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Lesson Plan

Nicholas Donohue, New Hampshire’s commissioner of education, has handed out plenty of bad report cards in his 25-year career. But this time, it’s not a pimply-faced teen with an attitude problem that’s about to receive a failing grade. This time, Donohue is giving America’s education system poor marks. By failing to provide today’s high school graduates with the skills they need to succeed in the 21st-century workforce, the system has placed the United States “on the verge of becoming a second-class society economically,” he says.



    “If we’re serious about maintaining our prominence in the world economically, then we have to have much higher expectations for our young people,” he says. “And that means investing in strategies for increasing educational results.”


    Today’s corporations are looking for job candidates with strong analytical and effective communication skills, qualifications that surpass the fundamentals of reading, writing and arithmetic. No longer can a high school graduate expect to land a position on a factory assembly line. Computer automation is slowly eliminating traditionally middle-class jobs, thus raising the bar for America’s workforce. Today, employers are in search of workers who can communicate clearly, use data to solve problems, work well with people of different backgrounds and use computers to carry out simple tasks like word processing. By failing to accommodate these new hiring demands, schools across the country are denying businesses the employees they need to properly compete in the global marketplace, says Kenneth Kay, president of The Partnership for 21st Century Skills, a public/private grouping of community and business leaders.


    Desperate for solutions, many companies are getting actively involved. Boston-based law firm Hale and Dorr has its lawyers participate in local after-school programs; IBM offers tutoring and mentoring sessions; and computer manufacturer Dell hosts courses in which students learn how to assemble a computer. It’s either lend a hand now or pay the price later for underskilled workers, as many companies find themselves having to foot the bill for compensatory training or outsource work to foreign labor forces.


“We have a serious problem in America,” says Barbara Dyer, president of the Hitachi Foundation, a nonprofit philanthropic organization. “Young people are graduating from high school without the skills really necessary to be employed in many of the positions that are available.”


    That is why businesses, school boards and busy parents are turning to after-school programs to help bridge the gap between an antiquated curriculum and the modern-day demands of the marketplace. The more than 4,000 hours a year children spend outside school presents fresh opportunities to develop essential skills for the new economy. Far from being glorified babysitting sessions, these programs can teach young participants real-world skills such as creativity, character development, problem solving and the ability to work on diverse teams.


    Congress has caught on to the educational benefits that can emerge outside regular school hours. Federal funding for the 21st Century Community Learning Centers program has jumped from $40 million in 1998 to nearly $1 billion in 2004. In the meantime, businesses are ramping up their contributions to after-school initiatives. At a time when the government’s No Child Left Behind legislation is narrowing the scope of education to focus on reading, writing and arithmetic, Kay says, big business is broadening the definition of “teacher” to include professionals willing to serve as community mentors.


Employers today require higher-order skills


  
The increase in the college/high school wage gap stems in part from changes in the occupational distribution. This chart shows the percentage of employed adults in various occupations in 1969 and 1999, indicating a declining need for less-skilled workers.  

Source: Richard Murnane and Frank Levy, The New Division of Labor (2004)		  

    To recognize just how after-school programs are preparing today’s students and tomorrow’s workforce is to understand how economic, educational and employment needs have evolved over the past few decades. Cash-strapped school districts and overcrowded classrooms are only part of the reason why countless young people are entering adulthood without the skills they need to work successfully. Richard Murnane, a Harvard professor of education and society, and Frank Levy, an M.I.T. professor of urban economics, offer an in-depth explanation in their new book, The New Division of Labor: How Computers Are Creating the Next Job Market. Murnane and Levy argue that computers are now carrying out tasks that were once performed by blue-collar workers. Long gone are the days when a hardworking high school graduate was practically guaranteed a day shift in a neighborhood factory. Computer technology such as automation software has displaced these workers, forcing them to find work outside the occupations they’ve historically inhabited. Murnane and Levy’s research shows that since 1969, there has been a nearly 10 percent decline in the need for routine manual labor and a 15 percent increase in the demand for complex communication skills.


    “Computers are increasingly doing the jobs that high school graduates used to do, which are the blue-collar assembly-line and clerical jobs,” Murnane says. “Consequently, it’s really changed the kinds of skills humans need to make a decent living.”


    But high school grads need not wind up working at dead-end service-sector jobs that rarely pay enough to support their families. Murnane and Levy say there is a way to prevent schools from churning out students without the qualifications necessary to obtain or move beyond a blue-collar job. The solution lies in teaching today’s youth 21st-century skills such as expert thinking and complex communication. Expert thinking entails being able to identify and solve new problems rather than simply perform routine tasks. Complex communication involves not only eliciting and absorbing information, but also conveying a particular interpretation of information to others. For example, a customer might complain of receiving inadequate service from your company. Rather than simply process this information, a worker with the appropriate 21st-century skills can interpret and weigh a customer’s needs in accordance with global events, economic circumstances, cultural differences and technological factors.


Computers are increasingly doing
the jobs that high school graduates used to do, which are the blue-collar assembly-line and clerical jobs. Consequently, it’s really changed
the kinds of skills humans need to make a decent living.


    Murnane and Levy aren’t alone in thinking that young adults need new skills to meet the changing needs of the workplace. Seventy percent of Americans believe that teens need to acquire skills beyond reading, writing and math to succeed in the workforce. And a study conducted by the AOL Time Warner Foundation found that 92 percent of the 1,000 adult American respondents think young people need different skills today than they did 10 years ago.


    The Partnership for 21st Century Skills is doing its part by actively promoting the adoption of new skill sets. The organization has defined a framework for the types of skills students require to succeed. Based on feedback from educators, researchers and employers across the country, this short list of qualifications includes effective communication, collaboration, problem-solving and analytical thinking.


    But it is knowing how to learn, not what to learn, that is the key to ongoing success in the modern-day workplace. Kay says technology is constantly changing the way that workers perform tasks and approach projects. As a result, today’s businesses want employees who are willing to become lifelong learners by continually updating their skills and knowledge. “The ability to adapt to change is just the reality of the 21st-century workforce,” Kay says.


    As schools across America continue to focus on the fundamentals of learning, after-school programs are fast becoming forums for students to develop and practice these new skills. High-quality programs offer small-group activities that can help young people develop important teamwork and leadership skills. Students interact with community mentors and learn about different fields of interest. And after-school sessions help students hone their math and literary skills by giving them the opportunity to apply their knowledge in hands-on activities.


