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In Just a Year, Cash-Balance Plans Go From Panacea to Pariah

Not long ago, companies considered cash-balance pension plans ideal for limiting financial liability and providing a more portable retirement program to today’s mobile workforce. The plans, a cross between a traditional defined-benefit plan and a defined-contribution plan, have been adopted by hundreds of major U.S. corporations since the 1980s, including IBM, Federal Express, Eastman Kodak and Delta, and cover an estimated 7 million workers. Hundreds more businesses looking to exit traditional defined-benefit plans were preparing to convert, according to government and industry experts.


    But in the space of a year, cash-balance plans turned from panacea to pariah. The turning point: a federal court’s landmark ruling in July 2003 that IBM’s cash-balance plan violated age-discrimination laws, throwing into question the legality of all such plans. In February, the same judge ordered IBM to pay back benefits, which plaintiffs in the class-action suit estimate could amount to $6 billion, a claim the company denies.


    Anxiety over cash-balance plans doesn’t end there. Proposals for federal regulation of cash-balance plans have rattled around Capitol Hill for years but remain just that–proposals. In February, the Treasury Department issued its latest proposed guidelines, only to be met by criticism from employer and employee groups. Interested parties now doubt that Congress will act on the matter before the November presidential election. Meanwhile, the Equal Employment Opportunity Commission has logged 950 consumer complaints about cash-balance plans, according to an agency spokeswoman. Karen Friedman, policy strategies director for the Pension Rights Center, a Washington, D.C., retiree lobby group, sums things up, saying simply: “The cash-balance situation is at a standstill.”


    The uncertainties have companies on edge. Some are waiting things out, sticking with existing defined-benefit or cash-balance plans. Others have frozen cash-balance accruals and switched to defined-contribution plans such as 401(k)s. Consultants report that a handful of clients have discontinued pension plans altogether.


    One company typical of those leaving behind cash-balance plans is Avaya Inc. On January 1, the $4.3 billion communications services business froze accruals for both a cash-balance plan and a traditional defined-benefit plan that together covered the company’s 7,500 U.S. salaried employees. In their place, the Basking Ridge, New Jersey, business installed an enhanced 401(k). An $800 million pension-fund deficit prompted the change. But the possible liability associated with cash-balance plans was a major factor, says Mike Harrison, Avaya’s vice president of global benefits and compensation, who spearheaded the overhaul. The IBM lawsuit specifically pushed the S&P 500 company away from cash-balance plans, Harrison says. “We didn’t want to go down that road.”


    Avaya isn’t alone. According to a Deloitte Consulting pension-plan survey released in May, more companies are shifting away from defined-benefit plans. Deloitte polled 125 companies with a median $1 billion revenue and found that 27 percent had recently changed plans. Of that number, 38 percent had moved to defined-contribution plans, says Brian Augustian, head of Deloitte’s retirement practice and the survey’s author. Avaya inherited a portfolio of pension plans when it spun off from Lucent Technologies in October 2000. Salaried employees who’d started at Lucent before 1999 received 1.4 percent of their average earnings from 1994 to 1998 for every year they’d worked before 1999, and 1.4 percent of earnings for every year worked after. Lucent employees hired after 1999 were covered by a cash-balance account, in which the company contributed 3 percent to 10 percent of their annual earnings, depending on the employee’s age. Hourly workers were covered by yet another plan under a union collective-bargaining agreement.


    At the time of the 2000 spin-off, the existing pension plans covered 14,200 U.S. salaried employees, or about 42 percent of the new company’s global workforce. In the ensuing years, Avaya restructured extensively, shedding business units and cutting the total number of worldwide employees by more than half. At the same time, the stock market crash and low interest rates took their toll on Avaya’s pension fund, by 2003 creating an $800 million shortfall in the $3 billion fund. To stem the losses, Avaya used $105 million from a September 2003 stock offering of $352 million to help pay down the pension fund’s liability. At the same time, Avaya announced the switch to a defined-contribution plan.


    Under the new plan, Avaya stopped funding its existing plans, which means that when existing employees retire they’ll get whatever was in their pension fund as of December 31, 2003. In its place, Avaya created an enhanced 401(k) for existing employees and salaried workers hired on or after January 1, 2004. In the enhanced 401(k), employees automatically receive 2 percent of their annual salary and bonus, a 100 percent company match for the first 2 percent they contribute and a 50 percent match for the next 4 percent they contribute.


    After less than five months, Harrison says that changes in the fund had “significantly reduced” future cash-flow requirements and expenses. He declined to elaborate. Avaya uses Fidelity Investments to run the 401(k) program, giving employees 26 options for investing in mutual funds, bond funds and company stock. To help employees understand the change, Avaya held educational seminars from January through April, though Harrison admits the classes weren’t as well attended as he would have liked.


    Even so, Harrison believes that employee dissatisfaction with the new plan is minimal. “We were very up-front about what we were doing, starting with our CEO,” he says. “People understood what we were doing and why we were doing it, and it was consistent with other actions we were taking to manage cash flow and our financial position.”


    Restructuring pension plans at other companies hasn’t gone as smoothly. In February, U.S. District Court Judge G. Patrick Murphy, in the Southern District of Illinois, found IBM liable for retroactive pension benefits. Translation: IBM may have to recalculate benefits for 140,000 employees and retirees. The suit is pending, with both sides preparing damage estimates. IBM maintains that it doesn’t owe anything and has previously stated that a loss won’t materially affect its operations.


