participants have all of their noncompany stock investments in a single lifecycle fund, according to Hewitt.


    “Employers really need to make it clear that there is a fork in the road and that you either choose one lifecycle fund or you choose a bunch of other funds,” Lucas says.


    This is where Bloch, as a pension administrator, puts her foot down. While she recognizes that there are participants in her plan who are misusing lifecycle funds, she does not have the time or resources to alert each of them to the fact that they are doing it wrong, she says. “I don’t believe in being a parent; I believe in education,” she says.



“Employers really need to make it clear that there is a fork in the road and that you either choose one lifecycle fund or you choose a bunch of other funds.”
—Lori Lucas, director of participant research at Hewitt Associates




    To this end, Univar, with help from Fidelity, periodically distributes information about its lifecycle funds and how they work. And that’s where the involvement ends.


    Parsons Brinckerhoff, a New York-based engineering consulting firm, is another company that is considering making its lifecycle funds a default option in its 401(k) plan. The company began offering T. Rowe Price’s lifecycle funds, called the Retirement Funds, in July. It already has about 200 of its 5,000 participants using the funds, says Mary Buckley, the company’s human resources administrator for retirement plans.


    The company views it as a natural progression to consider replacing its stable-value selection with these funds, Buckley says. “We want people to have the best rate of return with the least amount of risk,” she says. “The stable-value option is great for no risk, but the rate of return is less than stellar.” Parsons’ 401(k) committee expects to make a decision about the default option this year.



Awaiting guidance
    Many other companies, meanwhile, are waiting on the sidelines. Their hesitation is warranted, given that companies have been given little or no guidance from regulators about their liabilities if they offer these funds as the default option, say attorneys and consultants.


    “As a fiduciary, the government has made it easy for me to warn on one thing regarding default options: risk of loss,” says Steven Friedman, an attorney in the New York office of Littler Mendelson. The liability implications of being too conservative in the selection of a default option are unclear. Sixty-seven percent of plans with automatic enrollment default to a money market or stable-value fund, according to Hewitt.


    Given the tenor of the times, it’s not hard to imagine employees filing suit against former employers because they were placed in low-yielding money market funds, stayed there for 30 years and now don’t have enough money for retirement.


    “Plan sponsors are clearly split on this issue of growth versus preservation,” says Sam Campbell, a consultant at Financial Research Corp., a Boston-based firm. He says the pendulum is swinging toward the idea that employers could get in more trouble if they lean toward preservation .


    Cadmus Communications, a Richmond, Virginia-based publisher and printer, confronted this issue head-on last year when it adopted T. Rowe Price’s Retirement Funds as the default option for its 401(k). For benefits manager Cindy Ellis and the attorneys with whom she consulted, the choice seemed clear. The main concern for employers like Cadmus is that employees will come to them in 30 years saying, ” ‘You should have told me to do this,’ ” Ellis says.


    Lifecycle funds may be the solution because they provide investment options that make sense for the young worker in his 20s as well as the older employee who needs to have a more conservative portfolio, Ellis says. Cadmus, which used to have both a traditional defined-benefit plan and a 401(k) plan, froze the former in August 2003. The following month, it implemented a 2 percent default into T. Rowe Price Retirement Funds for employees who had not already invested in the company’s 401(k) plan. The company also offers a 2 percent match into its 401(k) plan. There were no changes for employees who already were contributing to the plan, which now has $133 million in assets and 3,500 participants.


    Cadmus has started to track the behavior of the participants in the plan, and Ellis says there has been good feedback so far. Initially, some employees were splitting up their 401(k) accounts between two lifecycle funds because T. Rowe Price only had funds with retirement dates in 10-year increments and they didn’t know exactly when they would retire, she explains. This became less of an issue last year when T. Rowe launched target-date funds in five-year increments. “We advised employees to choose the date they turn 65,” she says. Cadmus held a series of employee meetings when the new funds were added to the plan, and continues to explain them and answer questions in mailings and statement inserts.


    While education will help lifecycle funds become more popular as default options, consultants say there won’t be a widespread adoption until regulators address the liability issue.