    Eddie Locklear, national director of 4H After-School, a division of the National 4H Council, says that after-school programs serve as “a laboratory to allow young people to put into practice the skills they’re learning in school,” such as teamwork, leadership development and conflict resolution. The organization’s learn-by-doing curriculum ranges from teaching teens the basics of balancing a checkbook to discovering the science behind outdoor gardening.  


21st century skills  
This chart shows the changing attitudes towards the skills that Americans believe are needed to succeed in the 21st century. An increasing number of business leaders, teachers and parents believe reading, writing and math skills must be supplemented with strong communication and analytical skills for students to succeed in the modern-day workforce.  

Source: Partnership for 21 Century Skills
*Totals might not equal 100% because of rounding		  

    If  businesses are hungry for better-qualified employment candidates, Eric Schwarz says, they had better start contributing their time and energy to after-school learning programs. Schwarz is president of Citizen Schools. For nearly nine years, the Boston-based organization has been advocating a learning model that addresses community needs while building student skills through hands-on after-school learning activities. The organization operates 10 after-school programs for more than 1,000 middle-school students in Boston and 11 additional affiliate programs across the country. Citizens Schools’ programs range from field trips to local institutions, neighborhoods and universities to focused homework assistance to strengthen a student’s academic performance.


    But it’s the organization’s hands-on apprenticeships, taught by community business leaders, that promise to have the greatest impact on future generations of the workforce. Schwarz says that business owners have spent far too many years playing “Monday morning quarterbacks and spectators in education reform.” Now is the time, he says, for them to step in where many parents simply don’t have the time, money or energy to participate in their children’s lives. “The after-school program can really play a parenting role by introducing kids to music, art and sports,” Schwarz says.


    Lawyers at the Boston-based law firm Hale and Dorr have been lending both their pocketbooks and expert services to Citizen Schools since its inception. In addition to providing the organization with a $75,000 annual grant, twice a year Hale and Dorr ushers eager middle-school students from the inner city into its plush offices to help them prepare for mock trials. During these trials, students deliver opening statements, cross-examine witnesses and argue their cases before real federal and superior court judges.


    John J. Regan, a senior partner at Hale and Dorr, says that the program serves the community and helps the firm in the future. “Big business that is smart [gets involved in after-school programs] because it constitutes an investment in their future workforce,” Regan says. “Today’s children are going to be your candidates for employment in 10 years or less.”


    IBM is banking on its after-school agenda. In addition to partnering with Citizen Schools, the computer hardware giant is a supporter of TutoringPlus, an organization in Cambridge, Massachusetts, that fosters the academic and personal growth of youth through one-on-one tutoring and mentoring programs staffed by volunteers. “We want to make sure that down the road, we are able to have an educated community from which to draw our employees and our customers,” says Cathleen Finn, an IBM community relations program manager.


    Dell’s recruiting efforts are off to an early start with Dell TechKnow, the computer giant’s own after-school learning program. Teens from inner-city school districts are selected to participate in a 40-hour course during which they disassemble and rebuild personal computers donated by Dell. Graduates of the program take home the computer they build and receive a year of free Internet access as well. More than 2,000 students have completed the course, 80 percent of them ethnic minorities.


    For every student enrolled in an after-school program, there is an office-bound mother or father breathing a sigh of relief. In fact, studies have shown that workday productivity starts to slow down around 3 p.m., just as kids begin pouring out of school doors and onto city streets.


    Donna Klein isn’t the least bit surprised by the strong correlation between after-school programs and workplace productivity. Klein is CEO of Corporate Voices for Working Families, a two-year-old nonprofit, nonpartisan coalition of 47 companies that addresses policy makers and Congress on work/life issues. She says that dual-income families and long workdays are factors that have contributed to parents’ increased concern about their children’s after-school whereabouts. “If employees are worried about the safety of their children after school and concerned about whether or not they got home safely, that’s a tremendous draw-down on productivity,” Klein says.


    If providing peace of mind to parents isn’t enough to convince companies to help out, a strong business case can be made for after-school care as well. The National PTA reports that at least 7 million, and perhaps as many as 15 million, American children have nowhere to go after school. Because of this, they are at risk of both committing and becoming victims of crime. However, studies show that the nation’s taxpayers save approximately $3 for every dollar spent on after-school programs by reducing high-school dropout rates and cutting remedial-education costs.


    In the meantime, many companies continue to contend with the problem of poorly prepared job candidates. Kay says the fact that companies are being forced to invest in high-priced training courses and outsource jobs has served as a much-needed “clarion call.” Business leaders, teachers, parents and students are finally waking up to reality and recognizing the need for immediate action.


    “The most effective thing we can do,” Kay says, “is to make sure our students possess the skill sets that are going to make them as competitive as possible.”


Workforce Management, July 2004, pp. 37-40 — Subscribe Now!

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Workforce Management July 2004

All aboard
By Andy Meisler
Beset by rising insurance costs, Union Pacific employs semi-tough love to improve the health of its mostly middle-aged, blue collar workforce. While some companies take a no-prisoners approach, UP choose to nudge, encourage and prod its employees to good health. And it’s saving millions.

Lesson plans
By Cindy Waxler
Employers have long complained about workers whose education has ill prepared them for the job market. Now companies are trying to fix the problem with the next generation of employees via after-school programs. IBM offers tutoring and mentoring sessions. Dell hosts courses in which students learn how to  assemble computers. A Boson law firm, Hale and Dorr, provides grant money and prepares middle-school students for mock trials with the kids as lawyers. Businesses that have been “Monday morning quarterbacks and spectators in education reform” should get involved, on after-school educator says.

Pulling the plug
By Samuel Greengard
The complexity of installing and maintaining human resources management systems is prompting many companies to bypass them altogether. That was the course Regus Americas took, junking its HRMS and handing the walking papers to half its human resources staff. As large companies turn to total business process outsourcing, software companies could find themselves endangered and so are working hard to lock up contracts with outsourcing giants. Meanwhile, small- and medium-sized firms that haven’t previously relied on a major HRMS package are leapfrogging directly to outsourcing in the same way that countries like China and Kenya have skipped landline communications and headed directly to cellular phones.

