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Posted on December 30, 2004July 10, 2018

Sliding-Scale Plans Seeing a Renaissance

Providing affordable health coverage to customers is built into the corporate mission statement at Highmark Inc., a health insurance company in Pittsburgh. But like the shoemaker whose children had no shoes, many of the company’s own employees couldn’t afford the escalating premiums.



    The irony wasn’t lost on Highmark’s management.


    “We wanted to bring the intent of our mission in-house,” says Richard Little, director of corporate employee benefits. So, in January 2004, Highmark found a solution: a salary-based employee-contribution program. Workers in higher brackets pay up to 4.2 percent of their salaries (up to 50 percent of total premium for the most expensive option); those who earn less pay as little as 10 percent of premium for that same plan.


    Sliding-scale solutions such as Highmark’s emerged about 15 years ago but fell by the wayside over the ensuing years. Now, as companies struggle to manage double-digit increases in health care premiums and sophisticated technology makes the programs less cumbersome to administer, they are enjoying renewed interest. A 2004 study by Mercer Human Resource Consulting found that just 4 percent of companies had implemented compensation-based plans (the number rose to 10 percent in organizations with 500 or more employees), but many human resources experts believe they will become more widespread as health care costs continue to rise.


    Yet for some companies, the programs may create more problems with morale, recruitment or costs than they solve.


    D. Kevin Berchelmann, president of Triangle Performance, a Bellaire, Texas-based consultancy, is a fan of sliding-scale premiums and says two of his clients have recently launched them. “It’s difficult to explain to someone making $8 per hour why they pay the same for health care as a $200,000 executive,” he says. “These programs allow for reasonable sharing of rising costs.”



“There have been a few complaints from some people who make a fair amount of mone. But, quite frankly, anytime you do anything with benefits, someone won’t like it.”



    At one of Berchelmann’s client companies, workers earning less than $30,000 pay $100 per month for a family, while those in the $30,000 to $65,000 bracket pay $195 and employees with salaries of more than $65,000 pay $270.


    But such plans have a few inherent pitfalls, says Blaine Bos, a Mercer principal. For example, employees in the middle and higher tiers are likely to resent bearing the increased burden. “A wage earner making $100,000 is not necessarily rolling in dough. That is where you will get your biggest screech,” says Bos, chief analyst of Mercer’s 2004 survey on employer-sponsored health plans. “They can make the argument that there is no connection between compensation and health care utilization.”


At Highmark, “there have been a few complaints from some people who make a fair amount of money,” Little admits. “But, quite frankly, anytime you do anything with benefits, someone won’t like it.” He says he minimized employee backlash with a proactive communication plan that emphasized the company’s corporate mission as the basis for the program.


    But even if higher-paid employees embrace the sliding-scale philosophy, the programs could make it tough to recruit top talent, says Deborah Marsh, human resources director at TriQuint Semiconductor, a 2,100-employee electronics manufacturer in Hillsboro, Oregon. “You have the issue of trying to remain competitive,” she says. “You don’t want to be charging your technical, professional or managerial staff way more than market.” At TriQuint, employees contribute a flat percentage of the premium, regardless of salary.


    Finally, sliding-scale solutions may not be feasible for many companies from a purely financial perspective. Far from saving money or being revenue neutral, they can end up adding additional expenses if there aren’t enough highly paid employees to absorb the premium adjustment for those at the bottom of the scale.


    “It’s not as easy as merely redistributing wealth,” Bos says. “At most companies, the compensation structure looks like a pyramid. So if you have 1,000 lower-salaried people at the base and only 10 people at the top, you may end up with an increase in labor costs. Unless your compensation structure looks like an hourglass or square box, your company takes the hit. And the CFO will have your head.”


Workforce Management, January 2005, p. 22 — Subscribe Now!

Posted on December 30, 2004July 10, 2018

UnumProvident Settles Probes, But Woes Persist

Despite unumprovident corp.’s $127 million multistate settlement of investigations of its claims practices, it still faces challenges that could hurt its group disability insurance sales, some observers say.



    Continued legal challenges, rating agency actions and general policyholder wariness of dealing with the insurer will likely still be significant concerns for UnumProvident, they say.


    But the disability insurer, which is based in Chattanooga, Tennessee, is on the road to repairing its damaged reputation and needs time for improvements to play out, says Tom White, senior vice president of investor relations for UnumProvident. Business retention numbers, while falling slightly since last year, prove that buyers still believe in the company, he adds.


    In November, UnumProvident announced that it would pay a $15 million fine, change its claims-handling practices and reassess potentially hundreds of thousands of claims closed or denied since 1997. The settlement stems from market conduct examinations in several states that allegedly uncovered a number of problems, including an inappropriate burden placed on claimants to justify benefit eligibility, according to regulators.


    The insurer says the $127 million settlement figure includes potential benefit adjustments related to the reassessment of claims.


    But the settlement won’t end Unum-Provident’s problems.


    Trial lawyers have vowed to continue pressing individual and class-action lawsuits alleging that UnumProvident improperly denied or terminated disability claims.


    Additionally, four days after the company’s Nov. 18 settlement announcement, Moody’s Investors Service placed the corporation’s credit ratings and the financial-strength ratings of its insurance subsidiaries on review for possible downgrades. Moody’s currently rates UnumProvident’s senior debt at Ba1 and rates the financial strength of its life insurer units at Baa1, which is considered adequate, says Ann G. Perry, vice president and senior credit officer for Moody’s in New York.


    The rating agency says it will review how ongoing broker compensation investigations affect UnumProvident’s core U.S. group long-term disability coverage business—particularly sales and customer retention.


    Neither A.M. Best Co. nor Standard & Poor’s took any rating action against UnumProvident following the settlement announcement.


