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Secrets and Strategy at Kroll

As vice president of human resources at Kroll, a New York-based privateinvestigative firm whose operations span the globe, Jim Northrup deals with afew issues that are, well, a bit more complicated than the usual dilemmas thatHR professionals face. “Some companies have a workplace-violence preventionpolicy that anybody who brings a firearm onto the premises is fired on thespot,” he notes. “Obviously, we can’t have a rule like that, becausewe’ve got people who are licensed to carry (guns).”


    It’s Northrup’s job to devise benefits packages for the sort of employees whofind themselves suddenly jetting off to mysterious foreign locales forindeterminate stays. He has to create career-enrichment programs relevant to aworkforce whose jobs are already filled with intrigue — electronicsurveillance, kidnap-victim recovery, financial fraud, and anti-terrorism. Heoversees a corporate evaluation system designed for people whose work can’t betalked about in any great detail.


    And he has to make do without an employee policy manual. “We don’t havea book that states what you can and can’t do,” he says. “We takethings on a case-by-case basis. Every job is unique.”


    Kroll blandly bills itself in a corporate fact-sheet as “a global riskconsulting company specializing in investigative, intelligence, and securityservices,” but that’s akin to describing the ejector seat on James Bond’sAston Martin as an accessory. Founded three decades ago by attorney Jules Kroll,the eponymous outfit first made a name for itself on Wall Street, doingintelligence work for combatants in corporate-takeover battles. Kroll graduallyexpanded its franchise, hiring legions of former FBI and CIA agents,ex-prosecutors, accountants, and computer experts.


    The firm actually is a broad, continually evolving array of businesses, with2,000 employees and subsidiaries that offer everything from video surveillanceand drug testing to engineering consulting on how to make buildings more secure.It has branch offices all over the world, most of which operate withconsiderable autonomy and little contact with headquarters.


    In the 1980s and 1990s, Kroll staffers chased after the stolen loot ofdictators such as Saddam Hussein and Ferdinand Marcos, investigated themysterious hanging death of Italian banker Roberto Calvi, and helped pushorganized crime out of the trucking industry. After terrorists bombed the WorldTrade Center in 1993, Kroll was hired to help beef up security. More recently,Kroll spokesperson Patricia Wood says, the firm’s investigators delved into amurder case in the Ukraine, and helped a Hollywood star with a security problem.


The HR role in Kroll’s reinvention
    Beyond the unconventional personnel issues that Northrup and his 10-memberstaff sometimes encounter in the investigative/security field, there are evenmore complex challenges.


    HR is playing a key role in the reinvention of Kroll, which, after threeyears as part of a corporate merger, is emerging again as an independent company– a vastly bigger one, positioned in a dizzying array of new lines of business.Northrup and his team play a crucial role in helping those diverse,geographically distant operations work together to serve the new company’sstrategic goals.


    In addition, HR is developing recruiting, training, andenrichment programs that are helping the new Kroll cope with a corporatemarketplace that moves at Internet speed, where the demand can shift almostovernight from due diligence on mergers to, say, fraud investigations or countercyber-terrorism.


    For legal reasons — his work for Kroll might expose him to sensitiveinformation from investigations — Northrup is probably one of the few HRprofessionals around who’s had to become a licensed private investigator. Evenso, he notes that his résumé is anything but cloak-and-dagger. A native NewYorker in his early fifties, Northrup worked in the pharmaceutical industry forBristol-Myers and for a time ran his own business, recruiting executives fortemporary corporate assignments. He joined Kroll in January 2000, not out of afascination with intrigue but because the job offered some interesting HRchallenges.


    After years as an independent company, Kroll merged in 1997 with O’Gara Co.,an Ohio-based manufacturer of armored vehicles, in an attempt to create aone-stop shop for corporate security needs. But the two vastly differentbusinesses — investigative-security work and manufacturing — and theirmanagements didn’t mesh. After a failed takeover attempt by the Blackstone Groupin 1999, Kroll-O’Gara contemplated splitting into two separate publicly heldcompanies.


    Finally, in April, the company instead sold its armored-vehiclebusiness to Armor Holdings, Inc. for a reported $59.5 million in cash and stock.Kroll, as the company now again calls itself, will go back to focusing oninvestigative and security services and consulting.


    Because of acquisitions and growth in the investigative-security side,however, the new version of Kroll is far bigger than the original. “Krollwas a $70 million company before the merger,” Northrup says. “Now it’sa $200 million company.” The new Kroll’s operations reach around the globe,with employees working in 55 offices in 18 countries. And as Kroll has expanded,it’s evolved into an operation with more flexibility to adjust to continualchanges in the demand for investigative-security services.


    “The marketplaceis always moving,” Northrup says. “Six months to a year ago, we weredoing a ton of work on financial due diligence for Wall Street deals. But today,that’s a smaller part of the business. We’re doing more litigation support,fraud investigations, and asset tracing. In a downturn, those fields heatup.”

HR Tips from the Kroll File

  • Devise support systems to help employees thrust into difficult assignments. Kroll HR makes sure that employees abruptly dispatched on critical assignments aren’t distracted by worries about their insurance and benefits. That’s a good idea for any company, even if its staff isn’t rushing off to investigate a murder or thwart terrorists.

  • Don’t be afraid to be flexible. Rather than impose a one-size-fits-all U.S. standard on its compensation, benefits, and conduct criteria, Kroll tailors HR to fit the culture in which its employees must operate.

  • Take HR on the road. Not having permanent on-site HR people in local operations might seem like a problem, but Northrup has turned traveling HR into a plus for Kroll. He’s used site visits to strengthen the relationship between headquarters and its far-flung units.

  • Rely on electronic background screening. Today, an increasing amount of data from the legal system is online, through both official government sites such as PACER, which allows searches of federal court records, and private fee-based services such as Kroll’s Background America. A few keystrokes can give you peace of mind about a new hire, or help you avoid a big problem down the road.

Developing HR to fit Kroll’s needs
    The need to cope with the company’s evolution, in part, led Kroll to createfor the first time a separate HR department in 2000. For Northrup, it was notonly a rare chance to build a company’s HR department from scratch, but also anopportunity to help forge the overall corporate strategy that HR then would playa key role in executing. “Whenever the senior management group meets, I’mwith them,” Northrup says. “We have a voice at the table to assurethat HR is a player.”


    In some ways, working for an investigative firm actually makes Northrup’s jobsimpler. Integrity screening, for example, is a snap, because Kroll owns acompany, Background America, that is in the business of checking job applicants’names against computer databases of court records across the nation. Kroll usesthe same Web-based service that it sells to hospitals, day-care centers, andothers that need to root out potential bad apples. “It wouldn’t do for usto be the shoemaker’s children,” Northrup jokes.


    Similarly, Northrup doesn’t have to worry too much about recruiting. Despitethe company’s avoidance of publicity, over the years the occasional high-profilecases have made Kroll a brand name recognized by law-enforcement, legal, andintelligence-agency professionals. “It’s not unusual for us to get 200résumés in a week from people who are working in the investigative orprosecutorial or criminal justice fields,” he says. “We tend to getpeople who have extensive experience and specialized skills, and are at the peakof their careers.”


    The one exception: Kroll’s financial services unit,which is growing to meet the increasing demand for forensic accounting –detectives who can scrutinize a business’s books and expose fraud. “We tendto hire people who either are coming out of school and going for theiraccounting certification or have been recently certified but don’t want to workfor Big Five accounting firms,” Northrup says. “We give them a lot oftraining, and they progress.”


    Developing an HR program that fit Kroll’s needs was a particular challenge,for reasons that go beyond the hush-hush nature of the company’s work.Additionally, “most of the offices are relatively small. In Buenos Aires orHong Kong, you won’t have more than 50 or 60 people in an office. With that leaninfrastructure, there’s not a lot of ability to provide HR support at a locallevel.”