    IBM isn’t the only company on the losing end of a cash-balance lawsuit. In February, Georgia-Pacific settled a seven-year-old suit for $67 million that alleged the company underpaid workers who took lump-sum pension payments upon retirement. In November 2003, Xerox settled a similar suit for $239 million, a month after the U.S. Supreme Court refused to stay an appellate court ruling against it. Xerox took an $183 million charge to help cover the costs. As of early May, plaintiffs’ attorneys were determining how many retirees would receive settlements, and how the money would be divided. Cases against AT&T and CIGNA Corp. are pending.


    Meanwhile, the Treasury Department’s February proposal attempts to clear up companies’ concerns about the legality of cash-balance plans. The proposal came three months after federal lawmakers voted down a Bush-sponsored amendment to an annual spending bill that would have limited cash-balance conversions.


    Treasury’s latest proposal provides five years’ worth of transition relief to workers after a company converts to a cash-balance plan. Under the plan, employees would receive the better of what the benefit was under the traditional plan or the cash-balance plan. It would ban so-called “wear away,” in which employees accrue fewer benefits under a cash-balance plan than under a traditional plan. To discourage companies from converting to a less generous plan, it would impose a 100 percent excise tax on the difference between the traditional pension benefit and the lower cash-balance. Finally, it would clear cash-balance plans of violating age-discrimination tests if they met certain funding tests.


    Employer and employee groups aren’t taken with all aspects of the plan. If forced to continue an old plan for five years after converting to cash balance, most employers would just switch to a 401(k) plan, which doesn’t require a five-year conversion period, says Ron Gebhardtsbauer, senior pension fellow with the American Academy of Actuaries in Washington, D.C. However, employee groups want an even longer conversion period, he says.


    The sooner that groups come together to iron out their differences, the better, says Janice Gregory, senior vice president of the ERISA Industry Committee, a Washington, D.C., employer lobby group. A major obstacle: getting lawmakers up to speed on the issue.


    To that end, Sen. Tom Harkin (D-Iowa), an advocate of employee pension rights, has been working to schedule a summit for interested parties to hammer out policies acceptable to all that he could potentially introduce as legislation. “We’re at a crossroads,” one Harkin aide says. “This is a point where we can move.”


Workforce Management, June 2004, pp. 81-82 — Subscribe Now!

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Hiring Without Limits

At the IBM Research Center in Yorktown Heights, New York, scientists develop specialized technology that is the lifeblood of the company’s future products–and profits. The center depends on a constant influx of high-level talent, from computer programmers working on speech-recognition products to engineers fabricating semiconductor devices.



    Ironically, amid all this high-tech gadgetry, some of the hardest jobs to fill have the ring of rust-belt manufacturing. Like most firms, Big Blue has trouble finding enough precision machinists who operate lathes and milling equipment. “It’s a dying art,” says Bill Strachan, the center’s program director for technical recruiting. “Most of the precision machinists that are available are highly skilled members of the aging workforce, so we have to look for new sources.”


    That search for new sources took the company to an unexpected place: the National Technical Institute for the Deaf. The world’s largest technological college for students who are deaf or hard of hearing offers a degree in computer integrated machining technologies. Without employees trained in this field, IBM would have to send welding projects to outside vendors, slowing turnaround times and raising costs.


    Hiring disabled workers gives the 315,000-person organization access to a much larger talent pool that enables it to produce the best products, says Millie DesBiens, IBM’s program manager for global workforce diversity initiatives. She notes that, like other employees who are part of IBM’s diversity program, disabled workers also expose the company to fresh ideas and viewpoints. While IBM doesn’t calculate the ROI of its diversity program, DesBiens says that disabled workers contribute millions to the bottom line, and provide a crucial point of view for a company that makes and sells technology for the disabled. “We consider diversity strategic to our organization,” adds Jim Sinocchi, director of diversity communications for IBM, who is a paraplegic. “We don’t hire people who are disabled just because it’s a nice thing to do. We do it because it’s the right thing to do from a business standpoint.”


    IBM, which hired its first disabled employee in 1914, may become a model for creating the kind of workplace that can effectively leverage the skills of disabled workers. Last year, it was one of 10 companies given the inaugural New Freedom Initiative Award from the U.S. Department of Labor, for its training and mentoring programs for the disabled. In March, the American Foundation for the Blind gave IBM a 2004 Access Award for its corporate philosophy of promoting accessibility throughout the company and in its products and services.


    Roy Grizzard, assistant secretary of labor at the U.S. Office of Disability Employment Policy, recalls being at a meeting with an IBM vice president who told him straightforwardly that the company could not afford to overlook a potential employee because of a disability. “The executive told me that individual might develop the next iteration of a software or hardware product that could make the company a great deal of money,” Grizzard says.


    Disabled workers have long been an untapped source of talent, and are expected to play an increasingly vital role in the workplace in coming years. The massive wave of retiring older workers is expected to leave companies scrambling for new employees, especially hard-to-fill positions like precision machinist and computer programmer. Also, companies that coax older employees to stay on or to return to work will have to accommodate conditions such as poorer vision, hearing loss and mobility problems. “As we have an aging workforce, we are going to see more people with disabilities,” DesBiens says.


