It’s a classic HR conundrum: Your company wants to help employees save forretirement by offering a 401(k) or other pension plan. And since these plans areincreasingly laden with options, your company wants to offer education to employees,so they can make responsible decisions. Your company does not, however, want tobe held legally liable by employees whose investments don’t reap the expectedbenefits. So how do you give employees the information and tools they need tomake smart retirement-investment decisions without exposing the company to lawsuits?
Representative John Boehner (R-Ohio) recognized the problem when he introducedthe Retirement Security Advice Act of 2000, which is intended to “clarifyexisting federal law to give employers the green light to provide their employeeswith access to high-quality investment advice.” But the legislation failedto pass the House and was not reintroduced this session. So what to do now?Michael Nassau, head of the employee benefits and executive compensation practiceat Kramer, Levin, Naftalis, & Frankel in New York, gives guidelines to safepension-investment counseling.
Are a lot of employers concerned about offering investment advice?
Many companies feel that it’s proper to help employees save for retirement.And that, to make the plan work, they ought to offer education about the plan.But employers recognize that whenever you do anything that you don’t haveto, there’s some legal risk. Employees who feel it’s worked out badlyfor them may feel more misled than they would have if the employer had nevertried to offer any education. But you get to the question: If you really wantyour retirement program to work, and we’re giving participants a huge responsibilityin how it will work out, can your program meet its goals if you don’t givethem some basic concept of what they ought to be doing?
Are there any government guidelines that protect employers from liabilityfor offering investment advice?
In 1996, the Department of Labor decided it didn’t want fears of liabilityto deter employers from helping employees pick among different investment options.So it came out with a bulletin intended to give comfort, Interpretive Bulletin96-1 [posted in full on the DOL Web site, www.dol.gov]. The bulletin basicallyoutlines the information employers can offer without being considered fiduciaries.
What does being a fiduciary mean and how can it lead to liability?
Fiduciaries have discretionary authority over running the plan. It’s possiblethat by advising participants as to what investing is all about, or hiring someoneelse to do so, either you or they are acting as “fiduciaries.” Ifyou’re a fiduciary, you have certain burdens. You have to act prudently,which means you have to do your job right. It basically raises the stakes forliability under ERISA.
The DOL tried to address that?
Yes. It recognized that fiduciaries are held to certain standards, and if theydepart from them they can be subject to liability. The DOL realized that employersmight not want to give information unless they’re assured they won’tbe viewed as fiduciaries. So it offered an outline of the information you canimpart, information that won’t make you a fiduciary and therefore won’tleave you subject to liability under ERISA.
What kind of information can an employer offer?
The bulletin outlines safe harbors for employers to provide four specific categoriesof investment information and materials: plan information, general financialand investment information, asset allocation models, and interactive investmentmaterials.
Let’s take these piece by piece: What does plan information cover?
Here’s a no-brainer. It’s how the plan works and the consequencesof doing things under the plan. Information like: if you take out money pre-retirement,you’re going to have less. You can also explain the benefits of plan participation,the benefits of contributing more rather than less, the way that withdrawalsbefore retirement can hurt your income. All of that is perfectly fine.
What’s covered under “general financial and investment information”?
It’s basic information regarding the plan. For instance, the differentobjectives of different funds, the concept that investing involves a trade-offbetween risk and potential return. All that’s clearly OK. Then there’sthe basic primer on what investing is all about. So that’s the explanationfor concepts like dollar cost averaging, tax-deferred investments, compoundedreturn, the effects of inflation, and how to estimate future retirement-incomeneeds.
What do “asset allocation models” include?
You may give a participant a mechanism such as worksheets, pie charts, or graphsto allow the employee to figure out what his or her asset allocation model wouldbe. These include materials like model portfolios of hypothetical individualswith different time horizons and risk profiles. These models should be basedon widely accepted investment theories that take into account the historic returnsof different asset classes — such as equity, bonds, and cash over periods oftime. As long as you’re not counseling any particular individual as towhat specific investment decision he should make, offering those models is nota fiduciary activity.
And what are interactive investment materials?
Questionnaires, worksheets, and software that help the employee estimate hisor her future income needs in retirement, and estimate the impact of differentasset allocations on retirement income. Again, these should be based on widelyaccepted investment theories that take into account historic returns.
If HR plans to use an outside company, like an investment firm, to handlethe education on 401(k)s, what should HR consider?
If the company offering education is also offering the menu of investment options,there’s an issue of appearance (of conflict of interest). A mutual-fundsponsor, for instance, makes more money from stock funds than from bonds ormoney market funds. So you don’t want a situation where there’s arguablyan incentive on their part to skew the advice. This is an issue the mutual-fundssponsors are well aware of, however, and if they’re offering investmenteducation, they can avoid that problem.
So in the end, what’s the risk level?
I don’t believe the legal risks of offering an investment education programare great enough to deter you. If an employer wants to offer a 401(k), the employerwill probably want to offer education about it. If you’re going to do something,you ought to do it right.
This legislation (H.R.2070) seeks to amend the FairLabor Standards Act to make certain inside sales employees who use the telephone,fax, and computer to make sales from an employer’s establishment exemptfrom the minimum wage, recordkeeping and overtime compensation requirements.Technical provisions of the bill are substantially similar to legislation introducedlast year (H.R. 1302). The following factors are requirements under the proposedlegislation for an inside sales representative to be considered exempt fromthe FLSA overtime, minimum wage and recordkeeping provisions:
the employee has specialized or technical knowledge related to productsor services being sold,
the employee’s sales are predominantly to persons or entities to whomthe employee’s position has made previous sales, or the position does notinvolve initiating sales contacts,
the employee has a detailed understanding of the needs of those to whomthe employee is selling;
the employee exercises discretion in offering a variety of products andservices,
the employee receives base compensation, determined without regard tothe number of hours worked, of not less than 1.5 times the minimum wagemultiplied by 2,080, and in addition to the employee’s base compensation,compensation based upon each sale attributable to the employee,
the employee’s aggregate compensation based upon sales attributable tothe employee is not less than 40% of 1.5 times the minimum wage multipliedby 2,080, and
the employee receives a rate of compensation based upon each sale attributableto the employee which is beyond sales required to reach the compensationrequired above, which rate is not less than the rate on which the compensationrequired above is determined.
