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Seven Retention Steps

The steps to retaining key employees today have evolved because knowledgable workers have become such a valuable resource. Organizations who succeed in keeping these respected employees will ultimately flourish using principles such as these:


Identify the most valuable resources to retain. In order to control turnover, leaders must first focus on building their pool of top talent. Leaders should determine which people represent the most critical resources for the organization. The first principle of controlling turnover is knowing who the company’s critical human assets are. It’s a fundamental flaw to try focusing on every single employee as if he or she is key.


Drive out myths. Becoming realistic about driving retention is the second principle. There are myths and misconceptions regarding the best ways to keep top employees. Inaccurate explanations abound as to why employees leave organizations. Leaders must sort out fact from fiction, determine the competitive situation within their industry, and deal with the hard reality of their organization’s strengths and weaknesses.


Adhere to the new rules to compete for top talent. There are different rules which govern a new generation of employees who have different needs. Playing by the old rules can lead to losing important resources to a competitor that has already dealt with the new reality. Determine what you want and will do to retain top employees and do it consistently in accordance with the new rules.


Develop retention plans. Employers are spending more time and capital to attract resources, but are missing opportunities to keep them. Once you’re sure who your key employees are, recognize that they have different needs. Key employees are more apt to stay with organizations that are interested in their unique situations. Consider what the organization is willing to do to retain each key person, and develop individual plans that tie that person to the organization.


Employ powerful conversations. Best-in-class organizations today are reassessing their HR practices, testing underlying assumptions, and challenging them by talking to key employees and asking them what they want from the organization in the short and long term. Upfront, they ask key employees, “What will it take to keep you motivated, interested and linked?”


Evaluate. Have a powerful conversation strategy with the top third, and then work down. A powerful conversation is one in which the leader can honestly ask an employee, “What do you need and what do you want?” These discussions are best when they’re completely focused on the employee. For the manager, out of this conversation comes a vulnerability report which leads to a plan.


Plan. This final stage is where the leader and the employee reach an agreement on how to approach the needs and wants via a structured plan.


Workforce, October 1998, Vol. 77, No. 10, p. 76.

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Sexual Harassment What Youre Liable For Now

Sexual harassment is in the news every week. And on June 26, the topic made news again, as the United States Supreme Court issued rulings on the final two cases in a trio of sexual harassment lawsuits this year — the first of which was ruled on March 4 — having important implications for employers and HR managers.

In one case ruling, for the first time since Title VII of the Civil Rights Act of 1964 became law, employer liability for sexual harassment between members of the same gender was clearly defined. In another case ruling, sexual harassment by supervisors has been outlawed, and in the third case ruling, an employee can now sue an employer for harassment, even if the employee suffered no tangible job loss because of the misconduct.

Take a deep breath, folks, because these three cases mean big changes. Some of these changes are favorable for employers, but some aren’t. The implications of the Supreme Court’s decisions are clear: Sexual discrimination and harassment won’t be tolerated in America’s workplaces. The legal arena is making sure of it. Here’s what was decided and what it means for your organization:

CASE I: Oncale vs. Sundowner Offshore Services, Inc. (No. 96-568)

Decision date: March 4, 1998

Key question: Is it sexual harassment when misconduct is between members of the same gender?

Facts of the case: Joseph Oncale was hired as a roustabout (a deckhand or waterfront laborer) through Sundowner Offshore Services’ (SOS) Houma, Louisiana, office. He was assigned to work with an eight-man crew on a Chevron USA oil platform in the Gulf of Mexico.

In 1991, three of the crew members, including two supervisors, forcibly subjected Oncale on numerous occasions to humiliating, sex-related actions, some in front of the rest of the crew. The two supervisors, John Lyons, a crane operator, and Danny Pippen, a driller, physically assaulted Oncale in a sexual manner, and one of the supervisors even threatened Oncale with rape. A third co-worker, Brandon Johnson, also participated in the harassment.

Oncale complained of the blatant sexual misconduct to his supervisor, the company’s safety compliance clerk. But instead of doing anything about the problem, the clerk replied that he, too, had been picked on by two supervisors who had called him a name suggesting that he was homosexual.

Oncale also reported the misconduct to the highest-ranking supervisor on the rig, who neither investigated nor intervened. Oncale ultimately quit because of the verbal abuse and harassment. He testified in his deposition that he thought if he didn’t leave his job, he’d be raped or forced to have sex. SOS later explained the supervisors’ behavior as mere horseplay.

U.S. Supreme Court ruling: Unanimous (9 0)

The Supreme Court unanimously declared that sexual harassment is actionable, even when the people involved are of the same sex. In Justice Antonin Scalia’s opinion, what matters is the conduct at issue, not the sex of the people involved and not the presence or absence of sexual desire, whether heterosexual or homosexual. The Supreme Court noted that the law equally protects men and women against workplace discrimination.

CASE II: Burlington Industries, Inc. vs. Ellerth (No. 97-569)

Decision date: June 26, 1998

Key question: Is it sexual harassment when there’s no tangible job detriment?

Facts of the case: Kimberly Ellerth, a former marketing assistant at Burlington Industries’ mattress-fabric division in Chicago, claimed her boss, Theodore Slowik, a divisional vice president for sales and marketing, had made repeated “passes” at her in 1993 and 1994 during her employment. She claims he made inappropriate comments to her, such as “You know, Kim, I could make your life very hard or very easy at Burlington,” and “Are you wearing shorter skirts, yet, Kim, because it would make your job a whole lot easier.”

Despite rebuffing his advances, Ellerth never suffered any tangible job detriment because of the harassment. And although Ellerth was familiar with the company’s anti-sexual harassment policy, she never informed management about her supervisor’s misconduct. Ellerth even received a promotion before quitting. Fifteen months after resigning, she sued Burlington.

Title VII was unclear because of its original intent to prohibit employers from discriminating against women in jobs traditionally held by men.

U.S. Supreme Court ruling: Majority vote (7 2)

An employer can be liable for sexual harassment and can be sued regardless of whether a supervisor’s threats against an employee — for example, no promotion without sexual favors (quid pro quo) — are carried out. However, the Supreme Court says employers can assert an “affirmative defense” — meaning that an employer may be relieved of liability in the absence of tangible job detriment if it can show that it exercised reasonable care to prohibit and remedy sexual harassment, and if it can show that the employee unreasonably failed to take advantage of the corrective opportunities offered by the employer.

CASE III: Faragher vs. City of Boca Raton, Florida (No. 97-282)

Decision date: June 26, 1998

Key question: Is an organization liable for sexual harassment when the organization is unaware of a supervisor’s misconduct?

Facts of the case: Once an ocean lifeguard for the city of Boca Raton, Florida, Beth Faragher claimed she endured repeated sexual harassment from two male supervisors during the five years she worked on the city’s beaches.

Now a lawyer, Faragher says she and seven other female lifeguards worked for two men, Bill Terry and David Silverman, who would request sexual favors, grab them by the breasts and buttocks, try to break into their showers and referred to them regularly by vulgar epithets. Faragher says she didn’t report the problem to higher-ups because she feared retaliation. However, Faragher did speak to one police lieutenant about the behavior, but he didn’t think it was his place to act upon workplace complaints.

