Two new coalitions based in Washington, D.C. have formed to improve access to health care for about four million working Americans who lack health insurance. The initiatives are led by the HR Policy Association, a lobbying group of senior human resources executives in the United States.
The first group of employers will try to pool part-timers, contractors, temps, retirees under 65, people whose COBRA coverage has run out, and their dependents. The employers will select one health plan for this group, hoping that it will offer people at least some benefits even if the employees have pre-existing conditions. Employers won’t pay for the health care; their goal is to help employees get access at decent prices. Hewitt Associates has been providing consulting help to the coalition.
The second group will work in regions–Detroit, Dallas, Chicago, Atlanta, New and Los Angeles. The employers will choose a single health plan in the region in order to increase their purchasing clout. In exchange for giving the health plan the contract, says John D. Butler, the top human resources officer at Textron, participating companies “will get detailed quality and efficiency data on local hospitals and physicians.”
Starbucks, SYSCO, Home Depot and Texas Instruments are among the organizations involved in the HR Policy Association.
Disgruntled Former Employees May Use the Internet for Revenge
Diane Kuprewicz was angry when she lost her job at the School of Visual Arts in New York. Instead of going quietly, however, she decided to strike back. Unfortunately for the school and its director of human resources, Kuprewicz was computer savvy, and got her revenge in a very creative “21st century” way.
First, Kuprewicz posted two authentic-looking job listings on a Web site, announcing that the school was seeking applications for a director of human resources position. The school was not seeking such applications. In addition, Kuprewicz registered the work e-mail address of the director of human resources on a number of pornographic Web sites. As a result, the director received huge amounts of sexually explicit e-mails from these sites at work. The director also began to receive unwanted catalogs of pornographic materials at work.
Kourosh Kenneth Hamidi also sought revenge against his former employer, Intel, but his approach was more direct. After Hamidi left the company, he created a Web site critical of Intel and its employment practices. In addition, he sent mass e-mails to Intel employees at their work addresses, in which he “warned” them of the company’s unfair employment practices and suggested that they seek employment elsewhere.
Human resources professionals have always had to deal with disgruntled ex-employees who speak out against their former employers. As these cases illustrate, however, the Internet can raise this problem to an entirely new level.
Stealing “a cow’s milk”
In the past, unhappy former employees might have sent a letter to the editor of the local newspaper, or complained loudly to their neighbors. With the widespread availability and expansive reach of the Internet, however, these individuals have a much more effective and invasive method for harassing their former employers. For employers looking to stop these acts of revenge, or “cyber-harassment,” the use of the Internet and e-mail poses unique legal questions. The law in this area is still evolving, and employers are still trying to ascertain what rights they have to protect themselves and their current employees.
For the School of Visual Arts, the legal solution to the cyber-harassment campaign came from a traditional cause of action, rarely seen or applied in courtrooms today, and created well before the days of computers and the Internet. The school’s solution was to sue the former employee for “trespass to chattels.”
If a person sues another for theft, the cause of action is called “conversion”–the person converted your property to his own by stealing it. The little brother of conversion is called “trespass to chattels.” A chattel is simply an article of personal property. A claim for unlawful trespass to chattels must show that a person dispossessed another person of his property, or used or otherwise meddled with the person’s property in a way that damaged the property.
Trespass to chattels, therefore, is something less than outright theft; it is more like unlawful borrowing. To draw an analogy from colonial times (when trespass to chattels first became unlawful), conversion of property would be when a neighbor steals your cow; trespass to chattels would be when the neighbor takes all of the cow’s milk.
In the case involving the School of Visual Arts, the “cow” was the company’s computer system. Kuprewicz did not “steal” the school’s computer system, but she did “use and meddle” with the computer system and e-mail accounts when she caused mass e-mails to bombard the system. The school, therefore, brought suit against Kuprewicz using the theory of trespass to chattels, claiming that the chattel was the school’s computer, Internet and e-mail systems.
