Category: Archive

Posted on

The Drowning Pool

Part of James A. Klein’s job as president of the American Benefits Council is to keep an eye on the Pension Benefit Guaranty Corp., the federal agency that insures those retirement plans. To understand what he sees, picture the PBGC as a pool. It is one, of course, of the insurance variety. But for the moment, imagine it as the real thing–a nice clear pond in the woods.



    Klein says that when a major company terminates its pension plan and dumps it into the PBGC, it’s like dropping a rock in the water. It sets off unsettling ripples. The first to feel that queasy bobbing are the employees and retirees of the defaulting company. They’ll receive federally guaranteed benefits, but not necessarily all of what they would have received if the company plan survived. The ripples move on to the other employers that sponsor plans and pay premiums into the PBGC. With a major default, they think that “maybe they should exit the pension system before they find themselves facing higher pension premiums and more onerous pension-funding rules,” Klein says.


    That’s the effect of one stone. What hit the PBGC recently is a payload of boulders dropped from 30,000 feet.


    In August, United Airlines announced plans to terminate its four pension plans. The PBGC would be required to pick up $6.4 billion worth of those obligations. The agency, which was running a $9.7 billion deficit, would suddenly find itself in a $16 billion hole. The PBGC, understandably, has objected to United’s plan.


    In September, financially troubled Continental Airlines said it would skip contributions to its pension plan this year. Then came U.S. Airways’ bankruptcy filing, which raised fears that it too would ultimately default on its plans. The Center on Federal Financial Institutions predicts that the PBGC will go broke by 2020 if things go on like this, according to a story in The New York Times.


    I asked Klein if the airlines’ actions, along with such longer-standing problems as the courts’ hostility toward cash-balance plans, portend the end of the defined-benefit system altogether. He wanted to sound hopeful. “The outlook is very bleak. There is still hope. There are still things Congress can do to save this system.”


    The next question is whether the defined-benefit system warrants saving. Even without the current crisis, companies have been switching to defined-contribution plans for the last 20 years. In 1985, there were approximately 170,000 defined-benefit plans. Now only about 29,000 companies have them. So maybe it’s just Darwinism in action.


    That’s not it at all, says Don Fuerst, a retirement consultant with Mercer Human Resource Consulting. “There’s a huge lemming effect in corporate America,” he says, meaning that if it looks like everyone is getting out of the pension business, companies blindly follow suit. If companies were really smart, he says, they might take a different tack. By keeping (or starting) a defined-benefit plan, they may have a competitive advantage in the marketplace, particularly among older workers who are discovering how bare their 401(k) cupboards can be.


    A well-run traditional pension is a much better deal for employees, Fuerst says. First, it’s not their money that’s being invested–it’s the company’s. Second, investment professionals are running the show. Most people simply don’t have the time or expertise to manage assets as skillfully as a pro would. Finally, pension plans pool longevity risk, ensuring that a retiree will not outlive his assets.


    Fuerst thinks that defined-benefit plans could swing back into favor if they get some help from Congress in the way of more predictable funding rules. That would be good news for companies that, for the sake of their employees, don’t mind staying in the pool as long as they’re sure they won’t get drowned in the process.



Workforce Management, October 2004, p. 12 — Subscribe Now!

Posted on

The Art of the Apology

As director of medical-legal affairs for Kaiser Permanente in northern California, Dr. Bruce Merl sometimes observes by video monitor, with the patient’s permission, as a doctor talks with the person about a medical treatment that has not gone well. The bad news most often is the result of chance–failure to respond to a standard medication or a belated diagnosis of cancer that initially evaded tests–but sometimes it may be the result of a medical mistake. Either way, the resulting conversation is likely to be tense and painful. “The patient is worried about what’s going to happen to him, who’s going to help him get better,” Merl says. The doctors are worried, too, and not just about the possibility of a malpractice lawsuit. “Nobody comes to work thinking that they’re going to harm someone. They feel lost and scared.”



    But Merl and the Oakland, California-based HMO, which is the nation’s largest, have discovered a solution that seems to help both the injured patient and the doctor to make amends and move on from medical mishaps. And in the process, he hopes, it may also enable Kaiser Permanente to control its litigation costs. Last year, as part of its policy of disclosing information to patients, the HMO began training its 11,000 physicians how to apologize personally to patients for whatever suffering they’ve experienced, and to assure them that amends will be made if necessary. “We’re getting at the core of why people sometimes end up filing suits,” Merl says. In addition to their physical pain, “their emotional needs have to be met. They want to know that somebody understands what they’re going through.”


    Kaiser Permanente is challenging a long-standing American tradition. Business, to borrow a phrase from Love Story author Erich Segal, means never having to say you’re sorry. Human resources consultants and academics say that companies and individuals–from the rank and file to the boardroom–habitually resist admitting fault or expressing regret to anyone. But experts say that those who learn to swallow their pride and offer an apology gain an important business advantage. The right amount of contrition has been shown to significantly reduce the cost of settling lawsuits, and may even convince unhappy customers, irked business partners and/or resentful ex-employees not to sue at all. Experts say that companies willing to admit mistakes may uncover and fix problems that otherwise might have continued to fester, and avoid the stress and lost productivity that come when workers focus on covering up mistakes and misdeeds rather than achieving business objectives.


    While Kaiser Permanente and other health-care outfits seem to be leading the way, companies in other industries are trying contrition as well. In 2001, after a woman was paralyzed in an accident caused by faulty tires on a Ford Explorer, Ford attorneys offered a bedside apology to the victim. She then settled her lawsuit, reportedly for a third of the $100 million she originally had sought. “Ford might have marked a turning point,” says Thomas Hajduk, director of the Center for Business Communication at Carnegie Mellon University in Pittsburgh. “It signaled a change in management attitudes about the effectiveness of public apologies, making it easier for other companies to follow their very public lead.” In recent years, businesses such as Safeway, McDonald’s, Citigroup and Goldman Sachs have apologized to customers and investors for mistakes or a disappointing performance.


But experts caution that the art of apologizing involves more than simply getting down on the office carpet on bended knee or gritting one’s teeth and taking a few lumps. Organizations should develop corporate cultures in which taking responsibility for a mistake isn’t a fatal career move. Staffers at all levels need careful training and coaching on how to admit error in a way that satisfies the aggrieved person without increasing the company’s litigation risks. And companies must establish a mechanism for following up words of regret with tangible action to fix whatever has gone wrong.


More than just words
    Merl emphasizes that Kaiser Permanente’s policy for communicating with patients about unsuccessful treatments and medical mistakes involves far more than just apologizing. When the HMO began reevaluating how it dealt with such situations several years ago, it decided to build a multi-faceted program. In addition to several hours of communication training for doctors and other health-care professionals, it involves the creation of a new cadre of staffers known as ombuds/mediators, who go through an intense 80-hour course on communication and mediation skills. The ombuds/mediators’ job is twofold. They act as coaches for doctors, helping them to plan what they actually will say to a patient in a difficult situation. They also act as go-betweens, following up with the patient to be sure that his or her questions are being answered and needs are being met.