Status This legislation was introduced in the House by Rep.Patrick Tiberi (R-OH) on June 6, 2001 as H.R. 2070 and referred to the Educationand the Workforce Committee. The House Education and the Workforce Subcommittee on Workforce Protectionsapproved the bill by an 8-6 vote on June 27. The bill has bipartisan support, led by Rep. RobertAndrews (D-NJ), ranking member of the Education and Workforce Subcommittee onEmployer-Employee Relations, and is expected to be included in the House versionof a minimum wage package.
Impact The proposed legislation is a mixed blessing. Typically,employers welcome amendments to the FLSA, as the statute generally is perceivedas not in line with the modern workforce. Specifically, new technologies havetransformed the roles of many outside salespeople such that today they conductmore and more business on-site and risk losing the current “outside”sales exemption. The proposed exemption for inside sales personnel will encouragemore time spent trying to achieve sales, with a commission pay structure insteadof an overtime pay structure. This could increase sales, which in turn wouldgenerate more employee income via commissions.
From a design and implementation perspective, however,the legislation contains a number of potential problems:
Tying the base salary requirement to the minimum wage;
The exemption does not allow for any commission threshold;
The proposed law excludes salespeople who typically make cold calls. Anyensuing employer policy would need to distinguish between these classesof sales personnel, which it may or may not already do.
The proposed law implies that sales incentive compensation plans wouldhave to be uncapped with no decelerator.
In the event the new employee isn’t at 100% efficiency, you’d have to givethem higher commission rates to account for the difference
Saying that sales employees have to be paid for “each sale that isattributable to the employee” sounds as though it removes the potentialto use a bonus-based pay plan.
The bottom line is that it could be a painful pieceof legislation for organizations. There are many companies that have sales incentiveplans for inside sales representatives. Very few of these plans meet the parametersset out in the proposed legislation. In order to take advantage of the exemptoption if the legislation were to be implemented, companies would need to evaluatetheir compensation plans and determine whether they could meet the test foran inside sales exemption while still supporting their business goals.
It’s an overcast March morning and Adam Mentzell, director of human resources for Sounds True, is discussing the painful experience of laying off 15 percent of his company’s workforce last summer.
“What did I learn from it?” he asks. “I learned that people are tremendously capable of dealing with hardship. If you hire mature people and treat them well, they can be very resilient.”
As Mentzell finishes his last sentence, the alarm on his sports watch starts beeping. He excuses himself, walks to his desk, switches his telephone to the intercom mode, and strikes a small brass bell sitting next to the phone. He strikes the bell three times, creating low, calming tones that resonate throughout the company’s offices.
“Sorry about that,” Mentzell says as he sits back down to explain that the bell is rung at precisely 11:00 each day to call employees to group meditation — which he usually observes — or to practice 15 minutes of silence. The bell of mindfulness, as he calls it, is a way of reminding employees to slow down and become more present and aware.
Meditation? Mindfulness? These aren’t words normally discussed by corporate HR people. But at Sounds True, it’s fitting that the bell of mindfulness was rung during a conversation about downsizing, for this is a company that deals with all the routine struggles of a growing business, including layoffs, but does so with an eye — and heart — toward the human side of work life.
Sounds True is an audio publishing company based in Louisville, Colorado, a town located 20 miles northwest of Denver along the Front Range of Colorado’s Rocky Mountains. The privately held company was started in 1985 by Tami Simon, a 22-year-old woman who had a $30,000 inheritance and a vision to disseminate spiritual wisdom.
Today, Sounds True is a $9.3 million company that produces spoken-word audio tapes and CDs on topics related to world religion, psychology, and alternative medicine. The company boasts a catalog of more than 500 titles, including Women Who Run with the Wolves, by Clarissa Pinkola Estes, Energy Anatomy, by Caroline Myss, and Breathing: The Master Key to Self-Healing, by Andrew Weil, M.D. In 16 years, Sounds True has grown from a one-person labor of love into a 60-employee enterprise. Along the way, the challenge has always been how to maintain the company’s spiritual focus — and spiritual integrity — while also responding to the gritty, mortal demands of business.
At first glance, Sounds True does seem different from most buttoned-down corporate settings. Walk toward the company’s main entrance and you’ll pass a serene white marble statue of an angel. Once you’re inside, a golden retriever will click across the lobby and greet you. And as you tour the quiet offices, you’ll find employees wearing fleece and khaki and hiking boots. They work alongside rippling desktop fountains, or to the accompaniment of bamboo flutes, or underneath warm reading lamps.
But these are just superficial differences. Within this casual, fleecy environment, employees also have to negotiate contracts, meet deadlines, fulfill orders, and generate profits just like any other corporate workforce. How does Sounds True balance the realities of competitive corporate life — profit goals, employee conflict, and customer demands — with its goal to promote spiritual wisdom? How does the company instill self-awareness in employees alongside the requisite business awareness?
Spend a day with Mentzell and you’ll learn that the company’s desire to create an aware workplace is much like an individual’s attempt to find spiritual wisdom: it’s something that needs continual attention. Just as there is no path to permanent spiritual enlightenment — faith and spirituality being ongoing disciplines — there is also no such thing as an unwavering workplace culture.
The best that Sounds True or any HR department can do is to be continuously mindful of those things that contribute to a positive working environment: hiring the right employees, adhering to core values, and conducting business in a way that fosters both individual awareness and business accountability. Simply stated, creating cultural wisdom is a discipline, not a destination, a discipline that might best be called enlightened leadership.
Hiring: It’s not just a job
The path to enlightened HR starts with hiring, and fortunately, Sounds True is one of those lucky companies that attracts people with a natural affinity for their products. Just as techies head to Microsoft, metaphysically focused people gravitate toward Sounds True, supplying the small company with about 20 unsolicited résumés a week. “We attract employees who want to work in a different kind of way,” Mentzell says.
But even though many people have an interest in working for the company, it’s the job of Mentzell and other managers to make sure that those who are hired fully understand and embrace the company’s mission. “In key positions, such as those in the editorial department, it’s imperative that employees have a deep connection to our product line,” he says. This means recruiting people with education and experience in world religions, and having them demonstrate that knowledge both orally and in writing.