Between the Lines
The fast-forward future
We didn’t get a Jetsons future, but the one that’s arriving daily is just as interesting.
   Reactions From Readers
Letters on women at the top, a well-educated workforce and highly paid HR leaders.

In This Corner
The art of the covenant
Restrictive covenants are a necessary part of business today. But they’re difficult to craft and hard to enforce.

Legal Briefings
Reasonable accommodations for body piercing.

Data Bank
The curse of private funding

Wal-Mart vows to fight on
The largest retailer now faces the largest class-action lawsuit ever filed against a private employer. Also: With the acquisition of Exult, Hewitt aims to become outsourcing’s 800-pound gorilla. A new CEO promises a people focus at Coca-Cola. A study reveals what makes companies productive. Mitsubishi’s leaders take responsibility–and keep their jobs. The NLRB deals unions a bad hand.
  
 

Retirement Benefits
New tactics to boost 401(k) interest
Employers try contests, computer games and financial counseling to engage workers who can’t seem to focus on retirement planning.		  

Health & Safety
Ergonomics is back on the radar screen
Business and OSHA are turning their attention back to a hot issue of the 1990s.
  

Benefits Management
Auditing for the “ineligibles”
Companies save millions by weeding out grown children, ex-spouses and other employee dependents who are no longer eligible for benefits.
  

Awards & Recognition
A reward that money can’t buy
Procter & Gamble gave employees two extra vacations days are a reward for outstanding stock performance. It’s a model that other companies can follow.
  

Corporate Culture
No accounting for this tradition
There’s no demonstrable ROI, but that doesn’t stop the venerable company picnic.
  

Regulation
A key role in a complex compliance picture
As companies face the demands of Sarbanes-Oxley and other new regulations, human resources plays a critical part in the process.
  

 
June  2004

May  2003
April  2003
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All Aboard

The old baggage car, improbably filled with heavy-duty exercise equipment, spends most of its time in the Union Pacific Railroad Museum in Council Bluffs, Iowa. It’s the last of its kind, used only for excursions of the railroad’s steam-locomotive-drawn “heritage” rolling stock. But from 1990 to 1998, it was part of a fleet of 17 such cars that were attached to special work trains. The trains housed and fed 150-member “system gangs,” which roamed the railroad’s immense track system for weeks at a time. After a day of laying or repairing rails, roadbeds and signals, the overwhelmingly male laborers, welders, machinists and foremen had the option of throwing in a brisk workout on a treadmill or at a weight machine or free-weight bench.



    Or, of course, they could kick back with a dinner of fat-filled fried foods followed by beer and cigarettes. Nevertheless, the exercise cars reflected a genuine concern about employees’ long-term health before it was fashionable. But that was a different century, a different economy. In 2004, 15 years into a national health-care crisis, the costs and risks for UP are almost incalculably higher. With its aging, predominantly male and largely unionized blue-collar workforce, the 142-year-old company would seem to be a logical candidate for the kind of soul-sapping battle over health coverage experienced by so many old-line American corporations and smaller “old-economy” organizations. Which makes it all the more surprising to learn that Union Pacific is one of the best examples of a large American company that has successfully balanced the health of its employees with the need to boost its bottom line.


    Union Pacific estimates that during 2001, the last year for which a figure was calculated, its wellness program saved the company $53 million. That’s because more than 34,000 of the company’s 47,000 employees have voluntarily availed themselves of a free health-risk-assessment survey offered by the company. In 2003, 10,416 employees took the HRA and 6,642, prompted by health risks thus uncovered, enrolled in preventive health-education or disease-management programs. From 1990 to 2001, costs attributed to “lifestyle” factors such as smoking and alcoholism have dropped from 29 percent to 18.8 percent of the company’s total health-care bill. Among the employees who have taken advantage of the project, rates of high blood pressure, high cholesterol, smoking and excessive alcohol consumption have been significantly reduced.


    In 1997, the railroad commissioned a $75,000 study by Medstat, a company in Ann Arbor, Michigan, that provides research services for managing the cost and quality of health care. Medstat analyzed the company’s present and future workforce and predicted how its health-care costs would be affected by health and wellness efforts through 2008. Using a technique known as economic forecast modeling, it looked at four possible scenarios: What if the program disappeared? What if it stayed the same? What if UP realized a 1 percent reduction in risk? What if it achieved a 10 percent reduction over 10 years?


    Medstat’s rosiest scenario predicted savings per year of $77 million, but UP dialed back its expectations to come up with a figure $24 million lower because it didn’t think all the theoretical savings were realistic. It similarly scaled back its projected cost-benefit ratio to $4.53 saved for every dollar invested.


    In 1998, around the time the exercise cars were retired, the company contracted with 500 health clubs and gyms around its route system so that its employees could use the facilities free of charge. Recently, it instituted a pilot program providing a weight-loss medication, Meridia, to overweight employees to be used in combination with behavior modification, daily use of a pedometer and telephone counseling. And last year the company, which already provides the smoking-cessation drug Zyban, instituted the controversial policy of not hiring smokers. It does so on the honor system only and doesn’t include states where it operates and where it is illegal to prohibit employees’ off-duty use of legal substances. These states are: Oregon, Nevada, Arizona, New Mexico, Louisiana, Oklahoma, Wyoming, Nebraska, Oklahoma, Minnesota, Missouri, Tennessee and Wisconsin.


    Barbara Schaefer, a 26-year company veteran who is senior vice president for human resources, says Union Pacific does some cost calculations but that the numbers aren’t conclusive enough to release as proof of ROI. It declines to disclose either its health costs or the amount it spends each year–projected to average $1.9 million annually in the Medstat study–on its health and wellness programs. Arguably, UP’s strongest ROI data was collected at an early stage. In 1989, before the program was instituted, its employees had 17,954 encounters with health-care providers, at an average cost of $136.20 per encounter. In 1991, the number of encounters dropped to 17,291, at an average cost of $123.80. The company saved approximately $300,000. The program’s total cost was $110,000, yielding a benefit-to-cost ratio of 2.78:1.