    Since the program began in the spring of 2003, Kaiser Permanente has moved rapidly to implement it. The HMO already has put a third of its 11,000 physicians through the communication course, and hopes to train them all within the next two years, says Merl. Already, 26 ombuds/mediators have been trained and deployed at Kaiser Permanente facilities around the country. The program costs in the vicinity of $3 million a year to operate, according to consultants who designed it and provide the training. The HMO has kept its costs low by employing consultants to train about 100 Kaiser Permanente health-care professionals to teach the communication course, and then using them to spread the knowledge to their coworkers. While Kaiser is still in the process of compiling data to measure the impact of the program, it’s likely to provide a healthy return on the modest investment, says Carole Houk, a principal with Resolve Advisors in Arlington, Virginia, who trains the ombuds/mediators. “A medical error that’s litigated typically costs $300,000, plus legal fees and insurance costs,” she says, citing insurance-industry data. “One that’s settled in mediation might cost a tenth of that. If you avoid even one lawsuit a year [at a hospital], you’ve more than paid for the cost of an ombuds/mediator.”


    But Kaiser Permanente’s commitment to dealing with mistakes is atypical, say consultants and business executives. A 2003 study by the Customer Care Alliance, a group of customer-service consulting companies in Alexandria, Virginia, found that 60 percent of people who were unhappy with service wanted an apology, but only 5 percent ever received one. Kenneth Goodman, codirector of Ethics Programs at the University of Miami, says that when businesses do bring themselves to apologize, too often they lack sincerity. “When you’re on the line with the phone company and the person tells you, ‘I’m sorry for any inconvenience,’ that’s hollow and of no particular consequence. If someone says to you, ‘I’m sorry, and here’s what I’m going to do to pay for the mistake or fix things,’ that’s a real apology.”


    Certainly, U.S. firms have a long way to go before they reach the extremes of contrition common in some Asian cultures. As the Associated Press recently reported, when Japanese broadband Internet provider Softbank inadvertently leaked the addresses and phone numbers of 4.5 million subscribers, the company president, Masayoshi Son, publicly promised to upgrade security–and punished himself with a 50 percent salary cut for six months to demonstrate the depth of his remorse.


Contrition-resistant companies
    Why are companies and individuals so reluctant to say they’re sorry? Some point to an American culture that has long sent mixed signals about the virtue of contrition. In a 2000 article for Missouri Lawyers Weekly, for example, St. Louis attorney and mediator Paula Young cited classic movie westerns such as She Wore a Yellow Ribbon, in which a grizzled cavalry veteran, portrayed by John Wayne, admonishes younger officers to “never apologize–it’s a sign of weakness.” Other experts say that fear of lawsuits or possible harm to careers also deters people from owning up to mistakes or poor performance. Kenneth Cloke, an attorney and mediator who is director of the Center for Dispute Resolution in Santa Monica, California, argues that intractability simply may be a strand in corporate DNA. “The nature of most business organizations is that they’re set up to diffuse responsibility,” he says. “The higher you go up the corporate ladder, the more of an inclination there is to deny responsibility, and push the blame off onto someone else.”


    But organizations that have dared to use apologies often have avoided potentially serious problems, or at least reduced their impact. Most notably, corporate contrition can be a major factor in reducing companies’ litigation costs. Daniel O’Connell, Northwest regional coordinator for the Bayer Institute for Health Care Communication, designed the model for Kaiser Permanente’s communication training. He says studies in the United States and Great Britain have consistently shown that 70 percent of patients sue primarily because they’re frustrated by hospitals’ and doctors’ behavior.


    A 1994 study by University of Michigan legal scholars Russell Korobkin and Chris Guthrie found that only 12 percent of plaintiffs rejected a pretrial settlement proposal accompanied by an apology, compared to the 30 percent who turned down an offer sans contrition. After paying $1.5 million in damages from malpractice lawsuits in 1986, the Veterans Administration Medical Center in Lexington, Kentucky, instituted a new policy of promptly disclosing mistakes to patients and apologizing for them. A follow-up study, published in the Annals of Internal Medicine in 1999, showed that the hospital had reduced its average annual settlement costs to just $190,000.


    Margret McBride, co-author with Ken Blanchard of the 2003 book The One Minute Apology, says that learning to apologize can help a company avoid drains on its productivity and morale. “When you have a place where people are afraid to admit that they’ve screwed up, you’re creating a toxic environment. You can end up with an Enron, where people spend so much time shredding and deleting and trying to keep their lies straight that they don’t have time to get their work done. “


Apology as part of the culture
    Atlanta-based attorney and consultant Stephen Paskoff, who trains corporate staffs in ethical behavior, says it’s crucial for top management to lead the way in taking responsibility for mistakes and shortcomings, and offering apologies if necessary. “Apologies can be a powerful tool for conflict resolution, but only if they’re part of a cultural change,” he says. “You need your corporate leaders to say, ‘If we make mistakes, we fix them. If someone says there’s a problem, you need to listen to what they have to say. And if you have a problem, you need to bring it up, because we’ll listen.’”


    But it’s not enough just to convince people that it’s OK to admit they’re sorry. For contrition to be effective, companies have to create an institutional framework and protocol for giving apologies. Companies can set the right tone by utilizing contrition as a tool to solve both internal disputes and complaints by customers or business partners, McBride says. In her experience, it’s sometimes difficult to get managers to buy into the concept because they’re worried about appearing weak to subordinates if they admit mistakes. “They’ll insist they don’t have anything they need to apologize for,” she says. “I tell them that they should ask their staff about that. They’re usually surprised by what they hear because the truth is that everybody keeps a tally sheet for the boss.”


    When an apology is due, it’s critical that it be delivered by the right person, says Bayer Institute researcher O’Connell. The timing and stature of the messenger, he says, have to be proportional to the harm suffered. “If a young nurse makes a minor mistake with medication but the person doesn’t actually get hurt, it may be okay for her just to apologize right then and there,” he says. “If someone is at all harmed, though, you want the chief of nursing to come in and apologize. And if the injury is really serious, you want the CEO.”


    Consultants generally agree that an effective apology includes certain key ingredients:


    Sincere regret that the person suffered harm. “Every conversation should start with, ‘I’m so sorry that you’re going through this,’ ” says Houk. It’s vital to show an understanding of the pain, hardship and, most likely, fear that the person is experiencing. O’Connell advises doctors to imagine themselves as, say, the mother of a toddler who came into a hospital with the flu and ended up with spinal meningitis. “If you can visualize the feelings that a person is experiencing, you’re better able to communicate with him or her,” he says.


    Information. People appreciate a clear, honest explanation of why something went wrong, says O’Connell. Evasiveness, in contrast, can be disastrous. “Imagine that you’ve been on a plane that had a near miss, and the pilot gave the passengers some vague mumbo jumbo that you couldn’t figure out. Then later on, you’re walking by the pilots’ lounge, and you overhear the guy telling his buddies that it really happened because he made a mistake. You’re going to think, ‘That SOB lied to me. He thinks I’m a moron.’ The error then becomes a self-esteem issue–you’re angry and hurt, and you’re not going to let him get away with it. We don’t want that to happen.”


    Corrective action. If the harm is the result of a mistake or a flaw in the system, promise that everything possible will be done to fix the problem. “People want an assurance that the same thing is not going to happen to someone else,” says Houk. “It helps give meaning to what they’re going through.”


    Restoration. It’s important to promise to help the victim recover and, if appropriate, to provide compensation for harm that can’t be remedied–though specific details of a settlement should be left to the company’s lawyers or outside insurers, O’Connell says. The conversation should communicate the desire to make a person whole again, and not the impression that money is being thrown at a problem to make it go away. Hospitals, for example, may be able to assuage some of patients’ feelings of being wronged–and possibly avoid litigation–if they offer to provide follow-up care and needed items such as wheelchairs or medical devices.


