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Tips on Personnel Files

Here are some tips when it comes to personnel files:


  • Employees should be given notice about what will be maintained in their files.
  • Employees should be given reasonable access to review their files.
  • Allow employees to include a written explanation about an inconsistency or mistake in their files.
  • Restrict access to only those who have a reason to learn of the file contents.
  • Keep medical files separate from employment files.

SOURCE: Institute for Business & Professional Ethics, DePaul University, Illinois


Personnel Journal, July 1996, Vol. 75, No. 7, p. 93.


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HR Change Experts

Martha J. Watson
HR director, Minnesota Department of Human Services, St. Paul, Minnesota
Industry: state government agency
Number of employees: 7,000
Minnesota state government’s changing business: “We have three areas of change: 1) Welfare and health-care reform in Minnesota coming at the federal level; 2) Downsizing due to deinstitutionalization of developmentally disabled clients; 3) Changing the emphasis of human resources management (and the perception of HR management) to organizational development and internal consulting to better meet customer needs.”


Walter M. Oliver
Senior vice president human resources, Ameritech, Chicago, Illinois
Industry: Communications
Number of employees: 62,000
Ameritech’s changing business: “In the past three years, Ameritech has gone from a sleepy, bureaucratic company to a nimble, market-driven global communications company. We accomplished this by restructuring the company on several fronts: legislative and regulatory environments, culture and structure. We tapped new leadership and recruited new people. We compressed management layers. We pushed for those closest to customers to drive major company decisions. We outsourced and trimmed our workforce. We reorganized and consolidated. And the change continues.”


Kelly Ritchie
VP of employee services, Lands’ End, Dodgeville, Wisconsin
Industry: International direct merchant of clothing and sewn goods
Number of employees: 6,000
Lands’ End’s changing business: “Generally, we’re focused on making sure that we always provide the best quality products at the highest level of service and backing that with a guarantee as we continue to build our business both in the United States and abroad.”


Joan E. Farrell
HR manager, Lawson Mardon Label (part of Lawson Mardon Packaging, a division of Alusuisse-Lonza Holding Ltd.), Fayetteville, New York.
Industry: Consumer products packaging for food, health care, cosmetics and tobacco
Number of employees: 15,000
Lawson Mardon’s changing business: “Consumer products packaging is a volatile industry which has become more and more driven by speed to market, not only for existing products but also for new initiatives. Operationally, run lengths are shorter and SKUs have proliferated. To deliver successfully in this marketplace, companies must have highly flexible, customer-focused, technically competent employees who are empowered to take the necessary steps to deliver what customers want, 24 hours a day, seven days a week.”


Coleman H. Peterson
Senior VP, people division, Wal-Mart Stores Inc.
Industry: Discount retail stores and combined grocery operations
Number of employees: 670,000
Wal-Mart’s changing business: “Wal-Mart is changing in many ways. These changes are driven by domestic and global geographic expansion, technology and information improvements and the changing expectations of our customers. These external realities require us, internally, to change in response—from how we set our strategic objective to how we prepare our associates to serve the customer.”


Personnel Journal, July 1996, Vol. 75, No. 7, p. 57.


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1996 Vision Optimas Award Profile Rhino Foods Inc. (live copy)

You are a mad scientist, trying to create the perfect employee of the future. As lightning crackles outside, you labor furiously in your laboratory. There must be no mistakes — it’s a very delicate experiment. To start with, this perfect employee must be independent and empowered, be able to strike out on its own, not hover at the skirts of its employer. Then again, it must be involved and interested in the workplace, eager to interact with co-workers and make an impact on the business. Finally, your creation must be positive and proactive, the kind of employee who sees challenges rather than problems and who enjoys work.


You are a mad scientist, and you are frustrated. The experiment proves not just delicate but downright difficult. It may be impossible. As lightning again shocks the sky, you pour another cup of coffee and sulk.


Don’t wave the white flag quite yet. There’s a tiny company up in Burlington, Vermont, that just may have the workforce of the future. Its employees create solutions to problems on their own. They go after what they want. They offer up innovations without even being asked. They work in cohesive teams, competing (in a friendly way) for leadership. They actually have a fair amount of fun at work.


Besides being a rarity, why is this such a big deal? Because if the competitive advantage of tomorrow’s companies truly rests in their workforces, then the quicker- and smarter- and bolder-thinking a company’s workforce is, the more likely that company is to slam the competition.


So meet the competition — a firm with the foresight to build a futuristic workforce from the start while the rest of us were still puttering with the blueprint. Thanks to a menu of progressive HR programs, it boasts a dream team of employees who look impressively ready to tackle the 21st century — now. Welcome to Rhino Foods Inc.


Independent, empowered employees aren’t afraid of doing for themselves.
These days, employees can’t be spoon-fed, pampered and attended to like so many jittery kindergartners. They must be able to do for themselves, to act on their own. Over-attachment to one’s employer is deadly. Yet with the recurring downsizings of the past few years, it’s tempting for many employees to cling all the more tightly to their company, like castaways grasping their rafts in a stormy sea.


That’s what makes the way Rhino employees handled a potential layoff all the more impressive. In 1993, Rhino hit a slowdown period. For a firm of about 40 employees, this was potentially devastating — the company had a temporary overload of 10 production jobs, one-fourth of the workforce. But, in a refreshing turn of events, the higher-ups at the company didn’t whisper behind closed doors about who would stay and who would go. Instead, they called a company meeting and let the workers in on the problem. A group of 26 employees — more than half the workforce — took on the challenge: Find a way to keep a paycheck coming outside of Rhino job descriptions.


A lot of workforces would have been determined to keep a foot in the door of their company. Rhino’s employees decided on a better idea — they pushed away from their company. With the help of Marlene Dailey, director of HR, they hooked up with local businesses that needed extra hands for a time.


Ted Castle, president and owner, called a second meeting to ask for volunteers — pioneers — for the program. “He said that no one had tried this before and that we as a company would be sticking our neck out,” remembers quality assurance technician Stephen Mayo, a four-year employee. To offer a little security, Castle guaranteed the volunteers would have their jobs upon return as long as they fulfilled their duties at their “temporary employers.”


In the summer of 1993, six workers headed over to Ben & Jerry’s Homemade Inc., a major customer of Rhino (Rhino, a specialty-dessert manufacturer, makes the chocolate-chip cookie dough that goes in a Ben & Jerry’s ice cream). Another four volunteers went to jobs at Gardener’s Supply Company, a catalog firm of gardening products. Mayo was one of those employees. Why volunteer? “Basically it was to impress Rhino and make me more of an asset, make the company proud of me, show executives I’ll go the extra mile for the company,” he says.


For two months that summer, Mayo worked as a picker/packer, collecting the catalog items on a customer’s order and then shipping them off. He worked out in the sun, met a few new friends, even implemented a few changes around the warehouse to make gathering items easier. Even better, the whole time he was clocking in at Gardener’s, Mayo, just as all the other volunteers in the employee-exchange program, kept his seniority, his benefits and accrued vacation. The starting wage at Gardener’s was a little below his Rhino paycheck, so Gardener paid its share and Rhino made up the extra. “People ask me if I’d do it again,” says Mayo. “In a heartbeat. It’s like a vacation: You go somewhere a few months knowing you’ll be secure here. You know you’re eventually coming home. And it’s nice to get back home.”


Mayo isn’t the only one who would do it again. Dailey says the company enjoyed a much higher level of morale and trust from the exchange program than if they’d just gone through a round of layoffs. “If we got to an area where we’d have to downsize again, we’d absolutely consider that,” she says. “It was a really effective [initiative] during a potentially devastating time. It turned out to be scary and tense, but it really ended up cementing the team.”