    Although the company could commission a $250,000 statistical study putting a dollar value to each increment of employee health improvement since then, Schaefer has declined to do so. “I’ve got a few numbers,” she says a bit sheepishly, adding that her figures are nowhere near conclusive enough to release as proof of ROI. What is more important, Schaefer says, is that health and wellness is a significant part of the corporate culture. “Our chairman is the inspiration,” Schaefer says, referring to Richard Davidson, chairman and CEO since 1997. “He’s fired up about this initiative personally. He’s a former smoker who’s now a serious Atkins diet-ite. That’s because he’s a former cattle rancher who loves to eat as much beef as he wants.”


    As the railroad chugs along making solid if not spectacular progress in employee health, it also has consciously pulled back from some of the more draconian methods many companies are trying, such as requiring employees to take a health-risk assessment as a prerequisite for health coverage and making smoking or excessive drinking off duty a firing offense. While the company maintains its relatively low-key internal concern about employee health, there is a firestorm raging outside. The shrinking umbrella provided by company-funded health plans has become a national obsession. Fueled by dire declarations of an “obesity epidemic” and a demographic time bomb consisting of middle-aged baby boomers nearing retirement, many companies are using employee health costs as a club during contract negotiations, or as a blame-the-victim tactic to rock employees back on their heels and force them to “take ownership” of rising rates.


    The computer company Cognex, near Boston, and the Kissimmee, Florida, Sheriff’s Department are organizations that have not only banned smoking on the job but also instituted a policy of not hiring smokers and firing anyone who is discovered doing so. Others, like the Bluefield Regional Medical Center in West Virginia and the Washoe County, Nevada, School District, have tweaked their consumer-driven health-care policies, “withdrawing” anywhere from $25 to $600 per year from each employee’s health savings account. The money is then paid back in installments if employees undergo voluntary health-risk assessments and address whatever risks are found by enrolling in company-sponsored disease- and risk-management programs.


“You can’t do this stuff overnight,
just like you can’t ban smoking in the building and expect that everybody will immediately quit.”


    The beauty of this, health and wellness practitioners argue, is that their programs can be funded with the cash that stubbornly unhealthy employees leave on the table. The risk is that overweight or otherwise apparently unhealthy employees will be demonized by their coworkers for alleged lack of team spirit and/or driving up the cost of health care for everybody. “It’s the worst in small companies, where a few people can drive up the rates for everyone,” says Donald Walizer, an organizational psychologist in Conway, Arkansas, who formerly worked as a benefits manager for a Fortune 500 company. “I’ve seen people get very, very angry” at coworkers who are perceived to be unhealthy.


    At least one company has pressed even harder. In 2002, Monongalia Health System Inc., a 1,400-employee health-care provider in Morgantown, West Virginia, announced the institution of what it calls its “tough love” policy. Any employee or spouse wishing to remain on the company health plan would be required to complete a 50-question health-risk assessment. Then he would have to attend free medical self-care training designed to “engage employees in taking more responsibility for their health-care status” and educate them “on health-care costs and the tools needed to make more prudent decisions when accessing health care.” About 40 percent of the workforce complained that this was an invasion of privacy, an effort by the company to wriggle out of its obligation, an attempt to gather data that could be used against them at promotion or layoff time, or all of the above, the company reports. But after being reminded that the company health plan was a benefit, not an entitlement, the employees all complied.


    But tough love, as practiced by Monongalia and any employers that choose to emulate it, will not be an option at Union Pacific. “The risk of taking benefits away is that something catastrophic could happen, and that would break my heart,” Schaefer says, adding that she can’t envision a situation at her company or any other where one part of the workforce is offered health coverage and another part is not. “I don’t want to be critical of someone else’s design, but I’m not going that way.”


The road to wellness
    Union Pacific is unique,” reads a 2003 corporate achievement award citation from the American College of Occupational and Environmental Medicine. “It is strongly committed to research to understand not only the effectiveness of intervention strategies in reducing health-risk factors, but also employees’ acceptance of various interventions. This focus on research is rare in corporate America, but one that makes sense for a mature workforce.”


    In 2001, Union Pacific won a C. Everett Koop National Health Award from The Health Project, a private/public consortium chaired by the former surgeon general. In 2003, the U.S. Department of Health and Human Services gave UP its Innovation in Prevention Award for large companies. In both 1997 and 2002, the Wellness Councils of America, a nonprofit organization that has its headquarters near UP’s in Omaha, named the railroad a Platinum Well Workplace, its highest classification.


“We found that the most influential person in a person’s life is her spouse or significant other. So it’s best to get the information in their hands.”


    The main initiative that has kept the railroad out of the public health-care debate and off the picket lines is called Health Track. All of Union Pacific’s employees are given both the motive and the opportunity to improve their vital statistics in 10 distinct categories: obesity, fatigue, inactivity, diabetes, smoking, stress, high blood pressure, high cholesterol, asthma and depression.


    Health Track is promoted during shift changes, at safety meetings, at company-wide functions and in newsletters. Corps of employees who volunteer to be health mentors are trained to help their less-enthusiastic colleagues through the programs. For example, UP safety captains frequently coach and encourage their co-workers through the smoking cessation process, emphasizing that slips and backslides are an expected part of the process. Twenty-six occupational health nurses at 20 of the railroad’s far-flung work sites from New Orleans to Pocatello to Portland are also responsible for spreading the message.


    CEO Davidson got caught up in one such wellness dragnet while visiting with maintenance-of-way employees near Houston last year. “Our nurse came around to measure blood pressure and body fat, and I got in line,” he says. “She had this electronic device that measures fat somehow, and when she tried it on me she said ‘You exceed the upper limits.’ That put me over the edge.” Since then, Davidson says, he’s cut back on carbohydrates and sugars and lost 25 pounds.


In transit
    The railroad got into the health and wellness business in 1987 at the behest of the late Michael Walsh, then UP’s CEO and an avid runner and outdoorsman. A first-floor mailroom at headquarters was cleared out and a small exercise facility, available to all UP employees, was installed. The company contracted with private fitness centers along the UP system to admit its employees for free. To service roving track workers, the exercise cars were built and rolled out.


Change for the better


  
In 1990 Union Pacific calculated the percentage of its employee health-care costs that were due to chronic conditions and poor habits. Since the institution of Health Track, the percentage has gradually dropped.
 		  


