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English-only Policies Can Translate into Problems for Employers

Nearly five years ago, Lorraine Ramos was hired to work as a housekeeper at the Colorado Central Station Casino. At the time, her husband, Jorge Flores, worked the night shift at the 50,000-square-foot gaming establishment nestled in the small town of Black Hawk. But what began as a convenient work arrangement ended in anger, humiliation and a million-dollar legal settlement.



    Shortly after Ramos was hired, the casino’s human resources director ordered the housekeeping manager and supervisors to enforce a blanket English-only language policy in the predominantly Spanish-speaking housekeeping department. Any housekeeping employees who uttered so much as a word in Spanish were to be given a written warning or fired outright.


    The new rule posed problems for Ramos and her monolingual, Spanish-speaking husband. “Just to say good-bye, either my husband would have to follow me outside or we’d have to speak in the housekeeping closet, which was crazy,” Ramos recalls. “We were afraid that if they caught us even saying ‘adios,’ we’d get in trouble.”


    Matters worsened. Senior-level managers and non-Hispanic casino employees soon began shouting “English, English” at the Hispanic employees when encountering them in the halls. Humiliated and verbally harassed, a group of Spanish-speaking housekeepers at the casino, including Ramos and Flores, took their plight to the U.S. Equal Employment Opportunity Commission. The EEOC filed a class-action suit on behalf of the casino’s angry housekeepers in March of 2001. Six months ago, the Colorado Central Station Casino was ordered to pay $1.5 million for subjecting its employees to unlawful English-only rules.


    The judgment was heralded as a victory for foreign-language-speaking workers everywhere. But it also underscored how today’s controversial English-only policies are dividing America’s ethnically diverse workforces into warring factions. Last year, the EEOC received 228 charges challenging English-only policies in the workplace. Ernest Haffner, an attorney adviser to the EEOC, expects that number to grow as more languages are spoken in the workplace. The U.S. Census Bureau reports that the number of Americans who speak English poorly or not at all has increased 65 percent since 1990 as immigration rates rise.


    But while hefty settlements might slow the spread of English-only policies and prevent discriminatory workplace practices, many argue that these rules also serve to unite and protect people of different origins. Mauro E. Mujica is CEO of U.S. English, a citizens’ action group with 1.7 million members whose lobbying efforts include petitioning the U.S. government to make English the official language of the United States. An immigrant himself, Mujica believes that English-only policies “encourage communication and prevent people from being suspicious of other people speaking another language.”


    Even the EEOC makes allowances for English-only policies under certain circumstances. According to agency guidelines, requiring employees to speak English can conflict with Title VII of the Civil Rights Act, which prohibits discrimination based on national origin. The EEOC is the federal agency responsible for enforcing Title VII. However, the agency’s guidelines also state that English-only rules are permissible when: a) speaking a common language is imperative for safety, and b) it’s a matter of business necessity, for example, if a person’s lack of English skills would have a detrimental effect on job performance.


“There’s a certain utility in not having to remember in what language to yell, ‘Look out!’ “

    English-only policies for the sake of safety are common sense, says Jim Boulet, executive director of English First, an organization whose 150,000 members lobby for a broad range of issues on English language policy. “There’s a certain utility in not having to remember in what language to yell, ‘Look out!’ ” Boulet says. He adds that speaking a common language such as English should be made a top priority in dangerous work environments.


    Mike Hansen, a supply utility worker for the Military Sealift Command, a branch of the U.S. Navy, agrees with Boulet. The MSC operates the cargo ships that supply Navy ships around the world with food, fuel, equipment, ammunition and medical supplies. Hansen, who works with his wife, Karen, oversees the storage and delivery of the Navy’s ammunition. It’s a dangerous job that calls for enormous attention to detail and clear communication, and he strongly believes that safety levels are constantly being compromised by his non-English-speaking crewmates. “There isn’t a day that goes by that I don’t have an issue with the language barrier,” laments Hansen, who estimates that 75 percent of the ship’s workforce originate from the Philippines and are Tagalog speakers.


    Weekly fire drills are complicated by confused crewmates who don’t know how to respond to supervisors’ commands. And many shipmates fail to understand instructions while performing significant tasks such as working on deck, loading heavy equipment, maintaining the ship’s engine-room machinery and handling satellite communications. Hansen says that although he and his wife have voiced their concerns to the ship’s superiors, their complaints aren’t taken seriously. “Most reply comments usually end up with ‘This is the way it is’ or ‘If you don’t like it’ or ‘There is nothing you can do about it,’ ” Hansen says.


    In one well-publicized case, Richard Kidman, owner of R.D. Drive-In, a burger joint in Page, Arizona, displayed a sign warning his employees not to speak the Navajo language after female workers accused male coworkers of sexually harassing them in Navajo. Workers complained and the EEOC investigated. Kidman was slapped with a lawsuit. The case is scheduled to go to trial next year.


“What is an employer supposed to do? He’s liable if the employees insult the other employees. He’s also now liable if he takes steps to prevent that.
It’s darned if you do and darned
if you don’t.”