The HR road show pays off
    Instead of putting HR in every office, Northrup brings it to them. Unlikemost other HR executives, he spends about 40 percent of his time on the road.”When things get hot — there’s a major reorganization, or a change in thebenefit plan — I go to that location,” he says. He’s turned traveling HRinto a plus for Kroll, a vehicle for nurturing the relationship between a localoffice and headquarters. “These offices have maybe seen a handful of peoplefrom corporate, ever, so without exception they’re excited when I visit them inperson.”


    The firsthand knowledge and insights that he gathers from those visits alsohelp Northrup cope with the daunting complexity of Kroll’s compensation andbenefits programs. The company’s subsidiaries operate in an assortment ofcountries, many with differing corporate structures and regulation. “Youhave to be careful about applying U.S. standards to everything, because that maynot work,” he says. “There are compensation issues galore. In someparts of the world, you’re required to provide a company contribution to thepension program, but in other places there’s no requirement.


    “In some places,there’s a requirement if you have a plan. So we may have a situation where inone part of Europe, a unit has a nice contributory retirement plan, while in thenext country, a unit doesn’t have a pension plan at all. But that unit has muchhigher salaries to compensate. The problem is that each side sees the best ofwhat the other has, and wants that, too.”


    Other multinational firms may encounter similar dilemmas, but Kroll’ssituation gets even more complicated because of the nature of investigativejobs, which expand across borders and require operatives to go where the actionis. “We had somebody assigned to the London office, but they’re reallyspending a year in Moscow,” Northrup says. “We have somebody fromLondon based in Mexico City, and somebody from the United States based in SouthAfrica. That’s not your garden-variety HR issue.


    “We’ve also got situations wherepeople have to pack up and go someplace right away with a few days’ or even afew hours’ notice, and in many cases they can’t say anything to anybody aboutwhy. We try to ensure that programs are in place for them, so that they don’thave to be worrying about what sort of insurance coverage they have or whatother support mechanisms are in place for them. We need for them to be free tofocus on the job.”


Flexible benefits and secretive reviews
    To meet such varied needs, Northrup has to show ingenuity in devisingbenefits packages. Fortunately, despite the highly dangerous nature of some ofKroll’s work, few employees have needed the company’s disability benefits,Northrup says. “I don’t think we’ve had anyone who’s left the companybecause of stress or disability. We’ve got people in those jobs who are formerDEA, or FBI, or from another government agency. They’ve made this kind of thingtheir life’s work, and they’ve survived and thrived in it.”


    Evaluating employees can be a tricky HR issue for any company, but it’s aneven more sensitive matter at a firm whose work product often is shrouded insecrecy. In its previous incarnation, Kroll used a paper-based system forperformance review. This time around, Northrup is in the process of creating aWeb-based HR system that will allow managers around the world to input theresults of an evaluation from their desktop computers, allowing a greater levelof analysis than was previously practical. Some corporate HR departments mightbe leery of putting their data online, but they don’t have Kroll’s computernetwork, which already is outfitted with layers of stringent safeguards.”Everything we do from an IT perspective has got a lot of security.”


    Additionally, the performance reviews themselves tend to be discreet, in someinstances filled with references to locked-up case files rather than specificsand details. Kroll managers and executives, from their years in theinvestigative business, are adept at reading between the lines. “The seniorpeople in our organization are pretty sophisticated about what you can and can’tcommunicate,” he says.


Reinventing Kroll’s culture
    One of HR’s biggest priorities at the new Kroll is helping the investigativefirm re-invent its culture to match a rapidly changing global marketplace.Traditionally, Kroll relied on the skills of highly specialized investigatorswho tended to stay within their arcane areas of expertise. Today there’sincreasing recognition that Kroll and its employees both could benefit from thesort of enrichment and development approach that many less exotic companies haveinstituted.


    Kroll is developing a training center on the outskirts of Silicon Valley,where employees will be able to build their knowledge of the latest high-techinvestigation methods. The company also is working to provide employees withadditional training opportunities in investigation of financial crime. Becausein recent years Kroll has acquired so many diverse businesses, Northrup seessome potential for cross-training and the exchange of ideas, though there may belimits in an industry where so much information by necessity is on aneed-to-know basis.


    “We’re interested in having people at different levelsget exposure to other specialty areas, but I think it remains to be seen howextensive that will be,” he concedes. “But clearly, up to a point,they benefit from understanding other parts of the business.”


A confidential style can work elsewhere
    While not every company has to maintain as low a profile as Kroll, Northrupsays that HR professionals elsewhere can learn from the style — even if theyaren’t trying to evaluate electronic surveillance experts or devising insuranceplans for kidnap-ransom negotiators. “I’ve always subscribed to theprinciple that most of the things we do in HR deal with intensely personalissues for employees — how they’re paid, how they’re evaluated. We takesecurity to a pretty high degree. Here, people in the company don’t talk aboutthe cases they’re working on, and we don’t talk about people in the company. Ithink it works.”


Workforce, June 2001, pp. 48-54 —  SubscribeNow!

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Human Resources Accounting Revisited

The desire to quantify the benefit of the human resources function has been aconstant theme in the HR literature. Unfortunately, the bewildering variety ofproposals on how to accomplish this has led to confusion and inaction.


    This explanation should help.


    In the late 60s and early 70s, a number of writersproposed that the capital nature of certain human resource costs be recognizedas investments rather than as expenses, which collectively became known as HumanResources Accounting. While the underlying concept was simple andstraightforward, academics observed that capitalization and amortization ofapplicable Human Resources Accounting costs had no measurement of”value” or worth of the HR investment.


    Accordingly, proposals were developed to take the basicinformation and add the dimension of “value” of individuals and thewhole organization. Since accounting measures “cost,” not”value” or “worth,” the proposed improvements in Human ResourceAccounting took it out of the realm of acceptable accounting practice.


    Recent literature has focused on a broader measurement,namely that of “intellectual capital.” Despite those who considerintellectual capital a new approach, it is really an extension of HR accountingsince without the underlying concept of HR investment there can be nointellectual capital development.


    Advocates of intellectual capital cannot agree on which HRvariables to measure, so they propose letting the user pick and choose.Management consulting firms have picked up on intellectual capital in a big wayand various firms have developed indices that purport to relate specificintellectual capital variables. The end result measures revenue growth andprofit.


    The focus on intellectual capital has resulted in HRaccounting being shifted to the sidelines, even though the HR accounting conceptis far simpler and much easier to implement.


Generally accepted accounting principles and HR accounting
    It is helpful to review how the generally accepted accountingprinciples relate to HR accounting, because the ultimate goal of the HR functionis to have its performance measured “on the books” in the basicaccounting system. This is complete with measures of profit contribution; returnon investment and other measures that conventional accounting produces for theoperating departments.


    While “off the book” indices and statistics havea place, the ability to “show me the money” (to quote a line from arecent movie), ranks far higher in prestige and in determining bonuses andincentive compensation.


    The basic HR accounting model parallels the acquisition oftangible assets. Any acquisition, whether HR related or not, has to be recordedas an asset, an expense, or a loss. An asset is defined as an expenditureproducing future benefit, and recording an asset is known as capitalizing.Expenses and losses expire within the current period.


    As noted above, “value” and “worth”are not measured in generally accepted accounting principles unless there is anactual monetary transaction. So HR measurement based on “value” is notpart of generally accepted accounting principles, at least as now defined.


Capitalizing versus expensing the HR accounting model
    What kinds of HR costs could be considered capital because oftheir incurrence to generate future benefits? The companies that haveimplemented HR measurement either fully or partially have included such costsas:

  1. Recruitment, including agencyfees, headhunters, etc

  2. Hiring and testing

  3. Tuition reimbursement

  4. Seminar costs

  5. Formal training

  6. Informal training

    The same decisions on capitalizing versus expensing applyto both HR and non-HR acquisitions, namely are those costs maintenance,betterment, or improvement. “Maintenance,” including normal salarycosts and perhaps such extras as EAP programs and concierge services, areclearly expenses.