Employees who challenge themselves personally see a difference professionally too.
Scary and tense situations are usually carefully avoided by employees, right? Obviously, not at Rhino. For the past few years, a special program has helped employees challenge themselves even more. They’re encouraged to set and achieve goals — no matter how intimidating they may be. It’s called the wants program, and it works like this: A group of eight employees — from all areas and levels in the company — are trained as wants coordinators and are available one-on-one to any Rhino worker. Employees, on company time, meet with their wants coordinator once every quarter for an hour to set goals and work on achieving those goals.


Wants don’t have to be work-related. Although some employees might choose to focus on winning a promotion, others might set their sights on dreams as diverse as reuniting with a family member, writing a book or learning to skydive. The point is to empower employees to set goals and make things happen — on their own. To that end, Dailey carefully trains her wants coordinators on coaching employees, not just giving them the answers. For instance, if an employee were working toward buying a house, a wants coordinator wouldn’t say, “Oh, I’ve bought three houses, here’s how you do it.” Instead, the person would ask about what steps the employee was taking, the challenges he or she faced and what the employee would do about it. “There’s a difference between a want and a fantasy,” explains Dailey. “A want is something you’re willing to take action on.”


Between the training for the coordinators (about 90 minutes every two weeks for three months) and the actual meeting time (one hour four times a year for any employee who wants it) the program doesn’t come cheap. But Rhino feels it has gained a lot in return. For one thing, the company acknowledges the strong synergy between work life and personal life. If an employee achieves goals on a personal level, he or she can focus that much more on work. In addition, empowered employees are simply better employees. “The more they understand that they create their own world, whether it’s here or at home, the more confidence they have in their abilities,” says Dailey. “They’re more likely to speak up and offer their ideas.”


Troy Tsounis, a shipping and receiving worker, agrees. He has been a wants coordinator since the program’s inception and says he’s seen his skills grow because of his role. “The communications skills it [teaches] are superb,” he says. “I know how to talk to people and how to listen. I use the skills at work and at home also.”


Because Rhino has nearly doubled its staff in the past 16 months — it currently has more than 80 employees — Dailey and the wants coordinators have put the program temporarily on hold. They want to see how it can evolve to better meet the needs of a growing workforce. One incarnation under consideration would be a life-skills program that would emphasize goal-setting and communication skills, just as the wants program.


The main difference of the considered program is that it would be less intensely one-on-one and more peer-oriented, with employees using each other as a support system. “We were finding that after a while people are able to do this on their own and the need for a wants coordinator goes away, ” says Dailey. “Some people like the discipline of seeing someone and having deadlines, but for others, it’s ‘Thanks, this has been great, but I can go off on my own now’ — which is what we’re looking for anyway.”


Just as Rhino attests, empowered employees are proven value-adders. A study conducted this year by Los Angeles-based University of Southern California’s Center for Business Effectiveness found that companies with “high use of power-sharing programs” had a 10.3% return on sales compared to 6.3% among low-use organizations. In addition, in a 1995 Personnel Journal reader survey, 81% said they thought an empowered workforce is “worth the time and energy it takes to create,” and 81% also said it will be an “integral part of workplaces in the future.”


Rhino keeps employees involved in their workplace.
Another integral part of the future workplace: teams, teams and more teams. This clarion call echoes throughout the country today; we’re on a never-ending search for that perfect mixture of people to make that perfect team. Just as a group of Rhino employees was involved in avoiding that 1993 layoff, so are teams involved in nearly every aspect of the company.


For many projects, teams are created by enlisting people from all different parts of the business through opportunity postings. Similar to job postings, opportunity postings alert employees to project openings throughout the company. The posting will describe the nature of the opportunity as well as the necessary level of commitment.


When Dailey wanted to form a hiring committee using production workers, she posted the opportunity and asked for one year’s commitment. A daunting proposition at some companies, but Dailey had no problem finding four interested employees. For training, these volunteers sat in on interviews conducted by the incumbents of the hiring team — two HR people (including Dailey) and two supervisors. Afterward, the incumbents would offer a self-critique of the interview — what went right and what could be improved. The production volunteers also underwent training on the legalities, technique and etiquette of interviewing.


The four employees are now qualified to assist in hiring all entry-level jobs. They have a checklist that flags questions that are important to ask all candidates. And guess what? Several of those questions revolve around… teamwork. “We’ll ask questions like, ‘Can you tell us in the past what was the most team-oriented job you had?’ Or ‘Tell us the three words your teammates would use to describe you as a member,'” says Dailey.


These questions are important for finding good team members — and leaders. In the past year, Rhino has tinkered a bit with its approach to identifying team leaders. Used to be that employees on a production team rotated so that everyone had a chance to be both a leader and a member. Now that the company has expanded, and switched to skill-based pay, team leaders have to really show they deserve their position. So employees work their way up the team ladder until they can become a leader assistant. Before anyone can apply for a team-leader position (there are only four among the 40 production bakers), they must have first demonstrated their skills as an assistant. The director of operations, a trainer, two production supervisors and Dailey decide which applicant is awarded the team-leader role.


But most want to be team leaders or, at the very least, involved in a team. Dailey says that’s a common thread whenever she talks to employees about their appreciation for Rhino — being part of a team that really impacts the company.


Perhaps that’s the reason Rhino employees stay so involved — because Rhino makes their involvement mean something. For instance, despite a grueling production schedule, the company shuts down nearly every other week for at least 30 minutes for companywide meetings. “It really makes a difference — in people getting to know each other, in people knowing what’s going on in the company and really feeling connected to it,” says Dailey. In these meetings, the company addresses issues that affect everyone and invites employees to comment or question. For instance, when Rhino decided to introduce a 401(k), the company didn’t just slap down a plan and explain how it worked. Instead, it let the workforce in early on the process. Because the 401(k) is self-directed, Rhino wanted employees to feel comfortable with their vendor. So the three 401(k) contenders came into a company meeting and each made presentations on their services. The employees then voted on the winner. Is the participation level in the 401(k) high? Of course.


As the company profits, so do employees.
Just as Rhino shares information with employees, it shares success. In fact, the company has not one, not two, but three profit-sharing programs. They’re designed to recognize the workforce as a whole for performance, the workforce as a whole by seniority, as well as employees for individual performance.


The first program, around for the past six years, is playfully called The Game. Every day Rhino posts key information that shows where the company stands financially — its “score” for the day. For instance, on Tuesday, the score may indicate that if operations continue smoothly, each employee will receive $26 at month’s end. On Wednesday, the score may be down to $10 or $1. But all the information is posted to inform employees what happened on Tuesday to cause the drop — maybe a lot of product had to be scrapped. The point is, employees always know where they stand and what they have to do to keep their bonuses, which are given once a month in equal amounts to all employees.


To also acknowledge employees’ contributions to the company over time, a six-month profit sharing is distributed to people based on seniority. “If we make money, the people here for one year would get a small amount,” says Dailey. “The people who participated in the growth of the company over a longer period of time would get a lot. It doesn’t matter if they’re making $8 an hour, they’ll get a heck of a lot more than I will [Dailey’s been at Rhino four years].”


Finally, a pool of extra profits can be distributed to individuals based on their performance. “These programs keep employees tuned into the bottom line,” says Dailey. Castle himself names the profit-sharing initiatives among Rhino’s proudest accomplishments.


Positive, proactive employees like coming to work.
At some organizations, you can always spy the employee who has goofed up. The poor, errant worker is generally huddled in a corner of the cubicle, waiting for the boom to drop. Rhino is not one of those organizations. It’s not a blame-based type of company. It’s a “let’s identify the problem and figure out the solution together” kind of company.


