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HR Must Take Proactive Steps To Curb FMLA Misuse

Think fast: An employee returns to work on Monday after six months on workers’ comp leave. On Tuesday, he tells you that he needs to take another four months’ FMLA leave. What do you say? How about this: An employee with a history of poor performance ratings is about to be terminated from the company. The day before you inform her, she informs you that severe emotional stress will require her to take time off. Her poor performance history also includes several cases of falsely reported sick days. Can you turn her down? Can you terminate her? Try this one: A new father wants to stay home with his child in the mornings. However, his job as a sales rep receives its highest level of business in the mornings. What do you say?

Welcome to the second stage of Family and Medical Leave Act implementation. You’ve rearranged your leave plan to accommodate the 12 weeks of unpaid leave required. You’ve posted the necessary notice of FMLA rights. You’ve probably even had a few employees out on FMLA leave already, and juggled duties until they returned to their former positions, as mandated. But that, as many employers are discovering, is only the beginning. Because unless you tie up all the loopholes provided by this act, you may be in for an unpleasant surprise. Unless you make 100% sure your supervisors understand this act, you may invite trouble. Bottom line: If you don’t make it your business to keep current and confident on the provisions of the FMLA, you’re allowing this employee-friendly bill to be misused and misunderstood. What was intended to be a shield may become a sword, with the employer held as captive.

The FMLA tends to be an underestimated law. Described by many as a “feel-good” initiative, it’s often pushed to the back of the compliance to-do list, shadowed by the toothier Americans with Disabilities Act (ADA). It is true that other employer mandates have a harsher bite. The Department of Labor’s FMLA action to date has been focused more on resolving cases than on penalizing wayward employers: In the first half of fiscal year 1994, the DOL resolved 278 of 302 violations. Outcomes involved payments of back wages, restoration of benefits, and returns to former positions rather than harsh penalties. However, signs loom on the horizon that the DOL is tiring of issuing stingless reprimands. J. Dean Speer, director of policy and analysis for the Wage and Hour Division, has stated that his division, which oversees the FMLA, is encouraging the labor solicitor’s office to begin pursuing FMLA cases “to establish a presence.” And many predict that, although FMLA lawsuits won’t reach the proportions of some of the civil rights litigation, they will make more than a ripple. Employers who hope to reach compliance through trial and error may get themselves into trouble along the way. “There will be enough lawsuits that employers should not put it on the back burner,” says Janice Stanger, an associate with the San Francisco office of William M. Mercer. “They want to look at compliance in a proactive and intelligent fashion.”

And, unfortunately, non-compliance is only one potential snag. On the flip side of this issue is over-compliance: Many companies, all too aware of our litigious society, follow the dotted line to correct implementation, and on the way allow employees to get away with more than the law ever intended. And it’s easy to see why—the FMLA favors the worker. Consider this: When someone is about to be hauled off to jail—denied liberty—the arresting officer must read the person’s constitutional rights. Yet the employer must provide a worker his or her FMLA rights in writing.

 

Some abuse can be prevented, some can be curbed.
Certainly most employees will use FMLA in the spirit in which it was intended. It’s not as if masses of spiteful workers are eyeing the Act and plotting its abuse. Yet intentional misuse of the FMLA continues to surface.

Abuse has become a serious issue only recently. Early on, the FMLA had enjoyed a period of good will atypical of most new legislation. For instance, a 1993 survey conducted by the International Foundation of Employee Benefit Plans revealed that of almost 100 respondents, only 1% felt they’d experienced intentional abuse of the Act.

It’s likely that companies themselves gave the current abuse an inroads by not focusing on its prevention in the infancy of the FMLA. For instance, a 1993 Hewitt Associates survey revealed that of 628 employers, only 18% were concerned about potential abuse by employees. More were worried about administrative questions, such as recordkeeping. Such inattention has left the door open for the abuse—and concern over abuse—that we see now.

“There is a lot of fear among our members that their employees will take advantage of the situation and will try to take time off for conditions that aren’t covered by the law or aren’t authentic,” says Mary Reed, legislative representative for the National Federation of Independent Business, which has about 30,000 members affected by the FMLA. Adds David Block, a partner in the New York City-based law firm of Jackson, Lewis, Schnitzler and Krupman: “Most employees are good employees. But it’s those people who know how to work the system where it’s going to be the biggest problem.”

The abuse doesn’t always look the same. It could be an employee documenting exaggerated—or untrue—medical complaints. It could be a new father taking time to spend with his child, but actually using that leave working at his in-home business. Employees may take advantage of the overlap between the FMLA and other laws to take more than their share of time off. The extent and intention of the misuse may vary, but it’s still misuse.

Human resources plays a major part in protecting business from abuse—whatever form it takes. In a 1994 survey conducted by William M. Mercer and the University of California at Berkeley, more than half of 299 respondents reported that in their companies, human resources would be the primary administer of the FMLA.

One obvious role for HR to play in fending off FMLA abusers is that of police officer—and sometimes detective. When faced with an employee applying for leave, HR must first assess the situation. Does the certification seem sound, or does it need further investigation? “You hope that the instances of employees just getting a doctor to sign [medical certification] are small, but I don’t think that’s going to be the case, especially with what I call the more suspect,” says Block. “Certain things are very easy to document and are very tangible. Other issues, such as stress and back injuries, you can’t really tell.”