Attorneys for the city of Boca Raton argued that the city shouldn’t be held liable because it had a clear policy against sexual harassment since 1986, and because the male supervisors were acting on their own — not as representatives of the city. The city, however, had failed to disseminate the policy to its lifeguard employees or supervisors. Therefore, neither Faragher nor her supervisors had any knowledge of the policy.

U.S. Supreme Court ruling: Majority vote (7 2)

The Supreme Court said that an employer is liable for a pervasive, hostile atmosphere of harassment, and an employer is potentially liable for its supervisors’ misconduct, whether the company was aware of the harassment or not.

Sexual harassment: Unlawful between people of the same gender.
Of the three sexual-harassment cases decided this year, Oncale vs. Sundowner was the only unanimous decision handed down, which means a clear message for employers: Harassment between two or more men, or between two or more women, is still harassment. However, while on its way to the High Court, the Oncale case was perhaps the most misunderstood of the three harassment cases.

The confusion probably stems from the fact that whenever the word “sex” is involved in a discussion about sexual harassment, people get confused about what the term means. Does “sex” refer to the gender of the harasser or the victim? Or does it refer to the type of behavior? Or all three? That’s exactly the confusion that plagued lower courts with this case, and it was the issue that the nine Supreme Court justices agreed to answer.

Here’s what they had to work with: Title VII of the Civil Rights Act provides, in part, that “it shall be an unlawful employment practice for an employer … to discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment because of such individual’s race, color, religion, sex or national origin.” It’s the “because of … sex” phrase that has created all the controversy and confusion over the years.

Until now, Title VII was unclear whether it covered sexual harassment between members of the same gender because of its original intent to prohibit employers from discriminating against women in jobs traditionally held by men. Because of the law’s origins, some lower courts ruled that in cases like Oncale, same-sex sexual harassment lawsuits could be brought to court only if the harasser was gay, but dismissed lawsuits when the harasser was heterosexual. Other courts suggested that in cases in which the victim was gay or lesbian, he or she wasn’t protected because the harassment was considered sexual-orientation discrimination, which Title VII has been held not to prohibit.

In an amicus brief sent to the Supreme Court to consider while deciding this case, Lambda Legal Defense and Education Fund — a legal organization based in New York City that defends the civil rights of lesbians, gay men and people with HIV and AIDS — urged the Supreme Court to recognize that Title VII should be applied without regard to the sex or sexual orientation of the harasser or victim.

“Lambda, with the ACLU, NOW, Women’s Legal Defense Fund and many other civil rights groups, urges the Supreme Court to recognize that sexual harassment is about subjecting employees to unfair working conditions by taking advantage of them at a very vulnerable, sexual level,” said Ruth E. Harlow, Lambda managing attorney, who assisted in writing the brief, and who was quoted in an article compiled by Badpuppy’s GayToday, a daily news publication for the global gay and lesbian community. “Every instance of severe sexual harassment plays upon the sex of the targeted employee and is unlawful under Title VII, regardless of the gender or sexual orientation of the perpetrators,” she said.

Interestingly enough, Oncale identifies himself as a heterosexual, and didn’t realize that he would become an icon for gay-rights advocates. “He started out living a very closed existence, not having much contact with gay people,” his lawyer told The Advocate, a gay issues publication, last year. “But during this process, he has learned what gay people face in terms of discrimination. If his case can help them out, he’s happy about that.”

The Supreme Court affirmed that when harassment has a tangible consequence, like a poor work assignment, employer liability is absolute.

In the end, sexual orientation wasn’t the issue. Disparate impact “because of sex” was the issue. In its final decision, the Supreme Court held that Title VII showed “a congressional intent to strike at the entire spectrum of disparate treatment of men and women in employment.” So even though sexual harassment isn’t expressly prohibited in federal employment discrimination statutes, the Supreme Court has said it is actionable as a form of sex discrimination under Title VII.

In making the decision, the Supreme Court looked to the law of racial discrimination, which makes it clear that it’s possible for an employer to discriminate against members of its own race, not just members of another race. The Supreme Court bolstered its opinion with a sports metaphor to connote that context is everything: “A professional football player’s working environment is not severely or pervasively abusive, for example, if the coach smacks him on the buttocks as he heads onto the field, even if the same behavior would reasonably be experienced as abusive by the coach’s secretary (male or female) back at the office.”

“I think for most major employers, [the Oncale case decision] is just a blip on their radar screen because their policies already prohibit harassment of any form — not only sex, but also racial, religious, ethnic and any type of harassment based on any protected characteristic,” comments Paul Salvatore, a New York City-based labor and employment law partner and an expert on sexual harassment issues at Proskauer Rose LLP. “It came as no great surprise, I think, to most employers of any size with any sophisticated human resource function that this was the way the Supreme Court was going to go on this case.” Salvatore emphasizes that this case isn’t a big deal for most big employers that already have had policies against same-sex harassment in place for a while.

That’s exactly how Bob Hamilton, human resources diversity consultant for E.I. du Pont de Nemours and Co. (DuPont), based in Wilmington, Delaware, sees it. “We’ve always treated sexual harassment among the same gender as inappropriate,” says Hamilton, “but up until the Supreme Court rulings, it depended on the various district courts as to whether it was actionable [under the law] or not. So the Supreme Court finally made clarity around this issue.”

DuPont’s HR team, which won the 1997 Workforce Optimas Award for its laudable approach to diversity issues, identified same-sex harassment as a “no-no” years ago. Since 1988, before most companies had even acknowledged the term “sexual harassment,” DuPont had its training program, “A Matter of Respect,” up and running.

The training, which involves a series of video vignettes that emphasize nondiscriminatory behavior in the work environment, clearly shows workers how to treat each other on the job — and serves as a model program for other employers to emulate. “From our nondiscrimination policy and from our policies about treating people with respect, we try to let people know that whether it’s [happening between members of] the same sex or not, [discriminatory] behavior is inappropriate.”

Although it’s been a no-brainer to treat same-sex harassment the same as opposite-sex harassment for big-name firms like DuPont, the majority of most larger, mid-sized and smaller organizations aren’t quite so enlightened. Most experts say there’s going to be quite a bit of tweaking of policies, practices and training going on over the next few years to comply with the new law because of the Oncale case. Says one attorney who wished not to be identified: “We all know same-sex harassment is now covered. But it’s a little unclear under what circumstances.” The lower courts are bound to have to address that question over the next several years.

There doesn’t have to be a tangible job detriment for harassment to be actionable.
The key question raised by the Ellerth vs. Burlington Industries case was if nothing happened to an employee in terms of a tangible job threat or detriment, such as a salary reduction, a less-desirable job assignment or denial of a promotion, could he or she claim sexual harassment? The Supreme Court affirmed that when harassment has a tangible consequence, like a poor work assignment, employer liability is absolute.