Avoiding legal pitfalls
    Although the use of apologies has been shown to reduce lawsuits and litigation costs, companies still have to be cautious about the possible legal consequences of saying they’re sorry. Although the federal courts and least a half dozen states restrict recipients of apologies from using them as evidence in lawsuits, loopholes remain. In California, for example, an apology that contains a clear admission of negligence–or substantiates a plaintiff’s accusations–can be used against the person or company that expressed regret. That’s why attorney and ethics trainer Stephen Paskoff says apologies should be carefully crafted. “You’ve got to be sincere, but not admit liability,” he says. “So you say that you’re sorry for what happened, not that you’re sorry for having violated the law.”


    But it’s possible to give an apology that satisfies an aggrieved party without conceding liability, experts say, because most people really are looking for something besides legal vindication. “People don’t want you to confess or to grovel or to make gratuitous mea culpas,” says attorney and mediator Kenneth Cloke. “What they want is empathy. They want you to show that you understand what you’ve done to them, and to show genuine remorse. What they don’t want is for you to try to weasel out of it. “


    While Kaiser Permanente is still in the process of compiling data, Merl believes that it ultimately will validate the program’s effectiveness at reducing the sort of patient complaints that lead to litigation. Although he can’t give details because of medical confidentiality, Merl says, “We’ve had situations in which someone has been injured, but the patient and the doctor have been able to heal the relationship, and the patient is willing to continue being treated by the same doctor.”


Workforce Management, October 2004, pp. 57-62 — Subscribe Now!

Posted on

Quiet Retirement

In the months leading up to the election, President Bush and John Kerry sparred over lots of things: the war on terrorism, jobs, taxes, gay marriage, stem-cell research. But they ignored one issue that will be critical for whoever takes over the White House in January: how to ease America’s aging population into retirement without bankrupting the country in the process.



    With the oldest baby boomers nearing 65 and experts forecasting impending insolvency for government entitlement programs, reforming Social Security and regulations covering company pensions never seemed more urgent. Yet the candidates have remained all but mum on the subject, reluctant to tackle something so complex, long term and potentially explosive during the campaign. “It’s hard stuff. It doesn’t lend itself to easy sound bites,” says Judy Schub, managing director for the Committee on Investment of Employee Benefit Assets, which represents 15 million employees in 110 corporate pension funds.


    But tackle it they must. The first wave of 79 million baby boomers starts retiring four years from now. As more people stop working, the ratio of individuals paying into Social Security for each retiree collecting benefits will drop, from 3.3 to 1 today, to 2 to 1 by 2030, according to Social Security administrators. By 2018, Social Security won’t collect enough in payroll taxes in a year to cover annual benefits. By 2042, money pledged to the program’s trust funds will run out completely, according to a Social Security trustee report published in March.


    Pension funds face their own problems. A record 35 million Americans and their families are covered by defined-benefit pensions, according to Schub’s group. But despite stock prices that have rebounded from 2000 lows, many plans remain underfunded. The liabilities, along with United Airlines’ August announcement that it will likely terminate its pension plans as part of a bankruptcy restructuring, have put pressure on the Pension Benefit Guaranty Corp., the government agency that insures pensions for 44 million U.S. workers. That, along with uncertainty about proposed regulations and age-discrimination lawsuits over hybrid cash-balance accounts, is causing companies to turn away from defined-benefit plans. Instead, they’re offering more portable defined-contribution plans, putting more of the onus of investing retirement money on employees. Some are dropping pensions altogether.


    Corporate and employee-group lobbyists, academics and other observers say there’s no question that changes are needed. But the shape of the reforms, how quickly they’ll happen and the effect they’ll have on corporate America could be very different under a Bush or Kerry administration, industry watchers say.


    The candidates’ silence on retirement reform doesn’t mean they haven’t taken a position. Bush has pledged that, in a second administration, he would privatize Social Security, though he prefers to call it giving people “ownership.” He might raise the retirement age, according to experts and statements he has made during the campaign. Bush is also expected to continue working on pension-plan regulations introduced during his first term, including rules governing cash-balance plans and new measures for calculating pension-plan liabilities.


    By contrast, Kerry has vowed not to privatize Social Security, cut benefits, raise the retirement age or increase the current 12.4 percent Social Security payroll tax. Instead he’d shore up the program by cutting the federal budget deficit and growing the economy, though he hasn’t specified how that would happen. According to industry watchers, statements Kerry has made during the campaign, and materials on his official election Web site, www.johnkerry.com, he also supports laws keeping defined-benefit and defined-contribution plans strong, and protecting older workers from unfair treatment under cash-balance plans, though again he’s been fuzzy on the details.


Revamping Social Security
    Bush has said he favors partially privatizing Social Security to give people more control over their retirement savings. As he explains it, benefits for current retirees and older workers would remain unchanged, while younger workers could voluntarily divert a portion of their Social Security payroll taxes into some type of personal retirement savings account. Bush made reforming Social Security a major plank in his 2000 campaign platform, and after the election, a Bush-appointed commission that studied privatization came up with several options for how personal retirement savings accounts could work. The push stopped, though, after the 9/11 attacks diverted the administration’s attention to the war on terrorism.


    However, lawmakers have followed through, in the past few years introducing a number of reform proposals, including private retirement accounts. The latest, from centrist Reps. Jim Kolbe (R-AZ) and Charlie Stenholm (D-TX), also includes a government match for low-income workers’ contributions, some small benefit cuts, a faster increase in the retirement age and a small hike in the current $87,000 payroll tax cap. “I wouldn’t be surprised to see something like this take off,” says Kent Smetters, an associate professor of insurance and risk management at The Wharton School at the University of Pennsylvania, and former Treasury deputy assistant secretary under Bush. If Bush is re-elected, “I could imagine [him] saying, ‘I don’t like everything about it, but the good outweighs the bad.’ “


“Both Bush’s people and Kerry’s people realize they have to be careful or they’ll cause more problems” than they solve.


    But running a partially privatized Social Security payroll-tax program could be an administrative nightmare for corporate human resources departments, some industry experts say. Systems would have to be established to collect “extremely small amounts of money and put them together in a way that administrative costs don’t exceed the amounts people are putting in,” says Janice Gregory, senior vice president of the ERISA Industry Committee, a Washington, D.C., lobby group that tracks pensions and other employee benefits for major employers.


    Bush hasn’t fully explained how Social Security would make up for payroll taxes diverted to private accounts, says Nancy George, national grass-roots and elections coordinator for AARP, which represents 35 million Americans over the age of 50. By the administration’s own admission, if 2 or 3 percent of payroll taxes was set aside for private accounts, Social Security would have to come up with $1 trillion over the next 10 years to replace the diverted funds. “If you take money out to set up accounts, it won’t be there to provide benefits for people who are retiring,” George says.


    By contrast, Kerry’s Social Security reforms would include minor changes in calculating cost-of-living adjustments and the payroll tax cap, as well as shrinking the budget deficit so Social Security trust-fund dollars wouldn’t have to be used to pay general government expenses, as they have in the past. The Democratic hopeful has floated the idea of capping Social Security payments to wealthy retirees. Jason Furman, Kerry’s economic policy director, told Cox News Service in August that the cap would likely be for people with incomes over $200,000, but benefits wouldn’t be eliminated.