    On the other hand, costs such as those listed above, areclearly capital in nature and should be classified as assets or investments.


    Where and how should HR accounting be reported?


    There are three areas to consider:

  1. For taxation, all HR costswould be expensed, as in current treatment. However, there are issues as towhether certain training associated with start up projects has to bedeferred until the projects are operational.

  2. For external reportingpurposes to shareholders, etc, HR accounting must conform to GenerallyAccepted Accounting Principles (GAAP) to be included in external statements.

  3. For internal reporting tomanagement, there are no GAAP restrictions. Companies have implemented HRaccounting systems for portions of their personnel operations as part oftheir budgeting and performance measurement system.

What about the use of HR accounting in external reporting?
    Prior to the release of Accounting Principles Board OpinionNo. 17, there are examples of full or partial HR accounting disclosure inexternal statements. For example, the Atlanta Braves were a publicly held sportsfranchise whose president decided to capitalize the costs of running the team’sfarm club operations and then amortize that cost to expense over five years.


    He justified that treatment as his industry’s version ofresearch and development.


    The financial statements also include the costs of playercontracts, which were also being amortized. One could argue that the contractcosts warrant capitalization because of the existence of legal documents tyingthe players to the team. However, with the modern era of free agency andarbitration, even the players are not “owned” in the same way tangibleassets would be.


    Electronic Data Systems (EDS) decided to capitalize thecost of training its computer consultants, and to amortize that cost to expenseover a three-year period. It chose a method of amortization (reverse sum ofyears digits) that would write off larger amounts of training costs as theconsultants became more productive.


    Some air carriers capitalized the cost of flight trainingas new equipment was purchased and put into service, and included those costs insubsequent equipment depreciation.


    The R.G. Barry Corporation issued a comprehensivefinancial statement, but it chose to provide its “total” (conventionaland HR) statement as a supplemental disclosure, not its primary certifiedfinancial statements.


    Even so, the first R.G. Barry statement presented in 1969attracted wide attention in the business press, including the possibilities forincome manipulation. The company included a disclosure notice to remindstatement users that the “total” approach was not acceptable inconventional accounting practice. In retrospect, since Accounting PrinciplesBoard Opinion No. 17 had not yet been released, the decision to capitalizecertain personnel costs was no different than what the Braves did in its primarycertified statements.


    Unfortunately, R.G. Barry included more than actual outlaycosts in its “total approach” so that it could not use the primarystatements for disclosing this information. While an HR accounting system, onceadopted, would have to be applied consistently, the greatest benefit would occurin knowledge or skills-based companies, where employees represent the greatestincome producing asset, and where such abilities are not recognized in currentaccounting principles.


    Again, R.G. Barry was not such a company because it madeladies garments and accessories. It was decidedly “low tech” sewingand assembly operation. In addition, it would be fair to assume that in a”high tech” company, the amount invested in employee training anddevelopment would be a much greater percentage of total assets, so that theroughly $1 million in HR costs reported in 1969 would be much larger in aknowledge based company of equivalent size.


    Whatever the limits of the costs reported in the R.G.Barry financial statements are, the company demonstrated that capitalizingappropriate personnel related costs was feasible, and it also developed a modelfor predicting “expected service life” as the basis for amortizingsuch costs.


    The 1970 “total approach” statements produced alower income than conventional reporting, because the overall investment in HRhad declined faster from amortization of prior costs versus new investments. Thecompany provided such statements through the mid-70s.


    With the release of the accounting board opinion, anyattempts to continue such disclosure in primary statements were eliminated. Itwas ruled that internally generated intangibles, such as employee training, mustbe expensed as incurred.


Accounting board’s reasoning:
    The accounting board’s reasoning was as follows:

  1. Capitalization of internalintangibles was subjective and did not meet the objectivity standardrequired in generally accepted accounting principles.

  2. Even if objectivity could beachieved, the period of future benefit during which capitalized costs wouldbe amortized was uncertain. Employees were not “owned” liketangible assets, and could leave prematurely.

    As the successor to the Accounting Principles Board, theFinancial Accounting Standards Board (FASB), is aware of the glaring omission ofsuch intangibles in knowledge based companies. For example, a software companywhere the market value of the company equity is many times greater than theunderlying recorded assets. Here, the most important asset, the accumulatedskills of the staff, is not reported at all.


    Not to delve too deeply into the accounting process, butwhen such a company is acquired, and money or securities change hands, thoseunrecorded assets wind up being recorded in a “catch all” accountcalled “goodwill.”


    FASB is about to release a new rule on businesscombinations and accounting for goodwill. This is where HR accounting comes intoconsideration. The focus is on identifying as many “hidden assets” aspossible, and recording them in their own right. If the acquired company hadestablished an HR accounting system, that would facilitate the process.


    Aside from the goodwill issue, both FASB and the SEC areconcerned about the lack of information being provided investors inknowledge-based companies that relate to human resource based “intellectualcapital.” For example, as an investor, I would surely be interested inknowing that turnover had reached excessive levels and that key engineering andscientific personnel had left the firm. Such information is not now shown infinancial statements, leaving investors in the dark until a news source reportsthe defections.


    Despite the accounting board opinion, which may be revisedas part of the “goodwill” treatment, the underlying reasons fordenying capital status to HR-related costs has no basis in fact.


    If limited to actual outlay costs, and not measurement of”value” or “worth,” capitalization of the HR costs listedabove is as objective as recording an invoice for the acquisition of a physicalasset.


    With regard to the amortization period, companies withdefined benefit pension plans base their pension expenses on actuarial estimatesof service life, final compensation, etc. There is no legitimate reason thatthose same estimates could not be used for amortization of deferred HR costs. Ifan employee leaves prematurely, any un-amortized cost is written off as a lossand removed from use prematurely.


    The larger issue is the practical use of generatinginformation that is limited to actual cost and amortization and not to advance “off the book” measures of “value.”


Value of an “on the book” system
    An “on the books” system such as that used by R.G. Barry,for all its shortcomings, still provides invaluable information for investorsand management.

  1. First and foremost,capitalization of appropriate HR costs provides meaning to HR expendituresas an investment. Calling it such and then expensing those costs, ascurrently done, surely does not instill confidence that these outlays areindeed intended for long-term benefit.

  2. Second, the rate of increaseand decrease of the HR investment accounts over time (that is, either newinvestment exceeds amortization and write off, or amortization exceeds newinvestment) provides a clear indicator as to the level of personnelresources. It equates such changes to additional income or provides thebasis for an HR bottom line, and for ROI calculations.

  3. Third, even if the accountsare established for internal reporting to management only management canfinally have accurate answers to such questions as to what the costs ofturnover really are. Dumping such costs into current expense makes itimpossible to come up with an “on the books” dollar amount for HRcosts written off when employees depart prematurely. In the same situation,when it comes time to downsize, the amount of “investment” shouldbe one factor in making personnel decisions.

    I recall a presentation to a group of banks in SouthFlorida, whose managers acknowledged a problem with high turnover of part-timetellers, but were assured of a constant supply of replacements. They did notrecognize that while the costs per employee of the three-week new teller programwere about $3000 each. Some 4,000 such turnovers per year led to a heftyexpense.


    Had those costs been capitalized and amortized, apremature departure would cause management (and if included in externalstatements, shareholders) to be more proactive in protecting their investment bydeveloping better retention policies.


    Yes, amortized cost surely does not equate to”value” nor is it supposed to in an “on the book” measure.However, to ignore the benefits of an “on the books” measurement of HRinvestment and consumption for some index seems to me that the creation of an HRfinancial measurement system will never be developed.