But what’s more interesting is that the court took the law a step further by saying that even when there’s no tangible job detriment to an employee because of sexual harassment, an employer may still be responsible. The Supreme Court is saying, in effect, that harassment is defined by the ugly behavior of the perpetrator, not by what happens to the worker subsequently.

And the Supreme Court clearly outlined employer liability when this concrete tangibility isn’t present. Employers can be held for liability or damages unless: 1) They have a clear policy against harassment, including how to report such behavior, and 2) Such a policy exists, but the employee bringing suit “unreasonably” failed to take advantage of it. These two conditions of liability are called, in legalese, an affirmative defense.

“The million dollar question now is what impact will the affirmative defense have? Will it be a complete defense to liability? Or will it simply be a defense that lessens the amount of damages for which the company is responsible?” asks Gerald L. Maatman, Jr., a partner in the law firm of Baker & McKenzie in Chicago, specializing in sexual harassment issues. The Supreme Court has made it unclear because it used the word “or” — liability or damages. There’s no way of predicting exactly how lower courts may interpret this in future court decisions.

The good news for employers is that the second prong of the affirmative defense implies employees have a bigger role to play than they previously had to. Under the old rules, workers needed to tell someone if they were experiencing sexual harassment. Under the new rules, workers now need to tell someone with decision-making power if they’re experiencing sexual harassment. Both the Ellerth and Faragher cases make it clear that a worker who’s being harassed must report it. The employee has “a corresponding obligation of reasonable care to avoid harm.” The Supreme Court made it more of a two-way street.

Says Salvatore: “Before, we were kind of reading the tea leaves and reading between the lines. Now we have a definitive statement from the Supreme Court.”

Employers are now liable for supervisor misconduct.
Up until now, most sexual harassment cases have been known as “hostile work environment” — when someone is the victim of a pervasive pattern of unwanted advances, touching and other misbehavior in a given workplace.

Many employers have had no trouble getting such cases thrown out of court. That’s been mostly because employee plaintiffs had to prove negligence — that a company knew, or should have known, about the offensive behavior. Under the old rules, a manager who didn’t know about sexual harassment among his or her employees usually wasn’t responsible for the behavior. That has changed — dramatically.

“There’s been a definite change in the standard of liability when the harassment is done by a supervisor in the hostile work environment context, changing from a basically negligent standard — the ‘knew or should have known’ standard — to vicarious liability with an affirmative defense,” explains Ellen McLaughlin, a partner in the law firm of Seyfarth, Shaw, Fairweather & Geraldson in Chicago. McLaughlin specializes in sexual harassment liability issues. Now, the manager will be held strictly liable for a harasser’s actions, unless a company has a strong system of dealing with such problems, as outlined in the previous section.

That means plaintiffs now have an easier path to sue because a company will be held liable for its supervisors’ misconduct. Supervisors need to be advised of their responsibility and know how to handle such problems.

“For once, being in Connecticut is an advantage,” quips Jim Carabetta, director of HR for Fosdick Corp. in Wallingford, Connecticut. He explains: “Connecticut has its own, more stringent harassment laws, which require every employee with the authority to hire, fire, promote, discipline, direct, review or effectively recommend any of the above within six months of hire or promotion into the mandated group, and have two hours of approved sensitivity/harassment prevention training in a course that meets the state’s criterion for content.” Carabetta says his firm sticks by these guidelines, and trains its managers accordingly. Because he’s already been up to speed with the supervisor training, the new rulings by the Supreme Court won’t have much effect on how he proceeds with sexual harassment training.

So where are we on the sexual harassment spectrum?
Employers are collectively standing at the crossroads on the issue of sexual harassment. These three cases make it clear that employers, and HR in particular, can’t afford to ignore the topic. This is happening with good reason: Everyone’s predicting more lawsuits. The courts are already flooded with such cases, especially since 1991, the year that the Anita Hill-Clarence Thomas hearings made headline news and plaintiffs were first eligible for punitive damages.

“If you’re trying to get ahead of the curve, you simply have to do what the Supreme Court is telling you a responsible employer should do,” says Maatman.

Maatman explains: “The bottom line is simple — employers should be prepared to benamed in more lawsuits, and to incur a much greater risk of liability.” He says the net result of the rulings is that it’s easier for a plaintiff to state a case so that more people who go visit a lawyer will be told they have enough evidence to file a case. Whereas before, it might not be worth the time and effort to even file a lawsuit. “Also, it will be easier for a plaintiff to recover [damages], at least in a case of a company sued for what its supervisor does,” adds Maatman.

These three high-court decisions are forcing a lot of employers to take stock. “Employers are quickly revisiting their policies and modifying them,” says Seyfarth, Shaw, Fairweather & Geraldson’s McLaughlin, who recently gave a seminar on these Supreme Court decisions to a group of 260 people, mostly HR pros.

And she adds that companies are scrambling to get training programs together. “At many companies, especially if they’re having a bad financial year, training may be one of those things that goes. But I’ve heard some HR pros say, ‘I’m going back to my boss and tell him or her we really need to put training about sexual harassment back in the budget, given what’s occurred with these Supreme Court decisions.” Those who’ve already been vigilant on this issue remain convinced they need to stand firm in their actions. “Essentially, the rulings have no immediate effect on us because we’ve had a long-standing policy in place,” says DuPont’s Hamilton.

And Los Angeles-based Atlantic Richfield Co. (ARCO) is taking the same strong stance it has always had on the issue, as well. “For California employers, the Supreme Court cases, while interesting, aren’t that big a deal,” says Lloyd Loomis, the firm’s senior corporate counsel, employee relations. Of course, ARCO has also been a pioneer in taking zero tolerance to sexual harassment for years. Despite being in a male-dominated industry, the firm has created a system of awareness about such issues, including a 15-page section on sexual harassment on the firm’s intranet called “You Just Can’t Do That!” that’s available to all 20,000 employees. Even with such extraordinary measures, the company found itself firing an oil-tanker captain several years ago for sexually harassing co-workers. Clearly, even firms with the best of policies find themselves continually dealing with the issue.

“If you’re trying to get ahead of the curve, be practical and want to do the right thing, you simply have to do what the Supreme Court is telling you a responsible employer should do,” says Maatman. “Then if you still get sued, at least you have all the potential arguments available to you that [suggest] the case ought to be kicked out of the system in the first 30 days. If the court says no, it simply goes to damages, and you will be in the best and strongest position possible, should you have to face the jury and argue the case.”

The issue of sexual harassment isn’t primarily a legal one.
Employers should remember that sexual harassment is a behavioral and cultural problem in Corporate America, and it should be dealt with on both the individual and cultural level. Indeed, when 1,700 employees at medium- to large-sized U.S. companies were asked by Walker Information, a global research firm based in Indianapolis, to complete a national business integrity survey, employees said the top ethical problem in their organizations is sexual harassment.

Says Jennifer Blalock, a Cincinnati-based trainer who specializes in conflict resolution and preventing workplace harassment: “The issue of sexual harassment forces us to examine human behavior and ask, ‘Why does it require an elaborate set of laws to get people to respect each other? Where would we be if there were no laws holding us accountable for our behavior?’”

