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HR Certification

Major certificate programs in human resources:


  • Professional in Human Resources (PHR) and Senior Professional in Human Resources (SPHR) — Human Resource Certification Institute


    An outline of what HRCI considers the HR body of knowledge is found in its 2000 HRCI Candidate Handbook. Both certificate programs teach broad skills in such areas as compensation and benefits, employee and labor relations, health, safety, and security and management practices. The SPHR is designed to emphasize policy-making, while the PHR is centered on implementing policies formed by others. HRCI plans to include a greater technology emphasis in the next revision of its curriculum. For more information, contact HRCI at hrci@shrm.org or call 703/548-3440.


  • Certified Compensation Professional (CCP) and Certified Benefits Professional (CBP) — American Compensation Association


    Both certificates provide backgrounds in accounting and finance, compensation management, and quantitative methods. The CCP offers a choice of electives ranging from sales compensation to performance management, strategic communication, and international remuneration. The CBP’s electives cover such topics as retirement plans, health care and insurance, strategic benefits planning, and disability management. ACA also offers certificate programs in salary administration, executive compensation, health and welfare programs, and several other specialized topics. Various programs to address technology demands are now being developed. For more information, contact ACA at certification@acaonline.org, or call 480/922-2089.


  • Certified Employee Benefits Specialist Program (CEBS) — International Foundation of Employee Benefit Plans


    The CEBS program is made up of 10 courses that include health and welfare, retirement, human resource management, and compensation and benefits. Course 10 includes a section on benefits technology applications and legal issues surrounding new technologies. IFEBP also offers certificates in health-care plans, global benefits management, employee benefit plans, and retirement plans. Contact cebs@ifebp.org for more information, or call 800/449-2327.


  • IPMA HR Certification — International Personnel Management Association


    IPMA draws on its HR Competency Model, which has 22 components. The competencies are divided into the broad categories of Business Partner, Change Agent, and HR Leader, and range from “Possesses the Ability to Build Trust Relationships” to “Designs and Implements Change Process” and “Assesses and Balances Competing Values.” The emphasis is on human behavior, and there is no technology component. The complete list of competencies can be viewed online at www.ipma-hr.org/training/pdtrain.html. For more information, contact IPMA at 703/549-7100.


Workforce, May 2000, Vol. 79, No. 5, pp. 74 — Subscribe now!

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Minority Execs Want an Even Break

When the doors to Aetna Casualty and Life’s headquarters swung open for Darnell Williams, there seemed no limit to how far he could rise in the ranks. After all, he had worked his way up the lower rungs of the corporate ladder at field and regional offices in just five years, and he was ready for greater challenges.


Instead, 28-year-old Williams found himself in the slow lane for advancement. No matter how hard he worked, plum assignments went to others. “Year after year, I never reached my objectives because the goal line would move. I would do 10 things right and if the 11th was wrong, it became the focal point of my performance appraisal,” he remembers. “You’re hard-pressed to say, is it me?”


Williams found that other professionals of color at the company had similar experiences. “I worked in HR, so I can tell you what their frustrations were,” says Williams. “It wasn’t about skill sets; it was about fitting into the social fabric of the culture,” he reflects. “If you didn’t hook up with a rising star, you’d never make it to the fast track. I came to realize that there was nothing I could do or say to change the situation, so I left.”


Fortunately, Williams was able to apply this insight to finding a better job. He values his experience at Aetna and regrets only that he didn’t make a career move sooner.


It also helps that times have changed from 10 years ago when EEO audits, legal concerns and fears of criticism were believed to be the fuel behind numerous minority-executive recruitment initiatives. Today, many corporations hire top minority talent for other reasons — they see these senior-level professionals as a way to get a leg up on the competition. Because of changing demographics and fierce competition in the job market, a growing number of companies are starting to regard minority executives as an underused and undertapped resource.


Says Joanna Miller, a managing director at executive search firm Korn/Ferry International: “The most sophisticated [employers] realize that when it comes to solving problems and challenges, a diverse work group brings a variety of perspectives, backgrounds, and experiences, which can lead to creative and innovative outcomes.” Plus, given the burgeoning purchasing power of minorities, many realize that they need diverse marketing, sales, and strategic-planning talent that reflects the minority groups they are targeting, she adds.


However, despite recruitment efforts, something is very wrong. Once they’re on the job, a number of self-motivated, ambitious, senior-level minorities feel frustrated, undervalued, and downright angry — and many quit.


According to some diversity experts and recent studies, the problem of retaining minority executives is a serious one. In a Korn/Ferry-Columbia Business School study of 280 minority executives conducted last year, 40 percent of the respondents report having been denied a promotion and suspect that it was because of race or cultural background. Thirty-seven percent report that they’ve suppressed thoughts about organizational roadblocks they have personally experienced for fear of losing jobs or future career opportunities. Also, approximately 21 percent say that office support staff tend to give their work lower priority.