    Kerry’s critics claim that if he’s not going to substantially cut benefits, raise the retirement age or up payroll taxes, he’s left with only one option: raising general income taxes to make up for coming Social Security deficits. “He’s avoided saying anything that could lose the votes of the elderly,” says Wharton professor Smetters, who predicts that if elected, Kerry wouldn’t make reform a priority.


Revising Pension Regulations
    In the past four years, the Bush administration has been working on a complete overhaul of pension-plan regulations, parts of which have been introduced. Others are expected to appear if the president is re-elected.


    To aid underfunded pension plans, lawmakers in April approved a Bush-backed bill replacing the outdated 30-year Treasury bond previously used to set companies’ annual pension-plan liability. The new law replaces it, but only through 2005, with a composite corporate bond rate that lets companies contribute less to their plans. For a permanent benchmark, the Treasury Department has proposed using a corporate bond yield curve. But pension managers complain that a yield curve will make calculating how much they have to pay into their funds each year more volatile, and cause other pension-funding rules to be rewritten. “If they do something as simple as continue the [temporary] corporate bond rate into law, it’s a non-event for corporate America,” says Gregory of the ERISA Industry Committee. “But if they change the funding rules, it’s a big deal.”


    Industry watchers say Kerry wouldn’t back a yield-curve benchmark. “Normally, Republicans listen to employer groups and Democrats listen to employee groups, but this time Kerry is listening to both,” says Ron Gebhardtsbauer, a senior pension fellow with the American Academy of Actuaries in Washington, D.C.


    When a federal court ruled in July 2003 that IBM’s cash-balance-account pensions violated age-discrimination laws, it cast a pall on the hybrid defined-benefit plans, which hundreds of companies had adopted since the 1980s. The current administration has supported cash-balance plans, holding that they don’t show inherent bias against older workers. But in late 2003, federal lawmakers voted down an administration-sponsored bill that would have clarified cash-balance conversion rules. The Treasury Department issued a revised proposal last spring, but Bush has dropped the issue during the campaign, while the industry waits for a ruling on what back benefits IBM may be liable for in its suit.


    Kerry has promised to strengthen both defined-benefit and defined-contribution plans, and protect older workers from unfair treatment under cash-balance plans, but hasn’t said specifically how he’d do that. He has also vowed to “increase the portability of retirement savings,” according to the Kerry Web site, but again hasn’t offered many details.


    Some observers see Congress, not the White House, leading the charge to come up with rules covering conversions from defined-benefit plans to cash-balance plans that are palatable to employers and retirees. Senate and House committees with jurisdiction over pension affairs are already working on the issue, says Gregory. “In that sense, I don’t think the election changes much,” she says.


    Bailing out the Pension Benefit Guaranty Corp. could also be on the next president’s agenda. The PBGC already has a record deficit, $11.3 billion in 2003, and in the past three years has accumulated $15.9 billion in claims, twice the number amassed in the 18 years before that, according to a new report from the Cato Institute, a conservative Washington, D.C., think tank. Some argue that if other airlines follow United Airlines’ lead and dump their pension plans, the PBGC will go under, leading to higher insurance premiums for the agency’s 31,000 member companies and a taxpayer bailout.


    Others say the problem is exaggerated. The recent market downturn, slow economic recovery and period of low interest rates is unlikely to recur. “It’s a bizarre experience bound to be different in the future,” says John Hotz, deputy director of the Pension Rights Center, a Washington, D.C., employee lobby group.


    Regardless of who is president, he’ll have to walk a fine line, as the retirement issues facing the country are significant: reshaping Social Security for an aging workforce, and regulating pension plans to satisfy older workers and retirees without driving more companies to drop pensions. Says Gebhardtsbauer: “Both Bush’s people and Kerry’s people realize they have to be careful or they’ll cause more problems” than they solve.


Workforce Management, October 2004, p. 49-52 — Subscribe Now!

Posted on

Dear Workforce How Do We Implement a New Performance-Management System Using New Managers

Dear Befuddled:



Your challenge is not uncommon, especially given the economic chaos of the past three years. That has led to more new managers in the workforce. Don’t let that be a reason to uproot performance-management processes or change programs.

Your company’s leadership needs to demonstrate how serious performance management is, including being accountable. It doesn’t matter whether your organization uses one-way, multi-rater, 360-degree or other performance measures: upper management should understand the process and advocate it. Too many CEOs preach performance management to their employees yet show a woeful lack of knowledge about the process at year’s end.

View this as a great opportunity rather than a problem. It gives new managers a chance to demonstrate the importance they attach to good performance management, as well as approach the situation with honesty and care. At the least, new managers should do self-assessments and set goals with their own managers, be it the CEO or another executive. Draw organizational attention to this important step, and even share managers’ goals, ranging from economic to developmental, with the broader organization.

Although it may be unfair to ask new managers to comment on an employee’s past performance, they certainly ought to be involved in setting future goals. Being new to the company is not an excuse to abdicate that responsibility. New and existing managers should collaborate on a fair rating system. Leaving the responsibility only to existing managers sends the wrong message to both new managers and employees.

Collaboration is important for another reason: performance assessments are often tied to employee compensation. Have new managers poll several existing company managers for whom an employee has worked. Have them consult other data, such as customer feedback (internal and/or external), about the employee. Human resources should play an integral role, ensuring consistency in approach and fairness.

Change brings opportunity. This is a chance to elevate the importance and integrity of performance management within your organization. Don’t let the opportunity pass you by.

SOURCE: Matthew C. Levin,Hudson Highland Group, Chicago, November 10, 2003.

LEARN MORE:How Do I Change the Perception of Appraisals?

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

Dear Workforce How Do We Boost E-Learning Rates

Dear Befuddled:



Many organizations have a Field of Dreams approach to e-learning. They believe that if they build it, employees will come. The truth is that organizations face many obstacles that keep learners from accessing online learning. Some employees may have such a heavy workload that little time is available for training. Others may feel intimidated by the technology. Still others may resist changing to self-paced or synchronous online instruction, preferring traditional classroom-based training.

Below are some ways that organizations have increased the rate of user engagement in e-learning.

Give employees enough time and space for e-learning classes
Minimize distractions for learners as much as possible so they can concentrate on the training they need. There are several ways to do that, including:

  • Setting up a separate area for e-learning (e.g., computer lab).
  • Posting visual reminders that someone is “in class.”
  • Forwarding e-mails and calls.

Tie e-learning to consequences
Let learners know how important e-learning is by tying course usage or completion to performance reviews. You should:

  • Talk about training expectations during performance appraisals.
  • Make e-learning a prerequisite to classroom learning.
  • Require certifications.

Keep communicating
Don’t stop communicating with employees once you launch the curriculum. Keep people engaged long after the kickoff party by regularly informing them of new courses, certifications and services. Also, communicate in a variety of ways: e-mails, pamphlets, posters, and lunch-and-learn sessions, for example. In order to make the launch more than a one-day event, try these tactics:

  • Send regular e-mails.
  • Post notices on company bulletin boards.
  • Have regularly scheduled lunch-and-learn events.
  • Hold an annual learning fair.
  • Mention e-learning as a benefit of employment.

Reward completion
Some organizations provide reward points to employees who complete assigned training. These points can be redeemed at the company store or restaurant.