The attorney for the school put forward evidence before the court that its computer and e-mail systems were harmed by Kuprewicz’s actions. The school claimed that the unsolicited e-mails from the pornographic sites depleted hard-drive disk space, drained processing power, and adversely affected other system resources on the school’s computer system. The court found that, by demonstrating that its computer system was damaged evidence, the school had established a claim for trespass to chattels, and stopped Kuprewicz from continuing her campaign of cyber-harassment.
In Hamidi’s case, on the other hand, Intel did not put forward evidence that its computer hardware or software was damaged, or that Hamidi’s mass e-mails prevented Intel from using its computers for any unreasonable length of time. Intel, therefore, could not demonstrate any damage, and could not establish trespass to chattels.
The Kuprewicz and Hamidi cases teach companies that, when faced with campaigns of cyber-harassment by disgruntled former employees (or customers, or clients), they can bring a claim of trespass to chattels. The cases also demonstrate that if a company can prove damage to its computer, Internet or e-mail systems, it could obtain legal relief to stop the harassment.
Weigh the cost/benefit
The law in this area is still developing, so companies should not simply rely on claims of trespass to chattels to stop cyber-harassment. Not every unwanted e-mail from a former employee will result in a lawsuit. Employers must weigh the costs and benefits of going to court to enforce their rights in this area. Employers should also take proactive steps to defend themselves against cyber-harassment campaigns.
First, employers can and should purchase Internet and e-mail filters that stop unwanted materials from entering their computer systems. Some of these programs do an excellent job of filtering e-mails.
Second, if an employer decides that a former employee will receive severance payments, the company should insist on a clear non-disparagement agreement in the release obtained for the severance payment. In the non-disparagement clause, the employee should agree to not make any disparaging comments about the company or its employees. Further, the non-disparagement clause should clearly extend to all forms of communication, including e-mails, chat rooms, instant messaging and all other forms of electronic communication. A properly worded release can give the company the ability to sue to recover the severance paid if the employee begins a cyber-harassment campaign, and potentially stop the action.
Third, the company should carefully monitor any actions taken or e-mails sent by the ex-employee to see if the person makes any false statements, either in an e-mail or elsewhere on the Internet, that could be the basis for a defamation claim.
Finally, employers should remember the importance of disciplining and terminating employees with fairness and honesty. An employee who is given opportunities to improve her performance, a thoughtful and honest explanation of why she was not a good fit for the company, and assistance in transitioning is much less likely to resort to such extreme and destructive behavior. Human resources can play a critical role in preventing costly and time-consuming legal action.
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.
Dear Workforce Our Firm Is Reorganizing–How Do We Smooth the Transition
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Dear Workforce Should We Hire a Translator
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Performance-Based Pay Plans are Fraught with Problems
Many companies feel that their variable-pay programs are costing more than they bring in, according to a Hewitt Associates study, which compared companies with single-digit revenue growth to those with double-digit revenue growth.
The problem is apparently that some companies spend too little on these programs; they allocate the money poorly; they don’t tie the program to business results; and they don’t communicate well to employees. Only 56 percent of slow-growth companies use revenue and share price as part of their pay-for-performance measures, compared to 80 percent of high-growth companies. Twenty-five percent of companies, according to Hewitt, “focus variable pay measures on their ability to cut costs.” None of the high-growth companies do this.
High-growth companies budget much more per employee for variable compensation.
Rep. Woolsey “Is This Any Way to Treat Our Mothers”
A liberal California congresswoman–who once worked in the human resources field–yesterday argued for a sweeping expansion of the U.S. laws covering family leave, child care and benefits for part-timers.
At a May 5 press conference on Capitol Hill and in statements released by her public-relations office, Woolsey said that her bill, H.R. 3780, is necessary to “help working mothers balance work and family life by improving access to safe and affordable child care, and providing paid leave.” Woolsey tore into the Bush Administration–asking “Is this any way to treat our mothers?”–for providing “tax cuts to the wealthy” while at the same time cutting child-care funds and other programs for working mothers.