“Many companies don’t have faith in minorities’ intellectual or leadership capacity, and often don’t have confidence in their social skills,” explains Verna Ford, vice president and senior consultant at JHoward & Associates, a diversity consulting firm in Lexington, Massachusetts, that primarily works with Fortune 500 companies. “So they give [these workers] the jobs, but not necessarily the authority. They give them the money, but not the support. They give them titles, but not the plum assignments. You have these highly paid, well-educated, polished people in top corporate jobs twiddling their thumbs and looking for work to do. It hurts everybody.”


Yet the intense need for minority talent is unquestionable. “Locating talent in the midst of this tight labor market is a concern that keeps CEOs up at night,” explains Ford. “Retaining people of color is a big deal because well-equipped workers of any sort are needed.”


So how can HR managers tackle one of society’s greatest ills — an issue that few experts have a handle on — and at the same time develop a workplace where professionals of color want to stay? It can be done, says Ford, and a growing number of companies are making it work by creating an environment that promotes opportunity and advancement.


Help companies see the light.
Ford estimates that 75 percent of the senior-level professionals her company works with feel unhappy with their work situations. They secretly air their woes through internal audits, requested by clients concerned about low minority retention rates, and/or diversity workshops.


For example, one executive curses the day he accepted a position at a prestigious Fortune 500 company. A top graduate of a top MBA program with an impeccable work history, he believes that racism plays a part in the unchallenging projects that are assigned to him, and the lack of support from his peers, subordinates, and executive leaders. As soon as he finds another job where he thinks things will be better, he will leave.


In the Korn/Ferry-Columbia Business School study, respondents indicated that the four discriminatory experiences they most often observed were:


  • double standards in delegation of assignments (59 percent)
  • harsh or unfair treatment of minorities by whites (55 percent)
  • being the personal target of racial or cultural jokes (45 percent), and
  • the need to hold back anger so as not to be seen as having a “chip on the shoulder” (44 percent).

But many JHoward clients can’t believe that active exclusion is going on in their businesses, says Ford. And although many HR professionals may be aware of the problem, they often feel powerless to do anything. “We spend a third of our time in sessions helping to suspend their disbelief,” Ford explains. “They don’t think of themselves as discriminatory because they believe they are good, decent American citizens; and in many ways they are just that, but so many have blind spots. And if leadership can’t accept the truth, you can’t expect middle managers — who have a vested interest in leaving things the way they are — to accept it, either,” she adds.


So consultants like JHoward put these business leaders through exercises that demonstrate how easily they can miss stuff right in front of their eyes. In one activity, program participants are asked to count the number of times the letters fs appear in a sentence. Eighty percent routinely miss some. “We tell them that if they can miss what they are consciously looking for, something as literal as alphabets on a page, isn’t it possible that there are discriminatory management practices going on in their organizations that they don’t know about?” explains Ford.


JHoward raises clients’ awareness by stressing bottom-line business issues, says Ford. “A lot of our clients aren’t aware of how much they spend in turnover — recruitment, orientation, and training costs — let alone the loss of institutional knowledge. We tell them that administrative costs can be as much as 150 times the departing employee’s salary, not including the replacement wage.”


Next, they describe how discrimination works by explaining that everyone has, based on socialization, a natural attraction to people who are similar to them, and sometimes that results in exclusion of people who are different. “Emotional reactions to these differences can result in negative treatment,” she says. “And negative treatment [doesn’t provide] the support employees need to get their jobs done.” The company tells clients that if they institute management practices that value all employees, not just minorities, their productivity will go up. “If you’re fixing this piece, fix it for everyone,” says Ford.


For instance, snack-food maker Frito-Lay in Plano, Texas, offers diversity programs to all its exempt or salaried staff. Workshops, for example, demonstrate that women and people of color can build confidence politically, socially, and around their technical skills; teach managers how to work with diverse employee populations; and coach select employees to become leaders.


Ramona Ploof, diversity specialist at Frito-Lay in Plano, Texas, says it’s hard to prove that her company’s diversity initiative lowered turnover among employees of color, but she does see a difference. Since the program was rolled out in 1997, Frito-Lay employees have discovered a newfound loyalty to the company.


“We’ve had people attend our programs and later give testimonials that maybe they were at a point at which they were going to put their r sum on the street,” says Ploof. “But once they’ve gone through our programs, they recognize they’re in a company that cares about them, their development, and about inclusive management. They’re excited that their development is something they are partnering with the company on, and they have decided to stay with us.”


Create a land of opportunity.
It’s common sense: Minority executives want the same things as majority executives. Miller says that retaining successful minority executives is, in large part, dependent on the extent to which their talents and abilities are applied, the responsibility and authority they are being given, how well performance appraisals are tied to career-development goals, and the supportiveness of their work environment.