    It may very well be that the eventual resolution of theintangible reporting issue by FASB and/or the SEC will set the pace for theimplementation of a workable HR reporting system.


Postscript


    Since the submission of the above, FASB has finalized the business combinations revised rules, which are due to go into effect on June 30. In addition, FASB has added to its research agenda a stand-aloneproject on reporting of internally generated intangible assets, and is gathering input from the public.


    Readers interested in reading the initial proposals, and submitting their own opinions should go to www.fasb.org.


    The issues raised do not require a technical knowledge of accounting. The initial comments preclude the possiblerecognition of such costs as training and developmentas assets, on the premise that the organization incurring the costs lacks “control” over such assets.


    (The author believes that this control argument isarchaic and is not in accord with economic reality, in that the employer would not incur such costs if itdid not expect some kind of future benefit.)


    However, the initial comments are also directed to the nature of supplemental disclosures in financial statements (the footnotes) and to the development of a framework for such disclosures. It is in this category that the greatest promise exists for finally giving the HR function an “on the books” presence and a direct way to appraise shareholders of the effectiveness of HR policies and practices.

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Pros and Cons of Training Modes

Consult the following tables for the pros and cons of the varioustraining modes:


Instructor-LedClassroom Training
Pros
  • High quality delivery
  • Immediate Q & A
  • Leverage student questions
Cons
  • Costly student/trainer expense
  • Costly one-to-few training
  • Training often too soon/too late
  • Trainer must be knowledgeable of multiple applications
Best for:
  • Multiple students of similar skill level
  • Training in single location
  • Observable performance
  • Interpersonal skills/feedback
  • Highly interactive knowledgesharing
Worst for:
  • Students of widely-varyingskill levels
  • Training for largesystem/process rollout
  • Consistency across learnergroups
 
AsynchronousWeb-Based Internet/Intranet Training
Pros
  • Just-in-time training
  • No travel costs
  • Self-paced learning
  • Remedial training at no cost
  • Consistency
  • Possible increased retention
  • Easily distributed/updatedtraining materials
Cons
  • Self-directed motivation canbe problematic
  • Lack of classroomcollaboration
  • May be viewed as “done onyour own time”
Best for:
  • Basic training
  • Students in multiple locations
  • As part of instructor-ledtraining course
Worst for:
  • Observable interpersonalskills/feedback
  • Real-time knowledge sharing
 
Synchronous(real-time) Web-Based Internet/Intranet Training
Pros
  • High quality delivery
  • Immediate Q & A
  • Leverage student questions
  • Rapid, low-cost content
Cons
  • Cost-per-student higher thanasynchronous training
  • Network connection needed
Best for:
  • Basic training
  • Students in multiple locations
  • Highly interactive knowledge sharing
  • Hands-on application training
Worst for:
  • Students of widely-varyingskill levels
  • Observable interpersonalskills/feedback

For more information, visit the Trainingforum.


Copyright © 2001 The Hurwitz Group forInstruction Set, which is solely responsible for its content. All rightsreserved. No part of this report may be reproduced or stored in a retrievalsystem or transmitted in any form or by any means, without prior writtenpermission.

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Your Wonderful, Terrible HR Life

A s a human resource professional, youare cast in a leading role in the workplace drama. Yet people still have misconceptionsabout the character you play and the performers you support. Some perceive youas a people person and office social worker, others as a paper pusher and partyplanner.


Actually, yousay you are all of those things — and a lot more: strategic business partner,financial counselor, employee advocate, management envoy, legal authority, eventplanner, morale booster, shrink, bureaucrat, bookkeeper, budget analyst, benefitscounselor, talent scout, keeper of records, and dispenser of job offers, payraises, pink slips — and hankies.


Every June, inWorkforce magazine and at Workforce online, you share your stories,tales that speak poignantly and honestly about the range and nature of yourwork, your challenges and joys, your bad days and your good.


This year youcame through in greater numbers and with more candor than ever before. You toldus heart-wrenching stories about having to lay off people who had terminal diseases,conducting exit interviews with sobbing workers, dealing with sensitive transgenderissues, and coping with family tragedies.


“I was drivingback to work from a lunch break and saw a former employee who had been let godue to an extended leave that surpassed boundaries, begging on the side of theroad. I knew he had two young girls at home that he and his wife had adoptedseveral years before. It broke my heart.”


And you candidlyshared your own human frailties and personal mistakes:


“I messedup on payroll for about 300 employees,” one person volunteered. “Icut the checks on the wrong date. I had to come in at 4 a.m. to correct theproblem. As I thought I was finishing up, I noticed a computer problem. Whenvoiding the first checks, none of the deductions credited back. Everything wasoff. It was the longest and worst day of my life.”


You also expressedthe pride and joy you feel when people around you pull together to get a bigjob done, and when people express appreciation for your work.


“My bestday in HR came after a long, exhaustive struggle with an insurance company onbehalf of an employee who was trying to get approval for an oxygen-measuringmachine … to keep her asthmatic daughter from ending up in the emergency room.When I informed the employee that a machine was approved, she cried, and I cried,and it was wonderful.”


And from a managerwho recalled facilitating a company retreat: “People worked on a (mission)statement for the company that reflected the true heart of our employees. Whenyou tap into an employee’s soul, you receive an incredible amount of loyaltyand buy-in to your organization. It’s something that can’t be bought or taught.It (can be) … an almost sacred experience.”


This year, thevast majority of survey respondents were women — 85 percent. About half –49 percent — were under the age of 40. Most of the more than 200 survey participants– 70.8 percent — have worked in HR for more than 5 years, 21.5 percent for10 to 15 years, and 20.1 percent for more than 15 years.


When asked howHR affects key management decisions, 42.2 percent said they were full-fledgedparticipants, 43 percent that they were consulted on important issues but weren’tregulars at the executive management table, and 14.8 percent said they weretypically left in the dark.


On questionsabout on-the-job violence and media reports on related trouble in the workplace,36.1 percent said they haven’t been affected at all. But most said they’ve madesome changes: 26.5 percent have more security; 23.1 percent do more pre-employmentscreening; and half — 49 percent — said they pay more attention than theyonce did to workers who seem unhappy or angry. Thirteen percent have actuallyexperienced violence at their companies.


Not surprisingly,the recent economic slowdown has had a palpable impact on many in HR: 23 percenthave had to lay people off in recent months; 37.8 percent have slowed hiring;34.5 percent said they have fewer resources for projects such as HRMS upgradesand critical software training. Despite a cooling economy, however, 34.5 percentsaid their company hasn’t been affected by changes in the economy at all.


This year’sparticipants came from a wide range of industries, from the military to mentalhealth. Many (24.4 percent) came from manufacturing/software/systems, the government/military/nonprofit(14.1 percent), and the services sector such as health (12.8 percent). Otherindustries included travel, entertainment, hotels and restaurants, commercialfood processing, the Internet marketplace, logistics, social service agencies,and education.


In this year’ssurvey, participants were asked for personal comments about HR, and they wroteup a storm.


Hereare snapshots of their responses:


 


  1. What is the biggestmisconception about a career in HR?


  2. What’s the smartestthing you ever did in the course of your HR career?


  3. Tell us aboutyour worst day in HR.


  4. Tell us aboutyour best day in HR.


  5. What’s the bestthing you ever learned about HR from an employee?


  6. Have you evercreatively broken your company’s rules to accomplish something youthought was important?


  7. What one long-term money-saving idea won you kudos from top management?


  8. What one cost-cuttingidea that’s worked for you could other HR professionals implementimmediately?


  9. If you had yourHR career to do over again, what one thing would you do differently?


  10. What one pieceof advice did you receive that made a difference in your career?


  11. What one book,fiction or non-fiction, most influenced your professional development,and why?


What is the biggest misconceptionabout a career in HR?
Given an anonymous opportunity to grumble and complain,many of you did. “The biggest misconception is that HR is fun and you getto work with people,” one person groused. When people think HR, they “don’tthink about layoffs, demotions, people being passed over for promotion, harassmentcomplaints, personality conflicts, and all of the other things that show upat the door of an HR practitioner.”