    Atop the reputational damage from various settlements and investigations stemming from UnumProvident’s claims handling, additional harm to the company’s image could result from lawsuits filed by the California Department of Insurance and New York Attorney General Eliot Spitzer, Perry says.


    “Our concern is that if there is additional damage to the company’s reputation, it could translate into lower sales and lower retentions,” she says.


    In a lawsuit filed Nov. 18, the California Department of Insurance alleged that four insurers, including UnumProvident, participated in a client-steering kickback scheme with benefits broker Universal Life Resources Inc. Spitzer earlier sued ULR, charging the broker with steering business to insurers paying it secret override commissions, but he did not name any insurers as defendants.


    Sharon Kaleta, chairman and CEO of the Disability Management Employer Coalition, a San Diego-based organization founded by employers to advance integrated disability management, said that no employer she has spoken with has changed its disability coverage arrangements because of negative news involving UnumProvident.


    But a disability manager for a California county that provides long-term disability coverage for its employees says that recent events have changed her view of UnumProvident. If she were looking to purchase new coverage and other insurers presented similar quotes, she would pass on UnumProvident, says the disability manager, who asked not to be identified.


    No group disability clients of New York-based brokerage Travers, O’keefe Inc. have faced employee complaints because UnumProvident denied their claims, says John Van Wie, a broker at the firm who places disability benefits.


    But some new accounts are passing over UnumProvident for other insurers, Van Wie says. UnumProvident might have overcome one bad news story, but as several emerge, it grows increasingly difficult to do so, he adds. Over the past two years, several TV news programs have investigated UnumProvident’s claims practices, and other media outlets have reported on settlements and additional litigation.


    Financial reports issued by Unum-Provident show a drop in sales. In its third-quarter results released Nov. 3, UnumProvident reported that new sales for group long-term disability fully insured products declined 23.9 percent to $41.1 million from $54 million in the same period of 2003. Group sales of short-term income protection products also fell.


    But UnumProvident says that is by choice. The report attributes the sales decline to a “disciplined pricing strategy and the competitive market environment,” with expectations for a “lower rate of sales activity to continue as it places a higher emphasis on the profitability of its business.”


    Meanwhile, the insurer will still have to contend with some ongoing lawsuits over its claims-handling business.


    “I and all of the other lawyers with UnumProvident cases are going to press ahead,” says Michael Tobin, a Coral Gables, Florida, plaintiffs’ attorney who regularly communicates with lawyers nationwide who are suing the insurer.


    Tobin says he will continue pressing lawsuits he has filed until UnumProvident shows it will stick to the terms in its settlement agreement by properly addressing his clients’ claims.


UnumProvident’s White says that claims-handling changes made even before the global settlement have already reduced litigation. The number of claims litigated peaked in early 2003 following television news stories about UnumProvident’s claims handling. Litigated claims have been declining since, he says.


From the November 8 issue of Business Insurance. Written by Roberto Ceniceros

Posted on December 30, 2004July 10, 2018

Lessons From The Donald

I’m a big fan of “The Apprentice,” the reality TV show starring billionaire Donald Trump. I like it because of what it shows us about the business world, namely what a seriously dysfunctional workplace looks and acts like.



    Although the show purports to be about business, it has about as much to do with running an enterprise as “The Sopranos” has to do with family relationships. The show is really about individualism and winning no matter what it takes. Competitors on “The Apprentice” will say and do just about anything to win and seem to care very little about who they may have to step on to do it.


    Last fall, Stacy Blake-Beard, an associate professor at the Simmons School of Management in Massachusetts, told the Boston Globe, “The message of ‘The Apprentice’ is that to the extent that you look out for yourself above all else, you will be rewarded. Organizations talk about teamwork, but few of them promote it. They promote the star.”


    There are lessons to be learned from “The Apprentice,” however, and they can be applied to any business and workforce anywhere.


    Lesson No. 1: Leadership–even a little bit of it–matters. Although it is largely an individual competition, it’s not surprising that the winners of “The Apprentice” were the people who showed some basic team leadership skills, at least at a very minor level.


    The pattern was broken somewhat with Kelly Perdew, the latest “Apprentice” winner. He had great credentials as a West Point grad and Army intelligence officer with an MBA and law degree from UCLA. In his final task, Perdew had to stage a charity polo tournament by managing some of his defeated “Apprentice” competitors.


    Despite his impressive background, Perdew seemed to lack the leadership spark, choosing to park himself behind a laptop computer where he endlessly crunched numbers rather than managing his workers. He seemed to resist much personal direction of his team, and it is testament to the complete lack of leadership skills showed by his competitor that Perdew’s half-hearted, last-minute management of his people was enough to win.


    Lesson No. 2: Second-guessing is fatally disruptive. “The Apprentice” is a show where the second-guessing goes nonstop. Competitors constantly second-guess one another’s motives, appearance, work habits, leadership skills and everything else. And Trump is the worst, using the weekly boardroom appearance by the losing team as an opportunity to second-guess everything before he summarily fires someone.


    In this regard, he is like the boss from hell who gives little to no guidance to his staff about what he wants and then cans someone when she can’t read his mind. His actions in the boardroom devastate and demoralize the losing team each week–just as they would do in real life.


    Lesson No. 3: It’s good to be a selfless team player (even if Trump doesn’t think so).


    Each week on “The Apprentice,” two of the competitors are designated as “project managers” for that week’s task. The manager of the winning team gets a small bonus: They can’t be fired if their team loses the next week.


    This past season, one winning project manager chose to waive his right to be protected from getting fired the next week in an attempt to build some esprit de corps among his losing teammates. He thought his solid performance in a losing effort would keep him from getting fired, but his strategy blew up when Trump pounced on his “weakness” and canned him for his selfless action.


    Although this made for great television, it would have been an act of madness in a real workplace. Getting people to put the larger team above their own personal self-interest is one of the real keys to success for most any business and not a reason to fire someone.


