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Play Detective How To Conduct an Internal Investigation

Investigation. The very phrase oozes intrigue, recalling images from detective novels: Anonymous letters. Secret corridors. Butlers with guilty faces.


Well, don’t invest in a trenchcoat just yet. Conducting an internal investigation doesn’t demand magnifying glasses or superhuman powers of deduction. It does, however, require asking the right questions of the right people in the right manner. It does necessitate a critical mind that stops this side of being judgmental. And it does demand that HR use a variety of tactics, as the law requires different actions for different situations. For instance, investigating a complaint of sexual harassment requires a different approach than dealing with employee theft, because harassment brings with it a host of employer liability issues.


Here, Richard J. Simmons, attorney with the Los Angeles-based law firm of Musick, Peeler & Garrett, offers help in conducting a thorough—and legal—internal investigation.


First of all, who generally is the best person or department to conduct an internal investigation?
It’s going to depend on the resources the employer has—and the nature of the investigation. If it’s suspected wrongdoing by an employee, then it would typically involve either human resources people or security. If it’s misconduct, like one employee having treated someone else in an abrasive, offensive or inappropriate manner, then human resources would typically do it. If it’s something about theft, then maybe security would do it.


Let’s focus for a second on sexual harassment. When an employee initially files a complaint, is there a first step that a company should take?
If the individual who was allegedly harassed brings it to your attention, the first step is to say “thank you. Thank you for bringing this matter to our attention.”


Why is this so important?
Because the way you react can ultimately affect your liability and even the degree of your liability. If someone comes to you and says they’ve been sexually harassed and you say “Don’t tell me that, because now I have to investigate, your personal life is going to be exposed, this could be brutal for you as well as us”—it looks as though you were discouraging the person from coming forward and candidly disclosing a problem that you have a responsibility to address. But I see that all the time. So the first thing I would say in a sexual harassment case is thank you. It shows your good faith and that you are certainly willing to accept the claim.


What else should you cover in this initial meeting?
The second point you’d want to emphasize is to tell the employee that you have a strict policy against harassment and would not tolerate it by anyone. The third point you should absolutely make is to assure the employee that there will be no retaliation against them for having brought this matter to your attention.


And what should you say to the person being investigated?
When you investigate the alleged culprit, you’ve got to make the same points. Which is: No. 1, we have a strict policy against harassment and would not tolerate it by anyone. And No. 2, we won’t tolerate retaliation. You’ve got to anticipate the possibility that retaliation will occur. It’s just instinctive, even if the accused is innocent, for him or her to retaliate. Let the alleged offender know that you won’t tolerate it. That’s a critical point, you can’t overstate the significance of that.


What if an employee comes to you accusing another employee of stealing? Would you handle the meeting in a similar manner?
In this case what I’d do is get as much of a factual background as I could. I’d find out all the circumstances that led this person to believe that another person committed theft. [Ask questions such as] “Why do you believe that? What was the first hint you had that it occurred? Did you observe it? What evidence do you have?” You’ll want to ask if there are any witnesses, if the accused admitted it, if the accused was confronted. Basically, you’re going to do this fact-intensive analysis as to what forms the basis of the employee’s accusation. And sometimes people say, “Because [my property] is missing, and I know this guy wanted my stuff.” It may be that general. In other cases you’ll have much stronger evidence.


Once an employer embarks on an internal investigation, what are the primary legal concerns?
Well, it really is going to vary. There are some general guidelines for any type of investigation, but others that are really going to be specific [to the type of investigation]. One general consideration is whether you’re creating documents that will be discoverable. You don’t want to do that, particularly if the documents disclose weaknesses to your case or actual violations of the law. As an example, I had a case once where a client did an internal investigation and wrote, “This issue presents potentially staggering liability” in the first line of the memo.


What other information might be made available to a plaintiff if an internal investigation ends up in court?
Also discoverable by the other side is [information] not under the attorney/client privilege. You need to decide whether you’re going to have an investigation done under the direction of lawyers so that you can assert an attorney/client privilege. For example, if the president of the company sends you to investigate something and you write a memo—even if you do not write a memo, if you have notes—they’re completely discoverable. If it’s done under the direction of a lawyer then they probably are not discoverable.


Once you’re fully into the investigation, in cases like sexual harassment, are there questions that you should ask and questions that you shouldn’t ask?
You have to start off with sort of a broad slate in your mind. Do not prejudge any case. You don’t know at the beginning whether someone is absolutely guilty or absolutely innocent, or if the truth is somewhere in between. [On one hand] you want to be sympathetic to the person who comes to you. On the other hand, you don’t want to say “Gee, this is terrible!” and start making judgments early on.


So what approach do you take?
You’ve got to look at your role. You’re a fact finder, and you will evaluate, but you need to hear all the evidence before you can make a judgment. So the key is to have a good ear and to listen to all the facts. There’s often a fear to get into specifics, but as I say the devil lies in the details. If this person is credible, they’re going to have some specifics for you. They don’t have to recount the exact date and the exact hour, but you need to ask when this first occurred; were there any witnesses; did anyone overhear it; if so, who; did anybody else react; did you tell anybody about it at the time? These are all corroborating facts that are really important in harassment cases. Because often all you end up with is she said it happened, he said it didn’t. So you want to look for as much corroborating evidence as you can.


How should you probe for this corroborating evidence?
It’s basically a matter of asking questions that would surface as a matter of logic. Get facts: who, when, what, and where, with as much specificity as you can get. Sometimes recollections are going to be very vague, other times they’ll be very precise. You want to get as much information as you can, and don’t try to resolve it in 15 minutes if it’s going to take a lot longer. Do a good job with it.


What next?
Your objective is to take immediate corrective action. So you’re going to do an immediate investigation. Now one of the things that you have to be prepared for in a harassment case is when an employee says they’re coming to you in confidence. A lot of employers have policies that say they’ll maintain strict confidentiality. Well, that’s a poor policy because, in point of fact, the law says you must maintain as much [of an employee’s] confidence as possible, but that’s not pure confidentiality. Because you’re going to have to investigate, which will require that information be disclosed. So if somebody comes to you in confidence and says “This is between you and me, right?” you can’t say yes because then you end up violating your commitment. What you should say is that while you’ll keep it as confidential as you can, you can’t assure total confidentiality, because this is a legal matter. It’s like somebody coming to you in confidence, saying “Gee, John killed Suzie, don’t tell anyone.”


Would the same approach apply to other internal investigations—just try to get as much information as you can?
Yes, apart from the heightened sensitivity that you’d have in a harassment case, you’d definitely want to do the same thorough job in any investigation. Again, your job is to be a fact finder, so you’re going to find as much information as you can. And don’t be surprised if you have to go back after you’ve talked to some other people to pose additional follow-up questions.


As you’re conducting the investigation, how much information should you give to the person who first came to you with the complaint?
[Using a sexual harassment complaint as an example] I would not start off interviewing a third party. Let’s say Judy comes to me and complains and says that Jeff was a witness. I wouldn’t start off with Jeff by saying “this is what I’ve been told, is it true or false?” I don’t ever tell people what I have, because it’s too easy for them to just say yes, without giving me the type of testimony that would come out in court. So I’m going to start off with a general [questioning], and I may end up with a specific [question].


So how would you begin this general questioning?
I’m going to start off by saying “We have information indicating that Joe engaged in some questionable conduct with women, do you have any information about this?” If he says yes, you probe further. So I start up with a general question, let him come up with his own answers. Maybe he says, “No, sounds preposterous to me, I’ve never heard or seen anything involving Joe that was inappropriate.” Well, at that point I’m going to go further. I’m not just going to let that answer stand—I’m going to say, “Let me give you more specific situations. Do you know of any instance when he has actually made advances towards women, or do you know of a situation where he made inappropriate comments?” I’m going to start off with a general question. I will also insist that people cooperate fully; they must.


How do you express the message that employees must cooperate?
The employer has to be aware of losing control, because employees will sometimes say they don’t want to get involved, or they don’t want to say anything about Joe, or they don’t want to point fingers. Don’t accept that as an answer. Tell employees they need to cooperate fully, and if they don’t you’ll be forced to address it as insubordination, a refusal to cooperate. The employer is in control, and employees must realize that.


What about the case of an employee accused of stealing some of the company’s product. How do you handle the target of that kind of investigation?
You’ve got to be careful about what you accuse someone of. My approach to investigations is to give them an opportunity to explain. So I won’t accuse you, I’ll say, “Listen we’ve got some information that’s disturbing, and we want to provide you an opportunity to explain your role in this before we reach any conclusions.” The guy may say that you’re accusing him of theft. Tell him you’re not accusing him of anything right now—your objective is to give him a chance to respond.


What rights do employees have in this situation?
Employees do not have a right to an attorney to be present in one of these meetings. If the person is a union employee and asks for a union steward or a union representative to be present, the employee does have that right. If there’s no union they don’t have the right to have an attorney or anyone else present. And typically I won’t allow them to have an attorney present, because then it becomes a legal proceeding and the attorneys will typically block the investigation.


The employer seems to have a big say in how the questioning is conducted. Any lines to not cross?
What an employer cannot do is force employees to stay if they want to leave. In the Fermino vs. Fedco case, which went to the California Supreme Court, the employer had security and personnel and management people present. When the employee got up and wanted to leave, a company official slid in front of the door and gestured in a manner that allegedly prevented the employee from leaving. And the Supreme Court said that was false imprisonment. So if you’re investigating something and the employee wants to leave, they have the right to go. You can tell them you need their cooperation, that this is their chance to cooperate, and if they fail to do so you can take action based on your own investigation. But you can’t force them to stay in a room with you.