Of all the peoplewho responded, no one said HR is easy. Nor was there any agreement on HR’s rolein the workplace. “One misconception is that you will have a seat at thetable,” some said. Others had quite a different view: “The misconceptionis that HR is administrative rather than strategic.”


Other responses:


  • “That HR can function as a separateentity from the rest of the company.”


  • “That HR has no intrinsic valueand eats budget money.”


  • “That it is all warm and fuzzycommunications with the workers. Or that it is creative and involved inmaking a more congenial atmosphere for people at work. Actually it is bothof those some of the time, but most of the time it is a big mountain ofpaperwork which calls on a myriad of skills besides the ‘people’ type. Itis law, accounting, economics, philosophy, and logic as well as psychology,spirituality, tolerance, and humility.”


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What’s the smartest thingyou ever did in the course of your HR career?
Of all the questions you answered, none prompted amore unanimous response. Over and over again, you said that the smartest thingyou did was to continue learning by going to school, earning degrees, upgradingskills. Many mentioned receiving SPHR certification. Several stressed the importanceof changing jobs, and of knowing every facet of an organization.


“Findingout firsthand what line people think,” one person said. “I made pizzas.I made tacos. I sold merchandise. I counted trees. I negotiated land deals.I learned the business of my (internal) clients and I learned to talk theirlanguage.”


Other commentsincluded:


  • “Embedded my ethics into mywork and allowed the feminine aspect of me to shine in my work instead ofhiding it behind a corporate ‘suit.'”


  • “Learned to be generalist, allaspects of HR…Moved to a company where HR was active in management.”


  • “Started employee-recognitionprograms. The simple act of recognizing an employee’s performance in frontof their peers can make all the difference when it comes to productivityand retention.”


Tell us about your worstday in HR
Survey respondents particularly liked this invitation.And it is understandable. Many have experienced dreadful and dangerous daysthat only their HR colleagues can truly comprehend.


“On thefirst day of my new job, I had to fire an employee whom I’d fired in my previousjob,” one recalled. Another said simply, “Having to conduct six exitinterviews in one day and then having my boss conduct mine!”


A person in thefood industry remembered the day she had to terminate a butcher with a drugproblem. “He was very moody and aggressive. When he entered my office hehad on his knife belt…”


Many mentionedterminations and union problems, losing court cases, and receiving officialcharges in the mail from the EEOC. Some talked about handling sexually sensitiveissues. “My worst day was when a male employee came into my office andannounced that he was beginning a ‘transgender’ process, which included comingto work dressed as a woman.” And, “Counseling two transvestites aboutappropriate behavior and appearance at work.”


But it was thestories of violence and illness that often were the most compelling. One respondenttalked about the day her HR administrator’s “estranged 6-foot-4-inch, 250-poundhusband came to work, drunk, high on steroids, and wielding a knife.”


Other memorablestories:


  • “My worst day was with an employeewith emotional problems. She was picking fights with people because shethought she was being possessed by evil spirits dwelling within others.While we were talking, she slithered to the floor and began writhing andflicking her tongue out, as if she were a snake.”


  • “When I worked in a departmentstore and had personnel and store operations reporting to me. One of mysecurity staff was stabbed by a shoplifter. She survived, but all of mysecurity people handed in their resignations.”


  • “Letting go someone who’d justreceived a cancer diagnosis.”


  • “Having to terminate a largegroup of tenured employees for e-mail abuse, specifically pornography. Theinvestigation was massive and the content pretty horrific.”


Tell us about your bestday in HR
Everyone needs a pat on the back. HR people often aremore likely to give the pats than to receive them. So it isn’t surprising thatmany respondents said that their best day was when they received a thank-youcard or flowers, or some other form of appreciation or acknowledgment for ajob well done.


Many expressedthoughts like this: “Every day I’m able to help an employee make his orher workplace a better place is the best day in HR.”


Respondents tookpride and satisfaction in helping to recruit good people, seeing them promoted,designing higher pay scales, saving companies from expensive lawsuits. But thebest days were more personal.


“The nightArthur got off his night shift in shipping and came up to my office for a cupof coffee. ‘You know I own a house? Twenty years ago when I was running in thestreets, it wasn’t even a dream of mine. I would never have thought I’d owna house of my own. This job’s made it possible.’ “


And from others:


  • “I was given a large and unexpectedpay raise.”


  • “Strangely enough, the day aftera major layoff. I’d been given two weeks to reduce head count 30 percent.A large number of employees and members of the leadership team complimentedour group on our thoroughness, organization, and compassion. Dealing withaffected employees and survivors, it was probably the toughest thing I’vehad to do in my career, but it was really gratifying to know that we hadpreserved the dignity of everyone involved.”


  • “The day I passed out $100 billsto employees who’d completed a training program. At first they thought theywere pink slips.”


What’s the best thingyou ever learned about HR from an employee?
“Tell the truth 100 percent of the time. Whateveryou do, DO NOT LIE!”


Answers to thisquestion tended to be short and direct. “Don’t offer advice unless asked.””Every day I have the opportunity to change someone’s life.” “Alwaysmaintain a sense of humor.” “When you treat employees with respect,no matter what their position is in the organization, they will come throughfor you.”


“That Ican make a difference in someone’s life just by listening and offering honestfeedback.” “Never make assumptions about anyone.” “Listen,listen, listen.” “Don’t gossip; be patient.” “Don’t sugarcoatbad news.” “Don’t assume anything.”


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Have you ever creativelybroken your company’s rules to accomplish something you thought was important?
Although more people said they operated under the assumptionthat it’s easier to ask for forgiveness than to beg for permission, severaldid say they wouldn’t under any circumstance break rules. Dozens more, however,shared experiences in which the voice within won out.


“An applicantwho came to us from a homeless organization confessed during the interview thathe had a criminal record,” one respondent related. “Normally, I wouldhave declined to hire him, but I could tell that he had come clean, was sincere,and really needed an opportunity. After a lot of consideration, I recommendedhim for hire.


“He workedin a position in the warehouse where he stocked shelves with equipment and sweptthe floor. His love for his work was apparent to everyone. Within three monthshe received the Employee of the Month award and became a company spokesman tothe community. He worked hard, was honest, and was a truly good person. AlthoughI can say that I wouldn’t do it for everyone, sometimes you have to trust yourgut and take a risk.”


Others offeredthese comments:


  • “No. To break the rules hereusually costs you your job.”


  • “Sure. The most creative wayto get around some policies is to formulate a work group or task force tobrainstorm ways of achieving an outcome.”


  • “Comp time. I have often allowedmy HR employees to flex their schedules to accommodate things that theyhave going on.”


What one cost-cuttingidea that’s worked for you could other HR professionals implement immediately?
Though respondents came up with many creative ideas,a general theme emerged: the Internet is a good and affordable recruiting tool.


Other ideas included:


  •  “High-attendance incentiveprogram where employees earn ‘banked’ hours with 100 percent attendancethat can be used for emergencies, and hours not used are paid out at theend of the year. Our absenteeism rate dropped from 3.56 percent to 2 percentin less than a year.”


  • “Training in-house is much cheaperthan sending everyone out to seminars.”


  • “Use a digital camera insteadof requesting new hires to submit a printed photo. No development costsor waiting time.”


  • “Use self-funded insurance.”


  • “An employee-referral program.”


  • “Hand-written notes and computer-madecertificates have an impact on morale way beyond their cost.”


  • “Recruit on the Internet!”