“What is an employer supposed to do?” Boulet asks. “He’s liable if the employees insult the other employees. He’s also now liable if he takes steps to prevent that. It’s darned if you do and darned if you don’t.”


    Selena Solis has little sympathy for the plight of employers caught in what Boulet describes as a catch-22. Solis is a public defender in Texas and a former attorney with the Mexican American Legal Defense and Educational Fund. She served as co-counsel in the Colorado Central Station Casino case with the EEOC. She says that English-only policies shouldn’t be used to monitor harassment in the workplace. Instead, offending parties should be fired or brought to the attention of legal authorities. Nor does she agree with using “business necessity” as a defense for establishing an English-only policy in the workplace. Although the EEOC’s guidelines state that English-only rules can be enforced for business justifications such as “supervision or effective communication with customers,” Solis points out that a large percentage of non-English speakers work at menial jobs and aren’t communicating with customers.


    “Where we have been seeing these English-only policies take shape is in low, unskilled low-wage work environments on the assembly lines, among janitors, among housekeepers,” Solis says. “It’s just hard to accept the argument that there’s a business justification for that.” She points out that non-English-speaking immigrants are a perfect target for employers that wish to discriminate using English-only policies. These employees are often poor and unaware of their rights, and are more likely to suffer in silence than to express their views, for fear of losing their jobs.


    Employers interested in implementing an English-only policy would also be wise to know their rights as business owners. Peter Miscovich, a principal partner at Saratoga Institute, a human capital management firm, says there are steps that business owners can take to avoid future litigation. He suggests that employers document any and all language policies from the very beginning in clear and concise terms. In the event of litigation, business owners must be prepared to support an English-only policy by demonstrating that specific circumstances in the workplace necessitated the decision and that alternative resolutions were explored and exhausted. Employers also should communicate to employees the consequences of breaking the rule in no uncertain terms, and clearly specify whether there are exceptions during lunch and breaks.


    “Trouble arises when you have made arbitrary decisions that aren’t properly validated and allow for the risk of litigation,” Miscovich says. “That can be avoided with clear communication and documentation.” Despite the best-laid plans, the controversy surrounding English-only policies shows no sign of disappearing. With non-English speakers making up a growing component of America’s workforce–2.3 million new immigrant workers since 2000–there will be increased room for acts of discrimination, personal humiliation, safety hazards and business risks. It’s a reality that employees and employers alike must learn to accept.


    As Solis says, “Employees are becoming extremely translingual, and that’s a new form of the workforce whether employers like it or not.”


Workforce Management, January 2004, pp. 57-59 — Subscribe Now!

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Early-Retirement Offers That Work Too Well

When telecommunications giant Verizon Communications wanted to reduce its workforce in 2003, it turned to the time-honored method of offering employees incentives to take early retirement. Verizon’s package, which included a 5 percent increase in pension benefits, a one-year extension of medical coverage, two weeks’ pay for each year of service and a one-time severance benefit of up to $30,000 for managers, was generous. In fact, it may have been a bit too generous.



    Instead of the 12,000 workers that Verizon had hoped to convince to leave, more than 21,000–about a tenth of the company’s total workforce–jumped at the offer. As the company scrambled to hire new people and promote rank-and-file employees to replace the 16,000 managers who’d abruptly vanished, it assured customers that service and reliability wouldn’t be negatively affected. But not everyone was convinced. “It’s a mystery how they’re even running this company today,” said Don Trementozzi, president of Local 1400 of the Communications Workers of America, which represents 1,550 Verizon call-center workers in New England, in an interview with the Boston Globe. “We’re down to bare-bones staffing.”


    Although Verizon had hoped to shave $1 billion a year from its personnel costs, the massive expense of the buyout–upwards of $3 billion–meant that it would be at least several years before the benefit showed up on the bottom line.


    The company’s massive early-retirement miscalculation, say human resources consultants and experts on retirement strategy, illustrates the potential pitfalls of the device, which was once widely viewed as a painless, affordable way to reduce staff, cut expenses and make Wall Street investors happy. In the 1980s and 1990s, early-retirement plans were so common that some companies actually had successive waves of buyouts, says Rich Koski, retirement products leader for Mellon’s Human Resources and Investor Solutions in New York. “It got to the point that employees were starting to wait them out, knowing that the pot would get sweeter the next time around.” Companies didn’t worry that much about the cost of buyouts because they could keep them off the books by dipping into their existing retirement plans, which often were flush with extra funds from stock market investments.


    But the economic downturn of the past few years, which made early-retirement programs more difficult to finance, has greatly diminished the advantages of early retirement as a workforce-reduction and cost-saving device, experts say.


“It got to the point that employees were starting to wait them out, knowing that the pot would get sweeter the next time around.”