As you are conducting the investigation, what kind of interim action should be taken? Do you suggest suspending the accused employee?
Everything is based on the facts and circumstances of a particular case. If you have overwhelming evidence, then you might want to suspend right away. Or if you think that the person is in a sensitive position, or a position where he or she can do further damage, then you might suspend. Sometimes you suspend solely to investigate, sometimes you suspend in order to protect the work environment so that this person will not disrupt it or do anything that involves further detriment to the employer. So you have to look at the facts and circumstances. It also depends on how long you think the investigation is going to last. If you think it’s going to be a two-month investigation, suspending for two months is rather harsh; you better have really strong evidence, I think. Also suspensions can trigger wage and hour obligations, so you have to be sure that that’s the way you want to go. Oftentimes it is the appropriate way to go, but not always.


At an investigation’s end, when you’re deciding whether to terminate an employee, what steps should you take to ensure the action is legally defensible?
It’s going to depend in large part on whether the employer has an at-will standard, or a for-cause standard. [Most employers are moving to] at-will standards now. The difference is if you have a for-cause standard in your handbook, then as a matter of contract you have to prove that you had cause to fire. And I have to prove that in the form of admissible evidence that a jury will agree with years later. So the idea is if I can fire only for-cause under my policies or contract, I have to be able to prove cause. If you have an at-will standard, you’ll be better off. In many cases, you simply need to show that you had a good faith belief that the employee was guilty, and you can win your case. So there’s a real big difference there as to what type of latitude you have as an employer, depending on which standard you have.


Are there any other important points an employer should know?
You always want to be professional—no matter what you think the person is guilty of when an investigation starts. I can tell you from experience representing hundreds of employers for a lot of years, that oftentimes clients come to me with cases where they are absolutely convinced the person is guilty, absolutely convinced that he’s dirty, and I say, “Well, just amuse me for a moment and tell me what you have.” And I go through the facts and I find out that there are many i’s here that have not been dotted, t’s that have not been crossed. And we find out that the person is completely innocent. And you’ve got to be prepared for that, so be professional about it. Because as convinced as you may be at the outset, you may be wrong. And just as important, juries can get angry, offended by employers, even though they had the right to discipline someone, but they were ruthless in the way they investigated, so you want to avoid that. You want to be professional, that’s really important. And although there’s an exception to every rule in this area, my general rule is that you want to give the person a chance to explain. First of all you pin them down with their explanation, and that’s good because they can’t concoct some other theory later; and secondly, if they come up with a good explanation you can investigate it. It’s a good safety net—it can protect you against mistakes that could otherwise be harmful to the employee and to you. The other general point is: A good investigation is a prompt investigation. The longer it takes you to investigate, the more likely that memories fade, and evidence is lost.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 158-166.


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Intel Takes Its Educational Commitment to Higher Levels

A Census Bureau report sponsored by the Education Department and released in February reveals that employers believe schools and colleges aren’t preparing students for the workplace. Santa Clara, California-based Intel Corp. is one employer that’s doing something about it. Through its corporate K-12 program, the company is forging partnerships with elementary schools, such as the one with Kyrene de la Mirada in Chandler, Arizona.


But the company’s involvement with education doesn’t stop with high school graduation. Hilda Roy, new college graduate and new technical graduate sourcing manager for Intel in Arizona, says that the firm believes it can influence kindergarten through life-long education.


Right now, Intel’s focus is on junior colleges. According to Roy, Intel and other technology-based companies recruit about 70% of their manufacturing and technical people from two-year degree or certificate programs. Yet more and more, these companies are finding that students in these programs aren’t sufficiently trained. For example, according to F. Pat Foy, Southwest region manager for extended education at Intel, many past workers recruited from a two-year, associate degree electronics program — the most popular program — have had to be retrained in such areas as chemistry and physics once hired. “That shows us how little communication has been happening between the industries, high schools and community colleges,” says Roy.


To increase that communication, Intel has developed a curriculum suited to the technical field and is partnering with community and technical colleges to implement it. Already it has been installed at six New Mexico community and technical colleges, and work is under way in Arizona to do the same. The curriculum includes broad-based learning in chemistry, physics, math and electronics with a good emphasis on communications skills, particularly team building. And although it does focus at the end on semiconductor manufacturing technology, approximately 80% of it prepares people for the technology field across the board.


“Our strategy and our intent isn’t to install an Intel curriculum in the public sector,” Foy says. “We want to see the community and junior college and technical colleges make good on what their charter is, which is to prepare students for jobs that are available. So we’re trying to do our part to help the colleges prepare people for technologies in general.”


In addition to developing the curriculum, Intel has devoted approximately $3 million this year to enhance learning and facilities at community colleges in New Mexico and Arizona — where Intel already has large manufacturing plants and is in the process of building more that will increase current productivity six times. Part of that money is spent on benchmarking for community college faculty. “We’re taking their lead instructors and bringing them to Intel for the summer, and paying their salaries for the summer, to influence their curriculum.” says Roy. “Once they leave Intel, they go back to the classroom and teach the classes based on the experiences they had. It gives them more practical approaches to their teaching.”


Similarly, Intel is developing a work-study program for students. In addition, it’s creating scholarships, contributing money to community colleges for facilities enhancements and donating computer equipment. It’s also partnering with Los Alamos National Labs in New Mexico, to create process teaching labs in Arizona and New Mexico at which community college students can get hands-on experience.


Roy hopes that Intel’s role in the educational process can become a model for other companies and industries. Already some companies, including General Mills, Honeywell and Philips Semiconductor, have partnered in various degrees with Intel.


These businesses are on the right track. Indeed, during a speech at the San Bernardino Valley College in February, President Clinton stated that, “Not everybody has to go to a four-year college, but everybody needs to get out of high school and have access to at least two years of further education. One way to do that is to abolish the artificial distinction between learning and work by bringing the workplace into the school, the education into the workplace, and doing it everywhere in America.”


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 128-138.

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The Future of Contingent Work

Contingent work has continually evolved since its inception. The 1950s temp who filled in for emergencies and maternity leave has given way to the 1990s contingent who heads several projects and serves on work teams. And contingent work will continue to change in the future.


Temp work will become a training ground.
The recent spate of downsizings brought several things to light. First, there’s no such thing as cradle-to-grave paternalism in companies anymore. Second, to be economically viable, employees must continually learn new skills. In this past economic down cycle, 86% of the unemployment was due to structural changes, according to the Department of Labor. “People’s jobs just went away,” says Bruce Steinberg, spokesman for the National Association of Temporary and Staffing Services. “They didn’t suddenly become stupid; it’s just that they ended up with obsolete jobs because they’d been working at the same company for years.”


Many of these displaced employees found work at temporary jobs, where they honed old skills and learned new ones. In an NATSS survey of 2,189 temporary employees, 66% reported that they gained new skills during their tenure as a temporary. As the job market continues to tighten, and people continue to be phased out of jobs, it will be the temporary agencies that they turn to for help in developing the necessary job skills. “Thirty years ago if you were a typist, you could get a job, work at that job, and you’d have the same skills you had when you started. You wouldn’t need new skills,” says Steinberg. Not so anymore.


Terry Petra, a consultant to the staffing services industry and president of Professional Services Consultants, sees temp agencies in the future complementing school curriculums. “People need to learn how to adjust to environments much more quickly than they have traditionally,” he says. “Part of that responsibility will flow from the educational institutions. But a subset of specialized educational opportunities will be made increasingly available, some through the staffing-services industry.”


The number of professional-level contingents will continue to grow.
Professional-level temps are no longer an anomaly, and their ranks will continue to swell. “There’s a movement away from people using these types of services for the lower level,” says Olsten Staffing Services’ senior vice president of marketing, Gordon Bingham. “You’re seeing a lot of interest in professionals to be used on a project basis.”


Temp services specializing in such areas as management, accounting-even physicians-are springing up all over. Many companies are taking advantage of this highly trained group of contingents. For instance, KLA Instruments keeps a cadre of contract recruiters on hand-professionals who remain contingent by choice. “They don’t really want to be associated with any company,” says DeMars. “They like coming in and saving the world and then heading off and doing it again somewhere else.”


Robert Stover, CEO and founder of Western Temporary Services, gives an example of this temporary superhero: he knows a man who worked for several years as a temporary department store president for-hire. “The concept of what he was doing is the future. He’d work for one major store for a year or so, bring it back into a profitable situation, and then he’d leave.”


Steinberg thinks the trend will continue to grow, partly as a result of battlescarred victims of downsizing not wanting to jump back into the fray. “Temporary help is a way of empowering yourself. In many ways those people may have greater job security because their employment does not hinge on the fortunes or misfortunes of a single boss, a single company or industry.”


Temps are going to request-and receive-more benefits.
It’s the old law of supply and demand. With companies snatching up more and more contingent workers, the number of good temps decreases. In a survey conducted by Snelling Personnel Services, 86% of responding recruiters report that it’s more difficult than a year ago to find temporaries for assignments of any length. “There are some people who prefer being a ‘permanent temporary,’ but there are many temporary workers who’ve opted for full-time employment once the number of job openings grew,” says Snelling Personnel Services President and CEO, Timothy J. Loncharich.


The situation gives temps extra clout. “We’re going to have more demands placed on us,” says Steinberg. “With the competitive nature of our industry, temporary-help companies are going to offer people more incentives to work for their company.”


The most common of these incentives will be benefits. A report titled New Policies for the Part-time and Contingent Work Force by the Washington, D.C.-based Economic Policy Institute suggests several reform measures for the contingent work force, one of which is that employers should have to offer prorated health benefits to part-time workers. Right now, it’s none too common: In the NATSS survey, only 8% of respondents received health-care coverage from their temporary agencies.


But most think these numbers will shoot up over the next few years, either as a result of government mandate or temporary agencies’ heightened competition for the best workers. “I think it’s inevitable,” says Stover. “As temporary becomes a more stable part of American industry, I think all the benefit programs will gradually come.”