Blalock has a good point. She says companies should focus on the average individual. People need to learn how to communicate with each other. “A policy is useless unless people use it. Most research indicates that a small fraction of employees ever say or do anything about harassing behavior. It’s best to intervene and provide solutions before they escalate into full-blown, formal complaints,” Blalock adds. Which brings us back to the Supreme Court decisions.

“I don’t think that anyone is running for the hills or throwing up their hands and saying, ‘The sky is falling’ as a result of these three rulings,” says Maatman. “Instead, they’re redoubling their efforts at training, circulation and dissemination of policy statements.”

What employers should keep in mind is this: If you didn’t pay much attention to the issue of sexual harassment before, the Supreme Court just gave you at least three compelling reasons to do so. It has raised the bar, so to speak. If you already had a pretty good handle on the issue, make sure you tweak your policy and procedures so that they fall in line with the new rulings. As the experts say, this issue still isn’t going away — so make sure you’re doing what’s appropriate to deal with it.

Workforce, October 1998, Vol. 77, No. 10, pp. 34-42.

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Why Employees Stay — or GO

The employment picture is no longer pretty for employers. The supply side of having ample human resources assets has faded to near-full employment in many local and global markets. The result is a growing emphasis and a needs-based concern for attracting and retaining valuable employees.


The signs are obvious: employee benefits are increasing again; employment advertising has doubled since 1990 in most major U.S. markets; and employers from all segments of industry are searching for hard-to-find resources and designing new-and-improved benefits to help differentiate their organizations as the “organizations of choice.”


It is, and will remain, an employees’ market. Companies aren’t only having a hard time attracting employees—they’re finding it difficult to keep them.


At Linkage Inc., a global organizational development company based in Lexington, Massachusetts, we researched more than 100 HR and organizational development staff of medium and large companies. The primary question of our survey was: “Why do some leaders have consistently better retention of top talent?” We attempted to find why employees leave their organizations, and what employers can do to keep their key talent.


An unplanned turnover means more than a vacant position.
In the simplest terms, turnover is the loss of a human resource that requires a replacement. And there are two kinds of turnover: planned and unplanned.


Planned turnover isn’t usually a problem—like when someone retires or has to move on. On the other hand, unplanned turnover can be, and frequently is, devastating to organizations. When a key person leaves, businesses experience tremendous hurt and dislocation, resulting in lost business and lower margins. In today’s scarcity of knowledge workers, unplanned turnover can be downright scary.


Our research has uncovered some basic facts that further indicate the enormity of the stakes:


  • The most successful organizations hold on to their key resources.
  • Unplanned turnover can cost as much as three to five times the annual salary of the individuals involved.
  • We’re at the dawn of an era of increasing instability, in which many knowledge-based industries in the next 10 years will likely show a 30 percent to 40 percent rate of annual turnover.
  • The rules have changed regarding why employees leave and what companies do to keep those who threaten to leave.
  • There are some companies that recruiters don’t touch. They know it’s time consuming to pull people out of these organizations because HR has a handle on how to keep their talent. However, other companies are referred to as builders. Their training and development efforts only serve to get the employees ready to move on. These are organizations that are vulnerable to a recruiter’s cold call.

Consider that on any given day, while HR is hard at work improving ways to attract new talent, recruiters (headhunters, employment counselors and agents) are at your back door talking to your key talent, encouraging them to consider better opportunities elsewhere. What recruiters look for in their cold calls and referral networks are dissatisfiers—personally significant reasons for an employee to leave the company. They know from experience that all employees, even the most loyal, can be led to focus on what’s not right within their organization. Recruiters present new possibilities, and where to go to get more satisfaction. Employers need to better understand why employees leave their organizations.


There are various reasons employees leave one employer for another. As one recruiter told us, “Employees never leave because of just one dissatisfier.” While some leave because there are multiple upsides in a potential new job, others leave because there are more dissatisfiers at their present job. Even if there are large financial advances involved in a new job, key employees are unlikely to leave just for the money. We’ve talked to hundreds who have turned down huge cash because there weren’t enough dissatisfiers in their present job to pull them away.


But there is a price at which an employee would be willing to take the leap. As one highly paid Wall Street analyst explained, “The money was better, but for years I’ve been looking for the chance to be heard. No one here listens to my ideas. I could’ve gotten most of the gain here. In fact, the employer offered to match the offer.” Still, he decided to leave, because there were simply too many dissatisfiers in the mix for him to stay.


Employees feel obliged to leave to achieve unmet satisfiers.
Our research also indicates that most employees don’t really want to leave their organizations, but feel they must leave to achieve the satisfiers that aren’t being met. They’re simply driven out by dissatisfaction. Specifically, employees typically leave for five reasons:


1. The confidence factor. Organizations often look like they’re more out of focus when they’re seen internally, rather than externally. It’s not always clear to employees what the strategy is, and even when there’s a clear-cut strategy, it might not be apparent that it’s linked to the long-term mission and health of the organization. When a key employee loses confidence and hope, he or she may begin to think the grass is greener in another company, where there seems to be more focus.


2. The emotional factor. Key employees need to be recognized, rewarded and developed. When employees leave an organization, they often site lack of recognition, inadequate rewards and too little focus on their personal development as reasons to move on. When employers fail to fulfill these needs, they inevitably conclude they have no choice but to move on.


3. The trust factor. A feeling often expressed upon departure is: “There were too many broken promises and commitments that weren’t kept. They weren’t loyal to me. Why should I remain loyal to them?” Trust is a two-way street—it begins with the employer, and employees respond in kind. Psychologists refer to this phenomenon as transference—the ability of one person to transfer his or her care to another. A broken promise, whether implicit or explicit, breaks the underpinnings that support the trust paradigm.


4. The fit factor. Key employees who dedicate themselves to their organizations need to feel as though they fit—that their values and principles match those of the organization. We frequently hear exiting employees say, “I didn’t fit in with the team like I used to.” It’s much easier to leave a manager or team that you don’t like, or more importantly, that you believe doesn’t like you.


5. The listening factor. Key employees need to believe they’re being heard. This is perhaps the most frequently cited reason why employees leave an organization. They believe they’re not being heard. Failure to say exactly what’s needed and expected of them becomes a hurdle that tires out employees, and ends in statements like, “It isn’t worth it anymore.”


Identify who’s worth keeping.
Organizations today need to re-examine their rules in order to hold top people. First, you must identify the most important people to retain.


The rationale for making such an assessment is simple but compelling: Because you can’t reasonably pay close attention to every employee, you have to narrow the field so you can make sure your best employees are satisfied. And, especially in large organizations, it’s impossible to measure the potential loss of an employee (during a bidding war, for example) if HR hasn’t done its homework on the front end, and rated the individual in comparison to other employees.


We find that the best organizations use a defined process to identify who they want to keep, mainly because they realize it will never get done if there isn’t some sort of formal mechanism in place.


Managers must identify the best employees through focused decision making. In terms of measures, one easy cutoff is the one-third percentile—that is, the top third of your employees should receive 90 percent of your retention attention. Managers don’t have the time or resources to lavish attention on everyone. In any event, one might pick a different percentage as a cutoff, or opt for a different type of measure—just make a classification that allows HR to focus retention efforts on the most important people to retain.