    The increasingly few companies that are still utilizing buyouts–about 17 percent of firms, according to a recent survey by Watson Wyatt Worldwide–often find early-retirement offers to be unexpectedly costly and fraught with unpleasant side effects, such as the loss of crucial staff members. As a result, more companies are now opting for involuntary layoffs with severance packages, or periodic pruning of the lowest-ranking performers from their workforces.


    Even so, the early-retirement plan hasn’t yet become obsolete. For certain types of companies, such as those with unionized workforces or a high proportion of older workers, early-retirement plans may still be the best way to go. But making early retirement work effectively requires more preliminary research, calculations and careful planning than companies generally did in the past.


    Some experts have always taken a dim view of early-retirement programs precisely because they offered a seemingly pleasant, cheap way to solve the unpleasant, expensive problem of bloated workforces and pump up sagging corporate balance sheets. “Early-retirement plans enabled managers to avoid having to make tough decisions,” says John Sullivan, professor of management at San Francisco State University, who also has a consulting firm that bears his name. “They didn’t have to go up to Joe and say, ‘Sorry, but you’re just not productive enough, and the company needs to let you go,’ and risk Joe getting mad at them or filing a lawsuit. Instead, they could just periodically pay a bunch of people to retire voluntarily. And it seemed as if it didn’t cost anything because the money didn’t come out of operating income. Because it was painless, nobody ever wanted to look at whether it really worked in the long-term interests of the company.”


    Often it didn’t, Sullivan says. Because companies making buyout offers to broad segments of their workforces are unable to control who accepts them, they have watched helplessly as low performers stay on the job and high-performing workers with difficult-to-replace skills stick the money in their pockets and take jobs with the competition. “Imagine if the Yankees offered to buy out everyone on their roster,” Sullivan says. “They’d end up losing star players who can easily go out and get a great deal from another team, not the third-string catcher.” Other companies have been forced to hire back those critical workers as freelancers or consultants–at higher wages that negate the purpose of the buyout. “It’s staggering how many of them seem to find themselves in that bind,” Sullivan says.


    Despite these problems, early-retirement programs are still a good choice for some companies, say Dan Ishac, office practice leader for retirement, and Alex Dike, a senior retirement consultant, both with the Chicago office of Watson Wyatt International. A company with a unionized workforce may find it difficult under a collective-bargaining agreement to lay off its lowest-performing workers. Similarly, a company with a high proportion of older workers, women or minorities may find itself facing discrimination claims in the wake of involuntary downsizing. “Any time you have a performance-related conversation with a protected class under the law, there’s a litigation risk,” Dike says. “With a voluntary program, you avoid that problem.”


    But companies that want to use early retirement have to do more research and move more deftly than they once did. Dike and Ishac recommend that, instead of offering a buyout to most or all of their workforce, companies target their offers at specific business units or job classifications. “You want to be sure that you’re getting at the areas where you have redundancy or pockets of poor performance, rather than just spreading money all over the place,” Ishac says. In addition to studying today’s workforce snapshot, companies should try to project their staff needs 5 to 10 years ahead, so that this year’s retirements don’t leave the company with a shortage of, say, experienced senior managers down the road.


   Once a company identifies whom it wants to lure into early retirement, the next step is to come up with a package that will attract that group. Studying the age demographics of the targeted segment is crucial. “Employees who are 5 to 10 years from [normal] retirement require the most incentives to leave,” Ishac says. “They’re going to want six months to a year of severance, plus medical coverage. People who are two to five years away, in contrast, may be satisfied with a temporary cash enhancement to their pension, until Social Security kicks in.” Similarly, medical benefits aren’t quite as alluring to those older workers because they’re closer to age 65, when they become eligible for Medicare coverage. (About one-third of the firms in the Watson Wyatt study included enhanced health benefits in their offer.)


   Another new tactic is to offer incentives to retire. For example, a company might promise retirees that they will receive full health coverage if they leave the company before April 1.


    But a company doesn’t want a package to be too compelling, lest it end up in a Verizon-like situation. John Challenger, chief executive officer of the Chicago-based consulting firm Challenger Gray & Christmas, recommends the use of surveys to predict how employees will react to the offer. “You also should study other companies in your field or in the area, and benchmark what they’ve done.” Additionally, he says, smart companies identify critical employees who are eligible for buyouts and essentially re-recruit them, promising them desirable assignments and affirming their importance to the company’s future. “They’re going to those people and saying, ‘You’re entitled to take the buyout, too, but here are all the reasons why we hope you won’t,’ ” Challenger says. “You don’t want to leave that to chance.”


Workforce Management, January 2004, pp. 66-68 — Subscribe

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Theyre Hired Now the Real Recruiting Begins

Isn’t it ironic. Companies spend anywhere from $2,209 to $11,209 to hire a new employee, according to Staffing.org, but few put much effort into helping workers acclimate and become productive. The result is that many workers quickly leave or take longer to reach what economists call the “break-even” point–the point at which, basically, a new worker stops costing the firm money and starts making some.