For most of the company’s positions, however, religious knowledge is not as important as the right skill set, which is determined by past experience; the ability to communicate honestly and respectfully, which is assessed through a series of team interviews; and support for the overall mission. The last criterion is trickier to assess, because the mission is spiritual and it’s illegal to ask questions about religion in interviews. How does Mentzell determine whether candidates will uphold the mission to disseminate spiritual wisdom? By asking them to listen to taped products, review the catalog, and visit the company Web site.
“During follow-up interviews, I ask a series of open-ended questions about the candidate’s reaction to our products and ask whether or not it is a problem for them that Sounds True produces products from a wide variety of wisdom traditions and schools of thought,” he says. “Rather than looking for adherents, we are looking for capable people who do not have a problem with our material and support our overall mission.”
Sounds True Interview Questions
How will you make contributions to our core values?
If you were hired and we could jump ahead six months, what do you think we would be saying about how you helped forward our core values?
What core aspirations excite you or interest you?
Why in the world do you want to work here?
Tell me what is important to you — what do you value deeply?
Tell me about the last time you lost your cool. What was the cause? What action did you take? What did you learn?
What are your expectations from an employer? Name at least four.
Tell me about a specific situation when you were disappointed by an employer or manager.
Whom do you admire? Why?
Tell me about a time when you were overwhelmed at work. What was the cause? What action did you take? What did you learn that you can carry forward?
What in your history are you most proud of and why?
Conversely, what in your work history do you regret the most and why?
What do you understand the mission of the company to be?
The interest of spiritual seekers in working for Sounds True, combined with the company’s diligent hiring practices, makes it possible for the culture to be almost self-generating. Case in point: Three years ago, the company hired a longtime customer to manage its warehouse, a department where profanity and gruffness are the norm in most companies, Sounds True included. The new manager, thanks to his long-term interest in Sounds True products, used professional language, treated employees with respect, and lived the company’s value system. “He changed the way the warehouse was run not by dictating change, but by setting a good example,” Mentzell says.
Honesty, openness, and accountability
Let’s face it. Even if companies hire the right people, the ugly demands of business have a way of inflicting pain and uncertainty on even the wisest and most aware individuals. How does Sounds True make sure that employees don’t revert to nasty reactive behavior in the wake of tough business demands? They do it by adhering to company values. Sure, many companies pay heed to the importance of values. But at Sounds True, the company’s 20 values are integrated into daily business practices — with the emphasis on the word “practice.”
“One thing we are clear about is that our work is a work in progress,” Mentzell says. “We have set aspirations that we continually strive for, but sometimes we fall short of our goals.”
The guiding principles underlying all of Sounds True’s values are mindfulness, honesty, and kindness. “These are the spiritual or wisdom qualities that are taught on the tapes we publish, so we also want to live them in our own work lives,” says company president Tami Simon.
Let’s start with the practice of mindfulness, which Mentzell describes as the art of paying attention and seeing things in a fresh and non-habitual manner. Sounds True promotes mindfulness by encouraging employees to stop what they are doing and become aware of their thought patterns. This is done through the 11:00 call to meditation, by providing an on-site meditation room, and by opening every large staff meeting with a two-minute period of silence. “This contemplative space provides the opportunity, if only for a moment, for employees to set aside their individual agendas,” Mentzell explains.
The ability to set aside individual agendas allows employees to fully engage in the second guiding principle: honest and open communication. “In many companies, people waste a lot of time through backstabbing and office politics,” Simon notes. “This happens because people don’t trust each other.” She believes that the only way to foster trust is to promote open communication, even if employees don’t always like what they hear.
Sounds True encourages open communication in several ways. First, every Monday morning, employees gather in the lobby to discuss business issues with the management team. During this time, employees can ask any manager, including the president, pointed questions about budgets, the hiring processes, whatever. “Tami has admitted to making mistakes on more than one occasion,” Mentzell says.
Second, the company makes extensive use of peer-review processes that allow team members to provide direct feedback to coworkers about how they may be affecting others. Upward review processes are also used to give managers anonymous feedback from those they manage.
Third, the company promotes collaborative decision-making so that managers jointly make key business decisions, and departmental teams determine their own best way of working together. The only way to arrive at mutually beneficial decisions is for managers and employees to engage in honest communication.
Is there any downside to having such an open and honest culture? “Oh my god, yes,” Simon says. “People who are used to being in corporate environments where there is more strategic game playing don’t always make it here.” Why? “Because it often takes a while for people to realize that honesty, even if it pinches, can lead to much higher levels of trust. Some people just don’t make it that far.
“Many people here are very genuine, and they expect you to be genuine, too. If you are a person who doesn’t want to bring your emotional life to work, you may think that coworkers are poking at you to find out what’s going on in your life.”
Tim Bucher, a recently hired network administrator in Sounds True’s IT department, agrees with Simon. “I had wary thoughts coming in,” he admits. “I was used to a large corporate structure, and I was a bit intimidated by how different the culture was here. Now, I’m used to it. I don’t have to work to weed out truth from lies, because everybody here is so honest.”
The other guiding principle embedded in all of Sounds True’s values is kindness, which simply means respecting others and honoring individual differences. The company honors individual differences through such practices as a nonexistent dress code, flexible working hours, and allowing employees to bring their dogs to work.
Sounds True Values
Sounds True is both mission-driven and profit-driven.
We build workplace community.
We encourage authenticity in the workplace.
Open communication.
Animals are welcome.
We place a high value on creativity, innovation, and ideas.
Opportunities exist for flexible work schedules.
Teams determine the best way to reach their goals.
We honor and include a contemplative dimension in the workplace.
We reach out to a diverse community.
We strive to protect and preserve the Earth.
We have a relationship with our customers that is based on integrity.
We take time for kindness, have fun, and get a lot done.
We acknowledge that every person in the organization carries wisdom.
We encourage people to speak up and propose solutions.
We encourage people to listen deeply.
We honor individual differences and diversity.
We strive for clarity of expectations.
We encourage people to realize their creative potential.
Employees participate in profit sharing and ownership.
A complete description of each Sounds True value can be found on the company’s Web site, www.soundstrue.com.
Building financial acumen
In a company driven by spiritual values, capitalistic concerns such as cost and profit easily can become secondary. Such was the case at Sounds True last year, when the company tried to expand in too many different directions at once and ultimately lost money for the first time in 15 years.