Among other provisions, the legislation would give subsidies to businesses to help them establish on-site child-care centers. It also gives businesses incentives to offer paid leave to employees who need to be home with a sick child. Companies would have to extend some of their benefits to part-time and temporary employees.
Rep. Woolsey’s life story–told briefly on this site–included a stint as a welfare recipient and a job as a human resources manager. Eventually, Woolsey owned her own firm, offering human resources services to California companies.
Delaware Automates its Human Resources Systems
You may have heard that the federal government is involved in several major projects to automate its human resources systems. The state of Delaware, among other state governments, is doing the same.
According to Information Week, Delaware customized 40 percent of its human resources and payroll software. This “ended up adding costs to maintenance and millions of dollars to an upgrade to PeopleSoft 8.8 that’s in progress,” Information Week reports.
The state’s technology project includes implementing online benefits enrollment, and eventually adding an online recruiting package. Delaware also plans to replace its time-and-attendance system–now done manually–with an electronic version.
The Good News About a Bad Fight
Betsy Zikakis, senior vice president of marketing for Workscape, a human resources benefits and workforce management software firm, is nonplussed by all the noise erupting from the technology heavyweights that dominate high-end software applications: SAP, PeopleSoft and Oracle. Her company focuses on two main lines of the human resources technology business, and the firm has gotten good enough to attract clients like General Motors and Dow Chemical.
Zikakis figures when clients arrive at Workscape, they’ve already checked out the human resources software the big ERP players sell and decided to shop around. “We see a lot of people looking for alternatives,” she says.
Still, when Oracle announced its $9.4 billion hostile takeover bid of PeopleSoft more than a year ago, “people were really nervous,” Zikakis concedes. PeopleSoft is one of the oldest players in the human resources tech world and is a comfortable, trusted name to many workforce managers. Oracle, on the other hand, has a win-at-any-cost reputation to go along with its tech savvy.
One of the unsettling questions facing workforce managers is what happens if Oracle wins the takeover fight, now in its second year. PeopleSoft is the leading provider in the United States of the kind of monolithic foundational software systems that can tie a Fortune 500 company’s many divisions together, linking sales, manufacturing, human resources and other functions into a dandy package of state-of-the-art technology. But these systems can take years to install and can cost $100 million or more.
The research firm IDC estimates that licensing sales for human resources management and payroll processing software were $4.5 billion in 2003, and will grow at an annual rate of 5.6 percent to $5.7 billion by 2007. The broader category of enterprise applications software, which includes HRMS and a wide range of other business products, took in $65 billion during 2003, IDC reports. In the fierce competition to control the market for human resources and payroll processing software, SAP was first, taking 11.8 percent of the market share worldwide, compared to 11.3 percent for second-place PeopleSoft. Oracle, with 3 percent, was a distant fifth.
The fight by Oracle to take over PeopleSoft has not only dominated headlines but also elevated the visibility of these high-end enterprise resource planning systems that have become so important to corporations that human resources executives who ignore them do so at their own risk. Already, the technology has forced human resources to rethink its traditional role. Now the stakes are even higher. Experts say that workforce management executives who insist on keeping their focus on conventional administrative functions such as benefits administration or payroll could find themselves on the outside looking in, losers in the strategic battle by corporate leaders to extract ever greater productivity, profits and talent from the workforce.
Behind the curve
In his book Rethinking Strategic HR, John Sullivan, head of the human resources program at San Francisco State University, says that human resources professionals have been behind the technology curve compared to counterparts in, say, finance or manufacturing, who “are light years ahead in the extensive use of technology.” Ron Hanscome, a technology-industry analyst with Meta Group Inc., says that staying current with technology is a matter of survival for human resources. “A working knowledge of technology is an absolute requirement for anyone in the HR business,” Hanscome says. “There is a real need for HR to understand how technology can make a difference. Those who understand technology and its applications will have a good career. Those who don’t will be relegated to do more administrative things, and ultimately their jobs might be outsourced.”
| “Driving workforce productivity is an enormous priority, a major imperative for companies. We are not your mother’s HR department anymore.” |
Hanscome believes that when the dust settles, PeopleSoft will be able to fend off the attack by Oracle. “The market is well served with three strong competitive systems–it drives innovation, it keeps prices reasonable,” he says. “Each is working very hard to cover more and more human resources, particularly the more strategic HR functions.”