    But firing people adds drama, and that’s what makes “The Apprentice” fascinating. As the New York Times put it, “The show’s firing ritual is somehow more plausible than voting people off islands. It reflects the musical chairs quality of corporate life: top management keeps taking away seats so that only people no one would ever want to work with are left.”


    Somehow, I think that’s the real business lesson from “The Apprentice” worth remembering.


Workforce Management, January 2005, p. 8 — Subscribe Now!

Posted on December 30, 2004July 10, 2018

Dear Workforce How Do We Address the Troublesome Behavior of Sales Supervisors

Dear Affronted:



The age-old question asked by those we want to change is: ‘why should I, when my results prove that what I’m doing works?’ Unfortunately, they’re usually right, at least at first glance and in the short run. However, truly effective organizations have criteria for appropriate behavior that extend beyond what seems expedient for the moment.

Behaviors that support organizational effectiveness generally fall into two categories: values and vision. In most organizations, there exists a generally accepted point of view about how business is to be conducted. This point of view constitutes the basis for the organization’s values.

If the organization’s values include a commitment to treating people with dignity and respect, the supervisors’ behaviors are probably out of bounds and may subject them to disciplinary action. If your organization lacks such values, formal or informal, this might be a good time to take the lead in establishing them.

Aside from the likelihood that supervisors’ behaviors contribute to high turnover, employee dissatisfaction and even lawsuits, there’s the issue of how this directly affects business results and the corporate vision. Since the vision for the business probably includes specific performance targets relating to profitability, quality, customer service and so on, it’s hard to believe there’s no negative impact from your supervisors’ boorish behavior. Likewise, abused employees have little motivation to support the company vision–another impediment to business success.

How do the supervisors’ attitudes adversely affect your bottom line? Once you answer that question you’ll have a solid case for change. If sales supervisors see themselves as only accountable to the sales department, and not for the business overall, you have identified one problem. Present them with the facts and encourage them to change. Should they persist in their abusive behaviors, explain the next disciplinary steps to them. If nobody else is interested, CEOs and owners certainly should be.

SOURCE: Kevin Herring, president, Ascent Management Consulting, Tucson, Arizona, Feb. 10, 2004.

LEARN MORE:A Culture of Leadership.

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.

Ask a Question
Dear Workforce Newsletter
Posted on December 23, 2004July 10, 2018

Despite New Financial Rule, Options Will Still Have Their Place

Options aren’t dead.


That’s the word from one Mellon analyst, despite an accounting change that will create a more unfavorable climate for companies like Coors and Sun Microsystems that use options as a recruiting and retention tool.


Last week, the Financial Accounting Standards Board said that companies have to subtract the cost of stock options from their earnings. Public companies must start expensing options beginning with their first fiscal reporting period after June 15, 2005.


Ted Buyniski, principal at Mellon’s Human Resources & Investor Solutions, says that “for many companies, options will remain the most efficient equity compensation tool.” Similarly, Mellon senior consultant Brett Harsen says that there will be a decrease in the preference for stock options now, “but it may be an overstatement to call it ‘drastic.’”


Partly because restricted stock receives less favorable tax treatment, Harsen believes that options may still be a popular option for giving awards to lower-level employees. “The bottom line is that options will still very much have their place,” he says.


Competing with Asia
One observer who is pessimistic about the future of stock options at U.S. companies is Rory Knight, a stock option expert and dean emeritus of Templeton College at the University of Oxford. Knight, who is based in England, advises a coalition of American employers who have been lobbying against mandated expensing.


Knight says that offering options is critical to attracting, retaining and motivating employees. “It is not by chance that it’s the highly innovative sector that has options,” he says. “There’s inevitably a lot of uncertainty in that sector, and that’s why options have been such a useful innovation in allowing bright people to take more risk than they otherwise would.”


Established employers will move quickly to reduce their use of stock options following the FASB’s decision, he says. Some companies that are looking to go public might now delay their IPOs because their financial histories will look “lousy,” Knight says. Europe, he says, may enact similar standards as the United States, leaving the West at a competitive disadvantage to Asia.


This comes at a time when many employers are busy trying to comply with the Sarbanes-Oxley Act. If anything’s certain following these two shocks to business accounting, it’s that the job market for finance professionals is likely to remain strong.


Congress on hold
A spokesman for Sen. Mike Enzi, a Wyoming Republican who wants to require expensing only for the top five executives at a company, tells Workforce Management that the legislator does not believe that FASB listened carefully to the concerns voiced by the business community.


The senator isn’t sure of the next move he’ll make on the issue. Enzi, like many other members of the U.S. Congress, is in his home state for the holidays, making it highly unlikely that lawmakers will act on stock-option expensing before February. Jameel Aalim-Johnson, chief of staff for New York Congressman Gregory Meeks, says that Rep. Meeks “doesn’t actually want to step on the feet of FASB and have Congress become the body that sets accounting law,” but at the same time, “stock options have become such an engine of attracting talent where [companies] otherwise might not be able to.”


Mellon’s Buyniski and Harsen say that members of Congress–especially those from California–may try to undo the accounting rule when lawmakers return to Capitol Hill, but they’re not likely to succeed. “I doubt that Congress would overrule the FASB on something that is considered ‘good governance,’ ” Buyniski says.

Posted on December 23, 2004July 10, 2018

Dear Workforce How Do I Develop a Supervisory Manual That Works in Tandem with a Training Program

Dear Ground Up:



Your supervisor manual should be based on the structure and tone of your employee manual. It should include the procedures and processes that apply to managers–those forms, approvals and work-flow issues that supervisors need to know about to meet company obligations.

Follow the employee manual structure/table of contents and add the supervisory steps that augment the process. For example, if a supervisor needs to track attendance, the manual should include thresholds for discipline (e.g., being late three times leads to first warning), along with any sample attendance forms.