Smarting from the loss, the company was forced to lay off employees in unprofitable divisions and also pay stricter attention to financial concerns. This upset a few longtime employees, who felt that the company was “selling out” to capitalism and chose to leave on their own.
“We had to work to create business-mindedness,” Simon explains. “For 15 years the people who worked here did not pay much attention to the critical drivers of financial success such as cost of goods, margins on product lines, and product formats.”
“What we had to communicate to remaining employees,” Mentzell adds, “is that our mission to disseminate spiritual wisdom is not possible unless the company can also pay its bills.”
To make sure that employees are conscious of the relevant measures of financial performance, Sounds True launched an open-book management program called the Great Game of Business, wherein all employees were trained in financial literacy. Today, department representatives provide weekly forecasts against their specific budgets and then present this information in bimonthly business “scoreboard” meetings. All managers are in attendance at this fast-moving meeting and are expected to report financial information to their teams immediately afterward.
“Information on our performance against budget quickly travels to all areas of the organization,” Mentzell explains. This raises employee awareness of financial measures and stimulates employees to take corrective action when necessary.
Although speaking freely about finances has helped the company get back on track, there are some risks involved. “There is a certain kind of anxiety introduced in an environment where people know all about the business and its accompanying uncertainties,” Simon explains. “In companies where the executive team acts like parents who withhold difficult information from workers, people are protected from this anxiety. But I think that approach gives people a false sense of safety. Here, employees may feel anxious about finances more of the time, but at least everyone knows where they stand.”
The role of HR
It may come as no surprise that Sounds True’s HR director personally embodies the company’s mission. On the door of Mentzell’s office are in and outboxes marked with the signs: Breathing IN I feel calm; Breathing OUT I smile. “I’ve been on my own spiritual quest for 10 years,” he says, adding that he not only meditates regularly but also is a serious student of Western psychology and Eastern religion and philosophy.
Mentzell’s personal connection to the company’s mission helps him to be mindful of the never-ending work involved in creating an aware culture. As HR director, an unusual position in a company of this size, he oversees hiring, mediates disputes, communicates financial results, negotiates benefits, and trains managers. He reports directly to the CEO. “I’m responsible for how management happens here,” he says. Other than that, most of Mentzell’s job is typical HR: recruitment, benefits, compensation, performance reviews, and training.
“I’m surprised how much of my job is routine,” he says, almost sheepishly.
It could be routine because Sounds True is as mindful of human needs as it is of business needs, although Mentzell would be the first to say that maintaining the balance between financial and human goals is not easy. Shift too far in one direction and business suffers. Shift too far in the other and morale withers. But by staying aware that both goals are important — and by integrating that awareness into daily business practices — Sounds True has been able to weather hard times.
“Enlightened HR?” Mentzell asks. “Sounds True should not be portrayed as having figured it out, but merely striving to find a better way of doing business.”
What is the value of a human resource department? What led Bank of America, BPAmoco, and others to transfer all HR activities to an outside vendor? What isthe future of HR and what role should it play in business? These are questionson the minds of human resource professionals and executives alike, and the answersare not to be found in traditional models of human resource staffs. In fact, thevery survival of human resources hinges on the ability to shift to a new model.
The traditional view The role of HR has been described as personnel administrator, corporate conscience,trainer, legal guardian, corporate communicator, employee ombudsman, and laborplacater. Recently, the designation strategic partner has come into vogue toimply greater alignment of HR activities with business requirements, althoughHR activities still center mostly on the traditional roles of hiring, firing,and administering rewards.
Consequently, most methods of quantifying the value of HR are directed at thesetransactional activities. For example, common approaches to measuring HR valueinclude activity tracking, costing, benchmarking, surveying client satisfaction,and measuring HR as a “profit center.”
A new approach Although the various methods for valuing HR departments are useful, they failto account for the business of the business. In other words, the company’s purposeis to successfully produce, deliver, and/or sell a particular product or service,not to engage in efficient HR practices. Human resource departments exist tosupport the organization in achieving its objectives and can do so by findingways to create improved business results.
This is the new model of HR value. It identifies the HR department as potentiallya market-valued resource to the organization. In the market-valued role, HRprofessionals recognize that their value is based on marketplace perception,which is, in most cases, based on the experience of those in the core business.
Human resource departments must embrace the concept of being subject to marketpressures.
They must be prepared to demonstrate high market value. To do so, they needto actively seek opportunities to help the core business resolve problems, improveresults, and reach objectives.
An HR focus on the core business acts as a kind of low center of gravity, keepingHR close to the real issues of the day-to-day business and creating greaterquantifiable results. For example, instead of seeking methods to administerand track performance management activities efficiently, a market-valued HRprofessional might help core workers obtain customer feedback in order to respondmore effectively to customer needs.
Or, rather than creating another leadership development program, market-valuedHR staff will work on creating knowledgeable employees who act to eliminateproduction bottlenecks.
In other words, in place of activities with weak relationships to the bottomline, HR can serve the core business by using its expertise to directly addressbusiness needs.
To become a market-valued resource, HR professionals must do three things:
First, they must strategically partner with internal business people, aligningthemselves with operations and its purposes. Knowing the business is a precursorto becoming a partner, and becoming a partner is vital to having an impact onthe business.
Partnership in the true sense of the word implies ownership and risk. A businessarrangement with no risk to one party and considerable risk to the other isnot a partnership at all. Partners share in the decisions and the risk. Thismeans that human resource personnel must be willing to put themselves at risk,just as their clients do in the marketplace. For example, HR can pay, out ofits own budget, the cost of a consultant if objectives are not met.
Second, as described above, HR needs to focus on business problems rather thanHR activities. Demonstrating the value of HR by rolling out elaborate trainingprograms or hiring policies may do little to address the business needs of theproduction group.
The business problems faced daily in production are things like machine availability,customer response time, retooling time, marketplace demands, production bottlenecks,quality issues, production costs, shareholder value, and production efficiency.In a market-valued approach, the business gains value when these issues areaddressed.
Third, HR must assess its impact on the business in terms of measurable resultsrather than in activity efficiencies and costs. It is useful to show the dollarsavings in advertising as a result of innovative recruitment methods, but thetrue value of HR is measured in bottom-line business results, such as a 20 percentdecrease in retooling time, a new and innovative response to the marketplace,a 15 percent improvement in quality, or a 25percent increase in company stockprice. These are the outcomes that demonstrate the value of HR.