    Every minute that a worker’s break-even point can be accelerated helps build the business and contributes to the bottom line. Quint Studer, CEO of the Studer Group, a consulting firm in Gulf Breeze, Florida, finds that companies that take steps to “re-recruit” new employees can accelerate performance and reduce the costly problem of workers leaving in their first three months by as much as 66 percent. A survey of 610 CEOs by Harvard Business School estimated that typical mid-level managers require 6.2 months to reach their break-even point.


    “The job of recruiting doesn’t end when someone signs on the dotted line and comes to work for you,” says Bill Catlette, a management consultant and co-author of Contented Cows Give Better Milk. “You have to be constantly in the mode of making sure the goals of the organization and the individual line up.”


Think 30/60/90
    The concept of re-recruitment has been most widely adopted, consultants say, by service industries like restaurants and hotels, where turnover is both high andcostly. A report by the American Hotel and Lodging Association found that it takes about 90 days for a new employee to reach the level of productivity of an existing worker. If new hires don’t receive proper training and support early on (as they do at companies likeNational City), though, 47 percent leave their jobs within the first six months.


    Sonesta Hotels, a family-run chain of 18 properties on the East Coast of the United States as well as abroad, has developed a formal program to continuously acclimate new hires to their jobs throughout their first 100 days. This effort to boost performance and lower turnover is especially important in the hotel industry, which has suffered three tough years during the economic downtown. Over the past 12 months, Sonesta has lost $4.8 million on revenues of $85.6 million. The main thrust at Sonesta is to re-recruit workers on their 30-, 60- and 90-day anniversaries.


    At 30 days, the human resources director sits down with new employees to see if their expectations are being met, and whether they have all the tools they need to perform their work. “This time period is far enough into the job so the employee has an idea what it’s like, but not so far down that adjustments can’t be made if necessary,” says Grace Andrews, president of Training By Design, a Melrose, Massachusetts, company that runs the program.


    At 60 days, new employees receive a second orientation, called “the Booster.” The focus is on developing the workers’ communication and service skills. The company also solicits feedback about the employees’ training, and asks them what else they need to be successful, Andrews says.


    At 90 days, employees have a formal review with their manager, which focuses primarily on joint goal-setting for the rest of the year. “It’s more of a conversation than a review,” Andrews says. “People don’t want to be graded; they want to know what their future is.”


    Studer says that in the health-care field, surveys indicate that more than 25 percent of employees leave within the first 90 days. The Studer Group found that organizations can reduce that costly number by two-thirds using 30- and 90-day re-recruitment meetings. It recommends this process as a core retention strategy for the 250 hospitals it coaches.


    Quint Studer, author of the upcoming Hardwiring Excellence, tells supervisors to ask five key questions to head off potential problems and cement early retention:

  • How do we compare with what we said in your interview process?

  • What’s working well?

  • Which individuals have been helpful to you?

  • On the basis of your past experience, what systems or ideas do you feel could improve our operations?

  • Is there anything you are experiencing that would cause you to think about leaving?

Up to speed faster
    Some companies find that the best way to bring new employees up to speed quickly is to have veterans share their “secrets.” Michael Watkins, an associate professor at Harvard Business School and author of The First 90 Days, worked with one company that accomplished this by selecting 10 employees who had been with the firm for two to three years. This was long enough to know the terrain, but short enough so they remembered what it was like to be the new kid on the block.


    The 10 employees–all of whom were articulate and successful in their jobs–were videotaped candidly answering the kinds of questions that new employees have, like “What do you wish you had known about this place when you started?” The responses were edited into a 30-minute video that was handed to each new employee immediately after hiring.


J&J’s tools
    Watkins notes that a new employee’s relationship with his or her boss is the top factor in determining failure or success. In his book, Watkins details five key conversations that every boss should have with a new employee early on:

  • The Business Situation. Is it a turnaround, a start-up or a realignment? How did the company reach this point?

  • Expectations. What does the employee need to do in the short term and long term? How and when is the employee’s performance measured? What constitutes success?

  • Style. How can the boss and employee best interact? Does the boss prefer communications in writing or by e-mail? What kinds of decisions does the boss have to be consulted on?

  • Resources. What does the employee need to be successful in terms of equipment, funding and personnel?

  • Personal Development. How will the job improve the employee’s personal development? Are there projects or special assignments he can do without neglecting his main duties? Would courses or programs strengthen his capabilities?

    Many of the five conversations that Watkins cites are as much negotiations as dialogues. Of course, not every manager is skilled at discussing such matters. Some companies that he works with, including Johnson & Johnson, use online tools to cascade these practices down to managers. The Web site designed for this purpose provides forms that both managers and new employees can fill out before the conversation about, say, setting expectations, to keep the dialogue on track. “The key for this to be successful with line managers is to keep it simple,” he says. “If it’s more than one page, people’s eyes glaze over.”


Don’t wait a month
    Managers should try to connect the new hire to key people throughout the organization. At the start, managers should hand a new employee a list of 10 individuals that she should touch base with early on because they will be critical to her job.