Source: Union Pacific		  

    A 1990 evaluation produced the news that nearly a third of UP’s health costs were sparked by lifestyle factors that were at least theoretically subject to change. As health-care costs continued to zigzag upward, the railroad launched its first attempt at lifestyle modification. In Health Track’s first iteration, third-party providers were hired and pilot programs were launched to administer health-risk assessments. UP used the information gathered to alert employees who were deemed to be endangering their health by neglecting four risk factors.


    Over the next few years, as health costs continued to soar, the programs were expanded to address seven other health-risk factors. The programs were extended to all UP workers and their covered spouses, promoted heavily during work hours and integrated into the railroad’s safety-promotion program. It was also integrated into the company’s disability-procedures program in an effort to incorporate health and fitness into its aggressive return-to work-program.


    Adjustments were made and failures acknowledged. It was discovered, for instance, that promotional literature worked better if mailed to workers’ homes rather than distributed at work. “We found that the most influential person in a person’s life is her spouse or significant other,” says Jackie Austad, UP’s director of health and wellness. “So it’s best to get the information in their hands.” UP has also found that weight-reduction programs, including subsidized Weight Watchers meetings, are as effective for its employees as for the population as a whole. Still, 54 percent of its employees are overweight, an increase from 40 percent since 1990. (In 2000, The Centers for Disease Control and Prevention classified 64 percent of American adults as overweight.)


    Although far from ready to surrender, company officials figure that “awareness” is still no match for an aging, mainly male workforce relying increasingly on high-tech devices rather than brawn. Since the mid-1990s, smoking has been prohibited in progressively larger swaths of company property. It has long been forbidden in locomotives, shops and offices, and next year will be against the rules in outdoor switching yards and on rights-of-way as well. UP’s new Omaha headquarters building, due to open this summer, will have a large, well-equipped exercise center and a cafeteria with a section devoted to healthier foods.


    Next year, Schaefer says, the railroad will try nudging its non-union workers toward health by using the health savings account financial-incentive method. But the fine line between information and coercion, company officials say, will never intentionally be crossed. Marcy Zauha, UP’s director of health and safety, says it takes time. “You can’t do this stuff overnight, just like you can’t ban smoking in the building and expect that everybody will immediately quit.” What she tries to do is to give employees information and then ascertain their level of health awareness. “Are they someone who’s not yet ready to change?” Zauha asks. “Or are they somebody who’s ready to make a change right now?”


Workforce Management, July 2004, pp. 30-34 — Subscribe Now!

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The Company Picnic is Alive and Well

Twice each summer, the employees of Robert Smith & Associates PR, a public relations agency in Rockton, Illinois, attend an event so important that no one may schedule a doctor’s appointment on that day or skip it except in true emergencies. The big occasion is the company picnic, held at a nearby park. “I just bring hot dogs, chips, salad and pop–nothing extravagant,” says Robert Smith, the firm’s president, who started the tradition three years ago and estimates that each picnic sets him back about $1,000. “We play music, dance and have games.”



    The New Jersey law firm McElroy, Deutsch, Mulvaney & Carpenter, takes its annual barbecue even more seriously. The firm flies in attorneys and their spouses from as far away as Denver for the event, held for the past 17 years at the home of managing partner Edward Deutsch. Last year, 400 people attended the picnic, which included a 22-foot inflatable slide, pony rides, face painters, a Ferris wheel, miniature golf, volleyball, magicians, clowns, a petting zoo, goody bags for kids and a fully stocked Good Humor ice cream truck. Attorneys staffed the 6-foot grill, and the firm’s partners supplied salads and desserts. Price tag: up to $30,000. “It’s part of our firm’s culture to treat people well, maintain a positive working environment and provide an opportunity for employees to introduce their families to coworkers,” Deutsch says. “This is a reward in and of itself. Not everything we do must have a business reason behind it.”


    These are just two examples of a scene repeated at companies of all sizes nationwide. While many feel-good perks have been dropped in recent years, company picnics have survived and thrived, free of the intense bottom-line scrutiny applied to other employee rewards. In many cases, companies have instituted their first picnics in the last couple of years, and none of the workplace experts consulted for this story knew of any companies that have stopped having them, nor would they dismiss them as passé. Companies seem determined to not let the tradition fall by the wayside, arguing that their value, while not measurable, is real.


    “There’s no way I’d ever cancel a company picnic,” Smith says. “My biggest business advantage is my people, and the more I build a great environment, the better job they will do. If my workers are happy, it carries over when they deal with clients, prospects and each other–and I make more money.”


    The picnic is a way to support workplace morale, relationship-building and retention, says Mallary Tytel, president of Healthy Workplaces, a human resources consulting firm based in Bolton, Connecticut. “In times of uncertainty, it is particularly important to maintain corporate routines and rituals whenever possible,” she says. “That’s why more and more companies recognize that the company picnic is part and parcel of the organizational fabric, and that the return on investment is less tangible but more critical than a line item in the budget.”


Making connections
    Albert A. Vicere, professor of strategic leadership at Pennsylvania State University’s Smeal College of Business Administration, believes that the main value of picnics lies in the connection-building opportunities they provide. “In today’s business environment, we work far more in ad hoc teams than in formal structures. We rely on colleagues for help, information and support,” he says. “Picnics facilitate the development of such social networks. Effective teamwork is much easier when you have met and gotten to know the person you’ll be working with.”


“People come alive in the sunshine, with the smell of barbecue and the sounds of summer playing from the speakers…. This picnic lets them know their hard work and dedication are greatly appreciated.”


    That’s how it works at McElroy, Deutsch, Mulvaney & Carpenter, says Barbara Breivik, director of client relations and the event’s main organizer. “Our picnic boosts employee morale and reinforces the feeling of ‘family’ within the firm,” she says. “It’s a great way for employees to meet each other in a casual setting instead of a conference room. And the fact that the managing partner opens his home to all staff and their extended families goes a long way toward making everyone feel they are important to the firm, which in turn creates a great sense of loyalty.”


    Vicere agrees with both Deutsch and Breivik. “Will a company picnic have immediate, measurable financial payback? No, it won’t,” he says. “Can it help shape a high-performance culture? Yes, it can. Company picnics help build morale, demonstrate commitment and fuel loyalty. The fact is, we work harder and do better work when we like our job, respect our organization and get to know our colleagues.”