Make a module compulsory
Some people hesitate to accept change. That means they may resist e-learning without ever trying it. Develop or purchase a small, extremely engaging e-learning module and make it compulsory. Make the content fun, for example, by including instructional games, simulations, interesting assessments, etc. One of the benefits of good e-learning is that it can be addictive. Given a taste of good instructional design and presentation, your learners may be asking for more.

SOURCE: Brandon Hall, Ph.D., Lead Researcher, CEO,www.brandon-hall.com, Sunnyvale, California, Oct. 2, 2003.

LEARN MORE:Making E-Learning More Than “Pixie Dust.”

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

Telecommuting is “Alive and Well and Growing”

Telecommuting is “alive and well and growing” even though the balance of power has shifted more toward employers in recent years, according to Gil Gordon, a consultant for employers on telecommuting and mobile work.


Gordon, based in Monmouth Junction, New Jersey, sees two trends happening. One, traditional telecommuting, where employees work some days at home and some in the office, has given way, he says, to “a broader notion of mobile work or remote officing.” This includes employees working, basically, wherever—at a client’s office, at a coffee shop or at a hotel.


Second, Gordon says, some companies—especially the most proactive—no longer see telecommuting as a favor or perk given to employees when they request it. Instead, some employers are the ones requesting it of employees. “Companies aren’t just looking at this as something that’s going to benefit the employee,” Gordon says, “they look at it as something that’s going to benefit the employer as well. Employers who look at this strictly on an accommodation basis are unnecessarily limiting themselves as far as what they can get out of telecommuting.”


“Best workplaces”


Meanwhile, Intel was named the “best workplace for commuters,” according to the U.S. Environmental Protection Agency and the U.S. Department of Transportation. The study took into account the prevalence such benefits as telecommuting, but also whether companies made life easier for people who did go to the office—such as offering flexible schedules to avoid rush hour.


Last year, 40 percent of Intel’s employees telecommuted. Also, nearly 66 percent of Intel employees say their corporation “supports a flexible work environment”—up from 37 percent in 1999. Other companies honored include EMC, which operates a shuttle service for employees traveling between offices, and Texas Instruments, which provides free rapid-transit passes to all employees that work in the North Texas area.


According to the Transportation Department and the EPA, the financial benefits of commuting benefits for an employer include a reduced demand for parking spaces and thus savings on construction costs; lower employee turnover; tax breaks; higher productivity; lower stress and fewer employee injuries.


More information on telecommuting and related issues is available on the Workforce Management site, including a sample flextime proposal, evaluation form, and telecommuting agreement. Also, the U.S. government has an “emergency ride home toolkit” as well as case studies and success stories of telecommuting benefits.

Posted on

0410 Spectrum

“Of all the systems we evaluated, iVantage® was the only system that had all the features and functionality we needed. The cost, features, ease of customization, and the ability to add modules, such as Employee Self Service, one step at a time were real selling points.”


E


stablished in 1985, Flad Affiliated Corp (FAC) is a private service organization that caters to a group of architecture, engineering and construction management firms including Affiliated Construction Services, Affiliated Engineers, Inc. and Flad & Associates, Inc. The firms specialize in the planning, design and construction management of innovative facilities for academic, healthcare, research, development and production clients. With offices in over 16 locations throughout the United States, the companies are nationally recognized leaders in serving the complex needs of knowledge-based organizations and providing clients with highly specialized design solutions, including the development of laboratories for industry and academic institutions and state-of-the-art healthcare facilities. FAC provides common business services for these companies in the form of accounting, benefit administration, payroll, banking, investments and project systems.


FAC came to Spectrum Human Resource Systems Corporation in 2000 after they had begun to experience some growing pains when they went from 600 to 900 employees in just two years. FAC knew they had to find an HRIS that could grow with their unique structure and multiple locations. It was important that applicant and employee information was kept separate by firm and location, yet they still needed a centralized location for their system in order to administer benefits. They were in dire need of a system that could keep up with the rapid, continuous growth of the multiple locations throughout their companies, while keeping information secure for each individual location. “We needed a centralized point of entry for all information and all locations,” said Jennifer Linley, iVantage Administrator at Flad Affiliated Corp.


Although keeping information secure at individual locations was important, they also needed a simple way to quickly communicate important changes to employee records at each location. With approximately 35 HR users across different locations accessing the system everyday, it was imperative that they be able to communicate in a timely manner. “The ease of tasks and system generated emails made Spectrum’s iVantage the obvious choice,” said Linley.


FAC went live with iVantage in February 2001, allowing them to secure their data by location. “By having a location history page and basing security on location code, keeping information separate by company was no longer an issue,” said Linley. “We also added a new page for tracking multiple addresses and address types since our companies do a lot of summer intern hiring. In the past, trying to keep track of college and permanent addresses was difficult, but with iVantage, our recruiters have all the information they need right at their fingertips.”


Reporting was also a major factor in their decision to purchase iVantage. “In our business, we work with many different insurance companies, said Linley. “It was imperative that we were able to reconcile monthly billings for these companies quickly and accurately. Pulling reports in iVantage is a breeze and government reporting is virtually stress-free.” Linley also touts that with iVantage, they have greatly improved their benefits tracking and monthly reconciliations. “Employees are put on and taken off insurance in a timely fashion, which makes our billing more accurate and easier to manage,” said Linley.


Because FAC has such a large base of current and former employees, data entry was time consuming and labor-intensive, and information was difficult to track accurately. “Before iVantage, getting employee and applicant history was a long, painful and manual process,” said Linley. “With iVantage, applicant, employee and previous employee history is right at our fingertips.”


For FAC, the positive results of iVantage as their tool of choice are numerous. iVantage freed up their HR staff’s valuable time and resources – allowing them to concentrate on recruiting, retaining, training and other important HR tasks, rather than being bogged down with cumbersome data entry and number crunching for their 900 active employees. “Our HRIS administration is now located in one office and we no longer have to scramble to get information from multiple systems at multiple locations,” said Linley. “To us, the system is priceless.”


Linley was part of the HR team that evaluated over a dozen HR systems. “Of all the systems we evaluated, iVantage was the only system that had all the features and functionality we needed,” said Linley. “The cost, features, ease of customization and the ability to add modules, such as Employee Self Service, one step at a time were real selling points.”


When asked what else about iVantage she couldn’t live without, Linley raved about the Spectrum staff. “The best feature, by far, is that we have a reliable, knowledgeable and friendly support staff available to us at all times,” said Linley. “The training by the support staff is exceptional as well. I attended Sys-Ed 2003 (the national user’s conference) and the training and networking was such a wonderful experience. Now, I can call others who use the system and see how they have handled specific issues. You can’t ask for much more than that!”


* * * * *


About Spectrum Human Resource Systems Corporation

Spectrum has been providing top-of-the-line HR systems for 20 years. A team of HR professionals develop, support and sell our software with a primary focus of meeting the needs of other HR professionals. Spectrum’s Web and desktop-based HR systems include robust HR functionality and complete integrated reporting which is highly customizable and easy-to-use. As a Microsoft® Certified Solution Provider and one of the HRIS industry innovators, a Spectrum system is built on industry standard and dependable technology. With a company mission of achieving and maintaining client enthusiasm, you can be sure Spectrum will exceed your expectation every step of the way!