    The Internal Revenue Service has issued guidance saying that it would be appropriate for employers to make balanced funds, which are equity investments, a default option in their 401(k) plans. But there is still ambiguity about the use of lifecycle funds as the default, Lucas says. Financial Research Corp.’s Campbell believes that it’s only a matter of time before the IRS or another government body addresses the liability of having default funds that can’t outperform the market. The IRS or Department of Labor will likely provide more specific guidance on the question as early as this year, Campbell says.


    There is one encouraging sign for companies that are offering lifecycle funds as the default: The Bush administration’s Social Security reform proposal also calls for them to be the default option for investors over 50. If adopted, that would be a fairly good informal seal of approval.


    “If this happens, it would certainly send a signal to private-sector employers that you might want to do that,” says Patrick Purcell, specialist in social legislation for the Congressional Research Service at the Library of Congress. Still, he says, “it’s not the same thing as legislators saying this is OK under ERISA.”



Workforce Management, April 2005, pp. 65-67 — Subscribe Now!

Posted on April 1, 2005July 10, 2018

Trucking Outfit Shifts Hiring Into Overdrive

In trucking, a full crew of drivers is as critical to keeping rigs on the road making money as full tanks of diesel.



    But getting a new driver behind the wheel isn’t easy. Prospects have to pass government physical and drug tests, a road test and, in some areas, state and county criminal checks. After drivers have been cleared, they need to learn how to operate in-cab computers and other equipment and ride along with an experienced driver to learn their route.


    From beginning to end, the process can take a month. That’s a long time to be short-handed if there’s no ready pool of candidates to draw from should someone give notice unexpectedly.


    For all those reasons, it didn’t surprise John Pryor when three years ago executives at Southeastern Freight Lines made a New Year’s resolution to cut hiring time for drivers. On top of that, they wanted the drivers they hired to be better at their jobs–better suited to the work, stay longer on the job, have fewer accidents, and like what they do.


    Carrying out that resolution fell to Pryor, vice president of human resources and safety for Southeastern, a privately held $565.1 million company based in Lexington, South Carolina. Southeastern is what’s known as a less-than-truckload commercial carrier, consolidating freight from multiple customers onto one truck for delivery to a nearby city. Southeastern delivers to a 12-state area in the southeastern United States using 5,000 drivers and freight handlers operating from a network of local and regional service centers.


    Truck drivers and sales clerks don’t have much in common. But when Pryor started looking for a fix, sales clerks became his inspiration. He made the connection reading a magazine article about retailers using software to improve the quality and longevity of employees they hired. He called the vendor from the story, Unicru.


    Unicru, a vendor of recruiting and assessment software, wasn’t looking for the business. At the time, the Beaverton, Oregon, company was working exclusively with department stores, grocery chains and other retailers. It took the better part of a year for the companies to decide to work together and then for Unicru to create an application and assessments suited to the trucking business. Southeastern tested the hiring system in 10 service centers in fall 2003 before rolling it out companywide in early 2004.


    So far, so good. Using Unicru’s recruiting technology,background checks that once took three to five days now take a day or less. Based on such improvements, the period between when someone applies and their first day on the job has dropped by 40 percent, according to the company’s human resources staff.


    The job application Unicru created for Southeastern is helping the company pick higher-quality drivers. The job application includes an assessment that identifies personality traits associated with dependability that Southeastern is using to pick out the most likely job candidates. “Time’s going to tell, but our initial reaction is that the quality of hires is better” because of the assessment, says Bryon Hamrick, Southeastern’s human resources director, in a video testimonial produced by Unicru.


    As part of automating hiring, Southeastern did away with paper applications entirely and put applications on its corporate Web site. Online access made it so much easier to apply for a job that Southeastern received six times the number of applications in 2004–about 39,000—than it used to get in a year. “Our heaviest application day is Sunday. That wouldn’t have been available before because (our offices) aren’t open on Sunday,” Hamrick says in the video testimonial. Of applications processed through the new recruiting technology, Southeastern hired 392 drivers and 765 freight handlers, Pryor says.


    Integrating the recruiting technology had the unintended consequence of helping Southeastern track how well or poorly regional hiring managers were doing at keeping jobs filled. Last year, one regional hiring manager complained he couldn’t get anyone hired, but when the corporate human resources staff checked the application reports Unicru generates they discovered it was the manager who had been slacking off: He had gotten plenty of applications but hadn’t done anything with them for weeks. “That happened once, and it’s never come up again because they’ve learned we can tell what’s happening everywhere,” Pryor says.