For instance, instead of higher-ups giving orders and doling out punishments if those orders aren’t met, the company uses terminology called “requests and promises.” Both the request and the promise must be clearly understood, ensuring neither side can blame the other for miscommunication. If, for example, a new employee is starting at Rhino, Dailey may contact a trainer and request the trainer conduct an orientation. The trainer then makes the promise of performing the orientation or explains why he or she can’t make that promise. “We have to be good at making clear requests and keeping promises,” says Dailey. “Here, we say business is a series of conversations. The conversations can’t fall apart on either end.”


And what if the trainer makes the promise and then forgets about it? “We’ll say that having a bad memory isn’t an excuse,” says Dailey. “They have to find the tools to help them have a better memory.” In the past, Dailey has kept a supply of date books around for just such occasions — she’ll have a talk about time management and then suggest penciling in commitments.


A blunder such as forgetting a promise might fall under the Rhino rubric, breakdowns to breakthroughs: “We look at problems as breakdowns,” says Castle. “They’re really not problems; they’re opportunities for breakthroughs. They’re challenges to make things better.” The point, however, isn’t just how well the problem is solved, but the fact that it’s considered an opportunity, not an evil.


This positive spin is never more evident than in Rhino’s fun committee, a small team whose mission is simple: Dream up fun things for employees to do. For instance, after one company meeting, the workforce embarked on an ice-cream sculpture competition. Teams were supplied with big blocks of ice cream and candy decorations like rainbow-colored gummy worms, sprinkles and chocolate drops. One team glopped together a sculpture of “Champ,” the mythical serpent creature that’s nearby Lake Champlain’s answer to the Loch Ness monster.


But the fun committee also will put together projects to diffuse tension in the workplace. One year, Rhino was having huge ups and downs in production for a particular specialty product. After a series of trials, the employees finally made their goal — nine truckloads of the goody. For their catharsis, the director of operations slipped into his hockey outfit — gloves, face guard and all — and headed outside. There, employees got to have a high noon showdown with him, wielding piles of leftover frosted cheesecake at the man. “We work pretty hard and have a lot of pressure to grow the company,” says Dailey. “Increasing sales and product requires a ton of teamwork. So the fun committee does little things that make a big difference.”


Keeping its special culture intact.
The fun committee and open communication in general are going to be important through the rest of 1996: The company is still having some growing pains. Rhino has worked long and hard to establish its special brand of culture, and Castle worries about it being diluted with so many new employees coming on board. “You hire 10 people and then 10 more, and pretty soon you have a critical mass of people who don’t know what you’re talking about,” he says. “The challenge for us is to be able to continue with the programs while our workforce is changing and growing.”


Castle believes the continual companywide meetings and his open-door policy will help Rhino fight the good fight. And it’s the openness of Rhino that many employees say they appreciate the most. Just ask Tsounis, the wants coordinator: “If you speak your mind proactively, people will definitely listen. It’s a very comfortable atmosphere.”


Mayo, the employee-exchange volunteer, echoes the appreciation. “I can be honest, I’m not wild about working.” he says. “But working at Rhino, I can get out of bed, and I don’t have the work knots. I look forward to being here the time I need to be here. It’s unlike any company I’ve ever worked for. And Ted [Castle] knows I’ll be here until I retire. As long as the company needs what I’m giving it and it’s giving me what I need, I’ll be here without a doubt.”


So, with Rhino employees boasting so many attributes, what does Dailey appreciate most? Her answer gives insight to the special interdependence between employer and employee that makes Rhino so unique. “The workers care about what happens here,” she says. “We feel it’s up to the company to make sure that they care. They’re a responsible, creative workforce. It’s definitely a shared success for this company.”


So, you’re a mad scientist, trying to create the perfect employee of the future. As the lightning crackles in the background, you’re poring over your notebooks and mixing together volatile potions. You’re slurping down more coffee and cursing under your breath. Save yourself the headache. You may just want to head for a visit to Rhino Foods and watch the experiment in action.


Workforce, July 1996, Vol. 75, No.7, pp. 36-43.

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How To Handle E-mail Abuse

The Dilemma:
Vivian, a manager at your company, was reviewing random e-mails sent by one of her employees, John. She suspected that even though he had been warned to stop, he was still sending an excessive number of personal messages through the company-provided online service during company time. In checking the messages, she learned that another co-worker, Jennifer, was extremely unhappy about being passed over for a promotion and was considering quitting—and encouraging John and other friends to do the same. Vivian has come to you for input on how to handle the situation. What do you advise her to do?


Readers Respond:
Does John get his work done correctly and on time? Is he available to Vivian when she needs him? If the answer is “yes” then I’d ignore his e-mail activity and be grateful that I have the time to monitor anyone’s e-mail—randomly or not! I might wonder, however, if he has enough work to do.


However, if his work isn’t done, or if the e-mail costs the company money in another way, I’d go to the bottom line: “John, you’re not meeting reasonable production/quality standards. Do you understand that this could cost you your job?”


And, unless Jennifer is irreplaceable, I’d ignore that problem as well. It’s probably just a face-saving device. I believe American workers have an inalienable right to complain and a right (by law) to encourage their co-workers to join them. Let’s encourage our managers to concentrate on more important issues!
Sally McKinney, Director of HR Services,
American Society of Composers,
Authors and Publishers,
New York, New York


First, if Vivian’s first indication of employee dissatisfaction comes from reviewing e-mail, there could be a management problem. Perhaps Vivian is spending too much time sorting through e-mail and not enough time interacting directly with her employees.


Second, I would want to know if the company has a written policy on the use and ownership of e-mail and the disciplinary action that’ll be taken for violations. If the company doesn’t have an e-mail policy, then one should be written, placed in the company handbook and covered with and signed by all employees. If the company already has an established e-mail policy, then it would be appropriate for Vivian to follow the outlined actions.
Gaylynn Lankford,
President,
The HR Connection,
Jacksonville, Florida


Personnel Journal, July 1996, Vol. 75, No. 7, p. 88.


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Dump the Cash, Load On the Praise

Do you think money is the best reward? Many people do. After a recent presentation, I received some interesting feedback. I was discussing what motivates employees today with a management group from a Vancouver manufacturing company. After the session, the person who had invited me to speak pulled me aside. He claimed several people in the group didn’t agree with what I said about money: They believed it’s the top motivator for their people.


A sense of frustration overcame me. My experience has shown that money isn’t the main reason people work. Why is it so difficult for managers and business owners to believe this?


Certainly the research is convincing. In studies dating back to the 1940s, employees always have ranked other items-such as being shown appreciation for work done, feeling “in” on things and having interesting work-as being more important to them than their salaries. In the “1994 National Study of the Changing Workforce,” conducted by the Families and Work Institute in New York City, “open communication” was ranked highest by respondents asked to list items they had considered to be “very important” in choosing their current jobs. Everyone wants to know what’s going on-especially as it affects them-so simply sharing information is motivating. Salary was ranked 16th.


In a recent national survey conducted by Robert Half International, a staffing and recruitment firm based in Menlo Park, California, “limited praise and recognition” was ranked as the primary reason why employees leave their jobs today-ahead of compensation, limited authority and personality conflicts. Dr. Gerald Graham, professor of management at Wichita State University in Wichita, Kansas, also found that money wasn’t a top motivator. In a research study of 1,500 employees in a variety of work settings, personalized, instant recognition from managers was reported to be the most powerful motivator of the 65 potential incentives he evaluated. Second was a letter of praise for good performance written by the manager.