Feeling like an alien
    Twenty years ago, Sinocchi broke his neck while surfing on a vacation, and has used a wheelchair ever since. At the time of the accident, he was 25 years old and had been with IBM for five years. “They asked me to come back to work, and I had no idea what I would be able to do,” he says. “I felt like an alien. I didn’t know if I would be a burden or a person to be pitied.”


    IBM moved him to an office closer to his home so he wouldn’t have to make the grueling commute into New York City. He was given his choice of positions and selected a job producing technical briefs. Today, he runs the company’s internal Web site about disability issues and does a wide range of public relations tasks. Still, he says there are people who are surprised and even shocked to learn that he holds down an executive position and flies to conferences where he handles a wide range of media requests, and that he met his wife after he was disabled.


    “The problem is that people equate disability with stupidity,” he says. “When I go out to dinner, the waiter won’t ask me what I want. He’ll ask the people I’m with what I want to have.” This pervasive attitude must be broken for disabled workers to make a full contribution to society, he says. “The next time you see a person with a disability, try to look at them as a leader in your organization, not just as a worker.”


    That potential was a theme at IBM’s recent third-annual Global Leadership Conference for People with Disabilities. Forty-two percent of the company’s disabled workers have key-skill jobs, such as software engineering, marketing and IT architecture. The company estimates that about 1 to 2 percent of its workforce is disabled, but believes that the actual number is closer to 4 to 6 percent when it includes people with undisclosed disabilities such as speech impediments or amputees with prostheses. The higher figure would indicate that IBM has more than 18,000 disabled employees, contributing many millions of dollars, although company spokesmen say that it doesn’t specifically record the ROI of its disability efforts.


Building pipelines
    In its constant effort to attract disabled employees, IBM has developed outreach programs throughout the country. It plants recruiting seeds by sending executives to high schools and middle schools to speak to disabled students about careers in technology. “We have several deaf research scientists who are doing world-class work and can be role models for these kids,” Strachan says.


    For example, a deaf IBM researcher named Dimitri Kanevsky is a renowned expert in voice-recognition technology. The 52-year-old Kanevsky’s most recent advance was developing an automatic system in cars that carries on a conversation with the driver to help him stay awake. IBM research scientists take the time to demonstrate some of their latest projects for the students. Many times, deaf researchers also help students in getting acclimated to assistive technology that they will use in their day-to-day work.


    IBM has launched a number of heralded programs that reach out to disabled students and job-seekers. DesBiens says the key to their success is that they dovetail with the company’s culture. Mentoring programs for disabled workers are simply adaptations of similar programs that have been successful with able-bodied workers. In 1997, IBM joined with the American Association for the Advancement of Sciences to launch a program called Entry Point, which provides disabled students with a summer position or assignment that can last up to six months. The AAAS develops relationships with professors and students on campuses, which is important because many college students, like people of all ages, don’t identify themselves as disabled. Since the program’s founding, IBM has placed 137 students in internships and hired 29 for regular employment.


    IBM’s national recruiting organization has identified and assigned executives to work with five schools that have at least 50 disabled students in the math and science areas: the University of Minnesota, University of Michigan, New Mexico State, University of Illinois and the National Technical Institute for the Deaf. “These are five campuses where we were already successful at recruiting,” DesBiens says. In some cases, IBM helped start the disability programs on campus by hosting meetings and having employers talk to students and administrators about their jobs, accommodations and career development.


    Many companies have trouble hiring students and entry-level employees with disabilities because recruiters avoid them at job fairs and employment services. In many cases, IBM employees say, the recruiters are simply unaccustomed to being around disabled people and want to avoid embarrassing and awkward moments.


    In 1999, the company launched Project Able, which streamlines the process of hiring disabled workers. So far, 84 college students, 139 professionals and one nonexempt person with disabilities have been hired through the program. The program has a network of 30 volunteer “line champions” who meet with disabled applicants and advocate for them with hiring managers. The line champions also help managers and applicants prepare for the interviews.


“We don’t hire people who are disabled just because it’s a nice thing to do. We do it because it’s the right thing to do from a business standpoint.”

    Joe Peplinski, IBM’s e-server development environment manager and one who serves as a line champion, finds that disabled students tend to be shier than their able-bodied classmates and sometimes need an extra push to aggressively sell themselves at interviews. “Sometimes they simply aren’t as prepared as they should be for the interview because they don’t think they really have a chance to be hired,” says Peplinski, who has been paralyzed from the neck down since age 17, when he was a passenger on a motorcycle that was struck by a car. He earned a bachelor’s degree in therapeutic recreation at the University of Wisconsin, and worked with disabled patients for several years before earning another bachelor’s degree in computer science from Winona State University. He joined IBM 19 years ago after his basketball coach told him the company was looking to hire for a new manufacturing line.


    At IBM, managers receive training in hiring disabled people. “Managers should be trained to ask hard questions when interviewing people with disabilities,” Sinocchi says. “They should know how to ask hard questions. Ask a blind person how he reads; ask a person in a wheelchair how he travels. The last thing a disabled person wants is to have an interviewer knock him out because of things he thinks he can’t do without asking.” The blind person might use Home Page Reader, a self-voicing Web browser. A quadriplegic might have a reliable driver.