    Smart companies also look at the social aspects of a new employee’s indoctrination. “Let’s say a department with a staff of six had its regular monthly staff meeting a week ago,” Catlette says. “If a new person starts today, you shouldn’t wait a whole month to hold the next staff meeting, even if you don’t have the most robust agenda.”


    At Sonesta Hotels, managers are “highly encouraged” to take the new hire and the entire department out to lunch during the first month to foster team-building. At first, Andrews says, departments that have less of a people focus, like accounting, bristled at the notion. “That attitude started to shift when they saw the benefit of having people talk in an informal setting,” she says. “New employees learned a lot about their jobs and came up to speed much more quickly.”


    The departmental lunches are best held 20 to 30 days after a new employee has started. Before that, new workers are usually too overwhelmed with learning their jobs to benefit from the informal exchanges.


    There’s no question, in Sonesta’s view, that this kind of attention to new hires is essential to retention. “With it, they become good employees faster,” Andrews says. “Without it, they often don’t stay.”

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Board Directorships A Higher Calling

It was 90 years ago that Louis Brandeis, a future justice of the U.S. Supreme Court, wrote of the “financial oligarchy” controlling American business. “Usurpation,” “encroachment” and a “long-concealed concentration of power” were occurring in corporations and banks, a circumstance, he noted, that was “dangerous…when combined in the same persons.” Almost a century later, observers of recent corporate scandals might say that the situation in corporate America today isn’t much different. A study conducted last year by scientists in France and the United States found that cliques of well-connected businessmen do, in fact, tend to vote together and to control decision-making on corporate boards. And the more boards they serve on together, the more influence they wield.



    During a decade when the CEOs of the Gap and Apple sat on each other’s boards, and when the Gap chairman sits on Charles Schwab’s board and Schwab himself sits on the Gap’s board, clubby connections certainly still exist. Charles Lee, chairman of Verizon Communications, serves on five boards, two of them–Marathon Oil and United States Steel–with U.S. Steel CEO Thomas Usher, who also serves on five boards. With so much power concentrated in so few hands, any suggestion that a pack mentality could have contributed to the corporate disasters of the last two years is hardly far-fetched.


    Despite the reality that corporate relationships can still be a tangled web of who knows whom, there’s change on the horizon. Rob Reindl is one of the people fueling the transformation. As corporate vice president of human resources at Edwards Lifesciences, an $850 million cardiovascular technology company headquartered in Irvine, California, Reindl is deeply involved in a process that in the past was traditionally beyond the realm of human resources executives: the recruitment and selection of corporate board members.


    Once a murky process conducted through interconnected networks of CEOs and their inner circles, the appointment of company directors is becoming an increasingly organized, transparent process. Since Congress passed the Sarbanes-Oxley Act of 2002, corporate boards have been under close scrutiny. In an effort to ensure ethical conduct at the highest levels, the legislation addresses, among other issues, independence in corporate governance, auditing, accounting, executive compensation and timely disclosure of corporate information.


    In November 2003, the Securities and Exchange Commission adopted further reforms that require public companies to develop a specific process for finding and selecting new board members, and to make that information public. For support in creating these new methods, governing boards are turning to their in-house human resources experts. “We’ve instituted processes to help other people in the company be a part of talent scouting now, and that’s partially due to the shrinking pool of traditional candidates and Sarbanes-Oxley,” Reindl says. “By being involved at this level, you’re helping to set the strategic direction of the company. And that’s the difference between the new HR leader and the traditional profile of someone in HR.”


    At Edwards Lifesciences, the 5,000-employee former cardiovascular branch of Baxter International Inc., Reindl has coordinated the board-member search process since the company separated from its parent corporation in 2000. By working closely with chairman and CEO Michael Mussellam, he analyzes board needs, and by communicating with the existing board and with the company’s chosen search firm, Korn/Ferry International, he executes much of the selection process.


The new challenge: a wider search
    Even with the new help from human resources executives, however, board searches seem to be getting harder, not easier. Just as background and skills requirements are getting stricter, thus narrowing the pool of qualified people, the number of willing traditional candidates is also shrinking. The increased time commitment required of board members, as well as fears of liability, has some potential directors opting out of the selection process altogether.


    Bill George, former chairman and CEO of Medtronic, who serves on the boards of Goldman Sachs and Novartis, says that the increased time commitment–an average of 19 hours a month, according to Korn/Ferry’s 2003 Board of Directors report–has led many directors to cut back on their board affiliations. In the past, responsibilities were often minimal, and sitting CEOs, traditionally the most desirable board members, would serve on several boards at a time.


    “In the past, board members weren’t really taking their jobs seriously,” George says. “It was more of an honorary position.” Today’s sitting CEOs will serve on only one or two boards at most.


    Even the most high-profile CEOs are shedding directorships. The chairman and CEO of Oracle, Larry Ellison, dropped his board position at Apple in 2002, saying that he didn’t have time to attend the meetings. Forbes Magazine reported that Ellison had missed 75 percent of Apple’s board meetings since he joined in 1997. Ivan Seidenberg, president, board member and CEO of Verizon Communications, also dropped two board positions last year, citing a lack of time, among other reasons.