In fact, if possible you should publish the supervisory procedures within the employee manual. You may not want to give the impression that there are “secret” supervisory procedures. By revealing this information, you can prevent the “us vs. them” mentality.

Be sure to write and review the supervisor manual with a core group of managers (or all of them, if the group isn’t too large) to ensure that you haven’t overlooked any procedures or processes. You will also get buy-in to manage any potential resistance. It’s much easier to present a manual written by the management team than one written by a single human resources representative.

In putting together this manual and this training, first ask your senior management what skills, knowledge and behaviors (known as competencies) would make a successful supervisor. What do they see missing from their management staff? From this you’ll be able to prioritize training resources.

Second, speak with your management team to see what issues they face, what problems they have and what they see as their needs.

Last, before you begin training, involve your management team in the training by including them as subject-matter experts or in real-life case studies as examples of best practices.

SOURCE: Don Gaile, principal, dmg consulting company, New York City, February 10, 2004.

LEARN MORE:More information on management skills.

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.

Ask a Question
Dear Workforce Newsletter
Posted on December 22, 2004July 10, 2018

The Importance of Being Richard Branson

Richard Branson recently was asked how much it helps him to be famous.



    The founder and owner of the Virgin Group–an empire of 350 companies that includes Virgin Atlantic Airways as well as ventures in telecommunications, trains, cosmetics, credit cards and several other industries–replied: “It helps to be a global personality. When you can pick up the phone and call the president of Nigeria, it cuts a lot of corners. You can get things done that you couldn’t otherwise.”


    Fame has its disadvantages, though. For example, during a trip to New Zealand, Branson was approached by a male admirer who told him, “Richard, I love you. I wish you were gay–and that I were gay too!”


    That quirky interchange occurred on November 30 during a satellite telecast with Branson organized by Linkage, a Massachusetts-based organizational development firm, in collaboration with WHYY, a public television broadcaster in Philadelphia, as well as Wharton School Publishing and Knowledge@Wharton. Over 90 minutes, participants quizzed Branson on a wide range of topics from leadership to entrepreneurship to branding. Branson, who was visibly jet-lagged from a trip to India, was still articulate and good-humored as he answered questions posed via phone, fax and e-mail by participants around the world.


    Branson’s approach to building the Virgin brand came up several times during the discussion, particularly since he said his goal is to turn Virgin into “the most respected brand in the world.” Branson’s prowess in this regard also is responsible for his inclusion among the 25 most influential business leaders of the past 25 years, as listed in the recent book Lasting Leadership, co-authored by Nightly Business Report and Knowledge@Wharton. The book notes that Branson’s skill as a brand builder, a quality he shares with Oprah Winfrey and Lee Iacocca, is one of the reasons underlying his longevity as a business leader.


    It is difficult to separate the success of the Virgin brand from the flamboyant man behind that brand. Branson says he wouldn’t have it any other way. He travels the world weekly, reinforcing his good-natured, jet-setting billionaire reputation as a reflection of the companies he owns. “Generally speaking, I think being a high-profile person has its advantages,” he says. “Advertising costs enormous amounts of money these days. I just announced in India that I was setting up a domestic airline, and we ended up getting on the front pages of the newspaper. The costs of that in advertising terms would have been considerable.” Visibility is good, says Branson, “as long as you’re not in the headlines for the wrong reasons.”


Early leadership lessons
    As much as the Branson name is tied to the Virgin brand, it is also connected to the success of 350 very different operations. Who Branson is as a person is related to who he is as a leader, and to the identity of his companies. Branson believes that his leadership style has its origins in his upbringing by parents who taught him to stand on his own two feet. At age 6, his mother would shove him out of the car and tell him to try to find his own way home. At age 10, she put her son on a bike to ride 300 miles. These lessons built character as well as endurance–and also bred leadership qualities, Branson says.


    Branson believes he learned leadership through trial and error since founding his first company, Student magazine, at age 16. What is the most important quality of a good leader? “Having a personality of caring about people is important,” he says. “You can’t be a good leader unless you generally like people. That is how you bring out the best in them.” He reinforces that message with all his CEOs and top managers.


    Beyond Branson’s philosophy of leadership are the actual nuts and bolts. How does a man who owns 350 companies get it all done? Branson places enormous value on time management skills. As chairman of a large group of firms, Branson says he spends about a third of his time on troubleshooting, another third on new projects–both charitable and business–and the last third on promoting and talking about the businesses he has set up. He also makes time for family and vacation.


    How Branson allots his time relates closely to the values of his corporation. “I’ve had to create companies that I believe in 100 percent,” he says. “These are companies I feel will make a genuine difference. Then I have to be willing to find the time myself to talk about them, promote them and market them. I don’t want to spend my life doing something that I’m not proud of.” Branson leverages that philosophy even further by using his business skills and those of his employees and managers to tackle social issues around the world.


    He learned early on to develop his delegation skills. “As much as you need a strong personality to build a business from scratch, you also must understand the art of delegation,” Branson says. “I have to be good at helping people run the individual businesses, and I have to be willing to step back. The company must be set up so it can continue without me.”


A young, fun culture
    In order for this process to work, employees must be happy. Branson says his philosophy of “Look for the best and you’ll get the best” helped him build an empire recognized for its young, fun culture. “For the people who work for you or with you, you must lavish praise on them at all times,” Branson says. “If a flower is watered, it flourishes. If not, it shrivels up and dies. It’s much more fun looking for the best in people. People don’t need to be told where they’ve slipped up or made a mess of something. They’ll sort it out themselves.” Branson feels strongly that if an employee is not excelling in one area of the company, he or she should be given the opportunity to do well in a different Virgin Group job. Firing is seldom an option.