    At the Global Leadership Conference for People with Disabilities in April, IBM unveiled a new six-minute video for managers, titled “Help Wanted,” to answer the questions many are afraid to ask, such as whether disabled workers will be able to work as fast.


    Strachan says that this kind of trepidation is understandable, especially if a manager has never had a disabled employee. When a deaf intern goes to work at the IBM Research Center, Strachan tries to arrange for everyone who will be involved with the student to participate in a two- or three-hour orientation program. Managers, contractors and peers meet with representatives from the National Technical Institute for the Deaf.


    “It clears up a lot of misconceptions, such as people thinking that every deaf person can read sign language,” Strachan says.


    As a line champion, Peplinski makes sure that a new employee’s work environment is set up properly with any special equipment before he arrives, so his first week or two is not idle. He normally spends 10 to 12 hours with a new disabled employee during his first six months. Unlike a typical mentor, however, Peplinski also spends four to five hours with the worker’s manager, helping to smooth over any difficulties that arise.


    It’s not surprising that technology companies such as IBM have been the first to embrace disabled workers, since they make and sell products that eliminate workplace barriers for them. Nor is it a surprise that IBM goes far beyond the legal requirements to accommodate disabled workers.


    The company is in the middle of a sweeping project that began two years ago to make every one of its buildings in the 160 countries where it operates accessible to people with disabilities. At the Research Center in Yorktown Heights, the entire building is engineered for wireless communication, allowing deaf employees to easily chat online with coworkers. The center’s evacuation system has been outfitted with audible and visible signals, in accordance with the Americans with Disabilities Act. IBM has gone a step further, however, giving deaf workers in labs special beepers–which are tested once a week–as well as linking them with a buddy to assist in the event of an evacuation.


    The organization also tries to remove some of the barriers to hiring the disabled. A disabled worker may need to have doors widened or elevator buttons lowered. Like many other large companies, IBM maintains a special fund for such accommodations, rather than charge managers’ budgets, which would create a disincentive to hire a disabled worker.


    While all this is important, DesBiens notes that people sometimes forget that a disabled worker’s needs go beyond having the right kind of desk or computer monitor. When DesBiens is called for input on providing accommodations, she reminds coworkers to look at the whole person, especially if an employee is just becoming disabled. “Too often, the focus is only on providing the accommodations and getting the person back to work,” she says. “I tell them to think about the person and how they are feeling.” That may mean providing resources for counseling, support groups or tip sheets on how the disabled worker can adapt her home to her needs. The more quickly a disabled person handles such needs outside the workplace, the more productive she can be at work.


Not just once a year
    It’s a cliché, but creating a disability-friendly workplace does start at the top, DesBiens says. IBM’s 39 most senior executives take part in the company’s Executive Diversity Task Force, with four of those executives on the global task force for people with disabilities.


    As Grizzard of the U.S. Office of Disability Employment Policy points out, companies that create a disability-friendly environment make employees more willing to disclose those disabilities because they know they won’t be stigmatized. IBM trumpets its commitment to the world. Its diversity networking groups provide exposure within the company. Recently, its People with Disabilities Group joined with the women’s networking group to present a workshop about employees with children who are disabled. “Letting people know about disabilities is part of the culture here,” Peplinski says. “It isn’t just brought out once a year during National Disability Awareness Month.”


Workforce Management, June 2004, pp. 53-58 — Subscribe Now!

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A Call-Center Scam Prompts Greater Scrutiny

The telemarketing project for an American credit-card company was just coming to an end in January when an internal audit at the Wipro Spectramind call center in Navi Mumbai, India, discovered something very alarming: an organized ring of about 60 call-center agents had been systematically scamming U.S. consumers for two months. Supervisors had told the agents to spice up their sales pitch for the client, Capital One Financial Services, by making false claims about free gifts and membership fees, according to Indian press reports. The scam even bypassed Wipro’s sophisticated call-monitoring system.



    After conducting its own audit, Capital One, located in McLean, Virginia, rescinded the contract with Wipro in March. But its misadventure–and other recent departures from India by U.S. clients–has confirmed many doubts and concerns about the booming business of outsourcing call centers, and also is serving as a catalyst for human resources to develop more effective approaches to managing offshore workers. Experts and consultants believe that companies can meet the challenges and save millions of dollars by improving training and implementing tighter oversight of offshore call agents. Some U.S. companies have even installed their own teams at offshore call centers.


    “Capital One represents some of the challenges of outsourcing,” says David Butler, a professor at the University of Southern Mississippi and author of a book about call centers.


    A recent report by NASSCOM (National Association of Software and Service Companies) and Evalueserve shows that management costs for an offshore project average 18 percent more than for onshore. But experts say that offshore call centers, which save 20 percent to 50 percent on operating costs, can still be worth the hassles. “It’s no different being in India than being in Phoenix,” says Michael Janssen of Everest Group, a Dallas outsourcing firm. “You have to make sure you have people doing what you want them to do.”


    The recent exodus from offshore call centers has included such companies as Conseco Inc., an Indiana insurer that bought India-based ExlServices for $52.6 million in 2001, anticipating savings of up to $60 million a year in call-center costs. But customers complained that they could not understand the heavily accented call agents, and with service costs having fallen far less than expected, Conseco sold ExlServices at a $20 million loss in late 2002.