    George says that today’s board members simply have to be more committed than they were just a few years ago. The 2003 study by Korn/Ferry found that active participation of all board members has become the minimal accepted standard, a departure from the past. The research shows that boards “are asking directors to resign with unprecedented frequency, most often citing poor performance or a lack of participation as the main reason.” Sixty-five percent of the companies that responded to the survey said that in the previous year, at least one board member had been asked to resign or not stand for re-election. That’s a jump from 54 percent in 2002.


    “We’re seeing sitting CEOs on fewer and fewer boards,” says Nancy Hahn, a client partner at Korn/Ferry International who has been involved with executive searches for 12 years. “With the economy the way it is and companies struggling to make their numbers, we’re hearing that some candidates don’t want to move forward because of a lack of time. They need to concentrate on their own businesses.”


    In addition to the increased time commitment, the new rules mandating a majority of independent directors and greater media scrutiny about interlocking directorships are encouraging some directors to resign from their posts. Last year, for example, Sanford Weill, chairman and CEO of Citigroup, announced that he was dropping his directorships at AT&T and United Technologies to comply with his company’s policy prohibiting interlocking directorships. Some experts say that another factor producing boardroom vacancies is a fear of liability. “There’s a professional risk, and the risk/reward trade-off just isn’t there for some of them,” says Julie Daum, a practice leader at executive search firm Spencer Stuart. “They think, ‘I don’t want to see my name on the front page of the New York Times.’ ”


    The Korn/Ferry study reports that the average annual cash compensation for board members of Fortune 1,000 companies climbed to $43,306 last year, from $40,964 in 2000. At top companies, however, total compensation can be considerably higher. According to Forbes, General Motors pays its independent directors $200,000 per year, $60,000 in cash and $140,000 in restricted stock. A report by compensation consultants Pearl Meyer & Partners predicts that 2003 will see a dramatic rise in director compensation to counter “newly heightened commitment and time requirements, as well as potential reputational and financial risks of board service.”


    Hahn says that the increase is specifically due in part to the legal requirement that audit committees now have members with financial expertise. Competition, she says, is driving companies to offer better compensation for the best candidates.


    “The audit committee is a real hot topic right now,” Hahn says. “The biggest change we’ve seen in the last 12 to 18 months is an increase in searches for these financial experts. And there’s an increase in organizations saying, ‘Let’s see how we stack up against our peers.’ As a result, companies are increasing the retainer for the chair of the committee and the meeting fees. And the speculation from compensation consultants is that it will continue to increase.”


    Given the rigorous new standards for directors, as well as the independence, expertise, time and definitive absence of any conflict of interest that are now requirements for a seat on a corporate board, it isn’t hard to figure out why the task of recruiting board members is more demanding than ever before.


New process, new leaders
    The new challenges of the hunt, given recent legislation and increased scrutiny of corporate governance, coupled with the tools that workforce execs are now bringing to the recruiting table, are transforming the entire board-selection process. Not only are the methods for identifying and retaining the best candidate changing, but so is the picture of the ideal candidate. The reforms outlined in Sarbanes-Oxley are intended to decrease instances of fraud by increasing accountability as a deterrent to unethical conduct, but regulations can do only so much. As George says in his new book, Authentic Leadership, “you can’t legislate integrity.”


   The ultimate solution lies with people. “We don’t need new laws,” George says. “We need new leadership.”


    The damaging corporate scandals of the past two years have convinced experts and individual companies that the key to success lies in placing the right people in leadership positions. “We need to look at a much more diverse set of prospective board members,” says George, now an executive in residence at the Yale School of Management. “In the past there was a much greater tendency to look for people you know, people you’d served on other boards with, and that leads to crony boards or board members that are not as challenging of each other as they should be.” He says that traditionally, board candidates were selected by a company’s CEO and then received an almost automatic approval by the existing directors.


    “The old-fashioned way of recruiting directors was to say, ‘Okay, who does the board know? Who does the CEO know?’ And then to go from there,” Hahn says. “But given the economic landscape and the nature of business today, with all the scandals, it’s becoming a trend to separate the CEO or chairman from just picking a new board member. Now it’s the nominating committee, and the chairman and CEO are involved later on in the process.”


    Increasingly, nominating committees are looking to human resources executives like Reindl to facilitate the search process. The amount of work required for a high-quality, far-reaching search can be beyond what board members, who already are saddled with executive commitments at their respective companies, can contribute. So top workforce managers are stepping in to fill the gap. After all, this is the field’s traditional area of expertise: finding the best candidate for the job. There was a time not long ago when board directorships existed above the scrutiny of human resources departments. But now it often is the human resources executive who is conducting due diligence on potential appointments.