    Motivational strategies extend to innovative ideas. The key to encouraging innovation within the Virgin ranks, Branson says, is to listen to any and all ideas and to offer feedback. Employees often leave companies, he reasons, because they are frustrated by the fact that their ideas fall on deaf ears. Interaction between employees and managers is fundamental.


    At the companies for which he serves as both chief executive and chairman, Branson writes his staff “chitty-chatty” letters to tell them everything that is going on and to encourage them to write him with any ideas or suggestions. He gives them his home address and phone number. He responds with a letter personally, even if he doesn’t follow up and deal with the details. Sometimes people come to him with personal problems, while others have suggestions for improvements in their companies. Either way, they get the chance to be heard.


    And then, of course, there are occasions when the boss needs to connect with employees while leaning up against a bar.


    “Some 80 percent of your life is spent working,” Branson says. “You want to have fun at home; why shouldn’t you have fun at work? I think leaders have got to make a bigger effort to make sure the people who work for them are enjoying what they’re doing. If a chairman of a company visits Seattle, that chairman should take all the staff out in the evening and have a few drinks together, talk together and party together and not be embarrassed about the staff seeing the weaker side of you. They don’t lose respect for you because they see your human side. They actually gain more respect for you.”


Building trust
    Branson has developed a level of trust with his top managers by setting the direction and then stepping back to let them navigate. “I come up with the original idea, spend the first three months immersed in the business so I know the ins and outs and then give chief executives a stake in the company and ask them to run it as if it’s their own,” he says. “I intervene as little as possible. Give them that, and they will give everything back.”


    Trust in managers and employees is particularly important as Branson looks to build Virgin. Adding more companies to the cache makes it that much more difficult to be everywhere at once. Yet for Branson, expansion is always a priority.


    “Virgin is an unusual brand,” he notes, because it is a “way of life” brand, unlike Western brands such as Coca-Cola or Nike that focus on one type of product. Virgin challenges big businesses in completely different sectors. “In Nigeria, we’ve been asked to set up a national airline,” he says. “In India, we’re going to build a phone company. In South Africa, the financial services industry is still stuck 30 years back with incredibly high prices. We’re looking at getting in there and shaking up the industry. In America, we’re looking at space travel. Around the world we’re looking at taking the brand into a number of different industries. Our criterion is, will it fulfill the Virgin yardstick of being good value for the money? Will it enhance the brand by bringing great quality? Will we have fun doing it and can we make it profitable? If those criteria work, then we’ll seriously look at a new industry.”


    When asked what motivates him to grow now that he has money and fame, Branson says he sees his own life as the long university education he never had. “Every day I meet new people, challenging them and being challenged.” Virgin is poised, he believes, to make a real difference.


    “Because I don’t see Virgin as a company but as a way of life, and I fully enjoy it, I don’t think I’ll ever retire,” Branson says. “The world is a big place–and we’re going into space, which is an even bigger place. In the next stage of my life I want to use our business skills to tackle social issues around the world. There are issues that rage that should never have gotten out of control. Malaria in Africa kills 4 million people a year. AIDS kills even more. There are numerous other problems, as well. That’s something I plan to do. I don’t want to waste this fabulous situation in which I’ve found myself.”


Republished with permission from Knowledge@Wharton–http://knowledge.wharton.upenn.edu–the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

Posted on December 22, 2004July 10, 2018

Feedback on “Socialism in Human Resources”

Below are some excerpts from a few of the many readers who wrote in about the article “Is Your Human Resources Department Unwittingly a ‘Socialist’ Institution?”




    Saying human services departments should spend most of their time helping the best performers get even better makes as little sense as saying doctors ought to spend most of their time checking on patients that don’t come to see them, to make sure they are well.


    Capitalism didn’t “win”; a blend of socialism and capitalism won. Otherwise we have to close our libraries, eliminate Social Security and put our municipal water supplies under private ownership. Neither pure socialism nor pure capitalism is worth a damn in the modern world.


–Tom Taber, employment and training coordinator, Orleans Co. Job Development Agency, Albion, New York



    I must say that I agree with most of the things that were stated in the article. John has hit on something that we all need to take into account. If HR is going to ever move into a more business role, then why haven’t the HR trade journals that we all read feverishly figured it out?


    We see articles from CEOs and CFOs constantly stating that they want HR to be at the table with them, but I don’t see articles informing us of how to read and understand an annual report, or how to create and manage a budget.


    If someone were smart at all of these HR organizations and trade journals, they would have a yearlong series starting in ’05 on helping HR professionals be better business professionals, so they can get to the table and add value at all levels of the organization. Each month they should have an article that features a business attribute that is needed in business. Don’t continue to talk about what we need to do, help us get there!


–Valencia Woodard, recruiting manager, U.S. Cotton, Cleveland



    I tend to agree with John Sullivan’s general perception of the ‘socialist’ HR professional. Where I sense a degree of hypocrisy is that he has chosen a career as a college professor. Unless his university is far different than any I’ve encountered, he’s going through daily life in one of the most ‘socialist’ environments on the planet. I’d like him explain how San Francisco State addresses pay-for-performance, non-tenure-based recognition/reward practices, and the other “capitalist” virtues he claims to admire.


–Greg Sheldon, regional vice president, Globoforce, Tacoma, Washington.



    Mr. Sullivan makes some very interesting points. And I agree with him–capitalism has won out over socialism. I would run my department just as he suggests if I didn’t have the threat of lawsuits and harassment claims hanging over my head and the head of my company.


    Lawsuits and harassment suits are expensive and cost the company money, which, in turn, affects the bottom-line profit of a company. When you lose a million-dollar harassment suit or you lose an unfair termination suit and have to pay the employee back wages for six to eight months or maybe a year, and then have to put the employee back to work, you start seeing why companies have second-chance programs and progressive-discipline programs.