Another key step is to determine the market worth of each top performer and conduct a vulnerability assessment of the individuals. A vulnerability assessment is to look at the risks that key employees are exposed to on a daily basis. This measure will ensure that you’re not surprised by the sudden departure of one of your key employees. It will also provide you with the data you need to make hard decisions if you get into a bidding war with another company for an important employee.


You should anticipate and create retention scenarios with respect to top employees to be prepared to go to the mat, if necessary. Don’t wait for the offer. Spend time with key people, and use the satisfiers as a checklist to ensure that you’re satisfying them. In that way, if they ever think about leaving, you’ll have a better idea of what buttons you need to push to retain them. Think of retention as a business decision. No prudent businessperson would ever make an important business decision without the relevant data. The same holds true for retention.


More broadly, it’s critical that your organization reward and recognize actual current and potential worth. Don’t rely on old compensation formulas. They’re often detrimental—and can create a syndrome by which even the satisfied employee feels that he or she must leave because of the gap between your outmoded pay structure and the prevailing market rates. Pay for performance against industry standards and market worth, not internal compensation policies and procedures.


The best organizations also design, implement and leverage systems that detect warning signals projected by dissatisfied employees. These systems include performance reviews that give the employee feedback, and also give him or her the opportunity to provide feedback to the organization. A formal feedback mechanism will ensure that you’re warned with enough time to act on it. If you don’t respond, the employee will inevitably conclude that “they don’t care if I stay or not.”


Building relationships with your key employees.
Leaders of benchmark companies continually watch the back door to retain their key resources. They consciously dispel myths, make new rules explicit and support satisfiers. Many leaders follow these guidelines to get better turnover results:


1. They build confidence and hope through vision and strategy. The best managers we have observed spend a lot of time and energy making sure the vision and strategy connect to satisfiers. They invite key persons into the process of creating and defining the company’s vision.


2. They pay attention to the person. We find that the best leaders consciously pay close attention to their top employees, making sure they’re being developed, rewarded and recognized for their contributions. The best leaders find a way to make key persons feel they’re more important than the business (which, arguably, they are). They do all of this in a genuine way—if the appreciation seems forced, it comes off as artificial, and will be counterproductive in the long run.


3. They build loyalty, commitment and trust. Many leaders recognize that trustworthy organizations have higher employee retention. However, too many leaders fail to understand that trust is a belief and loyalty is an attitude—it’s only commitment that is an act of will. We’ve found that better managers focus on creating commitment as the foundation. They act deliberately to ensure that employees know they’re going to follow through on what they say they’re going to do. They are loyal to their key people. These leaders work at commitment, talk about loyalty and demonstrate trust to employees—and they get it back.


4. They build and maintain relationships. Managers should control turnover by making departure from the organization a painful thought, difficult to consider and very personal. Managers build one-on-one relationships with key people, knowing the names and ages of their children and important people in their lives. The network of these relationships becomes the basis of the team. Ultimately, the team becomes the reason why key employees stay.


5. They create clear communications systems. Employees hate to learn important information secondhand, so great managers ensure that every key employee is tied into what they need to know at the right time. Before employees “hear things,” managers should collect information and leverage processes for distributing it to key employees. They see communication as a two-way street.


The truth is people can’t work much harder or longer, and now they have more choices in terms of their employment. With these choices, the leverage has shifted from the employer to the employee. Managers and organizations should protect their back doors from hungry recruiters by learning how to focus on key employee satisfiers and dissatisfiers. Such a fundamental shift in thinking is required to counteract today’s increasing turnover.


Workforce, October 1998, Vol. 77, No. 10, pp. 74-78.

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Sexual Harassment New Rules, Higher Stakes

You’ve drafted policies, posted notices and implemented training. Your work at protecting your company against sexual harassment should be complete, right? Think again.


Unfortunately, your work has just begun. Three recent Supreme Court rulings have increased employers’ liability and have deemed it necessary for you to not only beef up your policies, but to continually communicate them. Read “What You’re Liable For Now,” to learn about your new responsibilities stemming from the court’s decisions.


The second article of this package recognizes that, despite a company’s best efforts, sexual harassment cases may still happen. And when they do happen, they’re costly. Employment practices liability insurance (EPLI) can help defray the costs. Get the facts on this important tool in “After Everything Else—Buy Insurance.”


But your work isn’t only around ensuring that your company is legally compliant. Sexual harassment incidents leave everyone who has been touched by them—the claimant, the alleged harasser and the other employees who either witnessed or were asked to speak about the incident—raw and vulnerable. In “Don’t Forget the Emotional Stakes,” you’ll read about the type of environment that needs to exist in order for healing to take place.


This package should give you a wealth of information on sexual harassment. But if you learn just one thing, make it be this: Keep sexual harassment on your radar screen. You can’t just implement policies, then sit back and relax. Unfortunately, the issue isn’t going away.


Workforce, October 1998, Vol. 77, No. 10, p. 33.

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IThe Leading Edge-I-Painting A Vivid Picture of HR

J

anet M. Brady is a member of what we like to call “the new breed of HR.” She’s smart, visionary and doesn t mind shaking things up a bit in HR when she sees a better way. Brady was in marketing for 17 years at The Clorox Company, where she headed up the function for three years before moving over to HR five years ago. Shortly after her foray into HR, she completely reorganized it, and was featured in “Put Your Job On The Line” (Workforce, June 1995) for her innovative approach to partnering with line management. Here’s a look at Brady’s interesting and effective HR leadership style.


How would you describe your leadership style?
It s evolving. I find that the more I m in a leadership position, the more I have to learn about being a leader. Let me contrast it with my former job in marketing. Having “grown up” in the marketing environment, and done what the folks I was leading have done, then I could get away with being more directive.


But in HR, because I didn t “grow up” in the functional expertise areas, I don t know where the soft spots are. I m forced into more of a leadership mode because I must be able to articulate where I want to go and what I want it to look like. Then I ve got to leave it up to the experts to be able to deliver that. That gave me a kick to start moving away from management to leadership, but I still have a long way to go.


Do you think it was an advantage for you to not have come from an HR background?
It s both an advantage and a disadvantage. It s an advantage because I don t have any background that says, “This is the way it needs to be done.” It s a disadvantage because who knows what I m walking into? I ve found it s evolving–trying to be able to ask the right questions and give people the courage that we can achieve what might look on the surface like it is undoable or very difficult.


Do you have a leadership model?
The model I use in leadership is I try to paint a picture. I try to get people to think about what things could look like, so they can visualize it, too. To use a sports analogy: You re a high jumper and [your coach] says: “I know you can jump another inch.” You think, “How am I going to do that?” Then [the coach] says, “I know you can place in the top five in the state championships.” And you say, “Whoa, how do I do that?” I mean, he gets pretty energized. I try to paint this kind of picture that stretches folks beyond their comfort zones.