    Drawing on experiences from Spencer Stuart’s more than 400 board searches in the last year, Daum has compiled a report on the new role of human resources in director selection. It was recently published in the Human Resource Planning Society’s book Restoring Trust: HR’s Role in Corporate Governance. “For the first time there is actually a process,” Daum says. “That hasn’t always been true. HR executives are now helping to create this process because they are used to doing this kind of work. They can help the nominating committee by looking for outside counsel, and they can help recruit and evaluate candidates.”


    At Edwards Lifesciences, Reindl stays abreast of board hiring needs by maintaining profiles of existing board members. He tracks whether or not they are CEOs, if they have international experience, their level of technical expertise and even where they live. His list of necessary skills includes experience in leadership, mergers and acquisitions, financial expertise and knowledge of Sarbanes-Oxley. He also looks ahead to the terms of board member commitments and is able to predict when upcoming vacancies will have to be filled. With this information, the company CEO is then able to analyze the gaps in the board as a whole.


    Despite the amplified criteria for the ideal director and the added challenges of the modern board-member search, George argues that high-quality candidates are out there. Human resources recruiters will simply have to cast a wider net. “There are actually a lot of new candidates coming into the pool,” the veteran board member says. “It’s becoming more and more important to get diverse boards made up of people with diverse backgrounds. Ideally, the board should reflect the population base you are serving.”


Workforce Management, January 2004, p. 47-49 — Subscribe Now!

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Watching Employees With GPS

The use of Global Positioning Systems to track employees is having some positive effects–and raising some significant privacy issues, according to The Christian Science Monitor. In Massachusetts, the highway department wants to monitor whether snow plowers are driving at the ideal speed for laying down salt, which could save an estimated $1.7 million a year. The GPS also helps keep track of plowers’ time. This may not be help the morale of drivers, who, according to the Monitor, resent “the implication that they waste tax dollars.” In other industries–such as the bail-bond collection business–a GPS helps employees feel more secure that someone knows their whereabouts.

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Dear Workforce How Can We Reinforce Our Leadership Development Training

Dear Bedeviled:



Generally, the best way to reinforce new knowledge and skills in the workplace is to hold executives accountable for their actions and whether desired results are met. If your organization has an effective performance management system, then it can be a critical tool for reinforcing learning at all levels of the organization. Be aware that some senior executives see performance management as something they do to others but is not relevant to their jobs.

At the executive level, other business-measurement systems can also be used to hold managers accountable. One of the best is the balanced scorecard, because it measures customer and human capital factors as well as business results. Other business measurement systems tend to focus on business outcomes and ignore how executives are leading their people. In these cases, you’ll need to add leadership measurements to the performance-management or other measurement systems.

The best way to extend and deepen the learning is to have other leaders attend the program (or a derivative designed for the next level of leadership). If that isn’t possible, senior executives will need to lead by example, coach other leaders, and change organizational processes and systems to reflect new objectives.

For example, if one of your organization’s goals is to embrace change and increase “organizational agility”–the change-management portion of the executive program–then senior executives should take the lead in changing organizational systems to make them more agile. All the while, they should be coaching other leaders in change management. The next step for senior executives is to find appropriate opportunities for these leaders and then coach them to success.

SOURCE: Jim Concelman, Leadership Development Product Manager,Development Dimensions International, Pittsburgh, Pennsylvania, Jan. 20, 2003.

LEARN MORE: ReadWhere Have All the Leaders Gone?

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.

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When Men Take Paternity Leave, True Equality Begins

When our first daughter was born in 1996, my husband, Ed, took two days off from work. I took six months of “maternity leave,” which was unpaid except that I used two months of accumulated sick, vacation and comp time that I had stored.



    I worked then as an attorney for a federal agency. Ed worked for a think tank, whose maternity- and paternity-leave policies mirrored ours. Theoretically, we were both entitled to the same amount of time off, although nobody had ever taken paternity leave at Ed’s employer. We never considered his taking more than a few days off, something I began to regret the day he went back to work.


    I learned a lot during maternity leave and later, most significantly that those who stay home with babies, even for a little while, become the family’s child-rearing expert. I saw that if we truly wanted to share parenting and both pursue careers, Dad would have to share in the bonding, work and beauty of the first weeks and months of life. That’s where it all begins.


    Equality between men and women will not occur until men start taking paternity leave and agitating for it, and employers encourage men to make time for family from the first months of life all the way to retirement. The pay gap between men and women will disappear only when dads make the same accommodations that moms do for children.


    The Family and Medical Leave Act took a big step toward establishing a maternity- and paternity-leave system in the United States. But it has had little effect on most American employees; only about half are eligible for the FMLA. The utilization rate is just 6.5 percent (up from 3 percent eight years ago) because the leave is unpaid. Few fathers take FMLA leave when their children are born. They do not want to lose income, and they are also deterred by old societal norms and fear of retribution.


    The fear of lost income and the stigma of a man taking leave play less of a role in dads’ decisions when the leave is paid and when employers get behind paternity leave, as KPMG recently discovered. In 2003, the second year of its new policy–which allows two weeks of paid paternity leave–87 percent of eligible employees at KPMG took paternity leave. That’s a huge difference: 6.5 percent versus 87 percent. Once the first man breaks through the nursery wall to take paternity leave and emerges happy and with his career unharmed, others follow. KPMG and other forward-looking companies such as IBM, Deloitte & Touche and Microsoft are changing family dynamics and, in ripples, the workplace and society at large.