    Pryor has mixed feelings about sharing his success with the world. “This gives us a competitive advantage,” he says. “One side of me says keep this a secret, but the other says our industry needs to catch up with others. We need technology like this.”


    Jason Shaw, a University of Kentucky professor who has studied the trucking industry, agrees that by relying on online applications and using assessments, Southeastern Freight Lines is blazing new trails. The fact that Southeastern is receiving so many job applications in the middle of atrucking industry labor shortage speaks to its success, Shaw says. “Any move away from subjectivity in the recruitment and selection process is likely to be more effective,” he says. “Unstructured interviews, which scads of organizations continue to use, are among the worst predictors of job performance.”


    At Southeastern, Pryor’s next goal is to improve training. In late 2003, he brought organizational development and training manager Paul Riddle on staff to direct the company’s college recruiting and Web-based learning. As part of its training effort, Southeastern is recruiting at four historically minority colleges with strong transportation and logistics majors, including Clayton State University in Morrow, Georgia, and Florida A&M University in Tallahassee. For Web-based training, Southeastern recently purchased Microsoft Office Live Meeting and will use it to record training sessions that can be broadcast company wide.


    This time, though, Pryor’s not expecting quick results. Measuring training “is a little harder than measuring turnover and productivity,” Pryor says. “It’ll take us at least five years.”

Posted on April 1, 2005July 10, 2018

Proposed Ban on Shutdown Benefits Raises Need For Alternatives

As part of its pension reform proposal, the Bush administration is seeking a ban on so-called “shutdown” pension benefits, and employers should start thinking about alternatives to offer unions during contract negotiations if the measure is passed, consultants and labor attorneys say.

These benefits, which are most common in the steel, tire, automotive and auto parts industries, are promised in employment contracts by companies in the event of a plant or division closure that displaces workers. The pension benefits are invaluable to workers who are too young to retire but too old to start a new job, experts say.


The benefits are a concern to the federal government because they cannot be prefunded under current laws. And by the time shutdown benefits are triggered, the company is often already in financial trouble, so the Pension Benefit Guaranty Corp., which insures private pensions, often winds up paying the pensions. The PBGC already is facing a $23.3 billion deficit, and in an apparent effort to limit further liabilities it has refused to pay out the benefits.


Observers say that a proposal for an all-out ban came as a bit of shock. “It’s surprising because the employees that are going to be affected by this will lose benefits, and typically the administration does not come out with proposals that obviously hurt some employees,” says Jan Jacobson, director of retirement policy at the American Benefits Council.


The shutdown-benefits controversy came to a head in 2002. That’s when the PBGC went up against the United Steelworkers by pre-emptively terminating four pension plans at Republic Technologies International, a Fairlawn, Ohio-based steel maker, says Tom Gigot, a partner at Washington, D.C.-based Groom Law Group who is representing the steelworkers in the case.


The agency projected that paying pensions to the estimated 2,500 workers would have cost it $170 million. The union filed suit against the PBGC and won at trial, but the decision was reversed in an appeals court last year. In March, the Supreme Court declined to hear the case, and the appellate decision stands.


Employers should now start figuring out what else they can offer up to unions if shutdown benefits are banned, pension experts say.


“From a union’s perspective, taking away the shutdown benefit is taking away something of value that will have to be replaced,” Gigot says. “I think their first choice would be an increase in the traditional side of the benefit formula rather than an increase in take-home pay.”


Jacobson, however, believes that employers should consider increasing severance packages for these workers.


Yet another option for employers is to work with Congress on a way to prefund shutdown benefits, says Bill Beyer, an attorney at Washington, D.C.-based Keighton & Ashner. Beyer is part of an American Bar Association task force that is working to help Congress analyze the issues involved with reforming the pension system.


Actuaries and members of Congress could develop a new type of vehicle that provides relief, Beyer says. Congress is concerned, however, that if it allows for prefunding of shutdown benefits, companies will use it to gain tax deductions.