Money has its value.
I’m not saying money isn’t important-clearly it is. We need money to pay our bills and maintain the standard of living to which we’re accustomed. I’m also not saying money has no motivational value. It does, and the strength of that motivation will vary throughout a person’s life. If you’re about to buy a new home, have unexpected medical bills or have children in college, you’re going to be more keenly aware of your monetary needs.


But for most of us, most of the time, once we’re able to meet our monthly expenses, our attention turns to other factors that have much greater significance in our work lives:


  • Feeling we’re making a contribution
  • Having a manager who tells us when we do a good job
  • Having the respect of our peers and colleagues
  • Being involved and informed about what’s going on in the company
  • Having meaningful, interesting work.

Granted, of the 16 employees who report to me, one clearly is motivated primarily by money. When this person finished a significant project for the company, I remember her response when I wanted to do something special to thank her. She told me she didn’t want a plaque or an award. As a token of thanks the only thing she desired was a bonus. Since people are motivated by different things, I gave her a bonus. But I also gave her a dozen roses at a company meeting-because recognition isn’t just for the person who performed well, it’s also a message to other employees about the type of performance that gets noticed in an organization. According to management consultant Rosabeth Moss Kanter, based in Cambridge, Massachusetts: “To the rest of the organization, recognition creates role models and heroes-and communicates the standards: These are the kinds of things that constitute great performance around here.”


Cash awards have some definite drawbacks.
The key point is that the money employees are paid for the job they’re hired to do is compensation, which should be a function of a company’s compensation philosophy as well as its market and geographic considerations. Increasingly, such economic incentives are becoming rights rather than rewards. In his book “Management: Tasks, Responsibilities, Practices,” management guru Peter Drucker of The Claremont Graduate School in Los Angeles points out: “Merit raises always are introduced as rewards for exceptional performance. In no time at all they become a right. To deny a merit raise or to grant only a small one becomes a punishment. The increasing demand for material rewards rapidly is destroying their usefulness as incentives and managerial tools.”


“Employees wonder: What’s the point of going all out if no one notices and it doesn’t seem to make a whit of difference?”


In some cases, cash awards even have been found to have a demotivating effect. Cecil Hill, corporate manager of improvement programs at Hughes Aircraft Co. based in Los Angeles, claims in a Spring 1989 article in National Productivity Review: “I have found that certain aspects of the cash awards approach would be counterproductive at Hughes Aircraft. For example, cash awards would reduce teamwork as employees concentrated primarily on individual cash gains. We also have found instances in which ‘pay’ for certain types of intellectual performance tends to denigrate the performance.” In short, cash awards seemed to have a demotivating effect overall.


Recognition boosts employees’ esteem and performance.
Recognition, on the other hand, is what you do above and beyond what people are paid to get the best effort from employees. “Compensation is a right, recognition is a gift,” Kanter points out. “Recognition has multiple functions beyond simple human courtesy. To the employee, recognition signifies that someone notices and someone cares. What’s the point of going all out to do something special if no one notices and it doesn’t seem to make a whit of difference?”


To illustrate the power of recognition on individual behavior, Daniel Boyle, vice president and treasurer of Diamond Fiber Products Inc. in Thorndike, Massachusetts, tells an anecdote in a Harvard Business Review March-April 1987 article. The story relates the impact on an employee when she was presented with a nylon and cotton jacket as a special employee recognition reward called “The 100 Club.” “You might think this is a trivial thing, but it means a lot to the people who earn a jacket. A teller at a local bank told me once that a woman came in and proudly modeled her bay blue 100 Club jacket for bank customers and employees. She said, ‘My employer gave me this for doing a good job. It’s the first time in the 18 years I’ve been there they’ve recognized the things I do every day.’ During those years she’d earned $230,000 in wages, which had paid for cars, a home mortgage, food, other essentials, vacations, college educations. In her mind, she’d provided a service for her earnings. The money wasn’t recognition for her work, but the 100 Club jacket was.


Salary alone isn’t a motivator.
You might wonder why salaries aren’t enough to encourage employees to do their jobs. Why do you have to do more? People will do their jobs for what they’re paid, but money will do little to get them to do their best work or to go above and beyond what you expect of them. That extra effort is more a function of how they’re treated-the softer side of management-not what they’re paid. In the work of management theorist Frederick Herzberg, a fair salary is considered a “hygiene” factor-something people need as an incentive to do the jobs they’re hired to do. Hygiene factors include adequate work space, light and heat, and necessary tools such as a computer or telephone. Without any of these items, employees will be demotivated and unable to do their jobs. Having all of these items, however, will enable employees to do their jobs but will do nothing to help them do the best job possible. Getting people to do their best work is more a function of what Herzberg calls “motivators.” These include praise and recognition, challenging work, and growth and development opportunities.


Paul M. Cook, founder and CEO of Raychem Corp. based in Menlo Park, California, agrees with this belief: “The most important factor is individual recognition-more important than salaries, bonuses or promotions. Most people, whether they’re engineers, business managers or machine operators, want to be creative. They want to identify with the success of their profession and their organization. They want to contribute to giving society more comfort, better health, more excitement. And their greatest reward is receiving acknowledgment that they did contribute to making something meaningful happen.”


So, as people sometimes ask me, “If money isn’t a top motivator, then why is it all I seem to hear about from my employees?” I’ve had a chance to examine this question firsthand in several companies and have found a couple of explanations:


  1. In some working environments, people are doing jobs they don’t enjoy for managers who never show their appreciation. These employees conclude that if this is what it’s like to work here, at least they ought to be paid well. Money thus becomes a psychological exchange for enduring a miserable job.
  2. In other companies I’ve found that managers only use money to thank people-for example, bonuses for completing projects, on-the-spot cash awards for desired behavior or an extra percentage in the employees’ annual salary increase. Unintentionally, these managers send the message to employees that unless you get cash, your contribution to the company isn’t important. Essentially, they train employees to expect cash as the only true form of thanks.

It’s true some people directly correlate the amount of money they earn with their perceived worth to the organization. You need to be careful, however, that you don’t just respond to those individuals who constantly ask for more money, since you need to reinforce results, not requests. Also realize that you’ll never get the best effort from employees just by paying them more. For employees who just want more money, they’ll never be satisfied with what they’re paid. Their expectations always will rise with each salary increase.


Realizing that money is a basic need, managers might wonder if employees must be paid well before the nonmonetary factors become motivating. This question came up during a conference keynote presentation I was giving, and I was delighted to have another member of the audience interject his experience. He found that by using positive reinforcement he was able to increase the level of performance of his employees, leading to increased sales revenue, which ultimately made it possible to pay people better. In other words, the use of nonmonetary incentives allowed the boat to rise financially for everyone.


Motivation is its own reward.
Another way to look at the relation between money and motivation is that while on any given day most of us can’t significantly influence what we earn, a lot of things can have an effect on how excited and motivated we are about our jobs each day. How employees are treated by their managers is paramount to having them come to work energized and committed, bringing their best thinking and initiative to the job. The daily interactions management has with employees serve to either build and develop the trust and respect of employees, or to hinder and erode those factors. According to Donald Petersen, president and CEO of Ford Motor Co. in Dearborn, Michigan: “The leader needs to be in touch with the employees and to communicate with them on a daily basis.”


Ways to enhance this communication within an organization are endless. For example, each morning at Precision Metalcraft in Winnipeg, Manitoba in Canada, management holds huddles to pass out the days’ work assignments. The huddles end in a cheer as people disperse to get to work. Security Pacific Corp. of Los Angeles has a Question Line with a toll-free number to respond to employees’ job-related problems and questions. And all Washington, D.C.-based Knight-Ridder publications have management coffee breaks, during which each publisher meets with 20 to 25 employees for an hour and a half over coffee. Employees can send questions in advance.