Consider PeopleSoft’s Enterprise Learning Management system. An electronic kiosk is set up in a central location like a break room. Retail sales associates, for example, can log on to a training module or dial up a call center and receive training on the spot to deal with a problem such as an abundance of inventory of a certain product. New prices can be set immediately, sales incentives laid out and a sales strategy provided. The system not only gives the salesperson on the floor valuable training but also provides division managers with a means of tracking the success or failure of individual employees and enables them to link their training directly to sales numbers to determine the effectiveness of the training.
“The kicker for the COO and other management is that they can then track the subsequent impact of the training on same-store retail sales,” says PeopleSoft’s Mark Lange, a vice president with responsibilities for global products marketing. “For years, training has been an expense. The CFO has never been clear on what kind of return on investment is generated for that expense. Now for the first time, you can have store training through the kiosk, with up-to-date information on how their stores performed.”
The goal is to make every employee a competitive asset. “Driving workforce productivity is an enormous priority, a major imperative for companies,” Lange says. “We are not your mother’s HR department anymore.”
PeopleSoft’s business results remain strong, despite the attack by Oracle, Lange says. As it stands, German powerhouse SAP is tops in sales worldwide, while PeopleSoft is No. 1 in the United States. Oracle would be a strong No. 2 if there were a takeover, but that would leave only two major players in an important segment of the software market. Seeing an obvious advantage in having only one major competitor instead of two, SAP has come out in favor of the takeover, publicly questioning an antitrust lawsuit filed by the Department of Justice to block Oracle.
SAP argues that it has the broadest, deepest system on the planet, one that can incorporate payroll, performance management, benefits administration, the handling of regulatory-compliance issues, e-recruiting and employee self-service transactions. But the main thrust of the SAP business, like that of its competitors, is integrating human resources systems under the broadly defined umbrella of workforce management. As this plays out, human resources is less about collecting and processing employment data than it is about taking responsibility for such things as coaching management on how to better manage teams. One of the roles of human resources executives should be identifying high-potential people in a company, connecting them to measurement criteria, creating a development plan for them and following their progress every step of the way, says SAP’s David Ludlow, vice president responsible for MySAP HR. “We believe management of the workforce has been elevated to higher levels within a company,” Ludlow says. “If we look at some of the valuations of the companies, more and more are being attributed to intangible assets, and one of those intangible assets is people. When we talk about writing a performance appraisal, it is not just an individual assessment. It’s about how someone’s performance is tied to the overall goals of the company.”
Joel Summers, senior vice president of Oracle global HRMS development, says the future of human resources “is all about connections”–or wiring in large amounts of corporate data that can go horizontal or vertical to promote profit-making strategies. Oracle is recognized as a leader in creating powerful databases. Playing to its strength, its systems mine and integrate massive amounts of information into data repositories, absorbing workforce information on a day-to-day basis and then feeding it out to heads of manufacturing, sales, finance, human resources and other divisions. This is especially valuable in tying together global operations, where workforce requirements and legal requirements can vary from one country to another.
| The future of human resources “is all about connections”–or wiring in large amounts of corporate data that can |
One example of the many challenges facing large corporations is the complex compliance and governance regulations passed in recent years in the crackdown on corporate malfeasance. “We have to have audit trails so that every [keyboard] touch is captured somewhere,” Summers says. “We have to have learning systems that allow us to distribute information on business ethics, explaining what the law says.” The way this might work for a company with thousands of salespeople is that teams from the legal and human resources departments would get together, set up a mandatory business-ethics course, record compliance as each person takes the course–with follow-up notices to employees who miss the training–and then feed the response rates up the management chain to the CEO.