    Customer complaints about unsympathetic or unintelligible agents were also a problem for Dell Computer, which decided last fall to pull two business computer product lines out of a center in Bangalore, India. “They’re extremely polite, but I call it sponge listening. They just soak it in and say, ‘I can understand why you’re angry,’ but nothing happens,” one disgruntled Dell customer told Fox News.


    What happened to Capital One, however, appears to be unprecedented, the first disclosed instance of a company ripping up a contract because of an organized scam by call-center workers. “It was wholesale fraud,” says Terry Healy, vice president of sales and marketing at CCC Interactive, a Houston outsourcing company.


    Wipro made its name writing high-quality software for such clients as Compaq, Home Depot and Nokia. In July 2002, it diversified its business by acquiring Spectramind, India’s leading call center, which handles everything from computer help-desk support to airline reservations. After Bill Gates visited Wipro’s Bangalore office in November 2002, the company landed Microsoft as a call-center client. Other major business for Wipro Spectramind, which has about 10,000 employees, came from Delta Air Lines and Lehman Brothers.


    The contract with Capital One, one of Wipro Spectramind’s top-10 clients, involved up to 600 agents making “outbound” calls to generate credit-card business. Under Wipro’s call-monitoring system, quality-controllers listen in on 10 percent of every 50,000 calls to make sure they do not cross legal and ethical boundaries. But the Indian media reported that the quality team stopped listening in for two weeks every month while the scam was in progress. Once Wipro discovered it, 65 agents lost their jobs.


    Capital One has not disclosed the value of the contract, and a company spokesperson did not respond to written questions about the Wipro episode. But outside observers suggest that it may have been the result of pressure on the agents to make sales combined with insufficient training about acceptable ways of doing business. The agents’ compensation was based in part on performance. “Did the agents even know it was fraud?” Healy asks. “Did management think they were doing something that was acceptable?” Another consultant calls it a “classic case of aggressive sales-incentive programs, starving [agents] on the base [salary], keeping ethical codes vague and not monitoring behavior.”


    Experts stress that problems such as overaggressive sales pitches are not unique to offshore call centers. “In any call-center environment, there’s always the chance for people to go beyond what the rules specify,” notes Butler, author of Bottom-Line Call Center Management. He and others say that offshore centers do present a unique managerial challenge, however, because of the geographic distance from headquarters and, to some extent, cultural differences. “It’s an issue of control,” Healy says. Some 250,000 call-center jobs have been outsourced to India and the Philippines since 2001 by companies trying to take advantage of lower labor costs.


    In one approach to ensuring control, IBM in April acquired Daksh, India’s third-largest customer support services firm. Industry sources value the deal at between $150 million and $200 million. “[IBM is] always dealing with a high volume of technical support, and almost always works within its own walls,” says analyst Brooks Gray of Technology Business Research.


    Locating nearer to home, or near shore, is another option. National Asset Recovery Services, a collections agency in Chesterfield, Missouri, decided to open a 26,000-square-foot call center in Montego Bay, Jamaica, going for proximity even at the expense of forgoing the lower labor costs offered in India. “If I needed to be there tomorrow, I could leave in the morning and be there by lunch,” says senior vice president Greg Cappa, who visits the center twice a month. “That’s a big deal for us.” A flight from the United States to India, by contrast, takes a very long day, and visitors have to cope with jet lag.


    Buying out Indian operations is not financially feasible for most U.S. companies. And while near-shore areas such as the Caribbean are attractive to some companies, experts see continued growth in offshore call centers. The fastest-growing sector of India’s IT-services industry, call centers are expected to expand by about 60 percent this year, for the third year running. “Offshore is economic reality,” Janssen says. “It’s not going away.”


    So how can companies maintain control and avoid Capital One-type headaches? For Geri Gantman, senior partner at the R.H. Oetting consulting firm in River Edge, New Jersey, the answer is, “You’ve got to have the right quality-assurance processes in place.” Quality assurance, Gantman advises her clients, means working closely with the offshore partner on call-monitoring and establishing a system that covers as broad a sample of calls as possible. The monitoring software should be able to record calls as audio computer files, providing faster and easier access than audiocassettes. Gantman also recommends “calibration” sessions between client and provider to ensure that “everybody who’s listening [to calls] is listening to the same things.”


Other expert recommendations for U.S. companies with offshore call-center partners include:


● Training and retraining of call agents so they stay on the right side of what Gantman calls the “electronic fence” of acceptable techniques. “You have to say, ‘These are my processes. Here’s the methodology,’ ” Healy says. “It’s the ‘Ugly American syndrome’ in a lot of ways.”


According to Gray, Dell Computer, which still uses offshore centers for consumer products, identifies agents who need retraining by evaluating customer-survey responses. “Dell is looking closely at this so they can pinpoint problem areas,” he says. At NARS, Cappa says that employees are trained to be aggressive. “But we don’t let them cross the line. We want it to be just like any other office we have.”


● Discouraging overselling by setting reasonable sales goals and linking compensation levels to customer satisfaction, rather than to sales alone.


● Installing a corporate management team in the offshore center. “A lot of India-based operations are being managed by U.S. executives,” Gray says. “It’s very important to have your top executives on-site in a lot of situations.”


    If companies have to pay for advanced call-monitoring, extensive training programs and expatriate managers, the question is what the cost benefit will be. This is where the experts differ. Butler, for one, believes that “if you have to turn the standard Indian call-center representative into the equivalent of an American call-center representative, it’s going to be quite cost-prohibitive. It’s going to cost you to do it effectively overseas,” he adds. “It will cost you in time, and in money.”