The focus of work used to be on renting employee behavior. In fact, in some work environments people even were referred to as “hired hands.” Today, it’s insufficient to simply rent the behavior you want from employees-you’ve got to find a way to elicit their best effort. To be competitive, each company needs to obtain extraordinary results from ordinary people. You have to make employees feel valued so they want to do their best work on a daily basis and to consistently act in the best interests of the organization. You can achieve this enhanced level of energy and initiative by focusing more on how you treat employees rather than how much more you will pay them. For the best results, pay them fairly, but treat them superbly.


Personnel Journal, July 1996, Vol. 75, No. 7, pp. 65-70.


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Expert Advice on How To Move Forward With Change

It’s a wonder you don’t see buildings actually spinning on their foundations with all the whirlwinds of corporate change buzzing through them lately. Instead, they remain undaunted while human resources professionals, the designated change agents at most organizations, take the brunt of the gusts, enough to make their heads spin.


Indeed, Personnel Journal’s latest survey of the nation’s top HR professionals at America’s Fortune 100 companies found that their number one concern is managing change. In fact, change management has topped HR leaders’ priority lists two years in a row (1994 and 1995). So, if corporate change-and how to manage it-is your toughest HR challenge, you’re in good company.


As the New York City-based American Management Association (AMA) describes it, change management is the developing discipline of planning, organizing and controlling organizational change to better solve present and future business problems. In the AMA’s latest (1994) survey on this topic, in association with the change management team from the accounting firm of Deloitte and Touche LLP based in Wilton, Connecticut, 84% of 259 executives polled said they have at least one change initiative going on at their organizations. Nearly half of them said they have three or more change initiatives under way, including such business agendas as growth (39%), productivity (30%), competition (27%) and globalization.


Ironically, only 68% of the executives reported that their companies have established any sort of formal change management program to support these initiatives. That leaves 32% of organizations flying by the seat of their pants when it comes to leading their people through rapidly changing business climates.


While it may be a cliche to say that if you fail to plan, you can pretty much plan to fail, you may do well to heed the advice of change management experts who say you can’t afford to forget the obvious in any change effort. They warn: Don’t rely on your employees and management staff to simply fall in line with every new business plan you send their way. Chances are, they won’t.


According to Price Pritchett, a change management expert at Dallas-based Pritchett & Associates Inc., the most important rule to keep in mind when you’re facing a change effort is the 20-50-30 rule: That approximately 20% of the people in the organization will be change friendly; the next 50% will sit on the fence; and the remaining 30% will resist, or even deliberately try to make it fail. That means you have a heavy burden-because only 20% of the people will be with you from the start-so you must pull the other 80% of the organization toward your company’s new goals.


Because change is perhaps the most important topic right now on HR’s agenda, we assembled a panel of experts-both management gurus and HR leaders who’ve recently stared down the eye of the change storm and won-to give you insight into what to think about and what to do when change is in the wind.


Are HR professionals, in fact, primarily responsible for being organizational change agents?


Walter M. Oliver:
Yes, I’m responsible for being the change agent at Ameritech. However, other executives also share in this charge. In fact, all of our business leaders and employees must take an active role in harnessing the power of change on behalf of our customers and shareowners.


Kelly Ritchie:
As the leader in human resources, I’m responsible for change leadership. However, I view this as a partnership between everyone in HR and our employees. We all must continually look for ways to improve our organization to meet the needs of our everchanging workplace. For example, we’ve added new programs or enhanced existing ones based on ideas from employees. These include the addition of an employee assistance program, adoption assistance and a work/life committee. So, even though I’m definitely responsible as the leader, I really view this as a partnership. And I think by partnering, and by really having a strong focus on making the company an even better place to work, I believe it’ll help our business grow. We’ll support our employees, and we’ll meet the needs of our customers.


Martha J. Watson:
I’m one of many change agents in my organization. I’m responsible, though, for helping all the other change agents (managers and supervisors) implement desired changes. I’m also responsible for helping top management identify needed changes in the overall organization. Yes, it’s my choice, but it’s also my choice by default because I’m the HR director. It has to do with the changing role of human resources management.


Coleman H. Peterson:
Yes. We’re all challenged to be change agents; however, the role of human resources places one in the “natural stream of change.”


What’s the toughest challenge in leading a change effort from an HR perspective?


Walter M. Oliver:
The toughest challenge is to get the entire organization engaged in this process. That challenge is coupled with the need to make sure that each individual understands his or her role in making change effective. It’s absolutely critical that everyone moves toward a certain level of involvement and engagement in the change process. Otherwise, a wide divergence of focus concerning the reasons for the change can slow or derail the entire process.


Kelly Ritchie:
One of our main challenges is to help everyone in the organization understand that it’s not fully an HR responsibility to lead this change, but rather, it’s the responsibility of all the stakeholders-employees, managers, senior managers and human resources. All areas must work together in building flexibility to help continue supporting our employees’ needs and position the business for future growth. And what I mean by that is, it’s not just HR’s responsibility for performance reviews or development of people or any of those categories, but rather it’s all of us working together.


Martha J. Watson:
Most of us in HR leadership roles today weren’t trained for this kind of [change management] work. We’re having to learn it as we go. I suppose that’s good for us because it mirrors what we say is going to happen to most people in the coming years: We’ll all continually have to learn new jobs. It’s also difficult because in many organizations, HR isn’t seen as adding value to the business. You have to get over that hurdle before you can be an effective change agent.


Coleman H. Peterson:
In a strong culture, change can sometimes look like the enemy of what already has been accomplished. It’s important to understand that the change process is holding on to the successful elements of the present culture and adding new elements that are important to propelling that culture into the future.


What three tools do HR leaders need to help lead their organizations through any change effort?


Walter M. Oliver:
The three tools an HR leader needs are-1) A thorough knowledge and understanding of the change process, 2) Courage and 3) A positive personal self-image that encourages continual learning and growth.


Kelly Ritchie:
The first thing you need is a strong employee focus. Then, you must be grounded in values. We’re grounded in our company’s values-the principles of doing business and the culture that we’ve all created here. We use those as the cornerstones. Then, the third tool is continuous improvement-being innovative with ideas focused on improving the quality of work life.


Martha J. Watson:
The three tools you can’t live without in managing change are: flexibility/adaptability, knowledge of the business and highly developed human relations skills.


Coleman H. Peterson:
Vision, patience and passion.


How do you harness energy from employees-both positive and negative-to enhance rganizational change and leverage it to an organization’s greatest advantage?
Stephen R. Covey:


I think that HR professionals need to be listening posts. They must learn how to listen empathically. Use this analogy. When you have air, you don’t think about it at all. But if you were to take the air out of the room that you’re in right now, you’d be running to get air. The unmet need motivates. So, when you listen to people empathically from that frame of reference, emotionally it’s so affirming and validating to them, they cease being defensive. And negative energy is dissipated.


HR people are in tough positions because they’re often in the crossfire between all of the forces of change and all of the forces within the culture that resist change. If they can learn to listen empathically and not take it personally-not agree, not disagree, just understand-they’ll find these negative energies disappear and get converted into positive energies. People then start to become more a part of the solution rather than part of the problem.


Walter M. Oliver:
The way to harness the energy of employees is to keep them focused on external, customer issues instead of issues with one another. People must have a clear understanding of the reasons for change. At Ameritech, external issues focused the need for change-the competitive marketplace and the regulatory climate were radically altering our business environment. Customers were at the crux of those changes. Senior executives worked to get in front of those challenges. So by revamping our culture, structure, processes, procedures and environment, we changed from a stodgy, bureaucratic monopoly into a nimble, competitive corporation focused on our customers’ needs. It wasn’t easy, but it was necessary and successful.