Oracle plays rough
Ever the hardball player, Oracle wants to control more of the market that is now going to vendors like Workscape. Smaller companies that concentrate on a limited number of applications, such as providing benefits administration, contend that their products are less expensive, perform more tasks and give better value.
At this point, there appears to be room for both large and small companies, though many in the industry predict that the universe of human resources software is shrinking and will accommodate fewer and fewer survivors. CEO Anthony Karrer of TechEmpower helps client companies choose learning-management and other software and then integrate it with large systems like PeopleSoft, SAP and Oracle. Not too long ago, the learning-management-software market was dominated by smaller companies with sophisticated, best-of-breed expertise. Now, PeopleSoft is moving into the field in a big way, with SAP and Oracle not too far behind, Karrer says. “The smaller public companies are going to be swallowed up or they are going to work really hard to stay out in front of the big guys.”
As a result of the frenzied competition and new products, people-management executives itching to broaden their strategic influence already have sweeping solutions at their disposal that can enhance training, productivity and talent development across a multitude of corporate divisions. But they are faced with numerous challenges, from convincing CIOs that one product is better than another to fighting for a place at the head of the line when decisions on technology investments are debated by CEOs. Then, once the sophisticated software has been purchased, there is the problem of teaching managers how to use it and convincing them that it is better than paper.
Some managers require more convincing than others. Despite the sweeping changes under way, there are still many Luddites in corporate America, ready to cast aside technology in the futile hope of returning to long-gone days. One of Zikakis’s chief selling points at Workscape is that her company’s compensation package gets a higher percentage of use than similar packages installed at other companies by competitors. That’s because her product is easier to use, she says. “If managers think the software is too complicated, they go back to paper,” Zikakis says. “They will create a spreadsheet and hand the spreadsheet in to human resources.”
Workforce Management, May 2004, pp. 53-55 — Subscribe Now!
Inexpensive Ways to Make Your Company Famous
A company’s employment brand or human resources brand is the image it has among employees and job candidates. It’s a long-term strategy–the sum total of all of the experiences employees and candidates have when they come in contact with the company.
Below, San Francisco State University’s John Sullivan (in his newbook) lists: 1) Low-cost things you can do to build your human resources brand–or, as the headline above reads, make your company famous; 2) Some low-cost branding tools; and 3) Downsides to being an employer everyone wants to work for.
LOW COST THINGS YOU CAN DO TO BUILD YOUR HUMAN RESOURCES BRAND
Here are a variety of no-cost things you can do to begin building your employment brand.
Benchmark and learn all you can internally from successful product and employment brands. Do the same externally (especially look at Cisco, GE, HP and IBM).
Assess your organization’s current management practices, benefits, culture, etc., to identify what you “have to sell” and what you need to improve.
Do a quick survey or assessment of your current employment “image” among employees, applicants and general public using surveys and focus groups.
Calculate the potential ROI for branding and sell the idea to management.
Develop a catchy slogan that highlights your very best “great place to work” feature(s).
Develop a people-program inventory that lists each of your organization’s unique human resource or people programs. This list should be used as ammunition to highlight your best practices in marketing pieces and in media articles.
Identify company products and programs that involve innovation, help save lives or protect the environment. Use these stories and examples in recruiting materials.
Rename some of your successful people programs with “catchy” names that grab people’s attention.
Do a side-by-side comparison of your benefits and people pro-grams against those of your talent competitors. Identify areas where you are clearly superior.
Identify and assess your competitors’ employment “brand” against which you’ll be competing. Develop a branding strategy that high-lights the differences between you and your competitor.
Compose one or two-paragraph profiles of individual employee “success stories” for use in articles and on the Web site.
Work with the CEO’s office to get top executives to mention your organization’s great people practices both in their internal and external communications. When necessary, write that section of the speech for the CEO.
Apply for listing in the Fortune 100 Best Places to Work list.