MacTemps is one agency taking a big step in that direction, with the addition of a dependent-care reimbursement plan. The first temporary placement firm to do so, the program will provide a special account for its employees to assign a portion of their weekly paychecks before federal income or social security taxes are withheld, to be paid exclusively for dependent care. In addition, employees who work 300 hours in a 10-week period will be eligible for long-term health coverage, full disability insurance and complete dental coverage for preventive care. MacTemps pays 60% of the cost for long-term health care, and 100% of disability insurance and preventive dental care. “We are doing this because we feel that it’s the right thing to do,” says MacTemps’ president John Chuang. “It’s part of our program to attract and retain the very best people.”


Personnel Journal, April 1995, Vol. 74, No. 4, p. 54.


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Union Carbide’s Lessons on Managed Care

Although health-care legislation faces an uncertain future, self-insured companies like Danbury, Connecticut-based Union Carbide, urgently needed to slow the rise of health-care costs while ensuring continued excellent care for employee and retiree families. At Union Carbide, health-care costs had been rising at double-digit rates since the late ’80s, reaching $77 million in 1992. There was no way to continue at that level. We had to apply the brakes.


We turned to managed care to gain control of costs. And it’s working. From the plan’s inception in July 1993 through the end of last year, our costs were $18 million less than we projected they would have been without managed care, and we expect at least $10 million more in savings by the end of this year. Despite the administrative glitches that go with most new programs, most em-ployees like the change.


But that outcome is by no means certain. Whatever name you give a new health-care plan, it will sound like trouble to employees who’ve grown comfortable with another. Unless you pay close attention to their concerns, even the best plan can mean headaches instead of savings. Here are some of the lessons we’ve learned:


  • Never underestimate the emotional tie between employees and their doctors. Often, these relationships span years, even decades. A new plan might end these relationships if doctors don’t join.
  • As with many managed-care plans, we require that employees choose a family doctor as their primary-care physician. This “gatekeeper” provides most health services and guides them in using other approved specialists or services. In return for using only ap-proved doctors and medical facilities, employees are reimbursed at higher rates with no annual deductible.

    But our new plan ripped away a “security blanket” for some 40% of our employees. They had to change to a primary-care physician in the plan or find one for the first time. Many em-ployees resented the restricted choice and others assumed that only second-rate doctors were willing to negotiate fees. Employees weren’t shy about letting management know how they felt. Company officers received angry letters; employees had heated discussions at employee meetings; and irate callers vented their frustrations on our benefits administrators.

    We tackled their concerns head-on at meetings and through written communications. We didn’t make cutting costs our only focus. Instead, we concentrated on listening to criticism and embracing good suggestions.

    We also advised employees about finding a new doctor, what questions to ask and even paid for “get-acquainted” visits to the primary-care physicians under consideration. We made it clear that plan members could change doctors at any time at no cost. Hundreds of employees took us up on this offer.

    In areas with new-physician networks, we encouraged employees to have their doctors apply for admission to the plan. We eventually certified a high percentage of those who did.

    We gave special attention to cases involving long-term or life-threatening illnesses, such as cancer. We approved continued treatment from doctors outside the network when there were good medical reasons for doing so. Otherwise, we worked with our administrator to find other qualified and plan-approved doctors for these patients.
  • Don’t be afraid to over-communicate. Only a unified management effort will enable you to sell a new plan. First, we called on all line managers nearly a year before introducing the plan. We distributed special monthly reports designed to make managers aware of the new managed-care plan’s features as they took shape and then trained them on plan fundamentals so they could answer questions.

    Then we rolled out the plan to Carbide’s 10,000 employees with a six-month, multimedia effort that included written materials, employee meetings, a video explaining managed care, and our plan and its administration.

    Weekly bulletins kept employees informed about new physicians joining the networks. We used our toll-free benefits-action line and our plan administrator’s member-service telephone networks to answer questions. But as good as we thought these efforts were, they weren’t enough.
  • Anticipate unexpected administrative issues and problems. As the plan kicked in, more than 70,000 calls came in during the first three months alone—double the usual number. In the first full year, calls increased 68% to 220,000. Our plan administrator’s member-services group needed new computer programs and more staff.

    All the effort paid off. Despite problems at the outset, employees have since embraced the new plan. A recent survey showed that 93% of our employees are satisfied with the quality of care received; another 92% are satisfied with their primary-care physicians; and 89% are happy with their specialists.

We still have work to do. Administrative problems persist, particularly with patient referrals. As before, we’re listening to employees and working in teams with our administrator to smooth things out. Change is painful. But if you’re sensitive to employees’ worries and concerns, anxieties can be reduced. You’ll come away with a program that saves your company and your employees money, and provides quality health care at lower cost.


Jean B. Case works for Union Carbide Corporation as corporate medical director.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 38-48.


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Taking the Sweat Out of Communication Anxiety

A supervisor steps in front of a sea of faces. Suddenly, his mind blanks. His stomach churns. And he’s uncertain he can make it to the restroom. Another outbreak of the flu? No such luck. It’s time to facilitate another team meeting—a situation that provokes communication anxiety among many adults in today’s changing workplace.


Indeed, two out of every 10 individuals experience some form of communication anxiety, according to communications experts. That doesn’t mean that the individual is less intelligent or undesirable, or should be labeled as different, but that he or she has a learned problem.


Hence, many individuals who fear public speaking often pursue careers that involve limited contact with groups or are removed from the mainstream. They tend to participate in organizations as individual contributors, but seldom draw attention to themselves. But what happens if your company reengineers its work processes, and you’re suddenly thrust into a position that requires you to engage people on a daily basis? Will you sweat, suffer, sink or swim?


Line supervisors at The Whirlpool Corporation, Clyde Division in Ohio, met this challenge head-on. Company management recognized the problem of communication anxiety as it attempted to institute self-directed work teams. So they gave their line supervisors training to improve their communication skills, teaching them to become group advisers rather than top-down directors.


Work teams require new role for supervisors.
In 1988, Whirlpool employees faced an increase in production schedules during a new product introduction, thus placing an added burden on an already productive work force of 3,200. The union-free division had just completed a multiyear project, which involved a major product-design change. They had successfully installed state-of-the-art manufacturing systems that allowed them to produce high-quality, low-cost automatic clothes washers.


To seek a business advantage, the company chose not to move plants to lower-cost labor markets like some of its competitors. Countering this trend, for three years, the Clyde Division issued lump sum payments in lieu of a base-wage increase. In an attempt to be a best-cost producer, the Clyde Division of Whirlpool Corporation wanted to bring their employees’ wages in line with other major appliance makers and the local market.


It became increasingly obvious that the company’s cost-containment efforts weren’t adequate in the highly competitive appliance industry. Only long-term solutions would give the company the advantages it needed. The solution: self-directed work teams. By moving from a supervisor-directed work force to an empowered one, employees would be better able to contribute to the organization.


But as the change process unfolded, Whirlpool managers discovered a few barriers. Most of the obstacles were experienced by the company’s line supervisors. For example, many of them questioned the long-term security of their jobs to the point where they failed to endorse the team concept.


They also were concerned about the increased work load, particularly during the design phase. The team development and training phase thrust the supervisors in a role that required additional work and into a role they weren’t prepared to perform.


The most unexpected concern, however, came from the line supervisor’s new role as communicator. In a team-oriented organization, not only is the line supervisor expected to perform the normal daily responsibilities of achieving the desired production and quality numbers, but he or she must coach individuals, make group presentations and lead work teams.


Bill Pasmore, author of Creating Strategic Change, observes: “Participation is a threat to authority based on top-down control of decision making.” In the traditional organization, Whirlpool supervisors were selected and retained on their ability to issue directives and handle discipline when a subordinate violated company policy. In the new organization, the area supervisor became a coach or team adviser. Instead of issuing directives, the team adviser was now being requested to facilitate team meetings, encourage and train individual team members, manage projects and provide general leadership to the team.


As the Clyde Division progressed further into the work-team process, the division vice president and five directors decided to form a Supervisor Design Team to address any problems. The design team was facilitated by two HR organizational development administrators and included eight randomly selected supervisors representing the various business units. The team’s objective was to identify the skills required under the new role as team supervisor and develop a plan to improve the current supervisors’ skills base. In an empowered organization, line supervisors turned advisers would have to spend at least 50% of their time interacting with others through team development, general communications and project management. After defining the performance required under a work-team model, the design team also generated a list of training requirements that would be required for success as team advisers. Some of the basic skills included computer literacy; engaging in interpersonal dialogue; planning meetings; making group presentations; and writing. Being a team adviser would also require leadership skills that help establish a lean production system. One must learn to coach, counsel and facilitate meetings.


Indeed, most supervisors, including the Design Team members, were quick to realize, but not publicly admit, their own shortcomings in the new environment. The symptoms were first noticed when traditionally strong-performing supervisors began to have difficulty leading their teams. For example, they appeared to lack control of the team meetings. Also, normally talkative supervisors were unusually frustrated and quiet during meetings, only to express opinions on the same topics outside the meetings. Additionally, the same supervisors, who normally appeared poised during general conversations, were extremely ill at ease when asked to present information to the division management team and other groups. The Supervisor Design Team recognized that their peer group suffered from more than just a lack of good presentation skills. The supervisor turned team adviser suffered from communication anxiety.


Communication anxiety is normal.
Through the data collection phase, the Supervisor Design Team learned that several organizations identified communication anxiety as a common problem. The team also learned about one training model that had been developed by a communications consultant to help alleviate this inhibitor. Based on this information, one of the article’s authors [Arden K. Watson] helped define the problem and work with the line supervisor group at Whirlpool’s Clyde Division.