For additional information on Spectrum’s products and services, call 800.477.3287 or visit workforcesystems.com

Posted on

Prepare For An Ugly Charge Discrimination

You’re discriminating against me!” The about-to-be-terminated employee springs from the chair and makes his pronouncement. Mouths open. The room grows quiet. The company’s human resources director and the employee’s supervisor exchange shocked looks. This was to be a simple termination: the supervisor, department head and the human resources director made sure the company’s progressive-discipline policy was followed to the letter.



    The poorly performing employee had first received a “coaching and counseling,” a written warning, followed by a performance-improvement plan and a two-day suspension. It was obvious that a firing was imminent. Everyone made a special effort to be civil and courteous, honest and open. But now, the cry comes: “Discrimination!”


    In our office, we call this a “hemorrhoid” case. Here’s why. In 1962 in Salina, Kansas, every seventh-grade boy was required to take an industrial arts class. On the first day of school, Mr. Milton, the shop teacher, quickly identified six boys (I was one of the miscreants) as the class clowns and moved us to the front of the room to sit at one big shop table so he could keep an eye on us. Big mistake. The perfect storm of six mischievous junior-high boys sitting together kept everyone in stitches. I misbehaved more at that table than I have before or since. One day as I entertained the table after lunch, I suddenly felt a weighty hand on my shoulder. The room got quiet. Mr. Milton was going to make me an example to the class. In those days of corporal punishment, Mr. Milton took special pride in his paddle. About 36 inches long, made of solid oak, with a half dozen quarter-size holes drilled through the middle to provide extra wallop, the feared instrument hung on a nail by the classroom door. On that day, Mr. Milton grabbed it, marched me to his desk, bent me over the edge and drew back for the swing. Just at the height of his backswing, a shout came from the shop table in front: “He has hemorrhoids!” Mr. Milton froze. No swat. I pranced back to my seat. Misfits 1, Mr. Milton 0.


    The diversion shout “hemorrhoids!” is not too different from the accusation of discrimination heard in many workplaces right before a firing. In some cases, there may actually be discrimination, and employers must be vigilant to eliminate it. Sadly, however, some employees also have learned that claiming discrimination or participation in a “protected activity” slows or stops disciplinary action because of the employer’s fear of retaliation claims. These fears are not unfounded: EEOC statistics confirm that for fiscal year 2003, almost one-third of discrimination charges included a charge of retaliation.


    Employees can choose from a virtual Scrabble board of laws (ADA, ADEA, FMLA, OSHA, Title VII, USERRA, NLRA) for protection from adverse job action. Each of these federal laws and corresponding state laws contains language to protect individuals against retaliation by their employer for participating in a protected activity. In the courtroom, an employee/plaintiff can prove retaliation in one of two ways: direct or circumstantial evidence. Direct evidence is the easiest to prove, but it very rarely happens. An example of direct evidence would be handing the employee a notice of termination that says, “You complained of discrimination and you’re fired.” Plaintiff’s attorneys dream of that kind of evidence. In that case, employee/plaintiff wins, hands down.


    Proving retaliation by circumstantial evidence is more common. The plaintiff must first show that he engaged in a “protected opposition” to the employer’s violation of law. This may be as simple as crying out some form of “discrimination!” just before being fired or expressing support for others who have complained of discrimination. Then, the plaintiff must prove that he was the subject of adverse job action by the employer and make a link, or “causal connection,” between the cry “discrimination” and the adverse job action. The employer then has to prove there was a legitimate, non-retaliatory reason for the action. And then back to the plaintiff to prove retaliation by poking holes in the employer’s legitimate non-retaliatory reasons for termination.


    An employee’s attorney usually pokes holes in the employer’s reasons by proving that (1) the employer’s stated reason was false; (2) the employer acted contrary to written company policy; (3) the employer acted contrary to its usual practice; and (4) the employer treated the employee differently from other similarly situated employees. If the plaintiff’s lawyer does her job, there will be witnesses who testify that other employees were not fired for similar infractions, and that the supervisor “had it in” for the plaintiff. Other employees’ job evaluations will show that the plaintiff got higher scores than employees who kept their jobs. By stacking up coincidence, inference and offhand comments, a good plaintiff’s attorney can wrangle a juicy jury verdict for the plaintiff.


    Here are the rules I think employers should follow to avoid a “hemorrhoid” case.


    Document, document, document. Records documenting that an employee’s poor performance came before the claim of discrimination or retaliation are wonderful trial exhibits when defending a lawsuit. Follow your company’s performance and discipline policies closely: careful documentation of verbal counseling, candid job evaluations concerning poor performance and detailed performance-improvement plans are all examples of the evidence that wins a retaliation case for the employer. Train supervisors to be complete, accurate and courteous when putting facts on paper. Have another supervisor review the final product for comment before presenting it to the employee.


    Be a fair and impartial judge. Listen to both sides of the story when employee issues arise. Give the employee a fair chance to improve. Involve at least three people in termination decisions. If the department head, the employee’s direct supervisor and a human resources representative all have a say in a decision to fire, defense of any subsequent retaliation claim becomes much easier, especially if these decision-makers are unaware of the employee’s protected activity. Proving a link between the termination and the protected activity will be almost impossible.


    I should have gotten that swat in 1962. I deserved it. And if Mr. Milton had known I didn’t really have hemorrhoids, he would have let me have it. He just didn’t get his facts before he pulled the paddle off the wall. Employers are the same: get the facts beforehand, satisfy yourself that the job action is unrelated to the protected activity and document performance problems and disciplinary action. You will make your lawyer’s job infinitely easier (and less expensive) and avoid hemorrhoids.


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.

Workforce Management, October 2004, pp. 18-19 —Subscribe Now!

Posted on

Oracle and PeopleSoft In Dubious Battle

Fifteen months after it launched its hostile takeover bid for PeopleSoft, Oracle has won a major victory that brings it closer to acquiring its rival. The question is whether the war of attrition has been worth it.



    When Wharton last looked at Oracle’s bid for PeopleSoft, uncertainty prevailed and the outcome of PeopleSoft’s acquisition of J.D. Edwards was unknown. That deal has been closed for more than a year, but the J.D. Edwards acquisition hasn’t helped PeopleSoft elude Oracle’s pursuit. When Oracle first bid for PeopleSoft, Wharton professors Morris Cohen and Harbir Singh said it wasn’t clear if CEO Larry Ellison was serious or just wanted to upstage rivals. Time will tell, said the professors, adding that perhaps the PeopleSoft bid was just an ego trip. Ego trip or not, it’s now clear that Ellison is serious and may just succeed.


    On Sept. 9, Oracle won a lawsuit filed by the Department of Justice that sought to block its proposed acquisition of PeopleSoft. Oracle is offering $21 a share in cash for PeopleSoft in a bid that has been raised twice since Oracle’s June 9, 2003, initial offer of $16 a share. Barring a DOJ appeal or the European Union preventing an acquisition–securities analysts expect the EU will follow the U.S. ruling–Oracle will have cleared its regulatory hurdles.


    Wall Street analysts now put the odds of Oracle success in taking over PeopleSoft at 70 percent. The catch is that PeopleSoft’s board of directors still dismisses Oracle’s bid as a lowball offer. And PeopleSoft’s poison pill provisions preventing a takeover are also still in place. Unless more shareholders tender shares to Oracle, CEO Larry Ellison will be held at bay despite his mantra that software consolidation is inevitable–a contention few experts will argue.