Work with the PR department to identify public events that the company is sponsoring. Send managers and recruiters to talk about the company’s great people practices. The recruiting department should also add a few of the marketing staff to its advisory team to offer suggestions and to coach recruiters on the latest marketing tools and strategies.
Work with the sales department to identify public sales events and trade shows where materials highlighting your great people practices can be displayed.
Quantify the participation and usage of your work-life balance and other similar high-profile people programs. Quantifying the usage sends a more powerful message than merely saying “we have a program.”
Rank potential media and tools to convey branding efforts (based on what your target audience reads or attends), and then select the initial media and methods to convey the branding message.
Review articles that mention different companies’ people pro-grams. Then develop a list of the criteria used by local publications when they select a company or people program to feature. Utilize these criteria for selecting which program stories you should high-light in your branding effort. In addition, build relationships with local publications and their reporters. Volunteer to act as sources, and encourage them to write stories on your great people and management practices.
Identify the target market (the type of candidate you are trying to attract) for your branding efforts. Develop a target profile for them (who they are; where to find them; what they read; events they go to; etc.).
Get key managers to write articles and give talks at industry association meetings. Be sure they include great people practices in their materials.
Get managers to give talks at community meetings and at the local Chamber of Commerce that highlight your people practices.
Invite family and friends of employees on site to see “what it is like to work here” and the importance of employees’ work so that they will help spread the word on what a great place your organization is to work.
Offer benchmarking sessions on your great “people practices” to teach your customers and suppliers how you do great people man-agement in an attempt to get the attendees to spread the word.
Profile key employee success stories and best management practices on your corporate career web site. Periodically highlight your great people practices in internal publications to remind employees of the great things you do.
Cosponsor “career workshops” in schools to build your im-age early.
Ask the union, if you have one, to help spread the word about what a great place to work you are.
Encourage local college professors to visit and write “case studies” and articles about the company’s people practices.
Participate in industry-wide benchmarking studies to help build your visibility.
Have human resource leaders speak at public human resource seminars and write articles for human resource trade publications about your people practices. Have them join the boards of local nonprofit groups and associations to help spread the word.
Include marketing and branding experience in the criteria you use to hire additional recruiters.
Create a process to measure and evaluate the program’s effective-ness, monitor its progress, and improve it.
LOW-COST BRANDING TOOLS
If you have a little money to spend on human resources branding, here are some low-cost things to do.
Re-energize your existing employee referral program and set “targets” for referrals from each department. Include participation as part of the normal performance appraisal process. Provide employees with cards listing the top ten reasons why it’s great to work for your company.
Encourage employees to put decals, license plate holders, etc., on their vehicles to broadcast their loyalty. Sell or distribute employment-branded items (hats, T-shirts, pens, etc.) that depict work at your organization.
Participate in community clean-up programs; get your organization named on “clean-up” highway signs.
Develop an alumni club for ex-employees and retirees. Involve these former employees in the process of spreading the word.
Distribute logo book bags, T-shirts, and other similar items to children; sponsor school events.
Work with the advertising department to place ads that occasion-ally highlight your great people and management practices as well as your products.
Train and reward managers for excellent people-management performance.
Conduct surveys of college students, business writers, academics, executive recruiters, and influential business leaders as well as your employees to assess your perceived strengths, weaknesses, corporate culture and image.
Revise recruiting practices to include “wow” elements to make a lasting impression. Continually review your recruitment strategy and team capabilities.
Have the CEO or human resource vice president write a book about the organization’s people-management practices.
POSSIBLE DISADVANTAGES OF BEING A SOUGHT-AFTER EMPLOYER
There is also a downside to being a choice employer–a possible downside to your branding efforts. Some of the possible problems include:
Executive recruiters often target your organization’s management and its employees.
The strength of the corporate culture makes changing it (as well as many operational changes) difficult.
Because of their “fame,” the organization’s employees have a tendency to become overconfident.
Performance measurement and willingness to accept criticism often diminish due to this overconfidence.
The company’s image must be defended continually. Minor errors can be blown out of proportion by the press.