Can you give an example of painting a picture for your HR team?
I ll use a banking analogy. When people used to stand in lines to get their banking done, one solution could have been to add more tellers. But the banks said, “No, we re going to put in ATMs.” If you asked consumers, “What do you want?” they weren t going to say, “Gosh, I d like some ATMs” because they had never heard of an ATM. What they needed was faster, more convenient service. You ve got to get them to articulate that.


What we ve tried to do is get our clients to articulate what they need, so we don t just keep adding more HR people. It s asking a lot of questions. And then in this environment of having different constituents-I serve the board of directors, executive management, general office employees, retirees, production and salespeople across the country, every type of function-and they all view HR slightly differently based on their backgrounds, their needs and their histories. That has told me there isn t a one-size-fits-all solution. I ve got to listen and ask questions, so that we can ultimately do something that s fair for everybody. HRcan be very challenging because what we do can affect people at the most personal level and we can t lose sight of that. HR has been very much a challenge from a leadership perspective.


Has your leadership style changed from when you were heading up the marketing function at Clorox to now heading up HR?
My leadership style has changed most dramatically in HR because my constituents are so different. When I was leading the marketing function, I had a more homogeneous group: They came from similar schools had similar backgrounds and they were extremely confident in what they did. In HR, we re charting new ground. I m learning about what it s like to manage international HR. We need to balance the corporate philosophy with country specific needs. That s not easy.


But would you say your marketing background has actually helped you develop this idea of painting pictures for people?
Absolutely. After all, HRalso is in the business of marketing-the difference is we market products to our employees. They are our consumers. And there s also the communication element of leadership. You can t communicate enough.


What would you consider your biggest leadership strength? Do you think it s the painting pictures metaphor?
Yes. I think it s trying to paint a picture and being excited about our ability to deliver it. I m the catalyst for the changes, but I really credit this HR team with making it happen. It s like I m the coach, but I ve got these Michael Jordans. And you know, at the end of the day, you ve got to look at the Michael Jordans and say, “It s a privilege to coach this talent pool.”


What s your definition of a good leader?
You see all kinds of different models and different definitions and the things that resonate most with me are ideas about having a vision, having the courage to hang in there, communicating a lot and having credibility behind your ability to be able to deliver your vision. The courage part [is important] to me because when you re in uncharted territory, and folks are looking to you to guide them and you re not exactly sure this is the right thing to do, you really have to have the courage to say, “I think this is right.” Then you have to have a strong team that works with you to help you deliver the vision. But sometimes it can be very lonely when you make a suggestion and there are a lot of obstacles. Part of being an effective leader, I think, is to be able to overcome those obstacles-that s the thing I continue to learn. I m not an expert at it, but being a leader is very humbling because you can really stumble. If someone asks, “Hey, are you a good leader?” [The answer would be,] “No, but I know what a good leader is and I m certainly going to strive to achieve that.”


Can you give me an example of an obstacle you ve faced in trying to lead this way?
Yes, one of the biggest obstacles was when we reorganized HR a few years ago. Our old infrastructure was based on a model in which each division had its own group of HR people that supported it. And we moved to a model in which each senior HR person supported a function, not a division. Also, there was no longer a staff supporting each of the people underneath them.


And what do you mean by “supporting a function”? Are you talking about HR functions?
No. For example, it would be sales, marketing or accounting within a division. We ve moved HR across the company to be function-based, rather than division-based. So now we have an HR director who supports sales for the company, another HR person supports marketing, etc. And we also established Centers of Expertise, so we have centralized expertise for staffing, training, compensation, benefits and so on. In retrospect, it was absolutely the right move. But when you re going through it and disbanding something that was functioning okay, but wasn t optimal, and also was within the comfort zone of a lot of folks, it s very difficult.


And interestingly, it was the people running the businesses that were very supportive of the change. That s what kind of gave me this “a-ha” feeling, because they were saying, “I don t care how I get this stuff done, I just need it done. You go figure out the most efficient way to deliver it.” They weren t really married to this old infrastructure, they were really interested in what kind of support they needed, not how they got it. But there was initial resistance from HR folks and I was kind of muscling my way through the process. Now as we begin to rethink HR again, it is the HR team that is coming up with the challenging ideas, not me.


What has frustrated you most about your leadership style?
When I can see that it s not effective and when I can be excited about an idea, but people aren t interested. Then I have to really do some self-examination. I ll talk to people and say, “Why aren t I getting through here?” It has to be beneficial to all involved. You have to ask questions. Recently, I wanted to launch another [reorganization] of HR and there was frustration in the room. Then I opened it up to talk about it, and I got very insightful input. And I said, “Boy, I really missed the mark there.” You can t say, “Hey, guess what, let s turn this place upside-down.” The reaction would be: “Well, why?” You have to paint a clear picture and be open to changing it based on input from the stakeholder. Just make sure it s the right picture.


Workforce, October 1998, Vol. 77, No. 10, pp. 26-30.

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Sexual Harassment Prevention Seven Actions to Take in the Wake of the Supreme Court’s Decisions

How should you respond to the recent verdicts in Burlington Industries, Inc. vs. Ellerth and Faragher vs. City of Boca Raton? Here are seven points of action in executing the Supreme Court’s new directives mentioned in “Sexual Harassment:New Rules, Higher Stakes” (Workforce, October 1998).


1. Develop an anti-harassment policy.


A thorough anti-harassment policy, including simple complaint procedures, is critical. An effective, easily understood policy is fundamental to the employer’s defense that it exercised reasonable care to prevent unlawful harassment.


The Supreme Court in the Faragher case stated that an anti-harassment policy with complaint procedures would constitute “a significant factor” in meeting the first element of the employer’s defense. A stand-alone anti-sexual harassment policy is acceptable, provided a broader, unlawful harassment policy also exists.


2. Distribute the policy.


Once an anti-harassment policy is generated, the employer should disseminate it to all employees. Of course, managers and employees at all levels need to know that the policy exists and how to follow the specific procedures in the event of concerns or complaints about sexual harassment. Too many employers still maintain these policies only in management binders or on corporate office shelves.


Current policies can be placed on an organization’s intranet and can be available 24 hours a day. Encrypted computer signatures can validate that the policy has been received. However, for most employers, a signed paper copy of the policy will still be the most efficient method of insuring that each employee has received it.


3. Conduct training.


The unequivocal message from the Supreme Court is that employers must act affirmatively to prevent sexual harassment. When they do, they may raise such acts as an affirmative defense in a lawsuit. For this reason, all employers should revisit their overall sexual-harassment prevention plans and adopt more effective, enlightened, practical and consistent training programs.


One of the most effective and proactive ways to prevent sexual-harassment lawsuits is to teach employees about the specific conduct prohibited, and to inform them that they will be held personally and individually accountable for such behavior.


It is important now, more than ever, that supervisors receive training that outlines the conduct that may constitute sex harassment and that they receive a strong message that their employer will not tolerate acts of harassment.


However, the best means of preventing unlawful harassment and laying a strong foundation for the affirmative defenses—as outlined in the Ellerth and Faragher cases—is to ensure that all employees attend comprehensive, periodic “awareness training.”