Kelly Ritchie:
I think all of our efforts in HR are built on trust from employees and managers that we’re sincerely interested in making improvements that add to the quality of Lands’ End. I think we try really hard to listen and then try to respond to those issues, so people feel like positive change is occurring as a result of their ideas. It’s built on trust. It’s built on people actually seeing us take action based on what they’re telling us. If you establish that trust, people are more willing to come forward with ideas and thoughts about what we could do to make it an even better place to work.


Martha J. Watson:
I think you have to give employees a clear and consistent direction and the flexibility to get there any way that makes the most sense to them. Reward the risktakers and support those for whom change is much harder. If you have unions, get them on board, too. That will help a lot.


What needs to exist in a corporate culture first before long-term corporate change can happen and stick?


Stephen R. Covey:
I think the missing ingredient with all of these new initiatives taking place inside corporations-such as the quality initiatives, empowerment, reengineering and outsourcing-is what I call 360-degree trust. That means trust, not only with your customers, but also with your suppliers, your people, the community, your dealers, your owners, the media-with all who have a stake in the welfare and success of your operation. This takes an ecological kind of thinking. You have to see the very delicate balance of how you achieve this kind of trust with all of these different stakeholders. If you only build trust toward customers, for example, and you violate your own people, you’ll gradually kill the goose that lays the golden egg. If you neglect the community, the environment, the next generation, and if you don’t have a sense of social responsibility, eventually you’ll kill the goose that lays the golden egg. They’re all interrelated.


So it takes an HR professional who encourages the executive decision makers to take the long view and to take a balanced ecological view toward all these stakeholders. Then they’ll find that they build trust which comes primarily from trustworthiness. That comes from our own integrity and living by our commitments and also from philosophically aligned structures and systems. You must work to align your work systems, your information systems, and so forth, with the values of cooperation, interdependency and 360-degree trust toward all stakeholders. And that’s the source of trust-it’s trustworthiness at both the personal level and the organizational level. HR professionals can become real catalysts in creating this understanding, this paradigm and this focus in executive, strategic decision making.


Robert Levering:
Trust is the most important ingredient in any corporate change process. Without it, management may find itself constantly fighting rear-guard skirmishes with employees instead of leading everyone forward with confidence toward the future. I believe trust is composed of three elements: credibility, respect and fairness. An example? Several years ago, Northwestern Mutual Life (one of the firms profiled in “The 100 Best Companies to Work for in America”) embarked on a major change effort to improve service quality and productivity. But it did so in such a way that it was able to maintain a high level of trust in the organization. First, the CEO called everyone together and assured them that no one would lose his or her job as a result of the process. Next, the company engaged clerical workers in task forces to redesign their jobs. To make a long story short, major change was accomplished (in one department, 60 job classifications were reduced to six) and that achieved the company’s objectives. Both productivity and service-delivery quality improved markedly.


At nearly the same time, another midwestern insurance company went through a similar change process that, on paper, resulted in a comparable redesign of job classifications. But the firm didn’t involve the employees in the redesign process. Worse, from the standpoint of trust, the firm did nothing to reassure workers that they wouldn’t lose their jobs because of the change. (In fact, a number were laid off.) The result: No change in productivity, morale plummeted and the company even had to fight off a unionizing drive among clerical workers.


Joan E. Farrell:
I think that a clear, unwavering vision of the future is an absolute necessity in a sustained change effort. This vision must then be backed up by a sound business strategy, strong values and an unblinking leadership team. Change is a war zone, and trust alone is powerless. Lead, communicate, train, trust, and people will do all they can.


How does a company begin to establish trust inside the organization, and what role should human resources play in the process?


Stephen R. Covey:
I’d like to focus on the image of a ship’s trim tab. A trim tab [is the device that] turns and directs the rudder, which in turn, steers the ship. That’s a tremendous image for human resources professionals. They should see themselves as trim tabs. Rather than getting seduced by their cultures and feeling unappreciated and undervalued, which oftentimes HR professionals do, they should be the catalysts, the smaller rudders that move the big rudder, that moves the entire ship. How? They need to be more loyal to principles than they are to their company. That’s the best way to serve the company.


For instance, what if you went to a doctor to get a physical, but the doctor was more interested in impressing you and in telling you what you’d like to hear than in telling you the truth? You wouldn’t feel well served. You want to hear the reality and that takes courage. I’ve worked with thousands of human resources professionals, and many times they feel undervalued, unappreciated and gradually become, in a sense, part of the culture. They get sucked into the culture and feel they have to be accepted; they have to keep their job and they kind of sell out. They use esoteric, professional language to badmouth their top executives. And they often take sides in the crossfire. They become the master and victim of doubletalk. I see them, little by little, losing their influence.


The way to enlarge your circle of influence is to get centered first on principles that are larger than any organization and that ultimately control life, such as honesty, integrity, courage, service, continued professional growth and 360-degree trust. If you get focused on those principles and you’re courageous, but also empathic, you’ll become a force that’s formidable. And decision makers will have to contend with you. It may take a few months, even a few years, but HR professionals will become a key force in their companies-a true trim tab person. And executives won’t make major decisions without their involvement. Where do they get the courage to be principle-centered, courageous and professional? They have to make sure that their own professional development is ongoing and that they’re at the cutting edge of all that’s happening.


Robert Levering:
Trust must be earned over time, but it can be destroyed overnight. It requires constant attention. Trust is earned by management showing good faith-by being open, by being respectful of the individual and by being consistent. That’s done both through the company’s policies and practices and by the way in which individual managers implement those policies and practices. HR professionals can play a big role in the process of building trust by encouraging more trustworthy behavior on the part of managers and by assuring that appropriate policies and practices are in place. There is no “Trust Cookbook” with a ready-made list of recipes of trust-building policies.


This much I’ve learned from years of researching the best workplaces in America: What distinguishes the very best workplaces is the way in which policies are designed, implemented and supported. All of this occurs in an atmosphere of trust which means that management is open and accessible, shows genuine appreciation for the work done by employees and has a high degree of integrity. The best human resources professionals I’ve met over the years understand that ultimately what’s important is the nature of the management-employee relationship, not the details of the policies themselves. The very best policies in the world make no difference if they aren’t well integrated with all other aspects of the company’s relationship with employees.


Walter M. Oliver:
Trust is developed through an openness of information, free flow of knowledge, clear direction, consistently communicated progress and finally, thorough knowledge about the process of change and results.


What have you done in the past that will make employees ready to trust you to lead them in the future?


Walter M. Oliver:
First, we have demonstrated consistent and proven accuracy in our strategic decisions. Second, we work very hard to keep people informed about the direction the corporation is taking. Our chairman regularly communicates with employees via e-mail on important issues to the company. Furthermore, he personally answers the responses he receives from employees. And third, we work to be consistent in communicating the vision of the company as we continually make progress on this journey. Change is a journey, not a destination.


Kelly Ritchie:
I think implementing new programs or enhancing existing programs that initiated from one of our employee’s ideas is the strongest sign of building trust. It demonstrates that we truly are listening and we’re trying to improve whenever and wherever we can. It’s also building on the partnerships that we’ve created so people feel comfortable to let us know what they’d like to see. In one of our areas, someone had the idea of a shift giveaway (workers can give a shift away if they can’t work it.) We piloted the program and have rolled it out in many areas. If people feel their ideas have been heard, and in some cases, those ideas have turned into enhancements, they’re much more willing to keep that open dialogue.