Boosting retention
    Health Central, a 1,400-employee hospital in Ocoee, Florida, holds picnics every May and November, with a combined budget of about $24,000. Gina Schwiegerath, director of human resources, believes the events are well worth the cost. “These picnics positively impact employee satisfaction, which we survey and measure. The amount we spend on the picnics is less costly than employee turnover,” she says.


    Stratus Technologies, a company in Maynard, Massachusetts, that supplies computer servers, holds two summer picnics–an on-site barbecue for the company’s 920 employees, which costs about $7,500, and another event for families at an amusement park, water park or zoo, which may run up to $20,000. Judy Reed, vice president of human resources, says the events play a major role in boosting employee retention. “I have no idea of their ROI and we don’t measure the results, but I can tell you that our employee-retention rate is among the highest in the industry,” she says. “We retain 95 percent of our employees each year, and we get almost half of our new hires from employee referrals. We have learned that employees who are friends are more likely to remain with the company, and the barbecue is one more way to encourage people to socialize with each other. People are more likely to try to work together on team issues if they have personal connections.”


Showing appreciation
    Saying thank you and providing an opportunity to socialize with coworkers are among the reasons for Ohio Northern University’s annual Employee Appreciation Picnic, held since 1998 at the close of the academic year. “With a 285-acre campus, some employees don’t often see staff from the other side of the property. The picnic allows employees to interact with their counterparts,” says former director of personnel services Mindi L. Wells, who coordinates the on-campus event, which includes big tents and music from the campus radio station.


    All 520 university employees and faculty members are invited, and the president, vice presidents, deans, supervisors and other campus bigwigs serve on the buffet line. “We anticipate that more than 300 will attend this year,” Wells says. “People come alive in the sunshine, with the smell of barbecue and the sounds of summer playing from the speakers. Our employees work hard all year long, especially in the days and weeks leading up to commencement. Many staff members put in extra time during May. This picnic lets them know their hard work and dedication are greatly appreciated.”


    Wells adds, “Like the commercial says: cost of barbecue chicken and bratwurst, $1,700; fee for volunteers, $0; contribution to employee morale, priceless.”


Workforce Management, July 2004, pp. 70-73 — Subscribe Now!

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New Tactics to Boost 401(k) Interest

For Barbara Green, director of retirement programs at Trinity Health, it had become increasingly clear that her workforce was in the dark about saving for retirement. As of 2002, less than half of the nearly 44,000 employees at the Novi, Michigan-based health-care system were enrolled in the defined-contribution plan. And most employees waited until they were 55-years-old before they inquired about retirement savings.



    Green knew that her organization needed a wake-up call. In 2002, Trinity launched a retirement-education campaign encompassing one-on-one counseling, group seminars, online tools, videos and access to a financial adviser. To generate buzz about a topic that most employees put on the back burner, the organization crafted creative marketing themes and offered special giveaways. This year’s campaign has a movie-theater theme; employees get a movie card stamped by doing such things as enrolling in the retirement-savings plan or reviewing their investment strategy with a financial representative. If they earn three stamps, they win Blockbuster coupons or movie tickets. The campaign has made a difference. In two years, participation in the nonprofit’s 403(b) plan grew from 45 percent to 59 percent, a 31 percent increase.


    Numerous studies show that most Americans have no clue about preparing for retirement. They underestimate how much money they will need and how long it will have to last. As the burden of saving for retirement has steadily shifted to the individual–with defined-contribution plans increasing in number and defined-benefit plans decreasing–employers like Trinity have stepped up their efforts to educate employees about retirement. If employees aren’t prepared, the retirement-savings crisis will affect millions. In the next two decades, the number of Americans over age 65 will swell from 36 million to 62 million, representing 20 percent of the population.


    “Many think retirement is a given. It’s not a given anymore,” Green says. “People really don’t understand how different our retirement is going to be from our parents’ retirement. We may or may not have health care or a defined-benefit plan, and we’re putting kids through college, taking care of elderly parents. Frankly, I have not even heard of anybody who has saved enough.”


    Most people haven’t saved nearly enough. One-third of workers believe they may outlive their retirement savings, according to a recent survey by the Employee Benefit Research Institute, American Savings Education Council and Mathew Greenwald & Associates. Among individuals who make less than $25,000, the concern is even greater. More than half believe they risk outliving their savings. Almost one-third of both pre-retirees and retirees have saved less than $50,000, and 12 percent of retirees and 17 percent of pre-retirees have saved between $50,000 and $99,000.


    When saving for the future, many individuals mistakenly think in terms of what they’re earning today, says Dallas Salisbury, CEO and president of the Employee Benefit Research Institute. They fail to consider how their lifestyle might change, how inflation and health-care expenses will eat away at their savings, and how long they’ll live. “Most people don’t plan for retirement,” Salisbury says. “The extent of their planning is–I plan to retire one day. People spend more time planning a vacation than planning for retirement.” People also make decisions based on how old their parents were when they died. Today, a 65-year-old man has a 50 percent chance of living beyond 85. So if a man retires at 65 and has saved enough money for 20 years, he has a 50 percent chance of outliving his money.


    Until now, retirement education has centered mostly on investing in 401(k) plans, says C. Robert Henrikson, president of U.S. Insurance and Financial Services businesses of MetLife Inc., based in New York. Employees today are so focused on growing a large portfolio that few know the true value of their nest egg. “Very little has been spent on educating people on how they then turn that bag of cash into income,” he says. “The emphasis [in education] has to move to more of a focus on living in retirement.”


    Employers are starting to move the emphasis in that direction, but many still face the challenge of motivating employees to set foot in a retirement seminar or to enroll in the 401(k) plan. Fuji Photo Film USA, based in Valhalla, New York, launched a campaign two years ago to prompt its younger employees to start saving for retirement by mailing out silver camera-shaped cards to 4,600 employees that said: “Think ‘point-and-click’ was easy? Try 401(k).” Employees who returned the detachable postcard were entered in a raffle to win a camera. As a result, 36 percent of respondents enrolled at an average deferral rate of 4.9 percent; 17 percent of respondents were already in the plan, and they increased their deferral rate to an average of 9.3 percent. “It’s more difficult to get younger people to consider long-term savings,” says Carl Gold, vice president of benefits.