    I’m wondering if he has ever heard of the EEOC, Title VII, Family Medical Leave Act and a host of other federal regulations that are the basis for most of these social programs that human resources departments must administer. These federal regulations were voted into law by liberal socialist Democrats in Washington, D.C. If we didn’t have these laws to worry about, I think Mr. Sullivan would see human resources departments run in a much different manner. I know I would run mine differently.


–Dave Neeb, human resources manager, Premier Industries, Harvey, Louisiana.



    You should have saved this for the April 1st issue. It reads like a sick parody of the worst excesses of business management and political philosophy–testosterone gone wild.


    Guess what? People are not a commodity. When you treat people like a commodity, you lose. Now, I don’t mean the top executives will lose–they never lose. Jack Welch is a good example. He is a person of questionable morals and overweening ego. The culture of competition he fostered was sick.


    The truth is that the oversimplified Darwinian idea of “survival of the fittest” as applied to the business world is shallow and self-serving for those who like to dominate others. In the long run, a balance between competition and cooperation will produce the best results for the most people. And the idea of community–that we are all in this together—will eventually come back to center stage. This will be, of course, after we’ve finished the current orgy of wrecking the environment, impoverishing our people, destroying our meager safety net and giving all the evidence of being well on our way to being a Third World country.


    Yes, it’s the Third World countries where there are a few rich people (the “top performers”) and a whole lot of poor people (the “poor performers”). When there is no one to protect the innocent from the predatory, the whole society loses.


    Human resources practitioners (not the ones at the top–they’ve learned to talk the language of money) have an interest in people. Most people are average. With the right management, they can produce great things. Treating them like losers will produce a lot of losers. Some people excel at dominating others. I would say they need remedial help in being human beings. It all depends on what you value–many human resources people do not have the value system of King Midas (Remember his story? Great truth there.), and thank God for that.


–Susan Northcutt, HR Administrator II, Heraeus Tenevo, Buford, Georgia



    Wow! Professor Sullivan is wrong about capitalism having won. It is only ahead at the present time in the ongoing game and will fall back from its own abuses. Pure capitalism or pure socialism is bad, so it is best when there is a balancing of the two. Currently, capitalism is winning.


    The problem with human resources is the “human” part. Those pesky human beings with their problems and weaknesses. Why can’t they all be intelligent, healthy, hardworking, dedicated capitalists whose only reason to exist is to further the profit of the company. Don’t you worry, professor. The capitalists have found a way to convince Americans to vote for their politicians who are dismantling protections for the “little guy” put in place over the last century. Soon the human resources departments won’t have to obey those socialistic anti-profit labor laws. The Republicans will see to that. Then they will come to your university and you can point out all of the left-leaning socialist-thinking professors who are corrupting the minds of our youth so they can be fired. That tenure thing is a really bad idea, but you probably know that.


    Your article will strike a nerve. I predict that with any luck you will soon be portrayed by the conservative talk show gang as a persecuted voice in the wilderness of socialist academia as you come under attack from those ignorant, misguided human resource professionals.


–Mike Burba, University of Cincinnati



    First, many companies have union contracts that dictate how employees should be handled. In my experience, most unions are socialistic in practice. Therefore, the policies they dictate to the companies that employ their union workers will reflect this.


    Second, more often than not it is the worst employees that bring lawsuits against the company. These employees try and find some outside source to excuse their poor performance. So, to avoid these lawsuits, HR departments often give these poor performers every chance possible to improve. In addition, conforming to labor law makes it nearly impossible to not spend extra effort to bring these employees performance up to acceptable standards.


    Third, part of human resources is to ensure (high) employee morale. A happy employee is a productive employee. Many unproductive or poor-performing employees are simply having a tough personal time. Given some support, many of these employees turn around and improve. Often what they need is that wake-up call in the form of a first warning to get the help they need. I’ve seen this happen more often than not. In fact, I’ve seen poor performers, given the right encouragement and support, become truly good performers. If we take a capitalistic approach and simply ignore them, we can and often will lose something that could be cultivated into a truly valuable resource.


    Finally, there are other factors that should be considered other than performance. This includes attitude, aptitude and the ability to work within a team. One employee may not be a top performer; but that same employee may be a morale booster helping other employees become top performers. Tell me, does that employee have less value than a top performer?


–Patricia S. Christiansen, HR manager, Image Technology, Palo Alto, California



    I was quite offended by John Sullivan’s stance in the article “Is Your Human Resources Dept. Unwittingly a ‘Socialist’ Institution?” I have been in human resources for the past 10 years since I got my MBA. I am educated on business management and although I do enjoy being able to help people, my first priority is helping my organization be productive and helping management reach their objectives. And most of the other HR people I know are likewise well-educated and part of “management.” Sure, HR publications talk about soft issues, but you also see many articles on HR being a strategic partner and HR metrics.


    And if HR people were not focused on paying for performance, then why is so much written about performance appraisals? I don’t know of any company offhand that does not pay for performance (in the private sector).


    And the very idea that layoffs are good for the organization is so naive I can’t believe you would print it. Sure, layoffs are a good way to cull out the poor performers–if you have a management team that isn’t strong enough to develop or fire those people. But layoffs are extremely harmful to the morale of the remaining staff, including the top performers. Companies that are known in town for layoffs cannot attract and retain the star employees. It also impacts your customers’ perception of your company, which affects the bottom line. It’s HR’s job to help develop or get rid of poor performers, and it’s also our job to try to staff to avoid layoffs (although in many industries that is simply not possible).


    This John Sullivan must have talked with a small handful of managers who don’t like their HR people. He has obviously not gotten a full measure of the HR world. I have worked in retail, banking, telecommunications and manufacturing, and in all cases the HR people have been focused on managing the business, performance and abiding the laws. I found his opinions to not at all represent the HR people I have known, and it was downright insulting to the profession.