According to James McCroskey, professor of speech communication at West Virginia University in Morgantown, West Virginia, the syndrome is “an individual’s level of fear or anxiety associated with either real or anticipated communication with another person or persons.” Fear of communicating is often associated with mere shyness, although shyness also includes social and personality difficulties.


The fear of giving a speech or talking in a new situation is normal, and it’s experienced by most individuals. But the abnormal fear of communication, experienced by one-fifth of the population, affects the lives of these people in many ways, according to McCroskey. They may experience more general anxiety, resist ambiguity, avoid new experiences, prefer to be alone and exhibit less creativity. And when they have to communicate, they often have difficulty expressing their ideas.


According to research by Virginia P. Richmond, a communications professor at West Virginia University, a job applicant study compared business students with similar credentials. The students with greater communication anxiety were projected to be less task-oriented, less satisfied in their job, to have poorer relations with their peers, supervisors and subordinates at work, to be less productive and less likely to be promoted in the business organization.


Not only does fear of speaking restrict the communication of the employee, it can have profound effects on the attitudes and productivity in the company. An organizational psychology researcher at Knoxville-based University of Tennessee, studied fear of speaking among government employees in a career-planning workshop. He suggests that the dissatisfaction of those with high fear of communication may have negative effects on communicating with a company’s clients. Moreover, the job satisfaction and functions of other employees may be negatively affected by interacting with a fearful peer.


Anxiety may originate in formative years.
One of the causes of communication anxiety may lie in a child’s experiences during the formative years, according to a study by John Daly and Gustav Friedrich, communication professors at the Universities of Texas and Oklahoma, respectively. Apparently a learned trait, it’s one that’s reinforced because of the child’s communication behavior. If a child is reinforced for being silent and isn’t reinforced for communicating, the probable result is a quiet child. Also, if the child is punished while attempting to communicate, the child is more likely to become quiet.


In order to tackle the problem at Whirlpool, the program that was implemented was called Speak With Confidence. It was developed by the author [Watson] and is used with groups of six or less participants. It incorporates both communication anxiety coping techniques and develops communication skills. Anxiety coping techniques include visualizing and setting goals; communication skills include introducing oneself, making presentations and learning to speak assertively.


The model consists of applicable material for all work levels, and the content includes introspective as well as interactive and practice activities that provide immediate feedback. Here are some examples of training exercises:


  • Describe three ways that talking is important and four ways it affects others and yourself
  • Use three steps to introduce yourself
  • Use three techniques to control fear of communicating—visualize the ideal scene; set behavioral goals and measure the accomplishment of behavioral goals you set; and use five steps of rational thinking
  • Develop the introduction, body and conclusion of an informal presentation
  • Effectively deliver an organized informational presentation
  • Use an assertiveness process to verbalize opinions; ask and answer questions; give directions and talk directly to authorities.

Participants for the Speak With Confidence training were selected after completing an attitude inventory. The inventory measured communication anxiety levels in situations such as: representing the organization to other people, fielding questions at a meeting, talking to subordinates or superiors, interviewing, talking in a group and presenting information to a large group. Of the 105 supervisors who took the inventory at the Whirlpool Clyde Division, 35 participants experienced abnormal communication anxiety.


Supervisors who scored abnormally high on the inventory were invited to a private interview with the trainer to discuss their training needs. In some cases, the trainer found that the employee didn’t need the training. Other supervisors who were invited avoided or refused to come to the interview. Most of those that did come, however, were receptive to and relieved that such training would be offered.


During the interview, the trainer explained the program and invited the supervisor into the training. If the person showed interest, the trainer explored the individual’s attitude toward communicating, their experiences in communicating, communication needs now required of the supervisor and any of their special communication concerns.


As word spread about the positive training, several supervisors who hadn’t tested in the abnormally high range requested to take the training. In all, 25 supervisors were trained in five groups. One group was trained each month during the fall of 1993. Training was held offsite in a comfortable and relaxed atmosphere.


The authors received positive reactions to the training. Through questionnaires, the participants were asked to rate the usefulness of the program, the learning material, the presenter and the facilities. One supervisor remarked: “I wish I hadn’t been so resistant.” When asked how she would use the training, another participant said, “I’m sure I’ll hold more meetings than I would have without this training. I may even be able to expand into other parts of my job.”


In terms of learning, the trainer measured a 29% reduction in inventory scores, which indicated less fear of and greater willingness to communicate.


One participant explained her change in attitude: “Just because I have a thought doesn’t make it so. How other people perceive me is different from what I feel on the inside.” When the supervisors’ pre- and post-objective lists were compared, the trainer found that the participants knew very few of the objectives prior to the training but afterwards, they had learned nearly all of them.


The behavioral evaluation was completed during three- and six-month interviews in which participants were asked to state the objectives they’d learned in the training and to explain how these behaviors were used on the job.


Training program improves supervisors’ self-esteem.
Indeed, companies can recognize the problem of communication anxiety among employees in three ways. First, by observing communication patterns, managers can learn whether the employee readily enters into a conversation, speaks up in a meeting or offers to give a presentation. Second, employees can be asked in what communication roles they feel comfortable or uncomfortable. And third, a professional trainer can administrate a communication anxiety inventory to reveal how many employees may suffer from the syndrome, what settings provoke the anxiety and who may benefit from training.


For Whirlpool’s Clyde Division, the Speak With Confidence training has been a success. Employees have learned to introduce themselves confidently, present information in a dynamic manner and speak assertively. By successfully communicating, they have increased their self-esteem as well as their dedication to the team process.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 111-119.


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Day’s Wage_Day’s Work The Old Employment Contract

Encourages employees to identify with the tasks they perform.
Consequently, employees have little sense of responsibility for the results produced when all positions interact. Furthermore, they resist change demanded by new market realities because “new” threatens current personal identity.


Encourages employees to “organize against the enemy.”
As employees identify with their tasks, they invite things to go wrong by blinding themselves to their actions’ consequences. When difficulties arise in the marketplace, it seems natural to blame someone else.


Rewards employees for “filling a position.”
Employees naturally want to protect the position they’re filling. Alliances designed for mutual protection emerge inviting creation or continuation of products and services that markets may not want or need.


Posits a mental model of adversarial relationships.
Employees assume they must fight for what is due them. They assume fighting well leads to respect and honor. They define achievement as winning the fight irrespective of market consequences.


Expects conformity.
Employees collude to leave their assumptions, beliefs and mental models unexamined, thereby discouraging new solutions to market problems.


Personnel Journal, April 1995, Vol. 74, No. 4, p. 80.


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Prudential Measures HR With A Total-quality Yardstick

In life, it’s generally a good idea to practice what you preach. In business, it’s not only a good idea, it can be crucial to your success.


Although Valhalla, New York-based Prudential Resources Management, a unit of The Prudential Insurance Co. of America, formally began a total-quality journey in 1991, that journey took a sharp and more focussed turn a couple of years ago when the company revised its mission and tied that mission to the company’s core values: Client Focus, Winning, Worthy of Trust and Respect for Each Other.


Because of the company’s move toward quality objectives, the firm’s culture had changed, but HR-and the systems it administered-had not. As a human resources consultant, it was time for the company to practice what it preached. It was a goal that although clear-as it is for many companies-isn’t always easy to reach. But it could offer large payoffs.


The company’s revised mission is to be a world-class leader in providing relocation, real estate, human resources and related consulting services to individuals and institutions globally while generating a satisfactory return. Above all, the company now strives to “delight its clients” and to do so with honesty, integrity and mutual respect, realizing that its greatest asset in achieving this mission is its employees. As a learning organization, the firm states that its employees’ ongoing education and development is critical to its success.


After Prudential set its sights on total-quality improvements, the organization’s Chairman and CEO Matthew M. Luca and President and COO T. Stephen Gross chartered an ongoing human relations assessment project (HRAP) team to be responsible for ensuring that all the company’s human relations systems directly support the company’s revised mission, vision and values.


“We recognized that in order to succeed, we needed to make sure that our human relations systems were aligned with our company’s mission, vision and total-quality principles,” explains Maria Stolfi, director of employee benefits and lead facilitator of the HRAP team. “When we say we [must] work toward continuous improvement, we [must also] give everybody the tools to do that.” Some of the questions they began asking themselves were: Are our human relations systems supporting continuous improvement and total quality? Are our people getting rewarded and recognized according to our mission and values? Is their performance being managed on that basis? In many cases, the answer was no. It clearly was time for action.


The HR team takes stock of HR systems.
According to their chairman’s mandate, the company formed a cross-functional team of 10 associates (which is how Prudential refers to all its employees) ranging in level from senior vice president to lower-level employees.


Why give the task to a team instead of simply giving it to the HR department? “One of the things in our learning about total quality is the strength and the effectiveness of cross-functional teams and that’s why we went that direction,” says Thomas R. Jago, an internal communications officer and an HRAP team member. The firm had had success over the past few years in having cross-functional teams tackling multidimensional projects, so the company’s senior management felt it should also give HR systems the same directive. Also, because there are only 10 individuals in the company’s internal HR organization, it would be difficult to give sole responsibility for a project of this magnitude to so few people.


The team first looked at the HR services the company provided for its employees and categorized them into well-defined service units. They identified six broad human relations systems or services which the human resources function provides to the organization. These services included: Performance management, reward and recognition, personnel policy, compensation and benefits, communication and career development.


After careful evaluation, the team ranked these systems, putting the performance-management system at the top of the list. They determined that these were the six areas where there were some concerns, where there was the greatest room for improvement and where they felt they could get some relatively quick results so that changes would have a positive impact on the organization.


The next step was to figure out how to systematically redesign each of these six systems so that they would be aligned with the company’s new vision, mission and values. The team went about setting concrete objectives for measuring the six HR systems’ impact on the organization. “We established a set of 10 objectives that we would base all of our human relations systems against,” says Jago.