Yet oftentimes the path to the top is different for minorities than for their white peers. In a study published in the book “Breaking Through: The Making of Minority Executives in America” (Harvard Business School Press, 1999), co-authors David A. Thomas and John J. Gabarro found that minorities who were placed on the fast track had careers that stalled in middle management. Their pace increased from middle to upper management, but was slower than that of whites. In the final move from upper management to executive, minorities and whites progressed at the same speed.


Thomas says the slow movement during minorities’ early careers is the result of a tax placed on them in the form of time. For example, white managers were rewarded for high performance with promotions to the next level, while minority executives were rewarded with the opportunity to compete again at the same level with more responsibilities and more challenging job assignments in the same position. As a result, these executives spent two to three times longer in a position before being promoted than white executives or minority managers.


“When I started with my former company in 1990, I was promised a promotion to executive level, but I was lied to,” recalls a frustrated minority engineer who asked not to be named. “Although I received lots of kudos, I was never promoted. I was fed up and I quit.”


On the positive side, the additional time that’s spent being tested and re-tested allows minority executives to build a deep foundation of competence, establish credibility, and develop confidence that contributes to their ability to break through the glass ceiling. Says the frustrated engineer, “My experience at this company has come in handy in landing me my present job. Today I have an executive-level position at a small start-up and I’m very happy.”


Encourage informal mentor relationships.
Executives of color in the study by Thomas and Gabarro cite mentors and sponsors — especially during the early stages of a career — as an ingredient in their success. Therefore, companies must identify and train informal mentors to advocate upward mobility.


“But these mentors need to work longer and do different things to sell minorities into good opportunities,” says Thomas. “Companies should make managers aware of obstacles that racial differences can make. You must show that the potential to discriminate resides in most people and that stereotypes can influence the way people are managed.”


Yet there are managers who take diversity awareness to the point of discomfort. It’s because of the issue’s sensitivity that minority executives seem to lack more casual relationships with leaders.


“Often, minorities are placed in formal mentor programs where everyone walks on eggshells, concerned about what they should or shouldn’t say,” says Ford. “It’s one thing to give a person positive emotional support and exposure to plum projects or key stakeholders; it’s another to give a good, swift kick in the butt when they aren’t performing well. Sometimes people are so afraid of lawsuits that they won’t give minorities constructive feedback on what they should be doing differently to be more successful.”


Teach minorities the right way to fight back.
In addition to teaching diversity awareness to the workforce overall, companies must help minorities respond to unfair treatment. Progressive companies help them look at ways they’ve been treated and how to get beyond feeling angry or isolated so they can get their work done and take advantage of new opportunities, Ford says.


Anna Duran, adjunct professor at Columbia Business School, says, “Many minority executives the Korn/Ferry-Columbia Business School study polled appear to have found ways to handle discrimination in the workplace that help mitigate potentially damaging consequences that could block their careers.” For instance, when respondents observe harsh or unfair treatment or feel that their work is given lower priority, they:


  • give direct feedback to correct the situation
  • view the situation as an opportunity for learning how things are done within the organization, and
  • analyze the situation and develop an action plan.

But for executives to be able to handle the situation professionally, they should feel comfortable expressing these concerns when they arise. And that depends on the company’s attitude and atmosphere.


Not long ago, when Darnell Williams disagreed with a negative assessment provided by a senior vice president at his current employer, Massachusetts General Hospital in Boston, he chose not to sulk, but made his point in a professional way.


“I developed and sent out a survey to my internal clients to determine areas that were satisfactory or needed improvement,” he explains. “Their feedback provided me with a better understanding of my services and ultimately refuted the negative evaluation. In addition, this same senior vice president [who did the assessment] is now my mentor and nominated me to become a member of our CEO’s diversity committee. Looking back, I’m grateful for the experiences I’ve had that didn’t work. Here at Massachusetts General Hospital, I’m in a situation where I can make them work.”


Workforce, April 2000, Vol. 79, No. 4, pp. 50-55.


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iOn the Contrary-i Remembering a Good Boy

Yesterday, I attended a memorial service for abillionaire. It was my first. I don’t normally travel in such circles.Maybe you’ve heard of this billionaire. His name was Bill Daniels andhe’s known in business circles as the father of cable television — his firmis credited with developing more than 50 of the biggest cable companies in theUnited States. But among the 2,000 people who gathered yesterday in his honor,Daniels wasn’t remembered for his business acumen. He was lauded for being“a good boy.”


    Yes, it’s an odd term todescribe someone who had been married several times, who fought — andeventually won — a decades-long battle with alcohol abuse, and whose languagesounded more like a dock worker’s than a high-tech executive’s.


    But Daniels, in the tearfulwords of his employees, family members, business partners and colleagues, wasthe kind of man who comes along once in a lifetime. Countless mourners worebuttons that said: “Bill Daniels touched my heart.” How many corporateexecutives can you say that about? 


“Good” doesn’t always mean “nice”
    What was it that made Mr.Daniels such a good boy — the kind of boy that caused employees to weep openlyat his funeral? It wasn’t that he was always nice. Daniels could actually bequite demanding.