Joan E. Farrell:
We said what we would do, did what we said, hung on through adversity, never blinked and were prepared to lose our jobs before we sacrificed our vision and the peoples’ effort in working toward it. On a personal basis, you become what I call the “organizational oiler” working behind the scenes to listen to squeaky wheels, slipping drive belts, worn gears and faltering engines and rolling up your sleeves to get things going again without any fuss, muss or bother. You suggest solutions, people try them and they work. And you never betray a confidence.


Coleman H. Peterson:
Listening. We work hard at listening to our associates. Listening establishes trust and a confidence on the part of the associates that their servant leaders want to do the right thing.


How do you manage the stress on the human resources organization during a change process/cultural transformation?


Walter M. Oliver:
The management of stress on the HR organization is best accomplished by sharing the challenges. It’s important to keep the balance of responsibility on the people involved in the change-managers and employees. Avoid loading the charge on any one function. And work to foster independence among employees for this process. A dependence on HR can become self-defeating. Instead, use the revamping of the organization as an opportunity to accelerate growth and learning for everyone involved, from the chairman down to entry-level employees.


Joan E. Farrell:
Because there’s no end of the tunnel, there’s no light at the end of the tunnel. So we make our tunnel as comfortable as possible and keep on rolling.


Martha Watson:
We do lots of fun things and provide lots of training opportunities. We help people see the future and help them see themselves as having a role in that future.


Coleman H. Peterson:
This is a challenge! It’s important to remember that our HR associates are only human and are experiencing the same anxieties and pressures of the rest of our organization. Therefore, it’s important to keep them well educated on the “whys” of their activities. Then we must keep them focused on the “hows.” We must celebrate and appreciate their work and help them understand how key they are to the change process.


When an organization is changing, what happens if you don’t align traditional HR concerns, such as benefits, compensation, reward statements and so on, with the change effort?


Walter M. Oliver:
The nonalignment of HR issues with the change process inevitably slows momentum and creates frustration among employees. A greater threat to the change process is that this nonalignment can divert the focus and attention of the organization away from key business objectives and toward ancillary human resources issues. This can waste precious time and resources that would be better used addressing the external issues confronting the organization.


Martha J. Watson:
It’ll take longer to get where the organization needs to go, and HR will be perceived as a barrier, rather than as adding value. HR can’t be a change agent if it doesn’t change itself.


Joan E. Farrell:
People are sensitive to mixed messages. The true believers are few; most will hang back and wait for us to blink. If exceeding customer expectations is what we say we want, but we reward people solely on the basis of machine efficiencies or bottom-line results, it won’t happen. It’s also important to look beyond HR systems to other business systems. If we establish mutual respect and trust as key values but require three signatures for a team leader to buy $50 in supplies, we’re kidding ourselves. Internal control systems are often based on a zero-trust premise. You can revamp these systems to ones of high trust and still have sufficient checks and balances to avoid getting burned.


What do you think is the most important question or topic in change management that you’d like discussed or answered? Then discuss or answer it.


Walter M. Oliver:
The two most important questions every company must ask are: Why do we need to change? And, what is the value proposition for everyone involved in the change process? Each company must be able to clearly state the need for change to each stakeholder group, including employees, shareowners, neighbors, customers, and if applicable, regulators. By necessity, those answers will be as individual, and specific, as each organization. At Ameritech, we’ve been able to succinctly and clearly articulate the need for change: Competition was coming to our market. The monopoly way of doing business was over. To prosper in this new environment, customers had to become the focus of our business. So what was good for customers was also good for us. And we continually work to help employees understand how and why these needed changes help everyone accomplish their business and personal objectives.


Joan E. Farrell:
What are you prepared to give up, personally and organizationally, to ensure that change sticks? It should be all but one’s personal values and the end vision. You’re an agent of change, and as such, you must do whatever it takes to get it done. The sacred cows may die, even the ones you’ve raised from birth. Making change happen must be more important than pleasing the boss, getting a raise, making friends, having a balanced scheduled, or often, even getting a good night’s sleep.


Stephen R. Covey:
The change process is going to increase the importance of the HR professional’s role in the future. Here’s the reason why: The world is in such a permanent whitewater state of change, that every organization and culture needs something that doesn’t change. The HR professional represents those principles and becomes a source of security which enables people to live with change and to run with it in exciting and profitable ways. But what if you have no one representing that which is unchangeable? What’s going to happen? Then the whole world becomes topsy-turvy, and people start protecting their positions. They start keeping the old industrial forms of structures and systems that are absolutely obsolete in today’s marketplace. And the HR professional then gets caught up in that and then runs scared and gets defensive.


So, the role is going to increase in significance and human resources professionals should feel a tremendous sense of hope. The hopeful thing is that organizations will develop enough principle-centeredness so that they’ll be on the cutting edge of their marketplaces. HR professionals are at the vanguard, ahead of the pack. And that’s what gives not only hope, but also a tremendous sense of adventure. It’s so much fun. Because when you’re anchored to principles inside, you just love being extremely open, flexible and adapting to whatever flows at you.


Personnel Journal, July 1996, Vol. 75, No. 7, pp. 54-63.


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A Utility Aligns Pay With Corporate Change

Two years ago, Rosemead, California-based Southern California Edison (SCE), the nation’s second-largest utility and a subsidiary of Edison International, faced the biggest change in it’s 100-year history: deregulation. The Public Utilities Commission (PUC) announced that it wanted to deregulate electric utility organizations in California, meaning only one thing for SCE: competition.


The problem was that all the company’s human resources programs and systems were appropriate for a monopoly but not for a newly competitive organization. “It basically changes a company in a relatively short period of time—three to four years—from a monopoly franchise to one that has to compete,” explains Dennis Spry, manager of total compensation for SCE. “Well, all our programs were designed for the [old kind of company]—our compensation, benefits, all our HR programs. So we had to change things pretty darn fast.”


While the particulars of deregulation are still being worked out from a governmental perspective, the organization has been hard at work trying to align its business structure and systems to support the new changes. Of particular note is SCE’s new compensation system the company calls the Compensation Integration Program or CIP, which was rolled out organizationwide on February 19, 1996. For an organization with a $1 billion a year payroll, compensation was an important area to explore for improvements. “We had to look at our comp program to see what we could do to help it better support the goals that the corporation is striving to achieve,” says Spry.


Although SCE already had a good market-driven, pay-for-performance system in place before it faced the changing business environment (already an atypical comp system for a utility firm), Spry knew the company would need to apply new thinking to how it paid people to change their mindset from a secure organizational stance to one in which every day was a new chance to fail, or to wildly succeed.


“All our HR programs were designed for the old kind of company – compensation, benefits, etc. We had to change things pretty darn fast.”


Enter the CIP. The CIP, a hybrid of a number of different compensation systems, tossed out the old salary-grade system, with its 3,200 job titles for 9,000 employees (that’s one job title for every three employees) and replaced it with far fewer job titles (170). Approximately 800 of those job titles alone formerly applied to managerial and supervisory positions. Now there’s seven job titles for managers and supervisors. The CIP also increased the corresponding salary bands to correspond with fewer job designations. In some cases, there’s a 250% spread in each band, which allows managers great flexibility in how to pay people.


Just these changes alone helped the organization remove the old us vs. them mentality from workers and helped blur the lines between exempt and nonexempt workers. Not a bad idea in a competitive environment.


Next, the CIP incorporated a brand new gainsharing program for SCE, called results-sharing. The basic idea of results-sharing is that if employees agree to surrender 5% of their base pay to the company upfront, they have a chance to replace it with as much as 10% of their annual pay (or 15% in a few cases) if the organization saves money or makes money during the year.