The goal of these 10 HR objectives, which included such areas as fostering open communication and leading by example (see “Prudential Resource Management’s 10 HR Objectives”), was to recognize that the company’s ongoing success is dependent on HR’s ability to recognize and value each individual’s unique differences and talents. The HRAP team envisioned that a work environment, supported by these 10 objectives, would allow each person the opportunity to reach his or her fullest potential, and therefore directly contribute to, and of course help improve, the bottom line.


Realigning employees’ performance goals with company goals.
After establishing the 10 HR objectives, the HRAP team had to figure out what criteria to use in aligning the company’s performance-management system with the 10 objectives. They had to determine: Where the systems fell on the objectives continuum, where they should be and where the gaps were.


To figure all this out, the team gathered best-practice information from award-winning companies and consulted with leading experts through secondary-research sources. “We also did informal benchmarking by referring to publications that have written about other organizations and what they’ve done in performance management,” Jago adds.


In addition, they evaluated a recent employee survey that had asked questions-many relating to performance management. From this, the HRAP group learned that the performance management system wasn’t used consistently, it didn’t stress ongoing and multilevel feedback and it didn’t factor in team performance.


The team also spoke to other organizations on an informal basis to get an outside perspective. “We didn’t actually go out and talk to other organizations because time was important to us,” says Stolfi. The HRAP team also solicited feedback from the organization’s senior management team about what changes they thought needed to be made. All those insights were incorporated into the evaluation process.


“Through our research of total quality, we imagineered what our HR systems would look like in terms of behaviors if they were aligned completely with all the [objectives],” Stolfi explains. “So we looked at all that data, came up with a common rating system and then conducted about 12 focus groups throughout our company of both management and nonmanagement groups,” adds Stolfi.


Over the course of a month (late last summer), they met with about 20% of the company’s employees in focus groups throughout the organization, facilitated by HRAP team members. The team’s research lead them to the realization that employees wanted a more formal way to see how the work they do every day helps the company achieve its mission and quality vision.


Performance management tops the list.
The HRAP team’s research suggested that the company’s performance-management system was the first HR system that needed to be realigned with the company’s new vision.


The system had flaws, both in design and in execution. The biggest flaws were that it didn’t clearly tie individual objectives to company objectives and that it lacked clear evaluation standards. Although people could be rated on a scale of 1-5 (from “needs substantial improvement” to “outstanding”), in several areas such as client focus and technical ability, those performance dimensions needed further clarification. “The process that we had was pretty good if people were using it as it was intended,” says Jago. “There were situations where people were doing quite well because employees’ managers were very focused on it.” But, in many cases, people weren’t using the system as it was intended, often because they didn’t receive training. Many weren’t using it at all.


“Where we were falling short was that [the performance-management system] was not well-communicated and it was very unevenly implemented,” says Jago. In fact, some employees weren’t setting objectives at all so they couldn’t be measured by any performance system. Often, managers were dictating objectives with little or no input from employees and employees weren’t getting a lot of ongoing feedback throughout the year about how they were achieving whatever objectives were set.


The performance-management system underwent reconstruction. What emerged was a four-part improvement plan. The new plan calls for:


  • Systems improvements:
    The plan requires feedback from three to five team members for each associate’s performance evaluation. Everyone is reviewed-exempt and non-exempt-with a 360-degree feedback system. Also, managers are now responsible for coaching and counseling their direct reports on a scheduled basis.
  • Skills building:
    A complaint of the old system was that managers, especially new managers, weren’t trained on how to help employees set objectives and how to conduct performance evaluations. Within the last several months, 700 of the company’s 1,000 employees have received training in how to set objectives for themselves or for their subordinates.
  • Education of the process and company expectations:
    “People had been feeling lousy about the [old] process because they didn’t know what the expectations were,” says Stolfi. Employees are being educated about how to set their job objectives based on company objectives.
  • Management of the process:
    There’s now a cross-functional team that’s responsible for managing the performance-management process-to make sure that there’s continuous improvement and measurement of how the process itself is proceeding on a monthly or quarterly basis.

The new performance management system now includes: setting performance objectives, ongoing communication and feedback between manager and associate, gathering associate input, client/ project team input, performance review and compensation review. The biggest difference between the company’s old system and the new one is that performance management is viewed as a shared, rather than a one-sided, top-down responsibility.


The new system was put into place for the company’s 1995 planning purposes at the end of 1994. Every associate has developed 1995 objectives that are meant to track and be consistent with their manager’s objectives and to support the company’s four strategic objectives. Everyone will be evaluated at the end of the year based on the new system.


Evaluating the new performance-management system’s progress.
Although the company is still in its first year of implementing the new performance-management system, already the HRAP team has identified changes they’ll make to next year’s plan.


They’ll be incorporating a section into the performance appraisal form to elicit feedback from clients-both internal clients, external clients and colleagues-similar to other feedback mechanisms the company has incorporated into areas of the business as a result of its quality objectives. Improvements such as these, in turn, help support the 10 HR objectives-communication being at the top of the list.


“One of the other things we’re going to be doing [more] is putting a couple of questions on our E-mail system and having people zap back their answers,” explains Stolfi. Before, they asked: “Were you setting objectives before, yes or no?” Now they’ll ask: “Were your objectives set by January 15th?” Or, “Have you assessed to improve the process?” Adds Stolfi: “We’re going to continually solicit more data. But there’s a lot more work to be done.”


Improving five other HR systems.
Prudential Resources Management’s HRAP team has started looking at revamping the next system on the list: reward and recognition. The realignment process for this system is taking the same course as the performance-management system did. “We’re looking at where we are today, we’re doing focus groups, we’re looking at survey data and we’re also doing a lot more internal work on the reward and recognition system,” says Stolfi.


In tandem with this project, the company is further focusing on evaluating HR’s approach to achieving total-quality objectives through: 1) Discussions by the senior management group about where they perceive HR to be today; 2) Having an outside consulting firm conduct an assessment of how well the company is meeting its total-quality objectives; 3) Designing a formal matrix of the organizationally sponsored HR programs.


The firm’s reward and recognition systems are a good place to start. “Right now, we’re looking at the organizationally sponsored programs and identifying what we spend on the programs, how many people it affects and how they’re utilized,” explains Stolfi. “A lot of our regions have different programs they they might do on their own.” For instance, there might be 15 different types of reward and recognition programs used throughout the company, which include such variations-on-a-theme as base pay, benefits, incentive compensation, public thank you’s and private thank you’s.


“People are being asked to rank what personally motivates them,” says Stolfi. “So we’re going to take that data to determine if we’re spending our money in the places that make sense for people.” Says Jack Navarro, senior VP: “We’ve brought our client focus to a higher level, we’ve got tools to improve our processes and we’re creating measurement systems for collecting data on client and associate satisfaction. Now we must focus on the human side of these initiatives.”


Although the company is eager to tackle each of the remaining four HR systems that it has committed to aligning with the firm’s mission, it doesn’t want to hurry the process by laying out an overly ambitious schedule. In keeping with the company’s commitment to continuous improvement, it plans to work on each remaining HR system until all have been revamped. But the process won’t stop there. Because each system will have a cross-functional team as its monitor, each will continue to undergo tinkering. Such is the way of total quality.


Measuring success with a total-quality filter.
For some organizations that decide to travel the total-quality road, results are immediate and measurable. Prudential Resources Management has found this to be true. Comparing its 1993 year-end results to 1991 (the year the company began its total-quality journey), it has found that:


  • The number of clients it serves has nearly doubled
  • Overall client satisfaction increased almost 10%
  • Associate productivity jumped 5%
  • It increased its profits by 20%.

Why is Prudential’s focus on tying quality objectives to HR systems so innovative? Sometimes, innovation is simply common sense put into action. However, common sense, as they say, often isn’t common at all. “The key is that we’re getting people involved and we’re understanding that their contributions impact the organization,” says Jago. Indeed, they have. “Last year we phased in more than $2.6 million in efficiency improvements, and it’s because of this planning and focus that we’ve been able to do that,” he adds.


Now, with numerous partnerships and more than 65 cross-functional quality planning and improvement teams throughout the company, total quality is well integrated into the fabric of the company. Practicing what you preach isn’t always easy and may feel like the road less travelled. In the end, however, it very well may be the road most profitable.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 139-143.


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Carving Out Health-care Savings

Thirty-eight million dollars is well above what most employers spend on health benefits each year. But that’s what the National Railway Labor Conference in Washington D.C. was able to save in health costs, specifically those related to mental-health and substance-abuse treatment, thanks to the use of a benefits-management strategy called carve-outs.


Using a similar approach, US West, the telecommunications company based in Englewood, Colorado, was able to slash its mental-health costs by 25% without reducing the level of benefits to employees. Carve-outs also allowed the Orange County School Board in Orlando, Florida, to cut its mental-health tab in half, and they helped a manufacturing division of Dow Chemical in Free-port, Texas, reduce mental-health expenditures from $5.2 million to $1.4 million in five years—a 73% savings.


What, exactly, is this technique that’s helping so many companies maintain the same level of employee benefits, while drastically cutting costs? Why are carve-outs becoming so popular? And what types of health costs are carve-outs most successful in controlling?


According to Leslie Schneider, managing consultant with Foster Higgins in Atlanta, the term carve-out refers to the practice of carving out or separating a particular class of health benefits—usually those that involve specialty health services—from the overall health plan in an effort to manage those benefits more cost-effectively. How? By applying managed-care strategies such as precertification, utilization review and case management.