    He expected employees to keeptheir desks clean, dress well, be supremely punctual, and whenever possible buyAmerican and vote Republican. No, Daniels wasn’t concerned with being liked asmuch as he was concerned with being ethical and doing the right thing for otherpeople.


    When the Utah Stars, abasketball team he owned, was forced to declare bankruptcy, Daniels saw thatevery season ticketholder was paid back, with interest, even though it wasn’tlegally required. When friends had financial problems he would leave unmarkedenvelopes full of cash at their doors before speeding off. “Drive-bygiving,” his stepdaughter called it.


    At his memorial service,stories were told of employees who received airplane tickets to visit sickfamily members, clothing for an important event, and rent money during hardtimes. He even paid for plastic surgery for a receptionist who was veryself-conscious because of an eye disorder.


    Yes, Bill Daniels had themoney to change people’s lives. But it was Daniels’ ability to inspireloyalty and help others realize their potential that made this man so memorable.As I listened to the tributes, it dawned on me that effective leadership isn’tabout being nice, in the way that realtors and Avon Ladies are nice. As BillDaniels demonstrated, leaders can be tough, demanding and even irrationallyneat, and people will still respect and admire them — as long as those leadershave the best interests of people in mind. 


Leaving a legacy of goodness
   I never knew Bill Daniels. I attended hismemorial service because I’ve been doing work with the Daniels Fund, thecharitable foundation that will inherit the lion’s share of his billion-dollarestate. But as I thought about his legacy, I thought about people in my lifewho’ve been tough but good to me. My favorite college professor was also themost intimidating. My favorite boss is also the one who fired me. My favoriteeditor regularly challenged me to find my own voice — and to rewrite piecesuntil that voice was apparent.


    There’s a lot of talk today about how to makemanagers more effective. In fact, this month’s cover story deals with thatvery topic. But I have to wonder if we’d really need all the business books,workshops and high-priced consultants to tell us how to cultivate trust andinspire loyalty if only we had more role models like Bill Daniels.


    Maybe what the workplace needs is not moremanagement development initiatives, but just a few more good boys and good girlswho make decisions based on a solid sense of what is right and wrong for thepeople involved. Is this too simplistic? Probably. But I also firmly believe wedon’t have to make things hard to make things right.


    The next time you’re facing a tough businessdecision, think how you would like be remembered at your funeral and actaccordingly. Chances are, Bill Daniels would have agreed with you.


Workforce, May 2000, Vol 79,No 5, p. 18 SubscribeNow!

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The Need for Speed

There’s no avoiding a basic reality in today’s dot-com, e-everythingworld: speed matters. Today, getting information, products, services and moreinto the hands of customers and employees at light speed is absolutelyessential. In an era of instant gratification, companies are pushing theboundaries to new heights — or some might say new depths.


Clearly, human resources is getting pulled along for the ride. Although itmight not experience the crushing pressures of an e-commerce site, HR isn’timmune from compressed technology cycles and growing demands for faster andbetter service. It’s no longer possible to install a new recruitingapplication or benefits system over a period of months or years. By the timesuch an implementation is complete, the functionality is obsolete.


“What makes e-business and the Web different is that it comes down tosurvival of the fastest, not necessarily the fittest,” states Ed Nazarko,managing director of Scient Corp., an e-business consulting and integration firmbased in San Francisco. Of course, the penalties for those who don’t play thegame effectively are steep: competitive disadvantage, and, in a worst-casescenario, outright failure.


If you feel like you’re sitting at the Mad Hatter’s tea party, you mightas well sit down and gulp the tea. Things aren’t going to change anytime soon.Because the underlying infrastructure of the Internet allows constant andimmediate change, it’s human nature to make constant and immediate changes.The important thing, says Jim Monastero, a lead partner for e-businessconsulting at KPMG Consulting, is to balance speed with the ability to deliveron your promises to customers or employees. “If you can’t deliver, yourreputation can be damaged, even destroyed,” he warns.


Here are seven rules for moving at Internet Speed:

  1. Understand that the Internet is fundamentally different. Processes andprocedures that worked just fine in the brick and mortar world can turn theInternet into a logjam. E-business and e-commerce require more creativethinking and less bureaucracy. This philosophy must filter into a number ofareas, including site design, usability, performance and generalcapabilities. But it also means thinking up new ways to communicate anddeveloping new business models. Some of these models haven’t been inventedyet.


    Yet, regardless of the exact approach, one thing remainsconstant: The key concepts here are delivery and service. Within anenterprise, employees typically desire information about their benefitsselections, retirement accounts and more. Managers want information on theirdesktop to make critical decisions — and workflow solutions can provide thefuel to make that happen. When all is said and done, the Internet can createnew opportunities — but only if HR understands the need to move quickly andeffectively.