“Maybe actuaries will be able to come up with a way of developing a funding formula that would appear to be not just an opportunity for tax deductions,” Beyer says. “I think it is worth it to be creative to find a way to cover the individuals that would be affected by a ban.”


—Jessica Marquez

Posted on April 1, 2005June 29, 2023

Leader Summit Series Applicant Tracking Systems

Operational efficiency. It’s a common buzzphrase, but it really defines what every major corporation is searching for—bottom-line results using systems with a proven track record of substantial results. A demanding request, considering some of the major human resource challenges are occurring in the recruitment and staffing sector.

These are extraordinary times, requiring extraordinary solutions. Embracing innovative and proactive methodology is the required approach to successful recruitment. Finding that perfect fit ensures matching great employees to great positions, as the entire workforce stands behind and participates in the hiring philosophy. It’s about building relationships, and commitment to the process.

Technology, like that offered by Hire.com, is the link, offering valuable flexibility in an unpredictable climate. The company firmly stands behind integrating a well-planned, strategic and proactive pursuit of quality talent. Incorporating a recruitment plan that includes technology and tracking saves time and money, and provides greater control over hiring processes and better relationships at every level.

Recruiting systems help corporations to achieve significant operational effectiveness by enabling managers to easily form and maintain relationships and fill positions right—the first time. Here, one of the country’s most optimistic and accomplished executives gives a glimpse at what it takes to excel in today’s ever-changing staffing culture.

Given the economic climate of the past year, how will the workforce management industry need to change its approach in the way they recruit and retain employees over the coming months?


First, companies must put a proactive talent strategy into place. A plan with the vision to recruit and deliver candidates ahead of demand in a highly competitive market. It’s a bi-directional selling process that brings people together, headed up by a seasoned recruiter who’s not afraid of innovation. Embrace technology. Blend recruitment skills with technology for talent relationship management success. And the relentless pursuit of great talent must be a part of the company culture—it’s everybody’s job.


What methods should human resources employ to evaluate return on investment of recruitment products and services?


You’ve conquered the efficiencies with technology. Now it’s time to focus on effectiveness. Start with sourcing. That means a series of check points throughout the recruitment process to assess the quality of candidate attracted by various sourcing initiatives. What do the hiring managers think of the talent pool? How do the successful candidates perform after six months? A year? Those results need to track back to the hiring source. Close the loop.


How important is candidate screening and background checking in the scope of the recruiting cycle?


Use technology for pre-screening, recruiters for qualification and vendors for background checks. Candidates tend to apply online in high volume, so companies have to prescreen on the front end, and that’s where technology really provides benefit. Let recruiters do what they do best—build relationships with qualified applicants. Background checking is vital, but best outsourced.


There are a lot of options available to recruitment and staffing managers by way of candidate testing and assessment today. What advice do you have for recruiters looking to address this need for their organizations?


Give great candidates a chance to get into your talent community. Don’t ask for test-and-assess too early in the process. The result? Marginal candidates with time on their hands fill your pipeline. The best will go elsewhere. Use a handful of specific pre-screening questions, just like a phone screen. Detailed testing and assessment kicks in when you know your candidate meets minimal qualifications.


How, and to what extent, can the integration of a “recruitment management system” address the fundamental needs in today’s competitive hiring environment?


You need Applicant Tracking Systems for compliance, reporting and process efficiency. But they don’t help with the first important step—sourcing and enticing top talent to your company. When you think in terms of “Talent Relationship Management,” think talent, not résumés. Your ATS should engage the best but graciously eliminate unqualified applicants. Let recruiters focus on only the qualified talent.


What are some of the potential pitfalls or dangers to avoid when implementing a recruitment management system?


Price can’t drive your decision. You’ll get what you pay for and your recruitment “engine” will spend too much time in the shop with a mechanic. Buy for the future, not just your immediate need. Don’t get fixated on process efficiency. It’s all about effectiveness as the talent wars heat up. Building relationships is sourcing ahead of demand.


What specific questions should recruitment and staffing managers ask of online recruitment vendors during their research and evaluation?


  • What are the elements of your strategic sourcing solutions?
  • Do you offer specialized candidate portals branded for candidates with specific skills or areas of expertise?
  • Describe your candidate sourcing capabilities using technologies such as blogs, RSS feeds and micro sites.
  • Do you offer consulting services to help us determine how and where to source in order to fulfill our workforce needs?