Although traditional managed-care organizations such as HMOs and PPOs utilize case-management techniques, they’re typically more concerned with the delivery of general medical services. They don’t have the depth of expertise to manage specialty areas. And the major insurance carriers, according to Suzanne Gelber, senior consultant with Towers Perrin in Stamford, Connecticut, have been more concerned with processing claims, not reviewing specialty treatment to see if the care provided was appropriate and cost-effective. “The carriers are just beginning to get into the health business,” she says. “For them to know all about several hundred mental-health diagnoses and how to handle them is pretty difficult.”


This is why more and more employers are taking it upon themselves to carve out certain benefits and assign the management of them to a specialty managed-care vendor who knows what is involved in that type of care. “It makes sense that a company devoted to that kind of care is going to be more focused on it,” Gelber adds. “They are going to have a better handle on how to manage, credential and contract with providers.”


To date, carve-outs have been most effective in controlling the cost of prescription drugs and mental-health and substance-abuse services. In fact, Towers Perrin estimates about 80% of Fortune 500 companies have carved out EAP services, mental-health care, or both. This is because these services are relatively distinct from the rest of the medical delivery system. “The more interconnected a service is with the rest of the delivery network, the less likely it is to be carved out,” says Howard Wizig, a consultant in the Kansas City office of Towers Perrin. The next generation of carve-outs is likely to manage such services as chiropractic and physical-therapy claims, diagnostic-testing services, high-risk pregnancy care, as-thma, diabetes and chronic-disease management. Why? Because these services also aren’t heavily intertwined with primary-care services.


While the term carve-out is relatively new, the practice itself isn’t. Dental plans, for instance, have been separate from the main medical plan in many companies for years. “Most people don’t think of them as being carved out,” Gelber explains, “when in fact, they are.” Dental plans are carved out because they represent an area of specialty care and because the care providers represent a specialized group of health professionals. The organizations that administer the claims are equally specialized.


Part of the reason carve-outs are getting more attention lately is because more specialty-care providers are managing carved-out services. These providers have had to become very entrepreneurial and respond to the cost and quality concerns of purchasers because of a growing trend, at least in the managed-care environment, to rely more heavily on primary-care physicians. Why? Because they’re cheaper. Fearing a loss of business, the specialists have banded together and created organizations that offer a level of expertise—be it in internal medicine or mental health—that’s not available anywhere else. In essence, this is marketplace economics at its finest.


The second reason carve-outs have become so popular is, quite simply, because they work. When specialists are put in charge of managing specialty care, patient satisfaction increases and costs go down. By how much? The large mental-health vendors routinely achieve a 90% satisfaction rate while cutting costs for employers, on average, from 30% to 40%, Gelber says. And in prescription drug carve-outs, savings can be as high as 50%. For companies that carve out these services, the potential savings come at a good time, because for years the costs of mental-health and drug benefits have been rising at a higher rate than those of other health benefits.


Deciding what to carve out.
In looking for pieces of the benefits pie to single out, HR professionals should begin by analyzing their health-care data to see how they’ve used health benefits, including for what diagnoses and what kinds of care. These data will allow you to spot problems in quality, utilization or cost. If you notice, for example, that mental-health costs are rising faster than the costs of other care areas, you might want to consider carving out this benefit.


Which is exactly what the National Railway Labor Conference did last year. The self-insured organization which provides, among other things, health benefits to more than 200,000 railroad employees across the nation, could not cut benefits as a means of controlling costs because railway workers are unionized and the union would not accept reduced coverage. Besides, as many companies have discovered, cutting benefits can ultimately lead to other problems such as lower morale, sicker workers and declining productivity. The alternative, according to Joe Epstein, director of employee benefits, was to work with the union to find better ways of managing those benefits. How? By carving out some of the benefits and contracting with Value Behavioral Health (VBH), a specialty vendor based in Wilton, Connecticut, to manage them.


VBH not only serves as a gatekeeper to all mental-health services by precertifying railroad employees to use those services, but also manages a network of mental-health providers. Employees who use providers in the network are covered at a higher benefit level than those who go outside the network. The $38 million National Railway saved came from the combination of reduced per-visit costs VBH was able to negotiate with its care providers, and from the avoidance of inappropriate care (especially costly procedures) realized by having experts manage the recently carved-out benefits.


The next generation of carve-outs is likely to manage such services as physical-therapy claims, diagnostic testing and chronic-disease management.


Savings can be a big reason why some companies decide to switch to carve-outs, but there are other factors. Despite the savings US West has realized, cost wasn’t the reason this organization carved out its mental-health benefits. Instead, it was because of access problems. In 1991, when the company consolidated four indemnity plans into one, HR professionals were concerned the chosen carrier would be unable to provide adequate mental-health coverage to all of its management employees in 14 western states. “In our opinion, the medical plan didn’t have a large enough mental-health network,” explains Keith Orton, regional director of mental-health services in the company’s Portland, Oregon, office. So, the company carved out its mental-health coverage and contracted with a specialty vendor. Today, US Behavioral Health in Emeryville, California, manages these services for US West.


Because utilization is closely monitored, US Behavioral Health knows where to add providers to the network in order to make sure all employees have access to quality services. “Their sole purpose in life is to efficiently manage mental-health services for their clients,” Orton explains.


Another factor in US West’s decision to carve out mental health was because negotiations with its union, the Communication Workers of America, comes up this year and the company wants to introduce managed care into the health-benefits package provided to union employees. By carving out mental-health services for management employees ahead of time, “we’re hoping we’ve created a plan that will look appealing to the bargained employees,” Orton says.


Sandoz Pharmaceuticals in East Hanover, New Jersey, carved out its medical-surgical and mental-health benefits in January 1994 for yet another reason: as a way of getting employees used to the idea of managed care. According to Bill Flannery, director of benefits, employees had been used to a traditional indemnity plan in which all reasonable and customary charges were paid in full. Employees didn’t have to go through a precertification and utilization review process, nor did they have to choose from a list of network providers.


In an effort to control costs, the company is planning to make the switch to a comprehensive managed-care program in 1995. As an interim step, Sandoz contracted with Intracorp in Plymouth Meeting, Pennsylvania, to review medical-surgical procedures, and with Value Behavioral Health for mental-health services. Both vendors serve the company solely as gatekeepers who approve procedures and length of stay. Employees are not—at least not yet—sent to providers in those networks.


“These vendors are charged with making medical judgements and determining the medical necessity of certain procedures,” Flannery says. “We want employees to get used to the idea of case management before we change the whole benefit program on them. Though we have saved some money by carving out and managing those two benefits more closely, our primary reason for doing so was to create a cultural change in the organization.”


There are lots of different ways to manage carved-out services.
Once you’ve decided what benefits you need to carve out and why, you must determine how you will manage those benefits. Since separate administration of carve-outs is what makes them so effective, choosing a qualified administrator is crucial.


There are essentially four ways to take advantage of carve-outs. The easiest way to manage carve-outs, and one that is mostly transparent to employers, is to contract with managed-care organizations that have already carved out specialty services. They do this by either creating their own internally specialized services or by contracting with outside vendors. Either way, the services are managed by experts.


An HMO may carve out radiology and laboratory services, for example, and instruct their doctors to use only pre-approved radiology and lab vendors. Because this is done internally, there is no impact felt by employers or their employees. However, because costs can be controlled, purchasers get the financial and quality benefits of carved-out services without having to manage them. According to Gelber, about 10% of employers use HMOs that have internally carved-out services. Because they are often invisible to purchasers, you may already be taking ad-vantage of them without knowing it.


The second and most difficult way to carve out benefits is by creating and contracting with your own network of providers. This requires the HR department to identify, credential and manage the physicians and vendors in the network, as well as handle all the precertification, utilization review, case management and claims processing. Direct contracting is by far the most cost-effective route because it eliminates costly intermediaries. However, the administrative burden on the HR function is enormous. “Increasingly, employers who had been direct contracting are not doing it anymore,” Gelber says, “because it’s a pain to administer.” Only about 10% of employers who use carve-outs have gone the direct-contract route.


About 40% of companies are taking advantage of carve-outs by using specialty services managed by major insurance carriers. Under this kind of arrangement, you could either opt to use the carve-outs offered by your own carrier—one-stop shopping, as it were—or carve out the benefits and assign them to separate carriers. You may choose Travelers Insurance, for example, for your indemnity coverage and Aetna for your medical point-of-service plan. The problem with using the same carrier for all carved-out services is that the account manager who handles your account will then be responsible for both the indemnity and specialty coverage. “Very often,” Gelber explains, “employers are not happy with that arrangement because account managers can’t know enough about all specialty areas. They aren’t dentists and pharmacists and mental-health clinicians as well as account executives.”


The last, and one of the most popular ways to manage carve-outs, is to use a specialty managed-care vendor like VBH or US Behavioral Health. These organizations are in business solely to provide cost-effective, high-quality specialty care for their clients.


Most companies, regardless of the way they decide to manage the carve-out, offer the carved-out managed-care services to employees as a choice that’s available in addition to their regular benefits coverage. Employees are then of-fered financial incentives to use the specialty network.


Managing carve-outs challenges HR professionals.
As you might imagine, there are several challenges inherent in managing carved-out services. First and foremost, you must make sure that specialty providers are able to work within your cost and quality requirements. Union Carbide Corp. in Danbury, Connecticut, learned this lesson the hard way when it contracted with a specialty vendor to carve out psychiatric and substance-abuse services in 1988.


According to Ed Hoefer, associate director of benefit plans, during the first year of the carve-out, costs for psychiatric services dropped significantly and the company was happy. By the end of the second year, however, costs had jumped up 40% and HR managers had a difficult time getting the vendor to account for the increase. After some investigation, Union Carbide found the vendor wasn’t properly managing the discounts it had negotiated with providers. For example, a per diem hospital rate that should have been $400 was actually being paid out at $800. Other claims were not being paid at negotiated rates because of problems with the vendor’s computer system. “Basically, the services were not being managed the way we were promised they would be,” Hoefer says.