And employees are expected to help generate those savings or earnings. For example, one group of print-shop workers suggested that instead of having the company pay to launder their smocks, they would take them home and wash them themselves, saving the company lots of money. “It’s little things like that, that employees came up with on their own, that saved us money, not to mention they’re now working smarter and harder,” says Spry.


In 1995, SCE’s results-sharing program generated $96 million in savings. “And we paid out less than $40 million,” says Spry. “So the way I see it, the company’s about 60 million ahead of the game.” While he doesn’t expect the firm will save nearly that amount this year, he says he honestly can’t predict what employees will be able to achieve. Above all, he says: “The one thing it does, if nothing else, is it gets employees focused on what’s important [to the company] and gets them engaged in the process.”


To top off the success of the CIP, it has been nearly 100% accepted from the beginning, the day it was rolled out. Why? Because it was developed with the help of employees. “We used people from the line organization to help us build this,” says Spry. There were more than 70 people involved in designing the CIP from the ground up. “Then we used people from the line to go out and conduct the meetings with their peers to explain this program,” he adds.


What all this employee interaction did was help ensure buy-in from the start—an important consideration any time you change the way you pay people (a topic near and dear to their hearts) and any time you’ve got a business environment that’s changing virtually everything about how and why people work. “That way, it wasn’t [just another] human resources program,” says Spry. “It was a company program.”


Personnel Journal, July 1996, Vol. 75, No. 7, p. 61.


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Reflexite’s Business Decline Contingency Plan

STAGE I:
DEFINITION
Sales below budgeted sales but ahead of the same period in prior year.


SYMPTOMS


  1. Bookings below plan for four weeks or more.
  2. Field reports confirm it.
  3. Backlog levels off.
  4. Large order levels fall.
  5. Book-to-bill ratio falls below 1.
  6. Profits below plan.

ACTION TO BE TAKEN


  1. Defer some budgeted hires.
  2. Defer some budgeted activities.
  3. Heighten awareness of current situation.
  4. Discuss at staff meetings.
  5. Monitor overall economic conditions.

EXPECTED RESULT
Adjust revenue and expenses to meet plan. Preserve all jobs and expected future stock value.


STAGE II:
DEFINITION
Sales and profits below prior year for a period of one quarter or more.


SYMPTOMS


  1. Bookings below plan for one quarter or more.
  2. Profits below prior year
  3. Backlog declines 15%.
  4. Incentive pay on sales slips below plan.
  5. Larger customers’ businesses decline or develop credit trouble.

ACTION TO BE TAKEN


  1. Revise Selling, General and Administrative (SG&A) expenditures.
  2. Revise forecast.
  3. Solicit ideas to cut costs, improve productivity and efficiency from employees.
  4. Cut overtime.
  5. Cut discretionary spending.
  6. Redeploy sales force.
  7. Increase cold calls.
  8. Accelerate new product introductions.

EXPECTED RESULT
Same as in Stage I.


STAGE III:
DEFINITION
Business operates at break-even level or generates losses of less than $100,000 for a period of one quarter or more.


SYMPTOMS


  1. Backlog declines 30% from previous high.
  2. Bank loans increase.

ACTION TO BE TAKEN


  1. Solicit ideas to cut costs, etc. from employee-owners.
  2. Voluntary leaves and furloughs.
  3. Same as #2
  4. Hiring becomes the exception.
  5. More reduction of SG&A expenditures.
  6. Increase management attention.
  7. Monitor Stage II actions for results.
  8. Defer lower-priority capital items.
  9. Introduce a more aggressive revenue-generation strategy.
  10. Price cuts on specification items.
  11. Sales of obsolete inventory.
  12. Offer extended terms for new business.
  13. Accelerate new product introductions.
  14. Delay refilling of vacated positions.
  15. Accelerate capital work with less than one year payout.
  16. Defer raises.
  17. More rigorous performance reviews.
  18. Defer or reduce salaries for highly compensated employees.
  19. Reduce hours.

EXPECTED RESULT
Revise plan to meet revenue expectations. Preserve jobs. Expected stock price above last year but below planned value.


STAGE IV
DEFINITION
Business generates losses for a period of two quarters or more.


SYMPTOMS


  1. Lose customers.
  2. Lose technological lead.
  3. Core products lose market share.
  4. Banks look at loans’ status more carefully.
  5. Suppliers don’t send materials due to unpaid or late-paid invoices.
  6. Stretch out payments to suppliers.
  7. Lose good employees.

ACTION TO BE TAKEN


  1. Salary deferments or reductions for balance of exempt employees.
  2. Trim benefits.
  3. Early retirements.
  4. Voluntary resignation offering.
  5. Layoffs.

EXPECTED RESULT
Downsizing required. Some loss of jobs. Stock price falls below prior level.


SOURCE: Reflexite Corp.


Personnel Journal, June 1996, Vol. 75, No. 6, p. 92.


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Making Work Flexible A Summary

The purpose of the study, “Making Work Flexible: Policy to Practice,” is to provide models for change. Catalyst created a framework of four goals, each with four strategies to develop a flexible work environment:


Goal I: Build organizational support


  • Define and explain the link between flexibility and business goals
  • Ensure and communicate senior management support
  • Articulate the organization’s commitment to flexibility
  • Identify and support pilot programs

Goal II: Support managers and users


  • Provide tools
  • Evaluate effectiveness
  • Share models and case studies
  • If necessary, revise systems

Goal III: Internalize the practice


  • Incorporate flexibility into other organizational initiatives
  • Create and support relationships and networks
  • Expand and refine human resources department roles
  • Assess the perceptions, experiences, and acceptance of alternative arrangements

Goal IV: Sustain the commitment


  • Continually communicate internally about the issues
  • Look for ways to promote flexibility externally
  • Implement accountability measures
  • Review and evaluate the work environment and modify activities accordingly

SOURCE: Catalyst


Personnel Journal, June 1996, Vol. 75, No. 6, p. 42.


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Ethics Process Outcomes

With the principles and goals in mind, from 1990 to 1992 the Office of Ethics and Business Conduct (OE&BC) at NYNEX accomplished the following:


  • Created a corporate ethics code for all employees. The NYNEX Code of Business Conduct was drafted by OE&BC and then was reviewed by a cross section of managers.

  • Opened business unit ethics offices throughout the corporation. Trained the staff in the corporate ombudsman role, ethics, equal employment opportunity and sexual har-assment, as well as listening and coaching skills.

  • Conducted a Values and Vulnerabilities Assessment (VVA) to ascertain operating values, culture, ethical issues and potential areas of vulnerability. The VVA consisted of interviews with 96 executives and senior managers, 22 focus groups with mid- and lower-level managers and a survey of a 7,000-member cross section of employees.

  • Established GuideLines-a service providing telephone numbers and mailboxes for employees to use to ask questions and report possible wrongdoing.

  • Began regular publication of the Ethics Leadership Review, an internal newsletter focusing on tough ethics issues and possible ways to resolve them.

  • Developed and delivered workshops for senior managers to increase awareness of ethics issues as perceived by employees, and to give managers the necessary skills to ensure that ethical standards are met. Workshops initiated for middle management featured a review of the new Code of Business Conduct and gave participants an opportunity to comment on the draft and on other ethics initiatives.

  • Developed and delivered ethics awareness training for 80,000 employees.

  • Communicated NYNEX’s policies on gifts and gratuities to all vendors and surveyed them to see how they viewed NYNEX’s ethical behavior.

Personnel Journal, June 1996, Vol. 75, No. 6, p. 152.