  2. Elicit the support of senior management. It’s simple, if your CEO andtop executives don’t understand and support your HRIS project it’sprobably headed for the virtual trash bin. It’s essential for HR to builda business case for projects and then provide plenty of useful informationso that management can understand what’s required. Equally important:Senior management must understand the fundamental reasons for embarking on aparticular initiative. It’s not to become part of the dot-com generation,it’s to compete in today’s rocket-paced environment.


    Of course,one of the best ways to get senior management’s attention is to providehigh-level capabilities that can boost earnings and slash expenses. Forexample, at Broward County School District in Fort Lauderdale, Florida, aWeb-based business intelligence system helps administrators betterunderstand everything from demographic trends to scheduling classes at over200 schools. The latter used to take days or weeks but can now beaccomplished in a single afternoon. Once top administrators saw the businessand HR capabilities the system offered, it was a no-brainer to move forwardas quickly as possible, says Nancy G. Terrel, director of strategic planningand accountability.

  3. Create a team or task force that is empowered to make quick decisions.Because e-business overlaps among multiple departments and domains, it isessential to develop teams that can communicate issues and understand theneeds and concerns of others. The timeline in the e-business and e-commerceworld is typically 60 to 120 days — and much of this thinking is filteringinto HR as well. “The conventional two-year implementation cycle thatmany companies have grown accustomed to cannot work on the Web,”Monastero warns.


    For example, at Dell Computer Corp., HR teamsfocusing on content and functional requirements, work closely with IT tospearhead the e-HR initiative. Management stands aside and lets these teamsmake their own decisions. That allows fast and efficient decision-makingthat mirrors the company’s customer service model for consumers. “Thegoal is to provide the best experience possible for employees and to putsystems in place to make that happen. It’s important eliminatebarriers,” says Terril Brummett, director of human resourcesinformation management at Dell.

  4. Don’t use conventional ROI calculations. Although it’s possible to useROI for measuring major systems, it isn’t always possible to calculate thevalue — or meaningful return on investment — of many e-HR functions.Monastero believes that an organization must weigh various trade-offsrelated to implementing and maintaining e-business solutions and the speedof progress. “It’s one thing to say, ‘This project will cost us $3million or $10 million and we can’t afford it.’ It’s quite another toexamine the affect of not investing the money.” Indeed, when it comesto e-business and e-HR, many initiatives are so new and there are so many”soft costs” wrapped into the equation that it is nearlyimpossible to measure a direct return on investment.


    Some of thesesoft costs can lead to enormous productivity gains or simply happieremployees who are more loyal and less willing to look elsewhere for work.Nazarko puts it this way: “There’s no question that financial gravityexists. But you can’t think about ROI in a two month or six month window.And you cannot allow the financial considerations to get in the way ofproperly upgrading and maintaining a Web site.” Indeed, if employeesdon’t find a site useful and easy to use, they’re perfectly happy tovote with their feet and their phones. Instead of turning to the Web siteand using e-HR functions, they’ll buckle HR with countless inquiries.

  5. Make sound business decisions. These days, it’s important to viewe-business as a balancing act, requiring trade-offs between scalable,personal and secure architecture and the need to deliver solutions quickly.That means working with other departments and IT to see the big picture ofhow various decisions affect HR and the entire enterprise. For example, asystem that benefits HR might not integrate effectively with systems fromfinance or operations. In the long run, it might create a roadblock as theorganization attempts to introduce additional functionality. Likewise, it’simportant to move fast but not leave gaping security holes or providemismatched content and capabilities. A poorly designed strategy or systemcan wreak havoc for months or years to come.

  6. Build an IT architecture that is flexible and scalable. If you get lockedinto proprietary systems and cannot expand easily, you could find yourselfwith a subpar intranet or creaky Web site. Worse, you could wind up shellingout big bucks later on in a futile attempt to fix everything. The righthardware and software can make it easy to move quickly as things change.


    That means laying the foundation with a solid ERP, database andmiddlewear to provide maximum flexibility. Unlike changes to a Web site orfront-end systems, these tools can remain in place for years. Yet, incertain instances and for particular applications, it might mean turning toapplication service providers (ASPs), which offer a turnkey solution bymanaging software and systems remotely — including things like time andattendance, payroll and recruiting. It also means tapping into expertise,either internally or through consultants, to oversee and monitor anenvironment effectively. “Ultimately, you have to ensure that for everyentrance strategy there’s an equally valid exit strategy,” Nazarkopoints out.

  7. Don’t be afraid to make mistakes. Even the most successful e-HRinitiative is fraught with mistakes and missteps. The key is to understandthe big picture and define the infrastructure and strategy as clearly aspossible. Then be ready to shift focus at a moment’s notice. Whensomething doesn’t work, consider changing it.