After working with the vendor and searching, mostly unsuccessfully, for ways to better manage costs, Union Carbide fi-nally gave the vendor an ultimatum: guarantee that costs would be maintained at a certain rate per em-ployee per year or lose the contract. “Because the vendor wanted our business, they agreed, and costs dropped like a rock the next year,” he says.


Yet this created an-other problem. “We no-ticed a drastic drop in admission rates and the average length of stay which made us wonder if the vendor was limiting access to necessary psychiatric care,” Hoefer explains. “We wanted to control costs, but we also wanted to get people well.”


About 40% of companies are taking advantage of carve0outs by using specialty services managed by major insurance carriers.


Eventually, Union Carbide worked with its vendor to draw up a detailed business plan that included a series of clinical quality measures. After five years, the company and its employees are finally happy with the arrangement. Costs are down—Union Carbide paid $228 per employee per year for mental-health services in 1994 compared to $326 in 1989—and patient satisfaction is up.


Given his experience, what advice would Hoefer have for other companies that wish to carve out psychiatric services? “Develop measurable standards,” he says. Gelber agrees, adding that vendors should be willing to pledge a percentage of their fee against the attainment of administrative, clinical and financial standards.


Another trick in managing carved-out services is getting the specialty vendors and primary-care physicians to work to-gether so referrals can be made between the two groups. If an employee is undergoing treatment for cancer, for example, he or she may need some support from mental-health therapists. The primary-care doctor who is covered under the general medical plan needs to know the specialty network exists. “This is tough because sometimes the primary-care physicians are not interested in knowing who to refer [patients] to,” Gelber says, and unless the carve-out vendor has been instructed to share appropriate information with medical providers, they may neglect to do so.


From an internal standpoint, the biggest challenge with carve-outs is communication. Teaching em-ployees what managed care and specialty health-care networks are all about is tough, but as Epstein from the National Railway Labor Conference ex-plains: “You can’t over-communicate about managed care.” Extensive communication with managers also is important because they are the ones who have to approve and sell the concept of managed care to their employees.


In the end, what is the biggest impact of carve-outs on the HR function itself? “It creates a different sort of function,” Gelber says, one that is focused on vendor management and data analysis. Carve-outs require analytical, coordination and management skills that fit well with the new customer-oriented generation of HR people. When carve-outs are done right, costs decline, care improves, quality monitoring improves and there’s a broader spectrum of care covered by the benefits plan. Companies can’t help but come out ahead.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 38-48.


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Revealing the Dark Side of Clinical Depression

Bill is a programmer/analyst in data processing for a major American bank. A few years ago, he hospitalized himself for clinical depression. He stayed for three weeks while the medication the hospital prescribed took effect and he learned a new way to manage his behavior to influence his feelings.


Bill is one of 17.6 million Americans who suffer from this debilitating disease. Yet, only one in three people within the work force who have clinical depression seeks treatment as Bill did, according to the Massachusetts Institute of Technology (MIT). This has wide implications for corporate America. According to a study of depression in the workplace reported in December 1993 by MIT, clinical depression costs employers approximately $44 billion a year in direct costs and lost productivity (see “The Economic Burden of Depression”).


Indeed, when an employee suffers from clinical depression, a silent thief is consuming sick days and robbing your workplace of productivity. A clinically depressed employee simply can’t perform to capacity. The employee can’t think clearly, may take no pleasure in his or her work and can’t contribute effectively to the efforts of a team.


According to Lori Altshuler, a physician at the UCLA Neuropsychiatric Institute in Los Angeles, a person who has untreated depression may suffer a diminished ability to process information or may feel that every part of the job is overwhelming. Symptoms may include headaches, fatigue, lethargy or anxiety, to the point where the person calls in sick.


Mana Kelly, a certified employee assistance professional, adds that a person with depression may show a decrease in motivation, isolate him or herself from co-workers, fail to contribute in meetings, avoid eye contact and show changes in personal appearance. He or she also may demonstrate low energy, lose concentration and the ability to follow directions, break into tears or present a generally “flat” (emotionless) demeanor.


You may have noticed someone at your company suffering from these things, but have felt too constrained by laws governing what you can and can’t discuss with the employee to confront him or her. Is there anything you can do?


Yes, according to directors of employee assistance programs (EAPs), psychologists who specialize in depression, insurance company psychiatrists and employees who have fought their way back from clinical depression to full productivity. But like many good outcomes, this one requires planning.


What is clinical depression?
Jonathan Aronoff, a psychologist in private practice in Stockbridge, Massachusetts, describes clinical depression like this: A person who normally operates on five or six cylinders now is operating on two or three. According to Rockville, Maryland-based National Institutes of Mental Health, “the highest overall age of onset [of clinical depression] is between 25 and 44, with an increasing rate for those born after 1945… .” The rate of clinical depression for women is roughly double that of men. For bipolar disorder—depression alternating with bouts of mania (excessive “highs”)—the rates are about the same for men and women.


A tendency to depression appears to run in families, so some people are more vulnerable to depression when major life stresses affect them. Researchers report that either chemical events in the brain, or life circumstances, can trigger depression. For example, the event that led Bill to treatment for depression occurred at work. He had always been ambitious for a management position, but when he achieved his goal, he discovered that his career success contrasted with his internal unhappiness. He suffered from anxiety and fear of confronting issues, problems that affected his work performance. Bill discussed the situation with his boss, and the two decided that Bill would step down. “It was devastating to my self-image. Part of who I am was gone. I got transferred to a more analytical job, but the feelings snowballed.”


A bout of depression such as Bill’s can last a few weeks to a few years; normally, Altshuler explains, untreated depression lasts from six months to a year. People suffering from depression do usually return to their regular state of functioning intermittently, but a subsequent episode quite often is more severe. Bill, for example, had been in and out of counseling several times, and even tried antidepressant medication once. The side effects of that first medication, however, were worse for him than the depression itself, so he abandoned the medication. His untreated depression returned at regular intervals, and each time it returned it was worse.


What’s more, Altshuler emphasizes that if a person has been clinically depressed one time, the likelihood of recurrence is 50%. If a person has been clinically depressed twice, the chances it will happen again is 75%. And if the depression occurs a third time, there’s a 90% chance that it will recur.


Ironically, most depressed people don’t recognize at first that they’re depressed. Kelly says that by the time depressed employees reach the company’s Employee Assistance Program, they’re usually in considerable mental pain. Kelly has directed the EAP for Rosemead-based Southern California Edison for eleven years and reports that, as with many physical ailments, most clinically depressed people don’t seek treatment until it hurts badly.


Fortunately, clinical depression is very treatable. Richard Kunnes, president of Prudential Psychiatric Management in Roseland, New Jersey, explains that although every person requires individual treatment, in most cases—especially moderate to severe depression—the patient responds best to a combination of medication and therapy.


Antidepressant medications do work, under proper supervision in a treatment plan. Normally the medications need three to six weeks to take effect, so early intervention is important. Altshuler explains that the literature on clinical depression tells us that if the person is in a clinically depressed state, a good response to medication is likely.


There’s a wide range of antidepressant medications appropriate for differing biochemistries. And, in fact, the more mild cases don’t require medication, Kunnes says. Also, not one professional interviewed for this article recommended medication alone, although all stated clearly that therapy alone may work. If there is to be medication, therefore, it must be with therapy or, in the long term, the investment in medication is wasted. Treatment with medication and therapy helps the patient return to work more quickly.


With appropriate treatment, the employer can expect most employees to return to work in about a month; there’s no reason to think that the employee will be unable to return at all. Some patients have difficult adjustments to medications and may need three or four months, but they’re likely to return to full productivity.


Kunnes also stresses appropriate follow-up. A patient who has returned to work following treatment for clinical depression needs to be seen once a month or once every two months, and may need to continue medication for a long time.


Treatment must be made available.
If one of your employees were diagnosed today as clinically depressed, would your health insurance plan cover the costs of medication? What about therapy? A combination of both?


Benefits managers bemoan the percentage of the health-care dollar that goes for mental-health coverage. Some say that mental-health treatment represents as much as 15% of their health-care costs. Because of this, and because mental-health treatment is so unlike a surgical procedure or a course of antibiotics—no clear beginning and end points, no confidence that it will ever be “over”—many benefits managers severely limit coverage.


In addition, an increasing number of managed-care companies are limiting coverage. Bob Bruner of Community Action/EAP, a national EAP based in San Bernardino, California, explains that managed-care companies have sold human resources managers on the idea that they’re going to limit expenditure of benefit dollars by limiting access to psychotherapy.


Some of these managed-care companies limit expenditure without notice. One EAP professional interviewed for this article, for example, described a company that has negotiated a health-care plan with its provider, an HMO, contracting for coverage for up to twenty sessions of psychotherapy per employee. But without the company’s knowledge, the HMO, upon receipt of a first claim, contacts the psychotherapist providing treatment and tells the professional that if the employee receives more than eight therapy sessions, the HMO will drop the therapist from its approved provider list. Not only is the company not receiving the benefit it pays for, but such an arrangement precludes effective treatment for most employees suffering from clinical depression, and adds greater cost to the corporate health-care budget. If an employee needs medication and therapy but under a particular managed-care agreement receives medication only, the depression is likely to recur and ultimately cost the company more money than full, effective treatment would cost in the first place.


Imagine the consequences of being denied treatment for Bert, a management consultant with an advanced professional degree who was guiding a large project for a major firm. Bert was waking up at three or four a.m., unable to get back to sleep, then suffering from mental dullness at work. Recognizing signs that no one else could see, Bert was motivated to seek treatment before the scenario he feared actually developed: that he would make a major gaffe and have to leave the organization. Edward Dunbar, Bert’s psychologist in Los Angeles, says something along those lines certainly was possible had Bert not sought treatment when he did. Through early intervention and treatment, however, Bert learned the skills he needed to focus his concerns about feedback and performance more effectively, and continued his 60-hour workweek. He believes that the employer never saw the problem before the intervention, or during the treatment. Bert was able to continue functioning as a key person in the organization, a partner in a happy marriage and an effective member of the community during treatment.