In your opinion, what changes regarding recruitment and staffing issues over the course of the coming year will have the greatest effect on HR’s ability to problem-solve for their organizations?


Recruiting and staffing must be tightly coupled to the business plan to develop an effective talent sourcing strategy. Implement the strategy ahead of demand. Remember it’s a dialogue. Provide a compelling candidate experience to attract both passive and active candidates. And don’t let up in your pursuit of the best possible people for your business.


What can staffing organizations do to be viewed as valued business partners within the company?


Run the organization like a P&L. Stop reporting outdated metrics like Cost Per Hire and Time To Fill. Line executives don’t care about that. They want to know which sources deliver the best quality talent. If another $100,000 is spent on staffing this quarter, what’s the revenue impact? What’s the cost of turnover?


Posted on April 1, 2005June 29, 2023

Yum Does a 360

Eight years ago, pizza and fried chicken powerhouse Yum Brands Inc. broke off from Pepsico and its celebrated people management programs. In the wake of that split, many of the soft drink company’s executives joined the new business and made a fundamental management decision that is paying huge dividends for Yum and its shareholders. The former Pepsico executives scrapped the parent company’s hard-charging workforce management approach and build a people-friendly style all their own.



    Somewhat surprisingly, one of the tools the new company decided to use to forge its new “customer maniac” workforce identity was the 360-degree assessment tool, an old standby that had lost some of its luster. The campaign is designed to promote customer-oriented values like speed, cleanliness and hospitality among its employees while promoting intangibles like creativity and enthusiasm. The 360s, traditionally paper-based and unwieldy, hardly seemed like an assessment that could help drive a dramatic transformation of workplace values for the 850,000 workers involved in running Yum’s Pizza Hut, Taco Bell, KFC, A&W and Long John Silver’s franchises.


    It turns out that the 360s, after a Web-based technology makeover and a high-profile campaign that reached 8,000 Yum managers down to the store level, became a great tool for reinforcing the customer maniac values. They also fit nicely with the company’s international expansion, helping establish a common set of values that are as readily assimilated by employees in a Beijing KFC restaurant as they are in a Taco Bell in Los Angeles.


    “Being a customer maniac is a big part of being successful at Yum,” says Tim Galbraith, Yum’s vice president of people development and a longtime Pepsico executive. “We call that delivering our passion, which is to put a yum, or smile, on customers’ faces. We want to do that on every transaction.”


    The shift in the people management philosophy has helped Yum achieve a remarkable record of growth. With 33,000 restaurants dishing out fried chicken, deep-dish pizzas and other goodies to 22 million customers daily around the world, Yum is on a pace to open 1,000 restaurants a year, with a strong focus on international expansion. The company has found particularly fertile ground for growth in China, where its 350 restaurants make it the No. 1 restaurant chain.


    Yum earnings are contributing to record prices for its stock, with shares rising 32 percent in 2004, and generating enough income to eliminate more than half the $4.5 billion in long-term debt it inherited from Pepsico. Standard & Poor’s projects that earnings per share will jump from $2.36 in 2004 to $2.63 this year and will grow at an annual rate 10 percent a year over the next few years.



Customer-focused
    At the time of the spinoff from Pepsico in 1997, leaders of the new company knew they had to get much more people-friendly to prosper as a stand-alone in the restaurant business. Pepsico’s focus is marketing and driving sales to big clients like supermarket chains. Yum’s customers care about getting their food hot and fresh, and with any luck, they’ll be served by an attentive counter person. A friendly separation from Pepsico’s hard-charging, show-me-the-numbers business style was inevitable.


    “Pepsico is a very strong, high-talent organization,” says Galbraith, who has a doctorate in industrial and organizational psychology. “What was missing were things more to do with values, the ability to deal well with people and be a great coach. So when the spinoff came, we swung all the way to the other side.”


    John Slocum, a professor of organizational behavior at Southern Methodist University’s Cox School of Business who has studied the two companies, says Yum made huge leap away from the Pepsico management style. The 360s and slogans like “walk the talk” went a long way in establishing an independent culture at the new company.