Pay levels (and thus costs of production) can be high due to the high cost of maintaining a world-class workforce.
New recruits may have unrealistic expectations based on image that can turn into disillusionment if everyday reality does not match.
Being an employer with a great reputation helps an organization grow, and this increase in size makes maintaining the culture and the “choice employer” status difficult over time.
SOURCE: Reprinted with permission from “Rethinking Strategic HR,” by John Sullivan, copyright 2004,CCH Incorporated. All Rights Reserved.
Screening Out Bad High-level Hires
A year ago, Kennametal Inc. could have served as a textbook example of how big companies hire senior executives. The $1.8 billion multinational tooling and engineering company used search firms to identify prospects, then invited top candidates to its Latrobe, Pennsylvania, headquarters. There they’d spend a half-day interviewing with key executives and human resources managers. “It was a fairly traditional and typical interview process,” says Jeffery Holst, Kennametal’s organizational effectiveness director.
But over the past few years, as executives sought to improve talent development for the western Pennsylvania company’s 13,500 employees, they concluded that to get higher-performing mid- and upper-level managers they needed to ask better questions in interviews. So in August 2003, Kennametal retained industrial psychologist Bradford Smart and his firm, Smart and Associates, in Wadsworth, Illinois, to conduct a two-day workshop on his “Chronological In-depth Structured” interview process for the publicly traded corporation’s top 65 executives. In the session, staff who typically interview job candidates–human resources and other top-level execs–learned to administer a series of highly formatted interview questions covering candidates’ education and career achievements and how they behaved to accomplish what they’d done. “It’s more than what 95 percent of corporate America does,” Holst says. Kennametal followed up by licensing interviewing guidelines and other materials from Smart and distributing them to human resources managers globally via CD-ROM.
It has paid off already. Since August, Kennametal has used the technique “dozens” of times in interviews with top-tier job finalists, Holst says. “In several situations, people who we thought were the right people we decided after more in-depth [interviewing] weren’t right after all,” he says.
Kennametal isn’t an isolated case. Companies large and small are putting middle- and upper-level management candidates through more hiring hoops. Organizations that once considered a recruiter’s recommendation, interviews with senior staff, some solid references and perhaps a skills test good enough are now requiring that finalists for top-tier jobs go through even more vetting. Blame it on the fear factor. Nobody wants their company to be the next corporate scandal splashed across the front page. The bad economy, the stock market decline and security concerns after 9/11 also helped push companies to adopt more stringent executive-hiring practices, according to human resources directors, executive recruiters and other industry watchers. Even as the economy appears to be on the mend, hiring for the corner office will never go back to what it was in the old days.
“People are scared, boards are scared because they’re being held accountable,” says David Pfenninger, president of Performance Assessment Network, a testing company in Carmel, Indiana.
Another driving factor is money. One mishire can cost a company 14 times the salary of a manager making less than $100,000 a year, and up to 28 times the salary of someone making $100,000 to $250,000 a year, according to Smart’s 1999 book, Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, based on 4,000 interviews with people at public and private companies. By that estimation, firing a single ineffective top manager making $200,000 a year could cost a company roughly $5.6 million. “It could be even more than that,” says Holst, “if you hire someone like a sales manager who alienates all your customers and then leaves after six months. That [cost] is hard to measure, but it’s huge.”
In the post-Enron world, experts say, candidates for senior posts can expect to be put through a battery of assessments, including tests that measure intelligence, problem-solving ability, people skills, management style and fit with a particular corporate culture. Group interviews are popular, as are workplace simulations in which a candidate may have to assemble facts for a boardroom presentation.