    For Oracle so far, the hostile takeover attempt has improved with age. Oracle has disrupted a key rival while holding its own financially. PeopleSoft, however, is struggling and could ultimately be forced to sell out to Oracle. “PeopleSoft is definitely in trouble,” says Wharton operations and information management professor Thomas Lee. “[Oracle’s win] adds additional doubt and more uncertainty to PeopleSoft’s business.”


    PeopleSoft CEO Craig Conway is adamant about the company remaining independent. At the PeopleSoft Connect customer conference this week, Conway touted the company’s future and unveiled an alliance where its software will be tightly integrated with IBM’s Websphere platform. “Today we have eclipsed the competition,” says Conway in a news release about the IBM deal.


    But is it in PeopleSoft’s best interest to keep fighting Oracle and risk that its business further deteriorates? “PeopleSoft is trying to defend itself, but there’s this gorilla waiting right offstage,” says Lee.


    Meanwhile, the war of words goes on.


    In a letter written on Sept. 9 to PeopleSoft’s Board, Oracle chairman Jeff Henley and CEO Larry Ellison wrote: “With the removal of the U.S. antitrust issue and Oracle’s commitment to acquire PeopleSoft, we are hopeful that a transaction can occur.”


    PeopleSoft’s reply: “PeopleSoft’s Board has carefully considered and unanimously rejected each of Oracle’s offers, including its current offer of $21 per share. On May 25, 2004, the Board concluded that the current offer was inadequate and did not reflect PeopleSoft’s real value.”


    PeopleSoft continued to say it would see Oracle in court again. The company is claiming compensatory damages of more than $1 billion plus punitive damages in a lawsuit against Oracle scheduled to go to trial in Oakland, Calif., on November 1, 2004. PeopleSoft’s complaint alleges that Oracle has engaged in unfair business practices, including a deliberate campaign to mislead PeopleSoft’s customers and disrupt its business.


    What’s next? A lot of questions persist. Can PeopleSoft continue to fend off Oracle? Have the assumptions underlying Oracle’s bid changed? Has the industry changed? Did Ellison start off a new round of consolidation?


    The jury is still out, but Wharton finance professor Andrew Metrick says people should get used to the Oracle-PeopleSoft saga—it could go on for a while. “This could drag on for years,” says Metrick. “If PeopleSoft’s board continues to refuse the offer, Oracle may have to win it with several proxy fights. It’s unusual to see an acquirer this dogged.”


    Toss in another big factor–the egos of Oracle CEO Ellison and PeopleSoft CEO Conway–and it’s clear this could be a protracted war. “This is a big ego battle,” says Metrick. And amid this war is a changing industry.


Consolidation looms
    Oracle’s rationale for the PeopleSoft acquisition still holds up a year later, says Metrick. Broadly speaking, Oracle contends consolidation in the software industry is inevitable. And for its part, Oracle wants PeopleSoft’s large installed base of customer and applications used to run the human resources and finance departments of many companies. In the DOJ trial, Oracle argued successfully that it needs to beef up to compete with the likes of SAP and Microsoft, two giants that even entertained merger possibilities. Oracle’s applications business remains weak, but its database sales continue to keep the company on track with Wall Street estimates. Bottom line: Oracle needs a bigger stack of software if it wants to dominate.


    Meanwhile, the software industry’s rebound from the time of Oracle’s initial offer has waned substantially. A host of companies such as Siebel Systems issued profit warnings last quarter. For the Sept. 30 quarter, firms such as Lawson Software have also sounded alarms. Corporate spending is down. The Federal Reserve’s Beige Book release for August tells the tale. “A new tone of caution has emerged for the short-term outlook of software and the IT markets,” notes the Federal Reserve. All these are factors that favor consolidation. According to Merrill Lynch, the Internet and software sectors are the only two pockets of technology that have shed 20 percent of their companies since the first quarter of 2002.


    One of the bombshells of the Oracle trial was the fact that SAP and Microsoft were pondering a merger. If those two giants felt the need to merge, what’s left for the thousands of smaller companies?


    A.G. Edwards analyst Kevin Buttigieg says software buyers are on strike because of Sarbanes-Oxley expenditures and uncertainty about the economy. He argues that buyers have no compelling reason to blow their budgets on software, especially without “must have” versions. Metrick agrees and say that’s why there’s a big push toward consolidation. Customers are seeking out the bigger vendors. “Everything Oracle has said about consolidation in general is true,” says Metrick.


No-win scenario?
    Despite the logic behind consolidation and an Oracle-PeopleSoft deal, it is possible that this war of attrition won’t pay for either party. For now, Oracle is holding its own, but doubts remain. In its first quarter ending August 31, Oracle reported net income of $509 million, or 10 cents a share, on revenues of $2.2 billion. The results, coming in a seasonally slow quarter, impressed Wall Street analysts. The biggest issue was applications revenues were down 37 percent to $497 million.


   Fifteen months after its first bid for PeopleSoft, Oracle results are showing pockets of strength and performing well overall compared to other software firms. Nevertheless, Oracle has its critics. “Almost all the investors we have spoken with over the last year are against the deal because of potential integration issues,” wrote William Blair analyst Laura Lederman in a research note.


   PeopleSoft’s position is more perilous. After stringing together a series of quarters where the company delivered good quarterly results, PeopleSoft faltered in the quarter ending June 30. After issuing a profit warning, PeopleSoft delivered second quarter net income of $11 million, or 3 cents a share, on revenues of $647 million. In the same quarter a year ago, PeopleSoft reported net income of $37 million and revenues of $497 million.


   And since Oracle won the DOJ trial the uncertainty among PeopleSoft customers is going to persist, analysts say. Schwab Soundview Capital Markets analyst James Mendelson says Oracle’s victory “creates additional uncertainty for PeopleSoft and hurts the prospects for its third quarter results.”


    On the second quarter conference call, Conway refused to call the quarter disappointing, noting that the company’s performance was solely related to media coverage of the Oracle DOJ trial. “It was the big elephant in the room on every sale,” said Conway. Unfortunately for Conway, the elephant is still there since Oracle won.


    An unintended consequence of the Oracle-PeopleSoft standoff is that it benefits SAP, the current enterprise software leader, no matter what the outcome. In a research note, Lederman says SAP may be the biggest winner in the slugfest. “We believe that Oracle’s buying PeopleSoft would help SAP,” she wrote. “Our belief is that Oracle will not continue to develop PeopleSoft’s products, which, over the long run, will cause the base to have to move to either Oracle or SAP products.”


    That’s good news for SAP, since it is already taking PeopleSoft customers. On PeopleSoft’s second quarter conference call, CEO Conway acknowledged that SAP is benefiting the most from PeopleSoft’s turmoil.


    At this juncture the key question of Oracle’s hostile bid for PeopleSoft is whether it’s really worth all the effort to buy a wounded rival. Metrick believes it still can be worth it because PeopleSoft continues to have a large base of customers. Oracle would inherit those customers and gain from the maintenance revenue. Contrary to early indications, Oracle has been steadfast in saying it would support PeopleSoft’s customers. The big issue is price.


    If Oracle raises its bid to, say, $26 a share and PeopleSoft struggles, Oracle could spark a shareholder revolt among big institutional holders, says Metrick. Lee, however, notes there are no guarantees that Oracle could retain all of PeopleSoft’s customers. Some may go to SAP. PeopleSoft customers that use Oracle databases are likely to stay with Oracle just because integration would be easier.