Becoming a market-valued HR practitioner Human resources, training, and other support departments can gain market valuein a company by adhering to some simple guidelines for working with “clients”from the core business.
Determine the key issues. Find out what the needs of the business are. One way is through HR metrics thatmay point to high turnover, low retention for first-year employees, or moraleissues in a particular department. Further analysis should reveal root causesthat HR can address.
A second, more powerful approach is to directly find out from operations orthe core business which issues concern them most, without regard to whetheror not the issues fit into the realm of HR. This is where HR can truly havean impact. Core-business employees constantly wrestle with issues that frustratethem in their efforts to reach production or financial targets. Since revenueis generated at this level, anything that addresses improvement to the productor service, cost, or response to the customer is an opportunity to add value.
Determine the impact on the business. To understand the difficult issues facing a department or work group, try tosee how the problem, unresolved, affects the business. Is it creating qualityproblems? Are people working inefficiently? Are decisions avoided, and if so,with what result? Are products being rejected or reworked? In other words, whatprice is the organization paying for these problems? This becomes the basisfor HR’s work, and the way HR shows its value.
Develop collaborative solutions. Once HR has defined the problem, and can see its business impact, it can thenturn to its own storehouses of knowledge, skills, and abilities to determinehow it might be able to help. This is in contrast to its traditional role, inwhich HR personnel, who unilaterally identify the problem, define the solution,and mandate actions for the target group without regard to whether or not theyare addressing the needs of the business.
Using HR skills to develop solutions with the client, while resisting the temptationto mandate, will increase the client’s ownership of and commitment to a solution.That increases the likelihood of success.
Establish measurable outcomes. If Step 2 is done well, the outcomes to measure should become apparent. If thebusiness problem necessitates the reworking of products, then measuring thatrework (before and after the changes are instituted) is the way to see if theintervention is having an effect. Likewise, if people are working inefficiently,then a measure of efficiency is in order.
Demonstrating hard-number results in these areas allows HR to set itself apartfrom those following benchmarking or profit-center models, and it establishessolid value for HR in the minds of those in the core business.
Assess effectiveness. This is not a one-time, post-implementation step, but rather an ongoing processof meeting with the core-business “client” to discuss progress, problems,and needs. It is where the adjusting, fine-tuning, and regrouping occurs. Itensures that the focus remains on identified business outcomes and the resultsthat can be achieved.
The new market-valued model presents HR as a supplier of necessary expertisethat helps the core business to be successful. As such HR continuously providesanswers to real business problems to maintain a reason to exist inside the organization.HR and other staff support departments that are committed to having an impacton the core business can establish themselves as market-valued departments thatare indispensable to the success of any organization.
BGA International A large international pump manufacturer, BGA International, was preparing to builda newly designed pump that was much larger and more efficient than any it hadbuilt up to that time. BGA’s sales force had sold the product while it was stillin the design stage: the significantly larger machining equipment required forfabrication had yet to be purchased, and the unionized machinists were preparingfor battle with management to determine who would operate the new equipment, andat what pay. A lot was at stake; unless this product was successfully built anddelivered as promised, the business’s ability to sustain profitability was inquestion.
In response to the challenge, BGA’s HR manager tried to convince managementthat the workforce could come through — if the problems were approached witha fresh outlook. HR and operations leaders contacted union leaders to discussthe issues and possibilities for addressing business needs, as well as the union’sconcerns. Soon the company reached an agreement: the top machinists would organizethemselves in a unique work system to install and learn to use the new equipment.They would develop the most effective methods of working together to producethe never-before-built product according to design specifications.
HR arranged for a trained in-house facilitator to teach the new machinist teambasic analysis and problem-solving methods, as well as how to organize and functionas a team. Using the newly acquired knowledge, the team soon realized that previouswork practices, which rewarded individual productivity at the expense of overallshop performance, would be detrimental to its objectives. The machinists foundthat bottlenecks were created by workers who began cleaning up early to avoidsetting up jobs for the next shift, leaving the incoming machinists to beginthe job from scratch. The team also found that simply grouping productivitymeasures by machine, rather than by individual, eliminated many such problemsand other bottlenecks common in the shop. Productivity increased substantially.
Working together, this team of core workers went on to overcome many equipmentfailures and design challenges. The team set up the equipment and work systemsto successfully produce the new product line on schedule, below budgeted cost,and with such precision that it surpassed product specifications for the operatingefficiency of the pump. Their work ensured another prosperous year for the organization.
Tucson Electric Power Tucson Electric Power faced a double challenge:deregulation and competition. In this business climate, a marketing departmentmanager at the utility company contacted the in-house organizational development(OD) group to request some training in interpersonal and communication skills.The manager’s concern was that the marketing group was unable to work togethereffectively. If the group failed to turn things around, it was in danger ofbeing replaced or outsourced. In fact, the group had been given 18 months tosuccessfully market a new guaranteed energy-cost program that had been flounderingfor as long. But most employees knew only that they were under pressure to showan improvement in sales.
After contracting with the marketing manager, the OD group proceeded to developits own point of view about the manager’s concerns by collecting data througha series of personal interviews. After analyzing the data, the organizationaldevelopment team concluded that the marketing group indeed had a problem, butit wasn’t poor communication or a lack of interpersonal skills. Instead, itsmembers lacked a sense of personal accountability for the success of the wholegroup. It had no clearly articulated vision or strategic direction, and it hadpoor meeting-management skills at all levels. These and other findings werereported by the OD staff to the entire marketing group, along with actions thatcould turn the group around.
In general, the marketing group agreed with the findings and supported theinterventions recommended by the OD staff. At Tucson Electric Power, the staffsupport groups were set up to charge back the cost of services to their in-house”clients.” In this case, the OD department agreed not to charge themarketing department for its time if there were no measurable results from theinterventions. This allowed the relationship to gel into a true partnership,with a strong commitment to success from the OD staff.
After considering the recommendations, the manager readily agreed to some coachingand group training. The marketing group learned more clearly what managementexpected of it. Then facilitated learning and planning sessions began. Thoughskeptical that it could meet management’s goals, it the group pushed ahead withan analysis of the situation. The group first clarified management expectationsand the details of what success would look like.