Web-based tests such as those administered by Performance Assessment Network and a growing pack of executive-search firms are on the rise, giving human resources managers a low-cost method of screening job candidates before forking over big bucks to hire them. Biodata testing, in which testers gather biographical and personal information and match it against normative databases to predict a potential employee’s future performance, is also gaining popularity. Procter & Gamble Co., which has used biodata testing on job candidates at all levels for decades and administers more than 100,000 such tests a year, began marketing the measurements to other businesses late last year.
| “If you hire someone like a sales manager who alienates all your customers and then leaves after six months. That [cost] is hard to measure, but it’s huge.” |
Implementing more stringent executive-hiring programs isn’t always cheap. At Kennametal, the Smart and Associates workshop and licensed materials have cost about the same as a single mishire, Holst estimates. The bigger expense has been taking busy managers away from their jobs to go through the interview training. To help cut those expenses, Holst has traveled to corporate divisions in the United States and China to conduct follow-up workshops, and will travel to Kennametal offices in India and Europe this year.
To Smart and Associates’ basic interviewing protocols, Kennametal added questions designed to identify competencies that the corporate culture considers important, including management integrity, Holst says. Screening potential managers for ethics is especially critical outside the United States because standard operating procedure in some countries can be “rough and tumble,” he says. Kennametal started 66 years ago in a small town outside Pittsburgh, “and small-town beliefs, ethics and behaviors were at the formation of this company, and we’ve hung on to them even though we’ve grown.”
The popularity of extra pre-employment analysis has been a boon for testing companies and consultants. Pfenninger, a clinical psychologist who markets Web-based assessments from 47 publishers to a client base of 5,000 companies and consultants, says that sales of management tests have increased 40 percent in the past four years. Jill George, consulting vice president and assessment practice leader at Right Management Consultants in Philadelphia, says that the number of companies using her services has tripled since 2002. Interest is coming from a variety of industries, including banking, pharmaceuticals, manufacturing, food, financial services and health care, she says.
One of Right Management’s customers is DuBois Regional Medical Center, a $120 million nonprofit medical center that owns two hospitals and several physicians’ groups in the city of DuBois, in rural west-central Pennsylvania. Executives at the 291-bed medical center were blindsided when several department heads who had performed superbly in pre-employment interviews fell short on the job. The mistakes were costly. When the managers were let go, the medical center lost $100,000 in recruiting fees, relocation expenses and severance packages–per person–according to Susan Grady, human resources vice president. That sum didn’t include what Grady refers to as “the hidden costs” of leaving a hospital department with no leader, causing employees to fret and disrupting patient care.
At a time when DuBois was growing quickly to cement its spot as the region’s No. 1 health-care provider, but facing the usual government and insurance reimbursement squeeze, wasting money on more bad hires wasn’t an option. So in 2000, DuBois hired George to perform intensive pre-employment screenings of upper-level job candidates. George also created benchmarks based on existing hospital execs’ characteristics. Those traits included high levels of integrity, strategic thinking, innovation, a passion for customer service and a “workaholic” nature, Grady says. Now, when a spot opens up for, say, a cancer center manager or heart surgery department head, candidates won’t move on to interview with senior executives unless they pass the screening and meet the benchmarks.
The results have been outstanding: the hospital’s ability to pick top performers has risen 30 percent to 50 percent in the past four years, George says. Without such testing, Grady says, “sometimes you get so involved in thinking ‘I’ve found the right person’ that you don’t ask the right questions.”
Since 2000, DuBois has spent $125,000 to put 25 job candidates and current managers through Right Management’s assessment program. To Grady, it was money well spent. “Assistance in making the right decision to hire or promote is worth much more than the original investment,” she says. In fact, DuBois senior managers were so pleased with the results that they’ve brought the program down to the supervisor level. The medical center also is using information culled from more rigorous pre-employment screening to map out career paths for the managers they hire. “It’s a good retention strategy because the candidates will feel they’re interested in them,” George says.
In the past year, DuBois also has begun putting existing managers who’ve been tapped to take over spots on the executive committee through the same assessment program. Grady is using the information to teach the director of human resources, who has been tapped to be her successor, what work he would need to do if she were to leave. “We’re in the middle of a building campaign, and if someone should leave, the board wants someone who could step in who understands our philosophy and traditions,” she says.
Workforce Management, May 2004, pp. 70-72 — Subscribe Now!