    In the coming months, it appears that price may become the biggest obstacle for Oracle. If the price is right, PeopleSoft will have to come to the bargaining table. As Metrick notes, “There’s no such thing as a bad company, just a badly priced one.”


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

Leader Summit Series HRMS Solutions

CHARLES D’AMBROSIA
CEO
Ascentis Corporation
CHARLES D’AMBROSIA, CEO, joined Ascentis Corporation in late 1997 as its chief executive officer. D’Ambrosia is an experienced “high tech” CEO and has been instrumental in the development of two successful software and hardware companies in the Seattle area.
MARK D. LANGE
 VP Global Product Marketing
PeopleSoft Human Capital Management
Mark Lange has been responsible for directing global marketing for PeopleSoft’s industry leading Human Capital Management (HCM) solutions since he joined the company in 2002.
SYBLL K. ROMLEY
Vice President, Sales and Marketing
Spectrum HR
Sybll K. Romley has worked at, and sat on the board of directors at SPECTRUM since 1987. Her background in HR and HR Systems includes product development, sales, and marketing. She holds a Bachelor of Arts from Occidental College.
Scott Scherr
Founder, President and CEO
Ultimate Software
Scott Scherr is the founder, president and CEO of Ultimate Software. Mr. Scherr has spent his entire working life in the HRMS/payroll industry. His underlying business philosophy has always been that experienced, committed people deliver great products and services.

Many functional and administrative components of HR management systems (e.g., training, compensation, recognition, recruitment, etc.) are now required to interact with several enterprise wide systems and applications. That being said, what advice would you give to HR seated at the management table as decisions are researched and made with regard to other functional software for the organization?


CHARLES D’AMBROSIA: Focus first on employee administration areas like HR and benefits administration, self-service, and connectivity to payroll and your insurance carriers-typically these areas are paper-based and can be totally automated. Let employees change their address, elect benefits, and request leave through ESS. This should leave time for you to focus on strategic HR.


MARK D. LANGE: The ERP vs. Best of Breed debate rages on, but the question is becoming less of “one over the other” and more one of “when to use one or the other.” Like many things in life, balance provides solutions that work best. Choose web-based, XML friendly applications that hold the promise of easier data exchange with core ERP systems.


SYBLL K. ROMLEY: With today’s technology it is not difficult to integrate and share data from disparate systems. Start by selecting the HR system that meets your HR needs. Then get buy-in from the other managers by showing how your system will benefit them and assuring them that the data will integrate with their systems.


SCOTT SCHERR: Whatever components companies select to meet business objectives, we suggest making it a high priority to establish your HRMS/payroll solution as the master data source for all workforce-related systems. A number of our customers are doing this and citing the need to comply with Sarbanes-Oxley controls as one reason for focusing on this effort.


In your opinion what are the most dangerous pitfalls or common mistakes to avoid when implementing an HRMS/HRIS solution?


CHARLES D’AMBROSIA: This depends on your company size. The key is to get the system implemented quickly so that you can reap the benefits of automation. It is better to get 80% of the correct functionality implemented in 20% of the time so that HR can become productive in key company performance areas.


SYBLL K. ROMLEY: Implementations fail when the wrong expectations have been set, by either the vendor or the client and when there is no internal project ownership. Compile and prioritize a list of all the features you want implemented in your new system. Confirm any implementation fees associated with these features. Finally, take project ownership when it comes time to implement.


SCOTT SCHERR: One of the most common mistakes in the industry with implementations is underestimating the scope and therefore total cost of a complete HRMS/payroll implementation. We advise buyers to look very closely at the track record of vendors or consultants implementing. Ask for publicly reported average implementation times and talk to references.


During difficult financial climates, HR becomes increasingly pressured to justify return on investment for implementation of new HR software products and services. What advice can you give HR on how to effectively measure or quantify ROI of their HRMS strategies?


CHARLES D’AMBROSIA: This depends on company size. You may not have the resources to test this out. There are many areas for performance measurement such as errors in your current system. Focus on specific metrics, error reduction, employee and manager surveys, and overall company perception of HR. These are all often reasons for buying the system.


MARK D. LANGE: Organizations depend upon multiple applications to complete critical business processes. PeopleSoft Integration and Process Solutions ensure that transactions move between these applications to enable successful business process automation. Now, it is possible to mix and match ERP systems such as PeopleSoft with third-party technology solutions using modular components. This open framework allows you to connect people to processes, integrate disparate applications, and fully leverage your organization’s technology investments.


SCOTT SCHERR: Solution providers can help you develop an ROI analysis. Our advice is to work with vendors that will supply you with ROI tools developed by a third-party rather than the vendor. You also need to know exactly how the ROI was calculated and to distinguish between hard, or direct, benefits and soft, or indirect.


In the current business climate punctuated by mergers, acquisitions, and questions of corporate integrity, how important are the concepts of vendor stability and trust to the selection process of a software provider?


CHARLES D’AMBROSIA: If you’re serious about purchasing software, you have to be serious about researching the software vendor. As a potential customer, don’t hesitate to ask questions, request references, and thoroughly research your potential vendor. If the vendor can’t or won’t answer legitimate questions, consider it a red flag and quickly move on.


SYBLL K. ROMLEY: Vendor stability is important and also easy to check, but trust is earned during the evaluation process. A vendor that is open, honest and straight forward about the level of effort required to implement your vision is more likely to result in a long term partnership, and successful business relationship.


The Internet continues to revolutionize business. From a futurist’s standpoint, what do you see as the next evolution of HRMS and web-enabled software?


SYBLL K. ROMLEY: The evolution of HR will be driven by wireless high speed access-essential information anytime, anywhere on a variety of devices. The value proposition will be in the analytics and decision support tools that will be available plus enormous improvements in communications, information dissemination, and knowledge sharing.


SCOTT SCHERR: Newer forms of outsourcing will become the dominant form of HRMS/payroll delivery in the future. Taking the responsibility for managing systems in-house out of the equation gives companies the opportunity to select best-of-breed solutions, whatever the platform. Wireless access to rich HRMS/payroll functions will also become increasingly prevalent.


What kind of new functionality for hiring management or applicant tracking systems should HR make themselves aware of and what functionality should be closely examined when investigating these products and services?


MARK D. LANGE: Some of the newer functionality we see emerging in work class recruiting includes: bidirectional integration between core HRIS and talent acquisition systems, more aggressive attention web branding and candidate management, a focus on global recruiting requirements, use and demand on on-line screening and assessment tools, adoption of tools to manage the contingent as well as traditional workforce.


HR and management teams are increasingly looking at streamlining and improving their overall training delivery and functionality for their companies and are seeking out information on new “learning management systems.” What are the most pertinent questions or checklist items that HR and management should ask or be aware of when investigating a learning management system (LMS) or learning content management (LCMS)?


MARK D. LANGE: Enterprise and departmental deployments each require their own distinct set of evaluation criteria. Organizations looking to standardize on a single enterprise LMS, should consider the following:

  • Flexibility to support of multiple domains
  • Alignment with business goals
  • Fit with IT infrastructure
  • HR business process integration
  • Integration with other organizational development processes
  • Ability for any business process to trigger learning
  • Integration to company financials
  • Enterprise learning analytics