    In fact, it’s not aquestion of whether to move fast, it’s how to move fast. The biggestproblem, says Nazarko, is that companies adopt a strategy that is tooconservative and defensive. “Instead of grasping the opportunity theyare saying, ‘I don’t want to get hurt.’ They spend too much timeanalyzing things. The reality is that you are going to be wrong 30 percentof the time and need to build that into the process.”

Ultimately, you might question whether the pace of today’s businessenvironment is truly progress. Every time we turn around it seems that someoneor something is heaping more stress our way. But the simple reality is: Theclock isn’t going to travel backwards, the need for instant gratification isn’tgoing to vanish, and the Internet isn’t going to become passé anytime soon.


Better strap on your seat belt because the ride has just begun. Welcome tothe brave new world of e-HR.


Workforce, May 2000, Vol. 79, No. 5, pp. 20-21— Subscribenow!

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Merging 401(k) Plans

The first thing they feel is ‘something awful is going to happen,’ “says Nancy Lazgin, describing the sinking feeling many employees have when theircompany is acquired. The most common concerns are about compensation andbenefits. “There’s a feeling that you’re going to take something away.But if you gain trust early on, you achieve success more easily,” she says.


Lazgin is the director of corporate benefits for Staples Inc., an officesupply retailer. She knows a lot about what happens when benefit plans areacquired, because Staples has been busy buying companies during the last fewyears. Most recently, Staples acquired Quill Corp., a catalog business, in May1998; Ivan Allen, an office furniture company, in November 1998; and ClaricomHoldings Inc., a telecommunications company, in March 1999.


Clearly, many issues arise when one company buys another. But one of the mostimportant to employees is what happens to their benefit plans. As Lazginobserves, people often are uncomfortable with the prospect that features andbenefits in their 401(k), for example, might change for the worse. That’s whyit’s important to plan and communicate well.


According to Phil Petrilli, a human resources executive at Quill, employees’chief concern during their company’s merger with Staples was the treatment oftheir retirement plan. But, “with the transition laid out and communicated,our employees tended to be more receptive to other benefits changes,” hesays.


With the guidance of 401(k) plan administrators New York Life BenefitServices LLP, based in Norwood, Massachusetts, Staples goes through anexhaustive comparison of the acquiring 401(k) plan and the plan to be merged in.Legally, the qualification status of both plans is on the line, so protectingthe necessary benefits of the merging plan is crucial.


On a more personal level, a thorough examination smoothes out the transition.As Lazgin says, “When dollars are involved and people are involved, we mustdeal with these issues with a great deal of sensitivity.”


To better understand the differences between plans, and how to successfullycombine them, here are several questions to ask yourself in order to make aneasier 401(k) plan transition during a merger or acquisition.


How good is the data?


As in any conversion, it’s important to evaluate the accuracy of data froman acquired plan. Information like employee contribution amounts andpercentages, loan repayment amounts, employer match and profit-sharing amounts,compensation, dates of birth, dates of hire, dates of termination, and hoursworked should all be correct when passed to the acquiring plan’s recordkeeper.”If they’re doing daily valuation, chances are it’s a pretty cleanplan,” says Lazgin. “But if it’s monthly or quarterly, it’s moredifficult.”


Daily plans are usually cleaner because information is likely to be updatedmore often. Also, daily recordkeepers have information that’s more visible toparticipants through the Internet, voice response systems, and participantservice centers, so inaccuracies are cleared up faster. But whether an acquiredplan is valued daily or quarterly, there are bound to be imperfections in thedata that need to be fixed. If the information has errors, cleaning it upinvolves going back through each employee’s records and finding mistakes andomissions. The process can be time consuming, but merging the plans with cleaninformation is essential.


What are the protected benefits?


ERISA, the Employee Retirement Income Security Act of 1974, requires certainretirement plan features to be maintained upon acquisition or merger. Plansponsors need to evaluate each of these protected benefits in the acquired planin order to take the appropriate steps with the merger.


  • Vesting: When Staples bought Claricom, the merging plans had different vesting schedules. And since vesting is a protected benefit, Staples had to be careful in merging these two different plan features.


    Staples, a retailer that tends to employ young and shorter-service employees,designed its vesting schedule to reward longer-service employees. Its plan,therefore, has a graded five-year vesting schedule. After the first year ofservice, employees are 20 percent vested, and every year after that they gainanother 20 percent vesting. This way, even short-term employees receive some ofthe company match when they leave. But if they choose to stay longer, they willbenefit even more.


    Claricom had had four-year graded vesting before merging with Staples. Giventhe nature of the two businesses, and the need to add incentives for Staples’48,000 mainly retail employees for longer service, Lazgin decided to keepStaples’ five-year schedule. But because vesting is a protected benefit,Claricom’s four-year vesting schedule was rolled into the merged plan forformer Claricom employees.


    According to Tracy Mignone, benefits manager at Claricom (now called StaplesCommunications), this transition wasn’t problematic. Employees who had beenvested remained so; those who weren’t stayed on their old schedules; newemployees had another year to wait but received other benefits, such as highermatching, in the Staples plan.