When the employer takes the matter seriously enough to launch a well-planned investigation, and communicates the plan and related policies to the victim prior to the investigation, risks of further claims and eventual liability are reduced.


Such training should incorporate both practical information and legal interpretation as to why and how harassment complaints arise, definitions of prohibited conduct in plain terms, and a delineation of complaint procedures that leaves no doubt as to the appropriate means for victims to obtain assistance and relief. Managers, supervisors and human resources representatives should additionally receive appropriate training on how to effectively implement an employer’s response mechanisms, from communication of the initial complaint or concern (no matter how informal) to investigating and executing corrective action.


Practical and interactive management-level training on handling typical challenges, such as uncooperative victims, the impact of consensual relationships and a lack of corroborating evidence in “he said-she said” situations is vital. Training on the issue of individual liability under state law can also be a very important tool to establish an initial interest among employers and supervisors in avoiding prohibited conduct.


Ideally, training programs should be reevaluated to insure that they cover more than just sexual harassment prevention. Other unlawful conduct in the workplace is equally unacceptable and also creates potential liability.


4. Audit employment decisions.


Every employer should heed the Supreme Court’s focus on “tangible employment actions” by ensuring that all such actions are subject to internal “checks and balances” before implementation. This review may be performed by human resources personnel or other experienced managers to ensure that no illegal actions are involved. This is a good way to limit the employer’s vicarious liability in situations where tangible employment action is an issue.


5. Promptly investigate.


Prompt investigation of harassment claims is critical. An employer’s indecisive action, or failure to exercise unambiguous leadership in this context, will neither correct unlawful behavior nor establish the affirmative defense that it exercised reasonable care and promptly corrected any inappropriate behavior. An effective investigation includes planning and coordination with human resources.


Experience has shown that when the employer takes the matter seriously enough to launch a well-planned investigation, and communicates the general plan and related policies (including no retaliation) to the victim prior to the investigation, the victim is reassured, and risks of further claims and eventual liability are reduced.


Finally, a thorough, accurate and factual documentation is a key factor in accomplishing the best possible outcome. Only well-trained employees or third parties should be charged with this responsibility because such investigations require outstanding listening and communication skills, as well as scrutiny and interpretation of complex human interactions. Incomplete, inaccurate or biased investigations can actually deepen both the problem and the employer’s liability.


6. Take prompt and effective remedial action.


After concluding that inappropriate harassment has likely occurred, an employer must take prompt remedial action that is reasonably designed to stop the harassment. The Ellerth and Faragher decisions emphasize the duty of the employer to promptly correct any unlawful behavior. While the victim is not entitled to decide the appropriate response, his or her wishes may be taken into consideration.


To avoid claims of retaliation, the victim should not be required to transfer or change jobs to resolve the situation. The threat of retaliation suits is great in this context, and must be aggressively addressed by reiteration of the employer’s “zero tolerance” policy at appropriate intervals throughout the process.


7. Follow up on remedial measures.


The employer should always check back with the victim after remedial action has been taken to make sure that it was effective in resolving the harassment. Periodic monitoring and follow-up questions should also be documented, and the victim’s feedback should be documented, as well.


At this stage, it is also a good idea to reaffirm the employer’s anti-harassment policy with all employees involved in the investigation, including the accused, the accuser and any witnesses. Copies of the policy should be distributed to such persons as a matter of course. Under appropriate circumstances, immediate training focused on any weak areas of the employer’s prevention or response plan is recommended.


Workforce Extra, Octber 1998.

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Four-step Strategy for Retaining Employees

An effective way to manage turnover is to use a process that ensures consistency and keeps good information in front of leaders. One way to do this is using a four-step process: Assess, measure, evaluate, and plan (AMEP). Each step provides maximum consideration to work your way through the myths and day-to-day distractions that may disguise reality.


Assess. The first step in controlling turnover is to value human assets. Rank the top third, middle third, and bottom third of your employees in categories in terms of value to the organization. To be accurate, agree on real measures, such as productivity, output, competencies and teamwork. The outcome of this process is a ranking report that is used to measure the “departure impact” of that employee to the organization. The ultimate goal: Retain the top third by focusing time, energy, and resources to make sure that they’re satisfied.


Measure. The second step is to measure the replacement costs of the top third so that the organization has a yardstick of market worth. Basically, it’s a risk report. Take into consideration all the hard costs associated with replacement, including customer impact, productivity, knowledge, etc.


Evaluate. The third step is to actually have a powerful conversation strategy with the top third and then work down. A powerful conversation is an honest discussion about what the employee needs and what the employee wants. These discussions are best held in a situation where the focus is totally on the employee and his or her desire. For the manager, out of this conversation comes a vulnerability report which leads to a plan.


Plan. This final stage is where a leader and the employee reach an agreement on how to approach the needs and wants via a structured plan.


This four-step process is a useful tool for logically meeting the critical responsibility of leaders to retain key people. Make clear who your key employees are, determine what would happen if they should leave, recognize the risks, and make a plan to go forward.


Find this and other advice on hundreds of different HR topics at the Workforce Online “Tips of the Day,” www.workforceonline.com/digest/tips. A new tip is added every day.


Workforce Extra, October 1998.

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How to Handle Post-harassment Formalities and Procedures

After a sexual harassment complaint has been settled, the workplace still doesn’t return to normal. Should the harasser and harassee be separated, and how are their co-workers affected? Even outside of the work relationships, there is paperwork and further therapy to be considered. Monica Ballard, president of Santa Monica, California-based Parallax Education LLC answered questions about how to approach several post-harassment issues.


Must, or should, a company always separate an employee who claims harassment and his or her harasser after the event is investigated, regardless of the outcome? If so, how should that be handled?
There are no hard rules that would indicate that the harasser and harassee should be separated after a claim. I always recommend that the last question the investigator asks the harassee is “How would you like to see this situation resolved?” If the complainant requests that the two be separated, then that is a request that should be considered. It shows that the company responded by meeting the complainant’s requests.


Separating the harasser and harassee can lead to increased liability if the company moves the harassee (to protect him or her) and the move causes the harassee difficulty. This would surely be termed “retaliation” by a plaintiff’s attorney if the complainant files a lawsuit.


If others in the department are affected by the harassment, how should their questions be handled?
Training is a remarkable tool that can help return the workplace to calm and productivity. In a controlled environment, the company’s policies and procedures can be reinforced. This is extremely important in light of the recent Supreme Court decisions.


The employees can discuss concerns, open items and issues, and then return to the work environment reassured that the company took steps to show it will not tolerate sexual harassment.


What, if anything, should be entered in the employee files?
One of the requirements placed on human resource professionals as they complete an investigation is that they “come to a conclusion.” That conclusion may vary from the one that harassment did occur to the conclusion that their investigation was “inconclusive.”


My recommendation is that the final conclusion be placed in the employee files. This documentation creates a record that can either reveal patterns showing numerous accusations of harassment or numerous claims against others of harassing behavior.


The files establish a history for future human resource professionals, creates documentation that the company took appropriate steps, and can allow the future company agents to react appropriately.