  • “Instead of providing full relocationto college students, give them cash. They will move themselves, have cashin pocket, and think more positively about the company. In my workplacewe saved about $5,000 per student, $100,000 annually.”


What one long-term money-savingidea won you kudos from top management?
It was a question that one incredulous HR professionalsimply couldn’t relate to. “Kudos from management?”


Many others sharedconcrete ideas:


  • “Researching and applying forstate training grants.”


  • “Billboard advertising at theintersection of two major highways.”


  • “Web recruitment. Costs havedropped and applicant pool has grown.”


  • “Really shopped around for insurancecompanies even though it’s the most boring job on the planet. Some companiesare a little better, a little more flexible, and a lot cheaper.”


  • “Welcome alternative work schedulesand grant more flextime.”


If you had your HR careerto do over again, what one thing would you do differently?
Surprisingly, several people responded, “I wouldnot change a thing.” But there were a few who grumbled, “Not go intoHR.”


Other popularresponses included: Gotten my degree sooner. Started my career earlier. Stayedout of management — too much stress from execs. Gotten an education in HR.Learned to listen better. Not argued with senior management about issues thatreally weren’t important. Changed jobs more often.


What one piece of advicedid you receive that made a difference in your career?
Once again, themes emerged, particularly thoughts aboutgetting an education, finishing a degree, listening more. “Paper wins”and “Document everything” also were frequent responses. Several answeredwith brief comments, often with an exclamation mark: Innovate! Network! Care!Never settle!


Other advice:


  • “Know your employees, and letthem know you care about them.”


  • “Fire someone in the first 30days of your employment. It establishes your presence in the company.”


  • “Don’t burn any bridges.”


  • “Take responsibility for youractions.”


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What one book, fictionor non-fiction, most influenced your professional development and why?
HR professionals would make up one weird book group.Their tastes range from self-help business books such as Don’tSweat the Small Stuff, First,Break All the Rules, and Escapefrom Cluelessness to OfMice and Men, ToKill a Mockingbird, and the Bible.


And, in keepingwith their rich range of responses to the survey, they admire writers as differentas AynRand, with her devotion to capitalism, and the Dalai Lama, with his dedicationto compassion.


Thanks to surveyrespondents, we at Workforce — and our readers throughout the world– have learned a great deal about today’s HR professionals: what you care about,what you’re up against, and the nature of your role as a leading player in theworkplace drama. Your comments help move the profession forward, and assistus all in our understanding of work that is — whether confounding or rewarding– of vital significance in the workplace today.


We’d love tohear more from you. Please drop us a line.


Workforce, June 2001, pp. 32-38– Subscribe Now!

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A Controversial Child-Care Study Has a Message for HR

At first glance, the results of the largest long-term study of child care inthe United States seemed to prove that working moms really ought to feel guilty.Research findings in the project, which was sponsored by the National Instituteof Child Health and Human Development, show that children cared for by someoneother than their mothers for more than 30 hours a week — including relativesand even dads — are more likely to display problem behavior in kindergarten.For working parents and employers, the report was profoundly disturbing.


    News reports seized on the link between child care andbehavior problems. One of the lead researchers — Jay Belsky, a longtime foe ofday care — cast a very negative spin on the results, arguing that working momsbelong at home taking care of their kids. But a closer look at the statisticsreveals them to be far less alarming. Only 17 percent of the children in daycare showed “explosive,” “disobedient,” or”aggressive” tendencies, and even these behaviors were in the normalrange. The other 83 percent displayed no such tendencies. And, since 9 percentof children who stay at home are seen by teachers as aggressive, the realdifferential is only 8 percent.


    At a time when many families need two incomes just tosurvive, several study investigators say, the initial interpretation of theresults caused unnecessary concern. But they are quick to add that the report ishelping to refocus attention on family-friendly policies in the workplace, andthe overwhelming need for businesses to be responsive to the realities ofemployees’ day-to-day lives.


    “It’s very important that corporate America step upto the plate about on-site child care and family-friendly workenvironments,” says Virginia Allhusen, a research professor at theUniversity of California/Irvine who participated in the study. “One of thehuge issues for parents is that child care is incredibly expensive. It’s laborintensive. The cost of child care for families as a percent of income is third– only behind food and shelter.”


    In order to be competitive, businesses must also becompassionate, says Kathy Hirsh-Pasek, a professor of psychology at TempleUniversity who also served as a study investigator. “It’s very importantthat employers allow families choices with things like flextime schedules. Weknow that the quality of child care makes a big difference. We also know thatthere are those who say children might be better off poor than in child care.There is no question: the single biggest problem facing children ispoverty.”


    Investigator Margaret Tresch Owen, a psychologist at theUniversity of Texas/Dallas, says the study “may suggest that part-time workmay be more ideal for many families. We ought to add information from the studyto the argument about family leave time. We ought to look at this as anopportunity for parents to push for more consideration in the workplace.”


Workforce, June 2001, p. 17 —  SubscribeNow!

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Productivity Bonuses and Profit Sharing Motivate a Team

Whatever kind of recognition and incentive program a company decides to use,it takes support from the top to succeed — especially when return on investmentis the name of the game, CultureWorx consultant Smithson says.

Medium Company

Name:

 Behlen Manufacturing Co.

Location:

 Columbus, Nebraska

Type of business:

 manufactures livestock equipment; grain storage; drying/handling systems; building systems

Number of Employees:

 1,400

    At Behlen Manufacturing Co. in Columbus, Nebraska, there’s no question that the boardroom buys into incentives for its employees. The company capitalizes on employee involvement and offers cash incentives, gain sharing, and profit sharing. Gain sharing is a monthly bonus based on productivity, and profit sharing an annual reward based on profits. The result is tremendous employee loyalty and productivity, says chairman and CEO Tony Raimondo. “Our employees are all in the business fight with us, so our theme is ‘Make the company better off, and we will share.'”


    He cautions, however, that sharing the fruits of a company’s success with its employees is not just an incentive program but also a way of life. Leadership truly has to believe that the company and everyone in it will be better off or it won’t work. “I see a lot of CEOs who simply are not comfortable with that, and I don’t think they should do it, because the employees are very smart, and the whole baseline is trust and respect.”


    Behlen manufactures livestock equipment; grain storage, drying, and handling systems; and building systems at several plants from Cullman, Alabama, to Baker City, Oregon. The company’s incentive system begins with a program called Awareness Is Money, which awards a minimum of $250 a month to an employee with the best idea about how to improve safety and productivity. The real bonus comes when the ideas are implemented and production increases. Depending on productivity, all employees also are participants in gain-sharing or productivity-sharing teams that can earn monthly bonuses of up to 12 percent of a person’s base pay, Raimondo says. Teams typically are made up of 10 to 30 people who participate in a product process from start to finish — such as manufacturing a building beam. Office employees as well as factory workers participate in the program.


    Behlen’s profit-sharing plan is a further incentive. During a good year, for example, employees might receive 140 hours of pay as a cash bonus just before Christmas.


    The programs are dedicated to creating participatory production environments rather than more traditional authoritative work cultures, Raimondo says. “We are always searching for ways to add value to customers. We think the key is the employees. If they share in the rewards, they will take better care of the customer.”


Workforce, June 2001, pp. 111-112 —  SubscribeNow!

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Incentive Dos and Don’ts

The experts offer a few suggestions for companies re-evaluating or thinkingabout adding incentive/reward programs:

  • Don’t rush into making modifications to your pay program just because theeconomy softens, says Hewitt Associates’ Frank Belmonte.

  • Particularly in down economic times, pay special attention to and rewardyour high performers. “The cost of losing them is going to far exceedthe investment you make to retain them,” Belmonte says.

  • Be sure that company leadership supports the rewards/recognition programsand allocates resources for the programs, says Kimberly Smithson, consultantand president of the National Association for Employee Recognition.