 “Many think retirement is a given. People really don’t understand how different our retirement is going to be from our parents’ retirement…. Frankly, I have not even heard of anybody who has saved enough.”


    To encourage employees to sign up for its 401(k) plan, the Seattle-based Starbucks Coffee Co., which has more than 75,000 employees, at an average age of 28, started a program called Futureroast.com. The Web site features four interactive computer games that demonstrate key investment concepts, says Jo Clark, manager of the savings program. In the Voyager game, employees learn about the concept of a company match. Players maneuver a ship and try to bring on as much cargo as possible. Along the way, players encounter enticing purchases like CDs and movie tickets, and they have to choose between buying them or saving their cargo. The longer they stay in the game, the greater the match. Since Futureroast.com started last June, participation in the 401(k) plan has grown from 18 percent to 22 percent–a 23 percent increase.


    A growing number of employers are turning to other Internet tools to educate their employees about saving. The last five years has seen the development of a mini-industry of tech companies that sell Web-based software programs offering investment advice by independent third parties. Employers typically pay a fee to use the programs based on their number of employees.


    The newly launched Boston-based LTSave offers a program that has individuals enter their 401(k) balance and other savings, and answer questions about their risk tolerance and retirement goals. It then shows them how much retirement income they’ll generate and how that compares to their goal. The program offers advice on how to reach their goal, as well as quarterly e-mail reminders to re-evaluate their investment strategy. “Once most employees enroll in their 401(k) plan, they never change their asset allocation,” says Sunil Bhatia, CEO of LTSave. And because of changes in the market, “over time, they don’t get the benefit of really compounding, which is a powerful force.” Employees can do the program on their own or with an adviser over the phone, or have LTSave manage their portfolio.


    The Hartford Financial Services Group, an investment and insurance company based in Hartford, Connecticut, is considering adopting an online tool, but prefers a more personal approach, says Karen Macke, senior vice president of compensation and benefits. Last September, it began offering its 30,000 employees advice from certified financial planners through a toll-free number. When employees are three years from retirement, they attend a three-day workshop that covers health benefits, retirement savings, Social Security benefits and other retirement issues. Employees can invite their spouses, adult children or their own financial planners to attend.


    Employers are also starting to go beyond the basics of retirement education. In response to hearing that employees needed help in learning how to turn their nest eggs into monthly retirement income, 401(k) provider Principal Financial recently developed a series of workbooks. The materials were sent out to 18,000 plan participants across several hundred companies. “People look at their assets and think, ‘Wow, that’s a lot of money.’ But when they look at it as income and realize it has to last 25 to 30 years, it’s a shock how small it is,” says Julie Leclere, director of retirement and investor services at Principal Financial. Principal’s tools include a workbook for employees 10 years away from retirement that allows them to plug in their savings, come up with an income goal for retirement, and then see how far they are from reaching that goal, with solutions on how to plug the gap.


    Studies have shown, though, that even among the best companies, employees often don’t take advantage of the education that’s provided, Salisbury says. “Are employers offering more education? Yes. Are individuals using it at higher rates? No,” he says.


    Trinity Health has tried to overcome that challenge by creating a sense of urgency with its marketing messages and offering education through every possible medium. Starting in September, Trinity will offer five one-hour seminars held either during lunch, on weekends or at night. “All employees walk out of their first seminar with the same comment: ‘Wow, I wish I could have come to this program when I was 30,’ ” Green says. “We want to make sure our employees are ready for retirement, knowing that the company cannot do it all for them anymore.”


Workforce Management, July 2004, pp. 57-58 — Subscribe Now!

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Restrictive Covenants with Employees

There was a time when care was taken to make sure a departing employee didn’t leave a company carrying a briefcase stuffed with leather notepads and expensive pens. Today the stakes are far higher, and can cost a company many millions of dollars. Today an employee might stroll off to open his own company taking with him a far more valuable cache: customers and coworkers who suddenly morph into competitors.



    Although a company’s first line of defense against this surreptitious practice is traditionally the restrictive covenant, the enforceability of such covenants is, well, a subject of much debate. While the validity of the restrictive covenant generally depends on the laws of the state where the employee works, most courts, not surprisingly, remain reluctant to enforce restrictive covenants in an economy in which unemployment is high. Most companies recognize the importance of having such agreements and do have employees execute them. Still, a surprising number give little thought to preparing and executing meaningful rules. For example, if a human resources professional has a brainstorm and decides that all the employees should sign restrictive covenants without value for the agreement, such as a bonus or a promotion, the enforcement of the restrictive covenant is, at best, questionable. If the restrictive covenant is too onerous or too anti-competitive, it may not be enforceable. And if the time restraint is too long, the court will not enforce it. Some states will allow continued employment to be sufficient consideration for a valid agreement, others will not. It is important to appreciate that almost any kind of obligation on former employees exists only if there is a valid agreement.


    Second, it is vital to note that your company’s rights of enforcement may depend on where the departing employee fits in the corporate food chain. In legal terms, the employee will have either a fiduciary duty or a duty of loyalty. In many jurisdictions these obligations are one and the same, and in other jurisdictions there are important nuances. For example, if a corporate officer intends to leave and knows that other employees are planning to resign to join him to compete against your company, the officer has a duty of disclosure, an obligation to tell the company that a group of employees is leaving. If the departing employee is not an officer and has only a duty of loyalty, generally there is no obligation of disclosure.


    While the outside parameters of an officer’s fiduciary duty are by no means perfectly clear, this obligation requires an employee to put his own interest behind that of the employer. If, for example, a corporate officer has a lifelong friend who is leaving to be a competitor, the officer should disclose the information to the company. While the law allows even a corporate officer to plan a departure, create a business and even set up that business before leaving, it does not allow the departing employee to solicit coworkers or customers before he officially separates from the company. This is an important distinction that gives a company significant leverage in taking action against the employee.


Have you noticed an employee who never works late or comes in on weekends starting to do so? Have you noticed a particular employee saving or e-mailing herself an unusually large number of documents?


    Beyond simply protecting a firm’s employees and customers, protecting a corporation’s confidential information and trade secrets has become more important than ever. The burden is on a company to make sure that a comprehensive plan is in place to protect any and all corporate assets, and to ensure that the organization’s agreements with employees are comprehensive, clear and current.