But for every Bert, is there another employee who abuses the system? Of course there are some, but no one interviewed for this article felt that occasional abuse was cause to not offer mental-health benefits to employees. Southern California Edison’s Kelly states, “Some people know how to manipulate the system, but there are many people who honestly need treatment. There are ways to make a difference, alternatives to simply seeing someone as a bad employee. I firmly believe that our employees are our best resource. If we don’t take care of them, we’re not taking care of business.”


How the human resources professional can plan for a good outcome.
Because receiving treatment is so important for workers who have clinical depression, one of the most important things an HR person can do is ensure that the company’s health-insurance covers effective treatment. If the insurer has a financial incentive not to treat, or to provide medication but no therapy, the insurer isn’t serving your long-term interests.


Next it’s important for HR to create an environment conducive for workers to receive help. Clinical depression often is widely misunderstood as a character flaw rather than as an illness, so it’s imperative to provide training to all managers and supervisors about the disease, as well as how to observe, confront and refer the employee to your company’s employee assistance program or similar available services.


If you have an EAP, arrange for EAP professionals to provide training in stress management, change management and related topics so that they become familiar and trusted. Fox, Inc. in Beverly Hills, California, brings an EAP counselor onsite once a week for confidential visits at the workplace. Usage of the EAP program soared when Fox began the practice. Regular visits also help managers feel more comfortable making a referral or calling the EAP to ask for advice in planning a confrontation with an employee whose performance has fallen off. Emphasize that the goal of these actions is to return an efficient employee to work, not to “dump” a “bad” employee.


It’s also important to provide easy access to care because the clinically depressed person isn’t able to function at his or her highest level. Make it easy for the manager to refer, and for the employee to contact the EAP independently. Provide a phone—and privacy—for that purpose.


Prudential Psychiatric Management gives members a 24-hour, seven-day-a-week toll-free telephone number answered by a mental-health professional. When an employee calls, if the person isn’t suicidal, the mental-health professional refers him or her to an appropriate therapist whose office is within 20 minutes of the caller, then sets up the initial appointment for the caller so that the employee doesn’t have to “cold call” the therapist.


Prudential’s Kunnes emphasizes that easy access works only when the employer has adequately informed employees about the EAP’s use, so distribute literature to all employees that explains how to contact the EAP or the psychiatric management service. (Dunbar’s patient Bert sought help through his spouse’s EAP because his own employer didn’t provide information about how to use its EAP, and his spouse’s company did. Without that resource, would he have sought treatment and avoided a major problem?)


What’s more, an employee who is unaware of the EAP or psychiatric services benefits may turn to workers’ compensation claims or lawsuits to address the problem of a deteriorating work relationship that has triggered his or her depression. This is especially true in a company going through downsizings. Employees at risk of depression will feel the impact more severely during this period, even if they keep their jobs. In one company cited by Bruner, 11% to 15% of the employees who had just survived a layoff filed workers’ compensation claims. These claims and lawsuits are more expensive than treatment and neither helps to get at the real problem of depression.


Along with setting up the structure for workers to get help—providing adequate insurance coverage and an accessible EAP or other service—it’s imperative that HR intervene. That doesn’t mean diagnosing or asking the employee about his or her mental state, but rather helping the depressed worker’s manager deal with work performance.


Managers and HR professionals should focus on changes in behavior. They should not try to diagnose the cause of an employee’s performance problems, but base comments on observable behavior. Example: “I’m seeing these changes in your ability to do your job.” Kathy Bruner of Community Action/EAP stresses that “human resources professionals need to know how to do appropriate observation and appropriate confrontation.” They don’t need to learn to diagnose clinical depression. She explains that the last thing an HR professional needs to be saying is, “You know, you need counseling.”


If the depressed employee is a supervisor, the human resources person needs to acknowledge that the supervisor’s depression affects the whole work group. According to psychologist Aronoff, a depressed supervisor will have difficulty organizing, leading, and identifying and following through with tasks—the essence of a supervisor’s job. Supervisees and colleagues may become anxious, confused and apathetic.


There are clear guidelines that are within the law for confronting workers, says Kathy Bruner. No manager or HR person should play amateur clinician, she stresses, but they need to initiate a conference about the employee’s performance. The language of clinical depression shouldn’t be part of the conference; if the employee brings up the feelings involved, the manager or HR person should listen, but not judge or comment.


One mistake that some managers and human resources practitioners make is assuming that because clinical depression is covered under the Americans with Disabilities Act, they must immediately make accommodations for a person with this diagnosis. Kathy Bruner says don’t do this: Use the EAP to validate the disability, with or without reference to the precise diagnosis, but stay focused on whether the employee is fulfilling all the essential functions of the job. Once the manager loses sight of that, Bruner explains, the clouds move in. Discussions of reasonable accommodation are appropriate only if the employee asks for it, with support from the psychotherapist.


Proper treatment reaps positive outcomes.
Thoughtful intervention from managers and HR people is key. Bill believes that the people around him in his work and home life gave him the courage to deal with the root cause. He began a course of medication and therapy. “That’s where the work really gets done—in therapy,” he insists. “Your behavior has to change. How you act affects how you feel, how you feel affects how you act. I think I act differently now, and that’s been hard to learn.”


Bob Bruner cites another example of positive results from a managerial confrontation with an employee whose eleven-year marriage was ending in divorce, whose mother had just died, and whose two young children were out of control. She was having panic attacks and was confused at work. Her job performance deteriorated, causing her supervisor to meet with her and issue a disciplinary memo. Because of good publicity and employer support for the employee assistance program, the employee turned to her EAP for help. She received medication and therapy, is again feeling in control of her life, and is now fulfilling all the essential functions of her job.


Bob Bruner explains that the constructive confrontation model—confront the employee with the behavior and give him or her the opportunity to do something about it—often saves the employee and changes the behavior so that productivity no longer is a problem. He points out that if a manager postpones the confrontation out of fear of hurt feelings or putting more pressure on an employee who’s already struggling, the problem gets worse.


Once a depressed person is in treatment, the company needs to take some pressure off the employee. UCLA’s Altshuler stresses that employers must recognize when dealing with an employee facing clinical depression that the employee already feels devastated, embarrassed, stigmatized. If the human resources professional knows the diagnosis, Altshuler suggests that simply acknowledging that the employee is facing biochemical events that must feel overwhelming can offer the employee immense relief.


Karen Z. agrees. The 30 year-old human resources development consultant found herself struggling with depression three years ago. She couldn’t sleep, was eating poorly, couldn’t make decisions and found no joy in anything. On the advice of her psychotherapist, she considered antidepressants.


When Karen began medication, she told her manager. At the time, her manager seemed not to know what to say, but Karen noticed that from then on, every time she made a questionable decision, her supervisor pushed and probed the decision past the point of Karen’s comfort.


Karen transferred to a new department and found her new environment more comfortable and supportive. Again, she elected to tell her manager—and the department’s vice president—about her diagnosis and treatment. “When I told them about the medication, they were primarily concerned about me, about Karen. It was clear: they cared about Karen.”


They didn’t ask about her treatment. Instead, they gave Karen steady feedback on her performance. “At one point, I got feedback from my manager that a memo was taking me a long time. I looked at how other things were going and decided I should increase the dose of the medication. Suddenly, I could write memos much faster. The feedback was that important, and that reliable.”


After offering performance feedback, the HR person must respect the employee’s confidentiality. After his hospitalization, Bill returned gradually to his full work responsibilities, and didn’t have to explain anything to his colleagues. “I had to work my way back into the flock. No one ever talked about it to me and I didn’t bring it up.” His absence and treatment weren’t the focus; performance issues were.


How has Bill’s performance changed? “I’m certainly a lot more comfortable with what I do. Data processing at my company is an unstable environment, but now I seem to be able to roll with the punches. My employer has been in a large cost-cutting process, something that could create a lot of anxiety, but my wife and others say I’m dealing with it now. I’ve learned that pretending there wouldn’t be a layoff isn’t the same as dealing with it. In fact, my attitude has probably contributed to my survival at the bank. I’ve maintained a high level of productivity and a good mental attitude.” Although Bill lost his father a few months ago in the midst of the major layoff at the bank, he feels that he now has the skills to keep an even emotional keel.


Karen reports that her performance now is at the highest level of her life. “My bad days now are better than my best days used to be. I feel much sharper than I did before. There’s a world out there.” Karen now runs an independent human resources consulting business.


Both Karen and Bill hoped that by telling their stories they might help human resources professionals understand depression as a workplace issue from the inside. Their advice to HR managers is to recognize that in each employee’s life, work and home issues are intertwined, and the spur to get into treatment has to come from one of them. What helped them the most is that their supervisors spoke to them frankly—and often—about their performance.


Personnel Journal, April 1995, Vol. 74, No. 4, pp. 121-127.


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A Total Reward Strategy Should Include Five Components

Five components of a total reward strategy:


Direct Financial:


  • Base pay
  • Incentives
  • Ownership
  • Cash recognition

Indirect Financial:


  • Benefits
  • Non-cash recognition

Identification:


  • Organizational pride
  • Title, level
  • Work environment

Work Content:


  • Clear goals
  • Feedback
  • Challenge
  • Elbow room

Career Opportunities:


  • Growth
  • Development
  • Job security

SOURCE: Sibson & Company


Personnel Journal, April 1995, Vol. 74, No. 4, p. 33.