  • Train managers, leaders, and supervisors on how to deliver recognition. A20-year pin in an inbox doesn’t cut it, Smithson says. “Goodrecognition is timely, personal, and very specific.”

  • Recognition and rewards have to be consistent and fairly administeredacross an organization. That’s a common gripe among employees, Smithsonsays.

Workforce, June 2001, p. 111 —  SubscribeNow!

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A Low-Cost Miles Program Brings a Big Boost to Sales

Lincoln Contractors takes a creative approach to incentives thatdistinguishes the company from its competition, and nets big returns. Thefamily-owned Milwaukee firm gives points — what it calls miles — as salesincentives both to generate excitement and to reward outstanding jobperformance. The miles, available to any of its 115 employees, can be exchangedfor merchandise, travel, or sporting event tickets.

Small Company

Name:

 Lincoln Contractors Supply, Inc.

Location:

 Milwaukee, Wisconsin

Type of business:

 rents/sells construction equipment, tools, supplies

Number of Employees:

 115

    Lincoln sells and rents construction equipment, tools, and supplies in sevenstores throughout Wisconsin, and is one of the largest independent distributorsof its kind in the United States. Its products range from a 20-cent concreteanchor to a $100,000 rough-terrain forklift.


    Its incentive miles program works like this: If a Lincoln employee wants anew backyard grill, for example, he or she can “buy” either a charcoalmodel for 5,500 miles or a more upscale gas-powered version for 25,000 miles.One employee recently redeemed his miles for an all-terrain vehicle, another gota John Deere garden tractor, and another plans to take his wife to Spain nextyear with airline tickets “purchased” with miles, says Dale Guenther,company vice president.


    Here are some features of Lincoln’s incentives program:

  • For every 10 customers an employee signs up, he or she earns 1,000 miles per customer, for a total of 10,000 miles.

  • To help get rid of old stock, employees receive miles equal to the dollar amount of an item sold.

  • Exemplary service nets extra miles. One employee attended a trade show, generating numerous leads, and received 25,000 miles for a job well done.

  • As a sales promotion, for every foot on a stepladder or inch on a diamond blade sold, employees earned 20 miles.

  • Employees earn 1,000 miles for each year they are with the company.

    Employee response to the program has been enthusiastic, Guenther says.Participation doesn’t cost employees anything, and the system generates salesand creates employee loyalty. Before the miles program, Lincoln relied solely oncash bonuses as incentives. But it’s the newer program that nets big results, henotes. In the first year of the little more than two-year-old plan, business wasup almost 40 percent. In the second year, there was a 17 percent increase.


    The program also is flexible, and can be adjusted yearly to account foreconomic or product changes. Though he won’t say what the program costs Lincoln,Guenther insists it’s cost-effective, especially because it’s stepping out ofthe box, doing something different from the competition. Product manufacturersalso help defray the cost of some bonus promotions.


    Once a month, Lincoln buys miles — perhaps one to two million — fromprogram originators MMS Incentives, the Norcross, Georgia-based company thatserves as project administrator. MMS operates about 3,200 incentive/rewardsprograms a year for tens of thousands of customers and employees. Clients rangefrom Fortune 100 companies to the “Joe’s Beer Dealership” down thestreet, CEO Mylle Mangum says.


    Mangum won’t talk about specific pricing, except to say it varies by companyand objective. But she will say that MMS usually can provide an incentiveprogram for one-half to two-thirds less than the amount companies spend in cash.A travel reward, for example, can cost a lot less through MMS because of itsbuying power in the marketplace. The company also has its own travel agency.”We can send anyone to the Ritz Carlton anywhere in the world a lot morecost effectively than if an employer were just going out and buying atrip,” Mangum says.


    This kind of rewards program is also a lot more effective from an employer’sstandpoint than cash. A travel reward may cost a company $350 to $500, but thetrophy value to an employee can be much greater — as much as $1,000 to $1,500,Mangum adds. An employee rewarded with cash ends up pocketing it and paying anenergy bill with it, for example. It’s not a “company currency” — theemployee doesn’t think of it necessarily in conjunction with a reward for workperformance at Lincoln. The miles or points program, on the other hand, isprivate labeled Lincoln Contractors points, and the reward is associateddirectly with the company. It optimizes what Mangum calls the share of”mind value.”


    Guenther stresses, however, that every employee — whether a phone operatoror a sales manager — should have an opportunity to participate. If they areleft out, non-sales employees can get frustrated. “Our bookkeeper just hadher 31st anniversary, and she got 31,000 miles.”


    Rewards or recognition programs like Lincoln’s don’t put ready cash in anemployee’s pocket. And, Eisen adds, people like cash. “It’s right there,right in their face. They can take it home in their paycheck or put it in theirpocket. It’s something they feel.”


    She says these types of rewards still can serve as extraordinarypsychological and emotional incentives.


Workforce, June 2001, pp. 109-110 —  SubscribeNow!

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100-Percent Bonuses Mean High Pay — Plus Low Labor Costs

At Nucor Corp., a share-the-wealth approach also has been a success. Based inCharlotte, North Carolina, the steel producer had a record $4.6 billion inrevenues last year. It employs 8,000 people at 22 plants in nine states, andranks among the Fortune 500.

Large Company

Name:

 Nucor Corp.

Location:

 Charlotte, North Carolina

Type of business:

 largest steel producer in the United States

Number of Employees:

 8,000

    The company pays much lower base wages — sometimes halfof what the competition pays hourly workers — then uses weekly bonus cashpayouts as an incentive. And they are not small amounts, either. Employees canearn 100 percent, 200 percent, and more of their regular hourly wage, with nocap, according to the amount of quality steel produced by, or passed through, awork team on a shift.


    It’s a production-driven system that wouldn’t work foreveryone. For non-union Nucor, however, it has worked since the 1960s, saysJames M. Coblin, vice president of human resources. “We have the highestproductivity of any steel mill in the United States in terms of tons peremployee or tons per hour. We have the highest-paid steelworkers on earth, andwe have arguably among the lowest labor costs per ton produced. So that’s prettyphenomenal if you can have the highest-paid employees but the lowest laborcost.”


    The secret to motivating people is money, he says.”If you give a bonus to somebody of 15 percent, of course they like it, or20 percent, even 25 percent, of course they love it. But if you give them abonus of 100 percent, you get their attention big-time, and when they startseeing 150 percent bonus or 160 percent bonus, they are focused on that bonus.And when they know it’s not going to be changed, like ratcheting up the basewhen they really start producing or putting a ceiling on it … they catchfire.”


    The average pay in the year 2000 for Nucor’s steel millemployees was about $63,000, and many of those people were high school graduatesliving in small towns like Darlington, South Carolina; Jewitt, Texas; andWaterloo, Indiana, very small communities where a dollar goes a long way, Coblinsays.


    In good times, when business is booming, every employee –from a receptionist to the CEO — shares in profits. Conversely, during downtimes there’s sharing, too. The company doesn’t lay off employees, but shutsdown its production lines for one or two days a week. Salaried executives stillwork, but hourly employees aren’t required to. About 80 percent of Nucor’semployees are on this production-incentive plan. Other employees also haveperformance-based compensation:

  • Department managers earn annual incentive bonuses based primarily on the percentage of net income to dollars of assets employed for their divisions. These bonuses can be as much as 80 percent of a department manager’s base pay.

  • Professional and clerical employees not on other plans earn bonuses based on their division’s net income return on assets.

    Senior officers earn lower base salaries, with theremainder of their compensation based on Nucor’s annual overall percentage ofnet income to stockholder’s equity, which is paid out in cash and stock.


    Coblin says the Nucor system is about giving high wages toaverage people for outstanding production, and about giving responsibility andauthority to lower-level employees. It’s the worker who drives production — andthe bottom line — not the executives. That can be a tough concept forauthoritative managers and companies to grasp.