    The mistake that many employers make is trying to bootstrap themselves after the fact into creating some form of overall protection by suing for breach of confidentiality. In this case, confidential material that should be protected typically includes information on compensation and productivity of co-employees, customer lists, and buying and pricing. An employer often uses litigation as a strategy to make a statement to stop other employees from divulging information or to prevent other employees from departing. Sometimes it works, but often it does not, and by then, much damage has already been done. Such a mistake could cost a company millions. Unlike the breach of restrictive covenants—the theft of confidential information—breaches of fiduciary duty and loyalty are difficult cases for a company to prove.


    Still, courts have little patience for employees who breach fiduciary or loyalty duties. Even when the damages are difficult to ascertain, courts will figure out a way to punish the wrongdoer. This could mean a forfeiture of salary, seizing the profits of the new venture and/or running the new company out of business. The more egregious the pre-departure conduct, the more likely that the employer will obtain real relief. But the clearer and more reasonable and comprehensive the restrictive agreements are, the less likely the chance of winding up in court.


    Frequently, a dishonorable employee will leave a paper trail or share confidences with an untrustworthy coworker who tries to take advantage by acting as a mole. There are always telltale signs when an employee is trying to ambush an employer by taking coworkers or customers into the new endeavor. You might ask the following questions: Have you noticed an employee who never works late or comes in on weekends starting to do so? Have you noticed a particular employee saving or e-mailing herself an unusually large number of documents? If so, investigate immediately and document your findings carefully.


    Finally, when such covenants are viewed in the broader context of one’s corporate responsibility, the approach to designing them becomes just as important as having them. Before executing restrictive covenants and other agreements with employees, give significant thought to what assets must be protected, how far the company will go to protect them and whether or not the covenant will, ultimately, be enforceable in court.


    And it never hurts to watch out for rogue employees and to investigate suspicious behavior.


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, July 2004, p. 16 —Subscribe Now!

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Success Stories Partnerships That Create Winning Solutions

When it’s time to step up to a new measured level of performance, fix an immediate problem, or find an innovative, profitable solution, there’s nothing like discovering the perfect partner for the enterprise. When that relationship thrives and succeeds, everyone wins.


Here you’ll read 4 such success stories. The companies on the following pages may be very similar to your own—the individuals involved all striving to successfully confront a variety of employee-related business issues through truly strategic workforce management initiatives.


All of these firms share a common ground—the utilization of companies that understand that there’s more to business than offering a product or introducing a service. Their business is built on relationships and partnerships that drive results through the engine of workforce management. And that’s the real benefit of successful partnering.


  Aramark Serves Improved University Workforce Management


  ER-One Averts A Potential HR Emergency


  American Office Takes Strategic Approach with Abra Suite


  Automated Prescreening Enhances HR Cost Savings

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Bad News, Good News For CEOs Who Get Stock Options

The value of stock options awarded to CEOs plummeted by 60 percent between 2001 and 2003, according to a new proxy analysis by human resources consultants Watson Wyatt. The average value of those new stock option grants declined from $10.2 million in 2001 to $4.2 million in 2003. Meanwhile, the value of restricted stock awards increased 58 percent, and the average value of other long-term incentive awards rose 80 percent, according to Watson Wyatt. The analysis looked at CEOs who were in their jobs between 2001 and 2003 at 373 of the largest publicly traded US companies.


The consolation for CEOs was the dramatic increase in the value of their unexercised stock options from previous grants. They were up 79 percent, from a median of $6.7 million in 2001 to $12 million last year, thanks to the stock market rebound. Nevertheless, the average total value of the CEOs’ pay elements declined by about $5 million over the two-year period.
 
Ira Kay, national director of compensation at Watson Wyatt, said that the shift in stock-option value shows that companies are taking executive compensation seriously. “However, many CEOs have yet to feel the full impact of this swing, because the value of their unexercised stock options from earlier grants has skyrocketed,” Kay says.


Nevertheless, the “golden age” of stock options may be over, he says. Companies will need to find a new mix of incentives and rewards that will replace stock options as a way of keeping key executives motivated, Kay says.

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Effective Succession Planning is Hard to Come By

Most companies aren’t executing succession-management plans well, according to a study by DDI and Chief Executive magazine of 1,200 senior executives in the United States.


Seventy-three percent of respondents said that “defining the skills, experience and attributes required for successful senior leadership is important.” Still, only 22 percent say their company has a highly effective system for doing it.


Some companies blame the lack of available talent for not implementing their succession plans. DDI says these promising employees are often working at the company but have not been identified. “Organizations will find more success developing leaders from within the organization than from bringing individuals in from the outside,” says DDI’s Matt Paese.


More information on workforce planning is available online.

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Human Resources Departments in Top Companies Spend Less Per Employee

The human resources functions that are “world class” spend less per employee each year than the average company, according to The Hackett Group.

 
Hackett says that the human resources divisions of companies it defines as “world class”–the top 25 percent of companies among the thousands Hackett studies–spend $1,390 per employee annually, 27 percent less than median companies. They also have 11 human resources professionals on staff for every 1,000 employees, compared to 16 at other companies, and their labor costs are 31 percent less. Their spending for outsourcing and technology also is about 8 percent less than median companies.
 
These top-performing companies pick and choose what they outsource. They’ve been spending 55 percent less than median companies, for example, on outsourcing staffing and development, largely because hiring has not been a hot spot in recent years, says Hackett HR Program Manager Patty Miller. That usage might rise as hiring need rises, she says. On the other hand, world-class companies spend 25 percent more than median companies on outsourcing total rewards–a category that includes health and welfare, pension and saving and compensation administration.
 
Miller says the research shows that technology and outsourcing–often touted as silver bullets for human resources cost containment–are not really the answer. Process simplification, however, might be. The world-class companies have 69 percent fewer health and welfare plans per 1,000 employees served and 46 percent fewer compensation plans. This allows companies to hire fewer human resources employees and run processes more efficiently. “There’s this misconception that to cut costs in HR you eliminate staff and replace them with technology and outsourcing support,” Miller says. “But the numbers simply don’t bear this out.”
 
World-class companies also have 61 percent fewer voluntary terminations.