–Amy Esry, human resources manager, Widen Enterprises, Madison, Wisconsin




    The article isn’t without merits, but its tone is rather hard-edged and uncompromising. A purely capitalistic approach would no more work than a purely socialistic approach. … A wise blending can help maintain productivity of top performers and support and inspire those who contribute in their own right. A pure focus on capitalism inspires corporate greed and corruption. (Just look at the history of the struggle in America between corporations’ and workers’ right. Left unchecked, the corporation would commit all sorts of atrocities in the name of capitalism and profit.) In fact, if applying the advice of this article, the corporate entity would appear more nationalistic than anything else.


    And the offshoring reference (about people opposed to it) as being socialistic and not capitalistic is idiotic. Offshoring takes way from the economic health of the local and national economies that help support the resources (the employees, the environment, the supplies, etc.) of the corporation. Offshoring is not capitalism; it is corporate greed in its purest form, and it is a very short-termed approach.


    America is not great only because of capitalism. It is great because of opportunity, freedom and democracy (with a little socialism thrown in, believe it or not). For a corporation to stand outside of that based on capitalism alone is a slap to all hardworking Americans and the reason we keep seeing them in court.


–Scott Byorum, director of business development, Nationwide Real Estate Tax Service, Santa Rosa, California



    John Sullivan’s criticisms of socialistic human resource departments make me wonder how widespread this problem is. And if a CEO is business-minded and his HR department isn’t, whose job is it to set the ship aright?


    I’ve seen too many people in charge of other people who have no skills at all for the tasks they’re appointed to do. I don’t know about ROI, but I do know these handpicked candidates are often the favorite son, daughter or golfing pal of the CEO. Maybe these are the people HR wants to protect other employees from. Or could they be the weak sisters that Sullivan is talking about? Or do they get a pass if a business-minded, business-degreed CEO handpicked them for the job?


    Perhaps Sullivan should look harder at managers who refuse to deal with poor performers instead of focusing his microscope on HR departments. Surely managers have more influence over employee performance than HR does.


    By the way, I am one of those freelance journalists who writes about those mushy topics like “social issues, obesity, housing issues and even concerns for a happy retirement.” For ROI reasons, I write only by assignment, and I haven’t asked my editors why they want those stories. But maybe it’s because some of these are issues that workers like to read about, along with the subjects of hiring effectively, the most efficient way of getting poor performers out the door, and training issues. And no, my degree is not in business, but in journalism. In spite of that, I was a manager once in a business that required hiring and working with all types of people at different stages of emotional and professional development. We called it a diverse workforce. I always thought the capitalistic structure not only benefited from it but was strong enough to make room for it.


–Barbara Elmore, business owner, Waco, Texas



    Yes, I guess we are social workers of a sort because we care if our employees can balance work and personal issues–so they can continue to be productive. We do not consider people disposable, and we want our supervisors to do their jobs in addressing issues rather than passing on crises.


–Karen Pavlinski, human resource manager, Lynntech, College Station, Texas



    People programs, in any company, do not begin with human resources; they begin with the people at the top, including the executive board. People policies are determined at this top level and given to the human resources team to implement within legal limits.


    I agree that high performers should receive the attention they deserve and poor performers should step up or out. Yet, when the top brass are not willing to put that stake in the ground, blame should not go to the human resources team but to the governance boards and CEOs. For example, in the merger of Compaq and Hewlett-Packard, many high performers found themselves in the wrong job at the wrong time. Many high performers took these positions because they were asked to by higher-ups; the brass knew who would get the job done right. Yet, when the budget ax fell after the merger, these programs were cut. It didn’t matter what level you were or what your performance was; if you were on the list, there was no further discussion.


    Hewlett-Packard dismissed a lot of high performers through their workforce-reduction program because the board wasn’t willing to look at the value of the performer–just the budget dollars for a job no longer needed. Yes, HP gave an “opportunity” to find another position in the company, but with little to no hiring going on, there weren’t many options. So high performers left while lower performers sat in their cubes hoping to fly low enough on the radar screen not to be selected next. There are still a lot of high performers at HP, but had the board put the right people programs in place, it would be tilted toward many more high performers rather than the mediocre.


–Kristine Werner, HR consultant, Meridian Concepts, Phoenix



    The substance of John Sullivan’s article is correct. But using the term “socialist” to describe a permissive, employee-centered workplace culture is way off the mark. Sullivan knows that the term “socialist” applies to the practice of socialism, which is a social, political system in which the means of production and distribution of goods are owned and controlled by the whole community. To use the term to describe a workplace or a human resources culture is not just inaccurate, but intentionally misleading.


    The term I prefer and use when speaking to employers or doing training with human resource people is “touchy-feely.” I recommend an adult-centered workplace culture rather than a child-centered workplace culture.


–Jim Collison, president, Employers of America, Mason City, Iowa



    John Sullivan’s excellent article makes a point that is long overdue. HR publications and organizations have, in fact, dedicated far too much time and space trying to convince business leaders that addressing social issues will benefit the bottom line. Furthermore, HR departments have relegated themselves to a position of employee advocate and/or compliance officer–unable to add real value to the business–instead of using their expertise and resources to help the core business generate revenue. Even many of the measures of HR effectiveness focus more on reducing HR costs and becoming better at doing HR stuff than on building workplace capacity to improve profitability.


    Although I strongly agree with the author’s premise and many of his examples, I believe that he weakens his argument when he mistakenly equates human assets with equipment and technology assets. Among the many differences is that our accounting systems reward investments in equipment and technology while punishing investments in people.