  • In-Service Withdrawals: All in-service withdrawal options are protected benefits except for hardship withdrawals. The most common allows employees to withdraw 401(k) contributions (and, at times, company contributions) after age 591⁄2. Other in-service withdrawal features can relate to rollover and company contributions.


    Quill, the company Staples bought two years ago, had an in-service withdrawaloption at age 65. Many of the employees at Quill were long-term, according toLazgin, and an age 65 in-service withdrawal option made sense for that plan.


    But Staples’ retirement plan had no such feature. Staples employees areyoung — the average age of the entire company is 32. Lazgin says most Staplesemployees rarely even think about being 65. So this protected benefit was notbeneficial to the overall Staples plan and was not adopted upon the merger. Butsince it had been a protected benefit, this feature was “grandfathered,”or rolled in, for existing Quill employees.

  • Distribution Options: Distribution options — or the way in which plan participants will receive assets on termination or retirement — are also protected. For instance, the plan might allow a lump sum distribution, installments, or the establishment of an annuity that pays out retirement income. Since many plans differ in the way distribution options are set up, protecting this benefit for “merged” employees can prove administratively difficult.


    Claricom allowed participants to receive retirement assets either in a lumpsum or in installments, whereas Staples provided a lump sum option only. Uponits merger with Claricom, Staples amended its plan to include both options forall employees.

What are non-protected benefits?


Even though non-protected benefits are not, as their name indicates, legallyprotected, how these benefits are handled in a merger can make a big differenceto an acquired company’s employees. Lazgin describes her philosophy onintegrating non-protected benefits as a best practice. “If there’s a goodreason for changing our plan to make it more attractive, then we would certainlyconsider it, as we did with our change in eligibility,” she explains.


  • Eligibility: Until its acquisition of Ivan Allen, Staples required one year of service before employees could participate in its 401(k) plan. But it thought the acquired plan’s provision, which allowed immediate entry, was more employee friendly.


    “Why are we making them wait a year when we want new employees to feel apart of the company from the start? My mandate is to gain synergies from theacquisition. We maximize benefit programs by doing that,” reasons Lazgin.This acquisition prompted Staples to change its plan to six months of servicefor eligibility. Those who had been in the Ivan Allen plan were allowed inimmediately.


    One eligibility issue that Staples had not encountered until the Claricommerger is that of coverage. What if the acquiring plan doesn’t cover a certainclass of workers (hourly employees, for instance) but the acquired plan does?Since eligibility is not a protected benefit, it may be legal to exclude the newclass of employees, but their reaction to that must be considered.

  • Company Match: One of the significant provisions for “acquired” employees is how their new employer matches 401(k) contributions. Keith Onysio, assistant controller at Quill, describes the feeling well. “Since I’m a financial guy, I was looking first at what the investment options were and what the matching looked like.”


    Onysio says he was very pleased with the changeover in investment options –from five no-name funds to nine brand-name options plus a match in Staplesstock. Quill would match 50 percent of employee contributions up to 5 percent ofpay. Staples matches 25 percent of employee contributions up to 6 percent ofpay, but also has a discretionary 20 percent match based on company performance.So if the company opts for this match, employees can receive a full45-cents-on-the-dollar match up to 6 percent of their pay. Staples has awardedthis match for the last six years.


    But even so, Onysio says, the word “discretionary” added someuncertainty to the picture. This is the type of thing that makes mergersdifficult for an acquired company’s employees. For Claricom, Staples’ matchand discretionary match were icing on the cake. Before the merger, Claricomwould match 25 percent of employee contributions with a maximum company paymentof $660. Tracy Mignone says employees “were ready to stand up and shouthooray” at the increased Staples match.

  • Loans and Hardship Withdrawals: Loans and hardship withdrawals aren’t protected benefits, so acquiring companies can abandon them at any time. But luckily for employees acquired by Staples, its corporate plan is quite generous. Many plans offer these benefits, even though they aren’t required by law. Loan and hardship withdrawal features allow access to 401(k) funds for expenses such as down payment on a house or in the event of serious illness. Staples allows loans to be given for any reason with no fee to the participant. It allows participants to withdraw pre-tax contributions and any rollovers from their 401(k) accounts in the event of a hardship.

  • Crediting Prior Service: There are two ways to credit prior service: the”hours of service” method or the “elapsed time” method. Theelapsed time method determines vesting by charting service from date of hire todate of termination. The hours of service method measures hours of serviceduring a 12-month period. If each plan in a merger credits service differently,a transition rule applies to convert one plan to the other’s method.


    This transition took place in merging Quill into the Staples plan. Staplesuses the hours of service method and Quill used elapsed time. “Shiftingfrom elapsed time to hours of service in the Staples plan was not anissue,” says Petrilli of Quill. “Expectations were managed, and newemployees come in knowing the ground rules.”

How do you communicate these changes?