Next, the group analyzed its current resources and work processes in relationto what was required for success. The OD staff helped the marketing group todiscover what was possible, and to overcome barriers to successfully achievingthe vision. In the sessions, the marketing staffers organized themselves totackle specific problems and decided that, in fact, they could meet or evensurpass sales expectations.
With the help of the organizational development department, the marketing groupwas able to achieve more in the next fiscal quarter than in the previous sixquarters combined. As the year progressed, the group faced many unforeseen challenges,but was able to overcome them, meeting the sales expectations that senior managementhad set for it.
Magma Copper Company Although Magma Copper Company set new productionrecords and produced copper at an incredibly low cost of 62 cents per pound,it was facing depleted reserves at the world’s largest underground copper mineunless it could exploit a richer orebody, located deep in the earth. The companyhad an engineering group working for years to design and develop a unique cost-effectivesystem for extracting the ore, and it believed it could be a success. However,in order to maintain the viability of the mine, the new orebody, called theLower-K, would have to begin successfully producing soon.
When the HR department learned the details of the project, it determined thatthe organization was missing key workforce-coordination components. The projectwould be delayed significantly unless the problems were addressed immediately.A manager from HR began meeting regularly with the project team to tackle theissues.
After several meetings, the HR manager recommended a process to address someof the project team’s needs. The group then began, for the first time, to clarifythe overall objectives, values, and strategies of the project organization.The group developed teams that included core employees from mine-developmentprocesses and other operations to chart the engineered work flows and identifypotential bottlenecks. These teams were then able to design appropriate worksystems that included new work teams with multi-skilled members and new classificationsdemanding new pay rates. Since several unions represented the affected workers,HR was able to facilitate agreements that supported the needs of this new operation.
The human resources department also was invaluable in the development of employee-selectionprocesses and integrated technical, safety, and team-competency training necessaryfor the effectiveness of each work team. HR was eventually able to facilitatethe development of a management structure to support the organization as itwas designed.
With the help of the human resource department, the company (which was acquiredby BPH Copper) developed Lower-K and placed it in production slightly aheadof schedule, supported by people systems and processes that ensured its success.Instead of producing at 62 cents per pound, the new mine was able to produceat an even more impressive, lower cost-54 cents per pound.
For Allen Salikof, “casual day” may have gone too far. The CEO ofManagement Recruiters International recently has observed dress that he — andmany of his clients — see as totally inappropriate for a business environment:Ripped jeans. Halter tops. Sweat suits.
Salikof isn’t alone. A recent survey by MRI reveals thatmore than a third of the 3,500 executives interviewed believed that theirworkplace had gotten too casual. This sentiment was particularly true amongexecutives in more “office related” fields such as finance and realestate.
This is the second time that MRI has examined trends inbusiness clothing. Last year, the company surveyed 3,500 executives and askedthem if the suit and tie was going to disappear. Salikof found it surprisingthat 40 percent of the executives believed it would.
He says the casual work clothes trend began withanarchistic dot-com ventures. Before the “crash” of late 2000, storiesfrom Silicon Valley were rife with tales of CEOs in shorts and T-shirts. Thetrend spiraled out to traditional brick-and-mortar businesses, particularly inthe information technology field.
Now, less than a year later, the fashion pendulum may havebegun swinging the other way. Jeannine Stein, a fashion correspondent for theLos Angeles Times, believes that business dress is becoming slightly moreconservative, and that the trend will continue. Still, neither she nor Salikofbelieves that the stodginess of earlier years will return.
The look now, they agree, is casual but professional.Salikof says that some sort of collared shirt is desirable for men working in anoffice environment. “Knit shirts are fine,” he says. “Poloshirts, even dress shirts. No sandals. Socks. We say, ‘of course,’ but I’ve seenmen come in with no socks and open-toed sandals.”
What’s most common is a sweater/sports coat/slackscombination, Salikof says. Women’s dress is harder to define. Cotton pants orslacks and a shirt or blouse is still acceptable by most standards. Somecompanies find jeans acceptable, others don’t.
It’s important for individual companies to define theparameters of their dress codes, and to state explicitly what is and is notacceptable, Salikof says. MRI goes as far as to set up fashion shows soemployees can get a clear idea of what’s expected.
At the same time, he cautions against pushing too hard toenforce a dress code, noting that valuable IT professionals are unlikely to putup with being forced to come to work in a suit and tie, when they can dress downfor the same pay elsewhere.
“The right dress code is important,” Salikofsays. “I think there’s going to be a happy medium.”
Several months ago, I did something I haven’t done in 33 years: I went to kindergarten. That’s right, I sat down with 20 five-year-olds and did my best to absorb the day’s activities.
No, I wasn’t there for a refresher course on colors and letters. As the parent of a soon-to-be kindergartner, I was checking the place out.
Truth be told, I arrived fully expecting to enroll my child in this school. It was just five minutes from our house. How perfect can you get?
Well, it was anything but perfect. From the moment I arrived until the moment I practically ran out, the classroom was an exercise in behavior control. At every turn, kids were given firm instructions on what to do and what not to do. Even art projects came with step-by-step decrees on how to color, what to cut, and where to glue. Loud voices were quickly quelled. Even an “aha” brought on by a learning moment prompted a rebuke from the teacher.
Then it was time to move from one room to another. The kids formed what appeared to be a pretty organized single file, but the teacher, who seemed to mistake this group for a troop of Marine Corps recruits, wanted something better.
“John, get behind Susan. Susan, stop looking around. Chris, go and put that book away.” John, Susan, Chris, and their classmates all had that glazed look that comes from being told too many times to do this and do that and please can you hurry up?
As I drove those five quick minutes back to our house, I decided that my child would never attend that school. And I felt so bad for those 20 kids who were in the process of having their creativity and curiosity drilled out of them.
I went on to visit several other kindergartens. Not all of them were so focused on rules and behavior, but overall, it seemed as if the top priority was to keep the kids in line. One teacher told me she was against small-group activities because then “I can’t control what’s happening.”
These visits reminded me of the hundreds of interviews I’ve conducted with employees from all walks of life. Over the years, so many people have told me about workplaces that are all about managing behavior and, seemingly, constraining curiosity and enthusiasm. As one person put it: “My company is rule-driven. We should be mission-driven.”