    Another key to Nucor’s success is the simplicity of itsincentive system, Coblin says. If every employee can understand and see how anincentive plan affects him each week, then it can succeed. If not, it won’t workin the long term.


    Beyond its bonus structure, Nucor also rewards employeeswith free dinners, jackets, and hats for outstanding production or safetyrecords broken. Service awards are handed out every five years. Employeesreceive one share of stock for every year at Nucor. Workers are essential to thecompany’s success, and are stockholders.


    It’s that ownership connection that is key to employeeperformance, NAM’s Eisen adds. She calls Nucor an extraordinary company.”They are using cash to incent. Other companies use benefits to incent. Whois the winner? I think you have to look at your own workforce.”

Nucor’s Reward System
All employees at steel giant Nucor are covered by one of four performance-related compensation systems. Each of the plans relate to specific goals and targets depending on the job. Nucor also periodically has issued an extraordinary bonus to all employees, except officers, in years of particularly strong company performance. This bonus has been as high as $800 for each employee. The four ongoing bonus plans include:

  • Production Incentive Plan: Operating and maintenance employees and supervisors at the facilities are paid weekly bonuses based on the productivity of their work group. The rate is calculated based on the capabilities of the equipment employed, and no bonus is paid if the equipment is not operating. In general, the production incentive bonus can average from 80 to 150 percent of an employee’s base pay. The vast majority of the company’s employees are covered under this plan.

  • Department Manager Incentive Plan: Department managers earn annual incentive bonuses based primarily on the percentage of net income to dollars of assets employed for their division. These bonuses can be as much as 80 percent of a department manager’s base pay.

  • Professional and Clerical Bonus Plan: This bonus is paid to employees who are not on the production or department manager plan and is based on the division’s net income return on assets.

  • Senior Officers Incentive Plan: Nucor’s senior officers do not have employment contracts. They do not participate in any pension, discretionary bonus, or retirement plans. Their base salaries are set lower than what executives receive in comparable companies. The remainder of their compensation is based on Nucor’s annual overall percentage of net income to stockholder’s equity and is paid out in cash and stock.

Workforce, June 2001, pp. 112-114 —  SubscribeNow!

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Tips for Increasing E-learning Completion Rates

Here are some strategies your company can use to help ensure a high coursecompletion rate from Augusto Failde, senior vice president of global developmentat NYUonline:


Develop a culture that takes online learning just as seriously as classroomtraining.
An employee who goes to a classroom or training lab to learn usuallywon’t be interrupted for routine matters, even if the classroom is on site. Butemployees who learn at their desktops often face constant distractions. Aprofessionally made “Do Not Disturb” sign can help, especially if amanager respects an employee’s e-learning time.
 
Many corporate e-learners say they would rather leave their desks entirely togo to a training lab. If that’s not possible, designating several workstationsfor e-learning at least allows participants to leave their own desks. For manye-learners, studying at home is best. Whenever possible, offer courses throughthe Internet or provide intranet access at home. Employees studying on their owntime will more than cover any added costs involved.
 
Do individual comparisons.
A company’s competitive culture can be leveragedby showing charts of “percentage completion” by each student for allparticipants (where they stand compared to other participants). Use weeklye-mail updates to communicate the results. Online education providers should beable to support companies by sending the charts to project managers andadministering a provider-based database or sending weekly email updates.However, email from a manager at the participating corporation is usually moreeffective.

A Fortune 50™ Company has created an internal competition to complete andpass online management courses. Managers on all levels compare their “timescores” and use these as a means of pride. This competition was againinitiated at senior management levels, and shared with employees via internalnewsletter, e-mails, Web site, etc.


Hold managers accountable for the success of their employees.
For example,Dell Computer managers get personal e-mail from CEO Michael Dell if the onlinecourse completion rate in their divisions isn’t 100%. Senior management shouldalso act as role models, taking and completing online courses themselves.
 
Use managers as role models.
If senior managers and business unit managerstake and complete the online courses in a reasonable time, employees feel thatthey can do it, too.
 
Create a social dimension to e-learning.
Elliot Masie of the Masie Centersays it’s important for companies to find ways to provide social interactionalongside the e-learning experience. He suggests assigning pre-work thatrequires e-learners to interact with colleagues, requiring team projects duringclass, and providing an at-work coach who can help students with course content.You can also provide perks like a free lunch to employees taking the same onlinecourse to foster discussion about course topics.
 
Make expectations clear up front.
Often, employees simply have to be told bya supervisor that it’s important for them to finish the course. One ofNYUonline’s clients had its vice-president of training meet personally withparticipants prior to a course launch to explain the importance of the course.It’s always better to positively reinforce course completion. Tell employees itwill be looked upon favorably in their evaluation, rather than threateningpunishment.
 
Provide formal rewards.
Financial incentives seem to work best for peopletaking their first online course. Once they finish a course they often return.For example, 60% of e-learners at TransAmerica Financial Services, which hasbeen offering financial incentives, return for another course. Professionalcertificates or credit are also an important motivator. If the course itselfdoesn’t offer a college credit, the company can provide a certificate.Highlighting “individual” employee rewards from online education –aside from the obvious knowledge and training serves as an incentive toemployees to complete courses. Better career prospects, personal fulfillment,more bankability, are such rewards.
 
Track performance.
As GE Capital discovered, performance tracking is crucial.A supervisor who doesn’t know whether an employee has progressed through acourse can do little to motivate or help them. When supervisors checkperformance, they can intervene if an employee is lagging behind. For example,the supervisor can find out if the employee is suffering from too manydistractions.

Managers can also use performance-tracking data to create and post dashboards- regular reports on progress through a course. Dashboards can show the averagestudent’s progress or the entire range of individual progress. (But neveridentify lagging e-learners by name — public humiliation is not a good way tomotivate.) If an e-learner who has fallen behind sees she’s in the bottom tenpercent or is five lessons behind the average student, that alone can be a powermotivator. Dashboards can also be used for team or individual competitions. Thefirst e-learner who hits the midway portion of the course can get a free dinner,or a team can win T-shirts.


Get personal.
Business unit managers and direct supervisors can sendindividual e-mail to participants who are behind in course completion, askinghow the course is going, and if they need any help or assistance. Onlineeducation providers, such as NYUonline, should be able to provide companies witha draft of such e-mails.
 
Hold a team competition.
Dividing eLearners into teams of two or more — bybusiness units; geographic location, etc. and pitting team against team in a”course completion competition” leads to a spirited sports-likerivalry between teams and lower drop-out rates.
 
Launch a communications campaign.
Use e-mails, newsletters, and Web sites tohighlight employees taking online courses. Have top e-learning performers giveadvice to others taking courses.

    The bottom line is companies must manage e-learning and not expect that allemployees can complete courses without any support. External vendors can’t dothe job of management, although a good e-learning provider can certainly provideconsulting services on how best to manage the online experience.


    As e-learning matures, will we see course completion rates rise to the levelof classroom education? Probably, but the future of e-learning shouldn’t focuson trying to replicate the classroom experience. Retention studies show peopleattending a lecture remember only five percent of what they’ve heard. E-learningcan do much better through simulations, probing discussions, and practicingskills.


    The e-learning industry is moving toward a future in which the most importantproduct is not a course, but learning objects, the building blocks of a course.Learning objects are small chunks of instruction that take about 15-20 minutesof study. They are easy to revise and update so learning becomes much moretopical and relevant. You can mix and match learning objects to create a course.E-learners are already creating their own courses by deciding which learningobjects they need to learn a particular skill. What used to be just-in-caselearning has become just in time, and in the future we can expect learning thatis just-for-me.


    As students take responsibility for their learning, the whole concept of acourse will become less relevant, and with it, the dropout rate. But engagingand satisfying the e-learner will always be crucial. Good companies thatrecognize the importance of human capital must motivate and support employees asthey develop a commitment to life-long learning.