    Gantman, on the other hand, argues that quality assurance and savings are compatible. “If it’s properly done, you don’t have to sacrifice quality for cost,” she says. “You can get both.” Increased costs may reduce the savings to as little as 20 percent. “It’s chasing savings of 60 percent that leaves the door open to all kinds of problems.”


    In Navi Mumbai, meanwhile, Wipro Spectramind also recently lost the IT help desk for Lehman Brothers. The Wall Street investment banking firm, citing poor quality of service, has brought the help desk back in-house. The relationship with Microsoft, including a $10 million call-center contract, has been rumored to be in trouble. But Microsoft is standing by Wipro, saying that the two partners “continue to have a strong relationship and identify new opportunities.”


Workforce Management, June 2004, p. 95-97 — Subscribe Now!

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A Year After its Harassment Case, the Dial Corporation is Changing

An agreement between the U.S. Equal Employment Opportunity Commission and the Dial Corporation to prevent further sexual-harassment is working, the EEOC said last week.


According to the EEOC, the three people appointed by a court to monitor Dial say, “All evidence available to us shows that sexual harassment and related retaliation are not significant problems in the plant at the present time.”


On April 29, 2003, a consent decree resolved the EEOC’s sexual-harassment case against the soap-maker. In addition to the damages it paid, Dial also had to toughen up its no-harassment policy; revise its complaint procedure to encourage employees to come forward; and make supervisors more accountable if harassment occurs among employees under their supervision.


EEOC Attorney John C. Hendrickson says that the atmosphere at the Dial Corporation has improved since allegations of harassment were reported at its Illinois plant. “…The management of any company must be dedicated to making the necessary changes and to continuously signaling in ways large and small that employees engage in sexual harassment at their peril,” Hendrickson says. “What the Dial monitors’ report tells us is that the necessary changes are being made at Dial and that the employees are understanding the signals. That is good news for everybody.”


The court monitors found that a “substantial majority of both men and women” say that there has been a change in the environment for women in the plant in recent years. A candid report on Dial’s progress is available on the EEOC’s Web site.

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Mosaic Achieves Nearly $8 Million In Value Creation With Taleo Throughout Its Canadian Operations

Mosaic is a leading field sales and marketing company that employs field specialists at retail department and specialty stores, banks, events and small-businesses for its customers across North America. Mosaic hires approximately 10,000 hourly workers annually, and needed better processes for managers, employees, recruiters and candidates to handle this volume. Mosaic Director of Talent Acquisition Karen Scott and her team at the company’s Canadian operations, implemented Taleo to address the day-to-day and long-term staffing needs of Mosaic. The implementation is projected to generate $8 million in value for the enterprise over a period of five years.

Tony LaSorda, President of Mosaic’s Canadian Operations stated, “After using Taleo consistently for nearly two years, we completed a comprehensive audit to measure our results. In the first year alone the value creation was $1.2 million per year, equating to nearly $8 million over a five-year period. We are clearly finding candidates that are better fits for our organization, which has had an impact on retention, costs and productivity. These savings and overall value creation clearly add to the bottom line.”

As a leading provider of hourly and retail talent for its customers, Mosaic must have the tools and processes in place to hire qualified professionals as well as hourly personnel to staff client events and programs quickly and accurately. As a result of the Taleo implementation, there have been a number of financial benefits, process improvements and service benefits across Mosaic. Today, Mosaic sources its candidates online through its corporate website, resulting in a 90 percent reduction in advertising costs. With more streamlined and efficient processes in place, the time to hire a qualified candidate has been reduced by 33 percent.

Furthermore, hiring managers’ time spent on the staffing process has declined by 75 percent, allowing them to spend time on more strategic activities. Recruiters report they spend 43 percent less time per hire, reflecting not only the streamlined processes but also a more effective way to assess and re-assign employees to various customer projects. Additionally, Mosaic reports reductions in turnover with its streamlined staffing process in place. “From 2002 to 2003 turnover among our temporary employees declined three percent while the reduction in turnover among our part time, permanent employees declined four percent,” said Scott.

“We made an investment in our workforce with Taleo, and this investment is apparent to our customers when we are quickly able to staff their important projects with higher quality candidates,” she added. “This has also had a favorable impact on customer loyalty. Additionally, at the executive level, we have clearly been able to quantify the savings we are achieving and the value we have created as a result of these process improvements with Taleo,” she added.

*All figures are in Canadian dollars.

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Technology The Great Equalizer

Jim Sinocchi calls technology “the great equalizer” for people with disabilities. When he speaks to someone on the phone or sends an e-mail, the recipient has no idea he’s receiving a message from a paraplegic in a wheelchair. “When you’re disabled, people make judgments about you before you open your mouth,” he says. “Technology smooths that over and helps people focus on the intellect and the exchange of ideas.”



    IBM has a long history of creating technology for disabled people, including the first powered Braille typewriter. In 2000, IBM’s chief executive officer issued a corporate directive that accessibility be incorporated into all the company’s products and services. “What IBM is saying is that providing accessibility to people with a disability is not a second thought, but something they take into account in the initial planning,” says Roy Grizzard, assistant secretary of labor at the U.S. Office of Disability Employment Policy.