Are organizations this way because people love rules and behavior control? Is it because we really think this is the best way to manage a complex enterprise? Is it because we have some innate desire to keep things tightly organized?
Or is it because of how we are nurtured in our early years?
In some areas of India, elephants are trained in a very traditional way. When they’re still babies, they’re tied to a thick tree with a heavy chain. Over time, the chain is replaced with something lighter, and the tree might give way to a stake in the ground. Then the chain is replaced with a thin rope tied to a post. Pretty soon, the elephant no longer tries to move beyond the length of the rope. The behavior-control system has become its own self-inflicted prison.
Of course, there’s no comparison between the brain capacity of an elephant and that of a human being. But science abounds with studies that show how early experiences create paths — ruts, in some cases — that lead us through the rest of our lives.
My search for a kindergarten eventually took me across town to another school district. I entered with a hard shell of cynicism and took a seat in the back of the room.
Then I noticed that things here were different. With a bit of facilitative guidance from the teacher, the kids went to work in groups of three or four, creating their own buildings out of modeling clay.
From group to group, the creations that took shape were wonderfully different. A hum of excited conversation floated through the room. Occasionally a child from one group would visit another for ideas. You could almost feel the electrical charges in these young minds as they exerted their creative powers. They were so engaged that no one seemed interested in getting “out of line.”
Part of this school’s mission is to foster passionate curiosity and a love of learning. And that day, I watched as their mission came alive. It was the same day that my search for a kindergarten reached a successful end.
We have just sold our house and bought a new one, and we’re getting ready for the character-building endeavor of moving an entire family. In our own way, we’re trying to stay mission-driven.
But I’m still thinking about how this applies to workplaces. And I’m starting to appreciate just how profoundly our early management training — very early, as in kindergarten — shapes the way in which we manage and lead.
So what about it? Are so many organizations so rule-bound because we have a deep fondness for policies and behavior control? Nope. Do we really think that rules and controls are the best way to manage a complex enterprise? To get compliance, maybe, but certainly not to stir commitment among employees. Do humans possess some deep desire to keep things always under their thumb — a “control” gene of sorts? Hardly.
Every workday, tens of thousands of managers wrestle with what and how questions. “What products should we launch in the next sales cycle?” “What new policy will prevent this problem?” “How can we reduce turnover?” “How can we increase customer satisfaction?”
Given all of the above, perhaps the most critical questions begin with a why. Why are we organized the way we are? Why are our systems designed the way they are? Why do we manage and supervise the way we do? As you explore these questions, be sure to go back far enough — at least to kindergarten.
The Workforce Optimas Awards are given annually in 10 categories.
Competitive Advantage HR has developed a program to help forge or maintain a winning edge over theorganization’s competitors.
Financial Impact HR has designed a program to effect a change that results in cost savings orincreased revenue.
Global Outlook HR has created a program or strategy to help the organization succeed in theworld marketplace.
Innovation HR has seized the opportunity to expand or improve its role in the organization.The innovation marks a departure for the winning company and often for the HRfield.
Managing Change HR has successfully developed a program in response to the changing businessenvironment.
Partnership HR has developed or implemented a program in partnership with another constituency,either within the organization or outside of it.
Quality of Life HR has taken a proactive approach to improving employees’ quality of life whilebalancing the business needs of the organization.
Service HR has developed a program to help another constituency within the organizationmeet its business goals.
Vision HR has anticipated internal and/or external trends that will affect the organizationand it has responded proactively.
General Excellence The General Excellence award is given to the organization whose HR departmenthas met the standards established for at least six of the other nine categories.
Winners Achieve Tangible Business Results All of the winning organizations share some characteristics.In each company,
The HR department is an active participant in helping the organizationachieve its business goals.
The HR department understands the business issues surrounding the organizationand respond accordingly.
The mission of Workforce is to provide the HRtrends and tools that produce business results. The Optimas winners representthose organizations where HR professionals have looked at the trends and issues,developed the HR programs, implemented the HR tools and produced the desiredbusiness results.
How Workforce Optimas Awards Candidates Are Identified First, HR professionals nominate their own HR departmentprograms and initiatives. The nomination form must be submitted by September19, 2003 to be considered for a 2004 Workforce Optimas Award.
In addition, Workforce editors spend monthscollecting information to identify other organizations that have the potentialto be winners. The data come from numerous sources: newspapers, business magazines,books, conferences and events, broadcast media, academics, previous winners,consultants and other HR professionals.
How Workforce Optimas Award Winners Are Chosen In the fall, the Workforce editorial staffmeets to determine the finalists. The editors use the following criteria todetermine the winners:
Is there a clearly identified business issue?
Are there quantifiable data that help clarify this business issue?
Is there a strong HR component to the solution of the business issue?
What is the HR program and how does it address the business issue?
What are the quantifiable business results of the HR program?
What are the non-measurable results that have a pay-off to the organization?
Are there “tools” developed to support the HR initiative thatcould be adapted by other HR professionals?
Does this HR initiative serve as a model for other HR departments?
Does this HR program demonstrate the power of HR to have an impact on thebusiness results of the organization?
Has the program been in operation a minimum of two years?
Once the candidates have been reviewed, the editorsnarrow the field to finalists in each category. Then the review startsanew. Through telephone interviews with key participants in the organization,a review of additional materials and other processes, the editors learn as muchas they can about the finalists. In the end, they reconvene to select the 10winners.
These winners are notified in December and announcedin Workforce the following March. They are also invited to participatein the Workforce Optimas Awards ceremony in March.
If you have questions about the Workforce OptimasAwards, contact Carroll Lachnit, Editor, at carroll@workforce.com.
Privacy is the hot topic of the InternetAge. Lawsuits are flying as consumer groups, Internet service providers, ad agencies,and others battle over the propriety of collecting information from private citizens.
But it’s the workplace that is shaping up as the real privacy battleground.More than 73 percent of companies now monitor their employees’ Internet use,according to a study last year by the American Management Association.
As monitoring has increased, so has employee wariness. Legal challenges areon the rise. Last year Congress debated a bill that would have forced companiesto supply employees with detailed information about the method, frequency, andgoals of monitoring. Violations of the requirements could have resulted in actualdamages, punitive damages, and attorney fees of up to $500,000. The bill did not pass,but new versions are appearing. Just recently, the California State Senate passed Senate Bill 147, which, ifapproved by the State Assembly and Governor Davis, would require employers to give written notice of any e-mail or electronic monitoring to its employees by March 1, 2002.