    Hard assets are generally treated as long-term investments, not hastily abandoned for short-term financial reporting demands. Human assets, in contrast, are treated as short-term, highly liquid assets, or like machinery to be rented and discarded as needed. Equipment and technology assets have much more predictable rates of return unaffected by human traits, whereas people are extremely complex and unpredictable day to day, year to year and person to person. People productivity is greatly influenced by the environment (i.e. organization culture). Management practices, organization architecture and support service groups–yes, even HR policies–have a profound impact on personal choice for accountability and motivation to produce.


    As a result, human assets often turn the worst piece of equipment into the highest-producing machine. On the other hand, they sometimes make the most efficient machine the poorest producer on the floor. Simply lining them up like widget machines alongside production equipment is hardly an effective way to assess the value of human assets. Decades of research supports the notion that human assets are, in fact, different and need to be treated such that their value can be fully realized to the benefit of the business.


    I agree with Mr. Sullivan that HR departments are too socialistic and stretch too hard to make a business case for many of their policies and practices. They need to reinvent themselves in a major way to become businesspeople committed to creating not minor but significant improvements to the bottom line. They can’t do that until they take a hard look at themselves from a capitalistic business perspective and focus on meaningful ROI measures.


    Having said that, I also believe that a little benevolence now and then never hurt anyone.


–Kevin Herring, Ascent Management Consulting, Oro Valley, Arizona



    The reason that HR may be a little “socialistic” is this: If “big business” treated people fairly (not the same, but fairly–there’s a difference), there would be no need for unions or HR or anything else. It is a sad commentary on business that (companies) typically become so ruthless in their search for the almighty dollar that there is a need for other people, functions and organizations to act as a counterbalance.


–Jacque Vilet, president, Vilet International, Dallas



    I agree wholeheartedly with most of your article. For years now, every publication for HR professionals continue to place emphasis on all the “soft” issues. Due to lawyers and laws, it takes an act of God to terminate anyone for performance issues especially in the state of California. It is no wonder that companies have poor producers and workers.


    The managers I work with avoid placing someone on a performance-improvement plan because of all the time, preparation, documentation, etc. And then when it comes down to it, they can’t terminate the person due to ADA, disability, leave or whatever issue. We have an employee who has been out over six months, has exhausted every leave available but we still can’t terminate him because of a “potential” ADA issue. Our attorney has advised us that we must play the “interaction” game for up to a year and continue to hold her job open! Unbelievable.


    Your article alluded to the fact that the reason HR professionals are socialists is because they don’t have degrees in business and do not know how to manage businesses. I disagree with that statement. HR professionals are held hostage by attorneys and laws that the state legislators are passing always in favor of the employee and their rights. The decisions that are made most often have nothing to do with how to run a a successful business; they are [based on] how to stay out of court and keep the company from going under due to a lawsuit.


    Gone are the days when you can be straight with the employee and tell them as it is. They may say you are discriminating against them, creating a hostile work environment, etc. Believe me, it is so frustrating to be in HR, see what is happening and what is required to follow all the necessary legal obligations. Consequently, the time is spent on the poor performers rather than the top performers.


    Hopefully, articles such as yours will enlighten those HR professionals who are in the socialist boat and want to stay there.


–Linda Johansen, human resource manager, Examen Inc., Sacramento, California.



    I’m surprised and disappointed in John Sullivan’s slanderous statements about a “social work mentality.”


    Mr. Sullivan implies several misconceptions about the profession of social work that I find damaging and offensive. I would like to remind your readers that social workers are not all socialists. Social workers most certainly do put profit first in business, and human resources’ adoption of “social work values” of fair and just treatment does not cut profits.


    Creating a safe environment with clear expectations, agreed upon expectations and respectful communication is not a “social work mentality.” It makes good business sense. You have to give to get.


–Debra Brooks, Portland, Oregon.


Posted on December 17, 2004July 10, 2018

Retiree Health Benefits Down for the Count

Only one-third of all midsize and large employers offer retiree health benefits, and a growing number of those are terminating coverage for future retirees or shifting to an access-only approach with retirees paying the full cost.


Eight percent of employers with retiree health plans terminated coverage for future retirees in 2004, and an additional 11 percent are very or somewhat likely to end coverage in 2005, according to the new Kaiser Family Foundation/Hewitt Associates survey of 333 large employers with retiree health plans. “The prospects for retiree health coverage are slowly disappearing for America’s workers, and retirees who have it will be paying more,” Kaiser president Drew Altman says.


Last year, 13 percent of employers with plans ended their subsidies and offered retirees access to benefits with retirees paying 100 percent of the costs. An additional 18 percent of employers expect to do so this year. Companies that continued subsidized coverage in 2004 raised the retirees’ share of costs by an average of 25 percent, and almost all expect to raise the retirees’ share again this year. More than half of all the companies with subsidized plans have capped their contributions, with half of these hitting their cap in 2004 and 28 percent anticipating that they will hit it within the next three years.

–Fay Hansen

Posted on December 15, 2004July 10, 2018

Employees Are Feeling Better About Senior Management

The percentage of employees who have trust and confidence in their senior management increased from 44 percent in 2002 to 51 percent this year, according to a Watson Wyatt survey of nearly 13,000 workers.


In addition, 50 percent of employees believe the information they’re getting from management, up from 37 percent in 2002. Other indicators were positive compared with 2002. Seven percent more employees believe their employer conducts business with honesty and integrity; 17 percent more believe management makes timely decisions and 7 percent more believe management motivates employees.


Weak areas, according to Watson Wyatt, continue to be performance management, communication, employee development and rewards. Only 31 percent of employees believe their company does a good job helping poor performers improve. Only 32 percent feel their company acts appropriately when performance does not improve.


“While companies have made strides in performance management, they still struggle to differentiate between high and low performers and to make tough decisions regarding poor performers who don’t improve,” said Watson Wyatt’s Ilene Gochman, one of the survey’s co-authors.

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