The payoff
    Employers get behind paternity leave for a variety of reasons, but ultimately because it makes them money. KPMG has gotten great publicity over the last two months in The Boston Globe, The Chicago Tribune and Working Mother because of its paternity-leave policy. Such recognition pays off in gains in recruiting, retention and productivity. KPMG estimates that so far, its paternity-leave policy has strengthened recruiting and retention by 10 to 25 percent. Of the companies on Working Mother’s 2003 list of the best employers, 39 percent offer paid paternity leave, as opposed to 12 percent nationwide.


    Paternity leave and flexible hours change the way we think about work and management. Study after study shows that most jobs can be done with modified start-and-stop times, job sharing and other flexible arrangements. It costs less to support a parental leave than to replace an employee who leaves.


    Many employers view those who work flexibly as at least as productive as and often more productive than those who work traditional schedules. In 1999, my husband became the first man in his office to make use of the FMLA upon the birth of his baby. He took one month off. Within days of returning to work, he felt like he had never left. He created a flexible schedule, worked hard, got promoted, and appreciated his employer for supporting his leave and new schedule.


    That time at home is now a dim, pleasant memory. But a year later, his boss took five weeks of paternity leave when his second child was born. Their office continues to thrive, their families benefit from their participation at home, and their employer’s culture has changed.


    We may never become just like Sweden, the country where men do the most housework and child care, largely because their government has encouraged them through leave and cash incentives. But if the workplace and dads embrace paternity leave, our business culture may evolve into a different animal, one that values face time and traditional hours less and productivity more. Society, children and even the bottom line will be better off as a result.

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Dear Workforce What Are The Challenges In Paying Straight Commission

Dear Shoestrings:



Both the “base plus bonus” and commission approaches have their uses. Generally, an organization’s sales cycle, size, and business model will affect the selection of commission vs. bonus. The following are some of the key differences between the two plan approaches.

In transactional selling environments with shorter sales cycles, where new business development is the priority, commission plans prevail. A commission plan in its simplest form is a rate of pay linked to a sales result, such as two percent of revenue or $200 per unit sold. Commissions provide clear line-of-sight to the sales person because the reward for the sales result is direct. Most companies in early stages of development use commission plans because they are simple to administer and drive new business. To ease cash flow for the rep, these early stage companies may also use a “draw” (basically, an advance) against commissions or a modest base salary.

As companies grow, this simple commission approach tends to break down. This is because sales strategies become more complex, new sales roles are introduced, and recurring customer revenue grows. In these environments, straight commission plans tend to overpay for the existing base of customer revenue, because they use the same rate for a large recurring revenue stream as for incremental new business. Commission plans also break down as territories vary in size because an individual’s earning opportunity is directly tied to territory size. The organization then begins the futile game of cutting and pasting territories to create a more equitable situation for all sales reps. The commission rate, used over time, becomes sacred and immovable. Changing the rate, to provide the necessary sales management flexibility, is typically viewed negatively. The organization becomes hamstrung by the commission plan and the sales management process starts to work backwards: companies make job and territory decisions to meet the needs of the commission plan.

At this point, many companies move to a base-plus-bonus plan. This structure allows the organization to vary the pay mix (the ratio of base salary to target incentive) according to the roles of each job. For example, account managers with a large base of existing business will have a less aggressive mix — perhaps 80 percent salary and 20 percent target incentive — than new business developers, who may have a mix of 40 percent salary and 60 percent target incentive. As this mix varies and a job carries more incentive pay at risk, as either commission or bonus, the accepted practice is to provide greater upside earning opportunity for performance above quota.

As a rule, for every dollar of incentive pay that would be earned at quota, a well-designed plan will provide the opportunity to earn one to two dollars in additional incentive pay at the excellence level of performance. So, for example, a plan that pays $20,000 at quota could provide an opportunity to earn an additional $20,000 for the top 5 percent to 10 percent of performers in the organization. The base-plus-bonus approach simply provides more flexibility to design a plan that fits each job role.

If the sales job in question is focused primarily on new business development and follows a transactional sales cycle of moderate length, a commission plan may be the way to go. To make the change from a base-plus-bonus to straight commission, you will need to consider cash flow for the rep. You may gradually lower the base or use a declining draw to smooth the transition. Also, if you add more risk to the plan by reducing the base salary, you should provide an appropriate level of new upside opportunity for the rep. You want to make the change motivational. After all, your objective with the plan should be to clearly communicate your sales priorities and to fully inspire the rep to work toward those priorities.

SOURCE: Mark A. Donnolo, consultant, Sibson Consulting, Atlanta, Georgia, Jan. 23, 2003.

LEARN MORE: ReadHow to structure sales commission targets and goals.

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.

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