The employer must distribute its electronic monitoring policy to all employees and obtain a receipt from the employee acknowledging they have read and understood the policy. Failure to comply with this new bill could result in a misdemeanor fine. Whether this bill or another version passes remains to be seen. The reality is, employee groupsare pushing for more protection of individual privacy rights and employers must be aware of the ever-changing rules.
Hoping to head off problems, several large companies, including Microsoft andAmerican Express, have created the post of Chief Privacy Officer to focus oncorporate privacy issues. Presumably, one of their job responsibilities will include addressing this issue.
Legal standing From a legal standpoint, it is generally agreed that if an employer providescomputers to its employees, then the computers are company property and theemployer can usually monitor and examine their contents.
Employers have good, legitimate reasons for monitoring employee Internet ande-mail usage. Aside from financial and liability problems stemming from employeemisconduct, Internet downloads clog computer systems and make the systems runslowly and inefficiently. More than 30 percent of Internet surfing that occursduring the 9-to-5 workday is not business related, according to a study by Websense,one of the several companies offering employers filtering software. With somuch at stake, sales of e-mail scanning software will grow from $52 millionin 1999 to $873 million in 2004, according to IDC, a research firm.
However, as they move to protect themselves, employers must be careful notto infringe on their employees’ privacy rights. They face both civil and criminalliability under the Electronic Communications Privacy Act of 1986 (“ECPA”).Originally adopted to address concerns about the illegal monitoring of phonelines, the ECPA has been interpreted by some federal district courts as alsoapplying to the monitoring of e-mails.
Regardless of the interpretation, the courts have agreed that an employer cancomfortably monitor an employee’s computer activities if the employee expresslyor indirectly consented to the monitoring, or the actions were undertaken duringthe ordinary course of business.
Express or implied consent can be shown if employees have formally agreed toa set of policies. Implied consent arises in situations where the employee hasno reasonable expectation of privacy. For example, courts have found that anemployee could not reasonably expect privacy in using an employer’s e-mail systemto send company trade secrets to a competitor. If the employer reviews thosee-mails, it would not be an ECPA violation for two reasons.
First, by using the company’s e-mail, the employee implied his consent to thecompany’s viewing of business-related e-mails. Second, under the “ordinarycourse of business” exception to ECPA, a company taking steps to protectits trade secrets in the ordinary course of business would not be liable.
Land mines still exist Employers still need to be careful. In addition to the civil and criminal implicationsof the EPCA, employers face liability under the common law tort of invasionof privacy. The most common actions arising under an invasion-of-privacy theoryare the unreasonable intrusion into an individual’s private affairs and publicdisclosure of private facts. While the employer may have the right to monitore-mails, once a determination of the “nature” of the e-mail is made,if it is personal and does not violate any company policies, viewing and monitoringof the e-mail should immediately cease.
Although it may sound simple, potential land mines are everywhere. For example,in this day and age of telecommuting, the review or monitoring of an employee’slaptop or home computer is a sticky situation. If the computers are companyproperty, the company should have similar rights to inspect and review the informationon the computers. However, if employees are using their own computers for companybusiness, it may be a different matter.
In California, Labor Code § 2860 provides that “everything whichan employee acquires by virtue of his employment, except compensation . . .belongs to the employer,” even after termination of employment. Accordingly,a company should have the right to review or remove any company files and informationstored on an employee’s personal computer. But the guidelines are differentthan those for monitoring employees’ use of computers at work, and the employer needs the employee’s permission before inspecting a personal computer.
With that in mind, an employer should put employees on specific notice thatany company information or property taken home or stored on personal computersstill belongs to the company. With highly sensitive information, companies maywant to adopt an across-the-board policy that strictly prohibits downloadingsuch information on personal computers. If an employee refuses to cooperate,an employer might need a court approval for an inspection.
Creating policies and procedures Confrontations can be avoided by implementing clear Internet and e-mail policies.Not only will it avert problems, but these policies can also help a companyestablish the express or implied consent exception to an ECPA claim.
First and foremost, employee handbooks should inform employees as to what constitutesinappropriate usage of the company computer. The policies should always containthe following key points:
The single most important pointis the need to reduce the employees’ expectations of privacy. The systembelongs to the employer. Even e-mails marked as private or confidentialhave no protection from employer monitoring. Passwords do not ensure theright to privacy, either. If employers don’t state the policy and enforceit, it can be read as implied consent for inappropriate behavior.
The policy should describe thepenalties for violating the Internet and e-mail policies. In most cases,it should be clearly stated that abuse of the Internet will not be toleratedand can lead to termination.
It should be made clear that e-mailis not a casual form of communication. Many employees compare e-mailsto telephone calls, but they are unaware that even if an e-mail is deleted,it is permanently stored on magnetic tape and still remains on the harddrive. Employees should understand that e-mails have to be carefully drafted,similar to formal correspondence. The policy should make it clear that even”casual” e-mails containing sexually suggestive, harassing, discriminatory,or unprofessional statements, or e-mails encouraging or engaging in illegalactivity, will not be tolerated.
All employees should be requiredto report any misconduct. When the rules are stated clearly and distinctly,enforcement becomes everyone’s responsibility.
The policy should inform employeesabout the type of monitoring that will take place. Some companies havea compliance department that might open every e-mail that comes in. Othercompanies may just do periodic reviews. Whatever the method, let the employeesknow about it.
Addressing abuse and misuse If a company discovers improper Internet or e-mail usage, it must promptlyaddress the problem and take all necessary steps to stop the activity. Failureto act may lead to the employer’s liability for employee misconduct. Furthermore,it may result in accusations that the employer tolerates or promotes a hostilework environment.
But even discovering the identity of the culprit may be difficult, thanks tothe anonymity afforded Internet users. Convincing an Internet service provider(ISP) may be difficult without a subpoena, warrant, court order, or other legalmeans. Even if the ISP responds, the information may not be helpful if the senderoriginally submitted false information to the ISP.
As with any investigation, there must be thorough interviews and the accusedshould be given the opportunity to be heard. Victims should be assured thatstrong action will be taken and their privacy rights will be considered.
By following established guidelines, employers can avoid potential headachesdown the road, as well as costly lawsuits.