    That same year, IBM opened its Accessibility Center, which operates in seven locations, including the United States, Europe, Australia and Japan. The seven centers, located in research labs, formalize the process of ensuring that accessibility features are embedded in new products. The center’s advisory council is made up of key executives in all lines of business.


    “Accessibility is one of the hottest areas in technology because of 508,” says Frances West, director of the IBM Accessibility Center. She means section 508 of the Rehabilitation Act, which requires federal agencies to purchase electronic and information technology that is accessible to people with disabilities. Many state agencies have followed suit. Arizona, for example, had IBM Global Services develop a disabled-friendly Web site called “Arizona @ Your Service,” which links to numerous state, local and federal agencies.


    IBM knows that a lot of technology that starts off as niche products for disabled people, such as speech-to-text programs to help the visually impaired, is eventually embraced by society as a whole. “As long as people view accessibility as a separate initiative, it will continue to be an uphill battle,” West says. “From the get-go, we have viewed this as a mainstream issue.”


Workforce Management, June 2004, p. 56 —Subscribe Now!

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Wharton Meets Demand for Tailored Programs

A decade ago, the executive education program at the University of Pennsylvania’s Wharton School consisted primarily of open-enrollment classes that brought together groups of executives from diverse companies and fields for class lectures and projects. The executive education field has changed a good deal since then, and Wharton has been especially keen on adapting. With companies demanding programs designed just for their own employees, the university quickly shifted emphasis. Today, nearly 60 percent of the 8,000 to 10,000 executives who attend each year take part in custom programs.



    As interest in custom programs escalates, so does the competition among institutions. “The bar for custom programs is rising,” says John Spector, vice dean for executive education at Wharton. “I think that in the past, a custom program was just an open-enrollment program where all the participants came from one company. Now it is much more about a deep relationship between a corporation and an institution. There are dimensions that are more subtle and more complex than they were before.”


    At Wharton, this means that professors who sign on for a custom program that will include a one-week course session often wind up with a commitment that lasts more than a year. It begins by working with the company to craft the custom program, which can mean spending about three months with a company’s executive team studying company operations and strategy. That helps shape the course content.


    The company then picks groups of promising managers, typically employees who are from 20 to 40 years old, and sends them to Wharton for a week or two of classes. That time is spent not just listening to lectures but also working on specific company issues or problems, with professors trying to help craft solutions.


“As customization becomes more and more necessary and expected, we have embraced the philosophy that the weeklong program is just the beginning of the process.
We will continue to be in front of
the participants and get them to continue to work on these issues
until it is complete.”


    When the class is over, the professor typically must follow up, staying in touch with participants to answer questions and sometimes offering coaching. “As customization becomes more and more necessary and expected, we have embraced the philosophy that the weeklong program is just the beginning of the process,” says Katie Wiesel, director of custom programs at Wharton. “We will insert the faculty and continue to be in front of the participants and get them to continue to work on these issues until it is complete. That can take a year or 18 months.”


    The price depends on what the company wants to accomplish. Each custom program is individually negotiated.


    Wiesel says that designing a typical one-week custom program can cost from $25,000 to $100,000. Tuition tends to run about $30,000 per day for a group of 20 to 50 participants; for a five-day course, the tab can be $150,000. The more people a company sends, the lower the cost per person.


    The grand total for a week: $175,000 to $250,000, plus room and board per person of about $1,750.


    By comparison, Wharton’s one-week, open-enrollment executive training courses in topics like leadership and strategy tend to run about $8,000 per person. Sending 20 people through open-enrollment courses would cost about $160,000.


    The trend is toward ever more customized education.


    “Custom is all the rage right now,” Wiesel says. “I really do think it is only going to get more so. I think the desire for customization will get even more complex.”


Workforce Management, March 2005, p. 60 — Subscribe Now!

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An Inside Look at Outsiders

Outsider status isn’t always a bad thing for an interim executive charged with taking the helm at a new company. Although gaining the trust of employees and mastering the corporate culture can be challenging for short-term leaders at the outset, consultants say that a new and independent perspective is often exactly what a company needs. Francie Dalton, president of the consulting firm Dalton Alliances in Columbia, Maryland, says that a temporary leader starting out with a clean slate can be more efficient than one with a history at the company as long as the person has the right skills. When a company is in crisis, as most are when they seek aid from interim execs, the person who steps in to lead should be someone from outside, rather than an in-house exec temporarily promoted to fill the slot, she says. Otherwise, jealousy and infighting can thwart any real progress toward meeting company goals. “If a company is in turmoil, it needs that outside objectivity,” Dalton says. “A political agenda cannot be imputed to that person and they can be as directive as they have to be because they have a special role to perform.”



    Another practical reason for bringing in a person from the outside is that often the skills required for a rapid, transformational change simply don’t exist within the organization. Poultry producer Foster Farms felt that it did not have the expertise to navigate a major technological overhaul. When the company hired interim executive Paul Lemerise, a veteran CIO, he brought not only fresh eyes but also the hard technical skills required to complete the task. Lemerise says his corporate and IT background helped him achieve success in the assignment, but so did his position as a change agent with temporary status. “As an outsider, I don’t have any skin in the game,” he says. “I have no agenda. I have an unbiased opinion and all these years of experience. I can be more effective in a shorter period.”