Are there any guidelines on what employers do in terms of reimbursing post-harassment therapy?
If the company finds that harassment did occur, then providing EAP support to the harassee serves several purposes. It helps the harassee to deal with the upsetting situation, and helps him or her to be more productive at work.


Therapy also provides evidence that the company is taking proactive steps, and is “doing the right thing” to protect its employees. Whatever accommodations can be made for the employee at this time will provide enormous good will for the future.


What action should be taken if comments about the situation by those not directly affected or those involved continues?
One way to handle this situation is to have all people interviewed sign a document stating that if they talk about anything discussed in the meeting, they could be terminated. It is very heavy handed, but it keeps the post-investigation gossip to a minimum.


I explain in the investigation to the harassee, the harasser and all interviewees that everyone will sign the form. I believe it allows the participants to be very forthcoming, without fear of retaliation. However, one cannot promise confidentiality.


When should an employer comply (or not comply) with requests from the harassed, such as requests for new assignment, new hours or relocation?
It is always helpful to ask how the harassee would like to see the situation remedied. If he or she makes a specific request, and if the company can meet the request, it shows good will and that the company did everything possible to meet the harassee’s needs. However, one cannot always meet the requests of the harassee, and in each situation, creativity is important.


Workforce, October 1998, Vol. 77, No. 10, p. 57.

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Protect Your Outsourcing Investment

Don’t discount outsourcing as Vendor Management 101. The outsourcing industry in North America heftily rings up around $141 billion a year, according to the Economic Intelligence Unit in London. And HR activities comprise a big chunk of that outsourcing bill—as high as 12 percent of total outsourcing business in North America, according to a 1997 study by Murray Hill, New Jersey-based Dunn &Bradstreet Corp. and New York City-based The Outsourcing Institute.


Given the importance of such functions as the administration of 401(k)s and pension plans, benefits, relocation and expatriate management, the investment should be considered as a priority. With each transaction, the “cha-chings” of the cash register are recording far more than nickels and dimes.


Yet how many HR managers are mentored or trained to work with outside service providers? Far too few of them to make sense. How often have you wondered if you’re really maximizing the time, effort and expense that you and your organization devote to outside services? Learning these skills may be simple and straightforward, but it’s no small change.


Identify your needs.
“Using outside providers is a necessity in today’s environment, in which cost effectiveness and service quality is paramount,” says Lynn Tamburo, a global relocation and compensation consultant who was formerly at New York City-based JP Morgan, in charge of the organization’s entire expatriate program. “It requires you to look for centers of excellence in the services you need to provide. You have to decide what capabilities you have internally and which ones you’re going to obtain from the outside.”


If you’re going to look for an external source to obtain some of the abilities you need, it’s important that you identify upfront what your needs are, what your selection criteria is, and what you’re looking for in a service provider. And cost isn’t the most important consideration. In fact, when you think of the reasons that you’re outsourcing services to begin with, cost is only one consideration among many.


Take a step back and think about why you’re outsourcing the functions. Think about the strategy of your actions. Is it because the area is outside your core competency? Is it because you want to reduce the need for specific in-house expertise, either as a cost-savings measure or because you can’t locate the talent? Is it because you believe outside providers can offer better service, as well as save money?


Match your needs to provider capabilities.
Once you make a list of your needs, move on to the selection criteria—find what’s important to you. This is the time to benchmark against other comparable companies with similar situations. The most effective way to approach this is networking with colleagues. Talk with them about what types of services they receive, whom they receive them from, and what the advantages and disadvantages are.


Next, identify the potential providers and solicit proposals from them. This could be a formal process by which you solicit proposals from several providers and put them through an evaluation process, critiquing them against the information you gathered from your initial examination of your needs.


Surprising as it may seem, some managers feel pressured to accept the conditions of the providers, allowing the vendor’s capabilities to dictate. Your organization’s needs should be paramount in the discussion; foremost is how well the provider can satisfy your needs.


“Personally, I would weigh the objective criteria (cost, services provided or referrals) more heavily than the subjective. But by the same token, I would not ignore the subjective. You need to ensure there’s good chemistry between you and your outsource provider when making a decision,” says Tamburo.


In other words, think of this relationship as a partnership. Have face-to-face meetings with the potential partner to determine if your goals and ways of doing business are compatible.


Manage the relationship with open communication.
Once you’ve honed in on who you think is the best provider, you’ve interviewed for personal fit and negotiated the best deal, then write a service agreement. Specify service levels and costs. What do you expect? What are the timetables? Outline the methods you’ll use to measure effectiveness. Document all of this before you begin to work together.


To manage the relationship, think of it as an alliance that allows you to provide to your clients. It reflects on you, so your clients are the ones who should give you feedback about the service, not the provider. Do this formally or informally, by survey or ongoing discussions.


For example, let’s say you’re looking for feedback on a moving company. After the move takes place, you’re able to call or send a questionnaire to your client and ask for various feedback on aspects of the move. Or you might want to talk to everyone who used that service to get all the information at once. But, particularly with a new service provider, getting immediate and ongoing feedback is preferable. Recognize that it’s particularly noteworthy when feedback comes to you unsolicited—good or bad.


It’s also essential to frequently communicate with your provider. Talk about what it’s doing for you and how it’s doing it. The frequency obviously depends upon the service being provided; if it’s a tax provider, the service tends to be once a year, while in other cases, it’s ongoing.


Continue to be specific about your expectations in terms of what you need and when you need it. Reinforce those messages until your expectations are being met. Ask about other ways in which the provider may be of service to you. Be open and candid about your needs.


Maintain the relationship by evaluating it.
Finally, conduct periodic service-level reviews. Consider annual reviews, which could be based on your evaluation methods and the anecdotal feedback you’ve received. Discuss what’s working and not working, and if improvements are necessary. You’ll also want to conduct internal reviews to find out how your clients think the outsourcing is working.


Repeat the competitive bidding process every so often, on two- to five-year intervals, depending on your confidence with the service provider, the results of your external benchmarking, and how stable your needs are. During this time, benchmark against your colleagues, and always question if the situation continues to work for you.


Outsourcing is more prominent than it used to be, and it’s much more important because the sophistication of the HR capability has increased. In the past, HR facilitated administration as it related to people. Now, the function is more strategic, and needs outside support. HR managers are working with business managers to help fulfill their business goals. Working proactively to identify service needs and how to effectively manage providers is not only important financially, but it can also be critical to the ability to meet business goals.


Workforce, October 1998, Vol. 77, No. 10, pp. 130-132

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Exempt from Tax Withholding

Let’s say one of your employees gives you a W-4 form, claiming exemption from withholding. Would you still have to send the form to the IRS?


According to the IRS, if you receive a W-4 form on which an employee claims exemption from withholding and his or her wages would normally be expected to exceed $200 or more a week, you must send a copy of that W-4 to the IRS service center with your next Form 941 return or with a cover letter. If the IRS determines that the form is incorrect, they’ll contact you with guidance on what to do.


Look in your Circular E (Employer’s Tax Guide) for more information.


Source: Internal Revenue Service, Washington, D.C., August 1998.