Keeping lines of communication open with employees — old and new — is alsocrucial to a plan merger. Since new employees will have access to a differentfund lineup, they’ll need to decide how to transfer their assets and meetdeadlines for doing so.


Onysio of Quill says merger communication was handled both by onsite HRprofessionals and by Staples. This hand-in-hand style made him and other Quillemployees feel as if the acquiring company was working with, not dictating to,Quill. “I was kept in the loop and was given information in a timelymanner,” he says.


An important aspect of communicating a plan merger is to inform newparticipants about the so-called “blackout period.” The blackout, ortransition, is a period during which 401(k) contributions and loan repaymentswill continue to be deducted from paychecks and invested into the new plan, butparticipants cannot reallocate assets, request loans, or make withdrawals.Employees in quarterly valued plans will notice little difference since, for themost part, they could make changes only once in a period (i.e., month, quarter)before.


The blackout is most difficult for plans already in a daily environment, eventhough the overall time frame will be shorter. Participants may get nervous whenthey can’t touch their 401(k) money for approximately one to two months. A new401(k) provider should communicate and reassure employees through magazines,posters, memos, and/or employee meetings before and during the blackout period.


The most important thing a plan sponsor can do is analyze each plan carefullyto be sure nothing is missed, and communicate effectively with new employees.According to Nancy Lazgin, plan sponsors should “manage for success.”This includes being respectful of the participants as well as the prior planvendors. Without the help of all these parties, the transition can have greathuman and financial costs.


Workforce, May 2000, Vol. 79, No. 5, pp. 40-44— Subscribenow!

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Dear Workforce: How Do You Control the Smell?

Q
Dear Workforce:
We are having a problem with an employee using so much fragrance that it’s causing others to have an allergic reaction. We have tried to request that the employee tone down the amount, but to no avail.
During orientation, we mention that we have a no-smoking building and some people are also allergic to fragrances. We request that everyone keeps perfumed items to a minimum. That’s always worked before, but not with this employee. Any suggestions?
— Overfragranced
A
Dear Fragrance:
Your situation isn’t so uncommon. In fact, employers could potentially have a legal duty to ask people not to wear offensive smells. I imagine people in the medical field are especially careful, as doctors, nurses and support staff don’t want to cause patients to have allergic reactions.
In addition to crafting a policy, now is the time to discretely sit this employee down and have a frank discussion. Perhaps you’ve been trying to be tactful, and this person remains blissfully unaware.
You can draft a written policy to the effect that the excessive use of perfume/cologne is to be avoided. You could define “excessive” in your work environment as creating distracting or uncomfortable work conditions for others, an assault on the senses in the same league as blasting the stereo or wearing overly provocative clothing in the office.
But someone should also spell things out a little better for the employee. You need to be as nice as possible but also firm. The fragrance might be lovely, but in the confines of the office it’s causing allergies, which is making the workplace unpleasant (if not hazardous) for others.
The amount must be drastically toned down so it is not obtrusive to others, or not worn at all. Use the written policy to back you up if need be, but perhaps all the employee needs is to be aware that this isn’t simply management imposing its own preference, but a necessary step for others’ well-being.
Good luck!
SOURCES
: Kelly Dunn, Workforce, April 2000 and Epstein, Becker & Green (EBG), a New York-based law firm.
E-mail your Dear Workforce questions to Online Editor Todd Raphael at raphaelt@workforceonline.com, along with your name, title, organization and location. Unless you state otherwise, your identifying info may be used on Workforce.com and in Workforce magazine. We can’t guarantee we’ll be able to answer every question.

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Sample Attendance Recordkeeping (Time Sheet) Policy

Here are a few paragraphs you can use and modify when crafting a time sheet policy for your employee handbook or intranet.



Each non-exempt employee is responsible for accurately recording the hours worked, sick leave, vacation, holidays and leaves of absence, whether paid or unpaid, on his/her time sheet. It is essential that this information be accurate.


Each exempt employee must indicate vacation, sick leave, leaves of absence (whether paid or unpaid) on his/her time sheet to ensure proper accrual and accounting of leave benefits.


At the end of the pay period, each employee must sign the time sheet signifying that the time record is accurate and complete. Changes to the time sheet may be made only by the employee and must be initialed by a member of management, signifying that the change is correct and accurate.


All time sheets must be submitted to the supervisor for approval and then submitted for payment processing. If an employee feels that changes or alterations have been made in his/her time sheet or that the information entered is incorrect, he/she must notify the supervisor so that the matter can be handled quickly.


All overtime worked must be authorized in advance by the supervisor and later designated on the time sheet showing time commenced and time ceased. A notation must be made on the time sheet as to the purpose of the overtime.


All time sheets must be received by noon on the Monday following the end of the pay period. Time sheets received after noon on Monday will be processed at the end of the next regularly scheduled pay period.


SOURCE: Todd Raphael, Online Editor, and other Workforce staff, April 20, 2000.


The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.