    Dalton says that a third component required for interim-executive success is a clear set of goals laid out at the beginning of the assignment. Without concrete deliverables such as increasing a company’s profit margin by a specific percentage in a set period or acquiring a specific company at a set price, interim execs can find themselves spending valuable time struggling to gain support for their ideas rather than just working to implement them. Lemerise says that at Foster Farms, he had six clear objectives, which included assessing the overall IT situation, implementing SAP for the entire supply chain, stabilizing the once unreliable weighing and pricing system, making a recommendation about outsourcing departments and restructuring the IT department, which eventually involved replacing a previous CIO. Dalton says that by establishing goals “as common enemies,” temporary leaders can “rally the troops around these specific objectives.”


    Still, experts say that even with industry expertise, fresh eyes and clear goals, the early days of an assignment can prove trying. Success is contingent on wielding authority immediately, and interim executives must be perceptive enough to sense potential interpersonal trouble spots and deal with them quickly and smoothly. “You always have to win them over,” Lemerise says. “You’re there as a change agent. In the beginning it can be a little awkward. Communication has to be frequent.”


    Kenneth Cleveland, executive managing director of Los Angeles-based interim-executive arm of consulting firm Ballenger, Cleveland & Issa, has served as an executive temp at eight midsize companies. He says getting management focused can be a challenge initially but that sooner or later, everyone reaches some form of consensus. Whenever an interim executive is brought in to make serious changes, Cleveland says, “people tend to be concerned, and that creates two kinds of people–those who welcome you with open arms because they know management isn’t doing their job and they’re afraid they’re going to lose their jobs, and those who understand the problems and want to work with you.”


Workforce Management, August 2004, p. 37 — Subscribe Now!

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Making the Case for Flexibility

Being a great place to work  has long been part of the mission at London-based Eversheds. Now leaders of the international law firm, with some 4,000 lawyers and staffers across Europe and Asia, want to encourage their employees to enjoy a better life, too.



    In 2002, Eversheds introduced a flexible work program, called Lifestyle, that’s open to all employees. It allows employees to flex their weekly schedule, as long as they can make a business case that their job responsibilities can be covered. Job-sharing, reduced hours or a compressed week are among the options, says Elaine Aarons, a labor attorney who heads the employment team in Eversheds’ London office.


    The law firm hadn’t been opposed to flexing hours previously. Aarons, also a partner, has been working a four-day week for 15 years. But the program formalizes the work option, Aarons says. Nearly 600 employees work a flexible schedule, half of them enrolling after Lifestyle was announced. “It’s really about insuring that we have the best talent,” Aarons says. “We think as time goes on, flexibility is an area of increasing importance to people.”


“We think as time goes on,
flexibility is an area of increasing importance to people.”
–Elaine Aarons


    In the first year, attrition among male and female employees declined from 21.5 percent to 17 percent, Aarons says. It’s also believed that more women are returning from maternity leave, though precise numbers aren’t available, she says.


    The schedule requests are handled by human resources, rather than direct supervisors, to make sure they’re evaluated uniformly. And employees aren’t required to specify why they’re requesting a new schedule, Aarons says.


    As the program moves forward, the firm is learning new ways to measure employee productivity beyond just billable hours. An attorney may have fewer billable hours because he or she is more efficient, Aarons points out. And thus the firm reaps increased client loyalty–feedback that can be picked up on client surveys.


    Europeans pride themselves on a family-friendly working culture, but a 2004 survey by the magazine Legal Business found that only 68 of the 3,600 partners at the top 10 U.K. law firms worked part time. Nineteen of those 68 are at Eversheds. “I thought U.K. law firms were more progressive than U.S. law firms,” she says. “I wasn’t so sure when I saw that (article).”


    Aarons, who lives the juggling act, concluded this interview after 10 p.m. London time. The mother of three had spent the evening with her children and was clocking in a few more hours before retiring for the night.


Workforce Management, May 2005, p. 66 — Subscribe Now!

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Setting Standards For a Growing Field

No one knows exactly how many executive coaches there are, but it is clear the numbers are swiftly rising.



    The International Coach Federation reports that it had 8,000 members at the end of 2004, up 31 percent in two years. About 35 new members a week were willing to pay the $190 annual dues to become members of the organization, which claims to be the largest such group in the world.


    Twana Ellis, the ICF’s director of member services, estimates that there are about 40,000 coaches who work with businesses and individuals around the world. There is no official registry of coaches and no one seems to be keeping count. One of the problems is that, like consultants, anyone can call himself a coach, print up business cards and go looking for clients.


    The federation is developing standards, and plans are in the works to institute a qualifying process that involves mandatory credentials. The backgrounds of the ICF’s coaches are diverse, with lawyers, college professors, psychologists and counselors among its members.


    At this point, the ICF has no qualifications for members other than that they submit an application and pay the fee. But Ellis says the organization plans on raising the bar. It has also developed a list of voluntary standards and a code of ethics.


    Another coaching group, the Worldwide Association of Business Coaches, doesn’t disclose its membership numbers but reports that its base is growing. The association is selective, requiring full members to submit five client testimonials.


    “These standards tell our colleagues and business clients that we’re serious and committed professionals with experience,” association member support specialist Lorenda Franklen says.


Workforce Management, February 2005, p. 56 — Subscribe Now!