    “For Yum, the performance criteria are soft: teamwork, communication, leadership. You answer to a mentor or coach, not a boss,” he says. “Pepsi is hard-charging, results-oriented, do it now. They want you to bring your numbers to performance review sessions.”


    He credits the Yum executives with recognizing the differences and setting up a workforce philosophy much more in tune with operating restaurants.


    Under the system developed at Yum, managers officially became coaches. The goal was to turn people into the required customer maniacs.


    Yum turned to Kenexa, a firm that has translated human resources programs into 50 languages, to develop a new version of Yum’s outdated, paper-based 360 system. Just like the old 360, the new Web-based system pulls feedback on an individual’s job performance from a worker’s peers, managers, subordinates and customers.


    Paper-based 360s proved difficult to track in a timely way. They were prone to questions of reliability because the results were hand-tabulated. Without uniformity, 360s are highly suspect because they can vary from workplace to workplace and manager to manager. The paper-and-pencil process meant that the 360s could only be given to management-level executives to keep from getting too unwieldy.



“A lot of companies have historically viewed 360s as executive leadership or corporate management tools. Yum has taken it out to the field.”



    With Kenexa driving the process, 360s can be completed in a compressed three-week cycle. The new system is efficient enough to drop down from senior executives to store-level managers.



How it works
    The process begins with e-mails asking employees who are subjects of the 360s to submit a list of employees who could serve as raters, using a step-by-step process to come up with a list. Supervisors review each list. Once an acceptable list of a dozen or more co-workers is developed, questionnaires are sent out. They include plenty of room for written comment.


    The feedback is collected and put into a report. Then the employee sits down with a supervisor to go over the results. Galbraith says the feedback covers a spectrum of topics. The company wants to know how well its managers know their customers and how well they go about exceeding their customers’ expectations. Yum managers are also held accountable for driving business results by building and aligning teams. Yum managers and executives are also graded on their coaching ability.


    “In the area of building and aligning teams, we will ask, ‘What do you appreciate about this person and how can they be more effective?’ ” Galbraith says.


    To avoid traditional problems with these multi-rater surveys, the evaluations are not tied to compensation. Pay issues are a separate process and are spaced months apart from the 360-degree assessments.


    Given Yum’s global sweep and international expansion plans, Kenexa created a more uniform process and was able to provide language translations of the survey tied to each person’s local region.


    Yum also insists that employees at manager level or above undergo a 360 assessment every year. There is a cumulative effect, enabling the company to get a snapshot of its managers every year and giving it much more control over workforce strategy.


    “This solution helps us paint a picture of where we are as a company in terms of our capability and bench strength,” Galbraith says. “It helps us understand what capabilities we have, what we are missing and where we need to put organizational development efforts.



The right fit
    Jim Holincheck, research director for consulting firm Gartner, says he isn’t surprised by Yum’s success. Companies with global workforces and the kind of similar job and customer relationships found in a fast-food restaurant are a nice fit. “It works well if the activities and skills required to do the activities are similar,” he says.


    Companies made big investments in 360s during the 1990s. Then they fell out of favor because of the paperwork involved, he says. “Today it is a lot easier and less expensive to deploy technology to do the job.”


    Troy Kanter, president of Kenexa’s human capital management division, says Yum helps drive business results by taking the surveys down to the restaurant-manager level.


    “A lot of companies have historically viewed 360s as executive leadership or corporate management tools,” he says. “Yum has taken it out to the field. The feedback may be much richer because it is dealing with immediate customer issues.”


    Galbraith says Yum’s 360s are still evolving. The shift away from the Pepsico management style has begun to swing back to a sharper business focus.


    “We don’t want to create just a great place to work; we also want to be a growth company,” he says.


    One of the new ideas injected into the process has been boiled down to another slogan, the “beat year ago” mentality. “We expect our people to grow and develop each year,” Galbraith says.


    Yum CEO David Novak is a big supporter of the assessments–so much so that he decided to ask a wide swath of company people for feedback on a recent appraisal of the job he was doing. Galbraith says 120 employees responded to the assessment.


    “It ran 65 pages,” he says.



Workforce Management, April 2005, pp. 59-60— Subscribe Now!

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