Businesses shouldn’t feel uncomfortable challenging suspect serious health conditions. It’s their right. Yet it is a rather prickly maneuver. In this situation, several issues arise. First is the wording of the FMLA itself, which demands that an employee’s reported condition only be questioned in good faith. So, in the earlier case of the about-to-be-terminated employee whose leave request was suspicious, a poor service record would not support a challenge. “If you’re going to doubt a medical certification, it’s got to be based upon some evidence,” says Lynn Outwater, a managing partner in the Pittsburgh office of Jackson, Lewis. Outwater gives examples of situations that employers may—and probably should—challenge: an employee who, in the past, had a workers’ comp certification proven false, or an employee who communicated with witnesses the untruth of a medical certification.

If an employer does decide to challenge the certification, it can demand two more medical opinions, but is required to pick up the tab for these. The employer may select the physician who’ll provide the second opinion, but the physician must have no previous relationship with the company. The third opinion must be given by a health-care provider who is mutually chosen by the employee and company. It is a final and binding opinion.

Because eliciting three different medical opinions can take so long—and rack up quite a bill in the process—Block warns that in absence of a bona fide doubt involving a substantial period of leave, the company may be wise to just accept the first certificate. Those who are determined to game the system have the advantage. “The potential for abuse is that employees will be able to get notes that say what they want to say because in general, physicians will accommodate their clients,” says Block. “From a malpractice point of view you can never be wrong by saying ‘Stay home and rest.’ So there’s no incentive for the physician to say anything other than what the employee would like to have said.”

However, a quick check into the physician’s history with the employee may prove beneficial. For example, Outwater cites an experience in which an employee’s physician turned out to be a relative. The worker received false certification and was going to use the time to take a vacation. An employer can give additional discouragement to this type of abuse by forcing employees to use vacation or personal time accrued as part of the FMLA leave. This will keep workers from trying to get two vacations for the “price” of one.

 

HR must get beneath the surface of the FMLA.
Not all misuse of the FMLA is intentional. Very often, employers themselves are indirectly responsible for the negative outcomes of its use. That’s because those granting leave haven’t been properly educated on the more intricate details of the Act.

HR needn’t start from scratch. Most companies know the basics. But because the FMLA has been in effect only since August 1993, many employers get stumped when it comes to the trickier questions.

“The first thing that employers should be cognizant of is the rather low threshhold it takes to trigger eligibility for leave,” says Block. Take the following example: An employer reports to her supervisor, explaining that her stomach hurts and she needs to go home. The supervisor assents and tells her to take a few days off. For two weeks, the employee remains out. A few weeks after returning, she becomes ill again. The worker contacts her supervisor with the news that the stomach ailment is serious and she’ll need the full 12 weeks of FMLA leave. But the manager only grants 10 weeks, reasoning that the employee has already been out for two. It seems logical. It’s also illegal. Because from the point that the worker informed the supervisor of her illness, the employer was considered on notice that the employee could be eligible for FMLA leave, and was obligated to give the employee her FMLA notice. So the firm loses two weeks that could have been chalked up to FMLA leave because the supervisor overlooked a policy detail.

The employer, however, is not completely stuck. Once a health condition is identified as being covered by the FMLA, leave may be applied retroactively—but only under specific conditions. These are:

  • The employee is still out on leave when the FMLA qualifications are discovered; and
  • The employee is out on paid leave.

All other situations would prevent an employer from applying FMLA leave retroactively.

Ellen McLaughlin, partner at Chicago-based Seyfarth, Shaw, Fairweather & Geraldson, offers another suggestion to keep a grip on FMLA leave. If an employee uses sick days sporadically, have the worker’s physician fill out a medical certification to ascertain whether the illness is due to a serious medical condition. “Then you may get an indication earlier as to whether the time they’re taking off is FMLA leave,” says McLaughlin. This way, if it’s a serious medical condition that is causing the spotty attendance, the company may count those lost days under FMLA leave—but it must make sure each absence is verified as being caused by the medical condition. “Just saying they’re sick isn’t going to get you anywhere,” says McLaughlin.

Again, the company must balance protecting itself with making leave taking as easy as possible for those who really need it. But if a company must err, it should err on the side of caution. Says Block: “You’re never wrong in jumping the gun. If an employee says that it’s not an FMLA [condition], then you can count those leaves as unexcused absences. But you should start getting reflexive.”

Unfortunately, proactive response seems to be the exception rather than the rule. To date, employers appear to have more of a knee-jerk reaction to the FMLA’s mandates. They go through the obvious surface gestures but fail to follow through. For instance, 75% of respondents to the Mercer-Berkeley survey said that they had prepared a formal, written policy on family leave to comply with the FMLA. Yet only about 50% had prepared a form that employees can use to request leave. And less than half had prepared notices to give to employees who request leave. This type of oversight is the very thing that invites misunderstanding. And it’s the type of misunderstanding that can wind up on the DOL’s plate. “The folks over at the DOL are finding that employers are not complying,” says Kathleen Rosenow, consultant, group and health-care practice with Washington, D.C.-based Wyatt Co. “It’s not for not wanting to comply. They’ve tried to comply and something slips through the cracks.”

And there’s a lot that can slip through the cracks. “Administering this law has become a nightmare,” says Block. “It’s different than other laws. The discrimination laws, in Biblical proportions, say: ‘Thou shalt not discriminate against someone because they are white or black; thou shalt not sexually harass.’ This law is very different, it’s a ‘Thou shalt…’”

Yet employers don’t have to allow the FMLA commandments to completely disable them in their quest to keep the workplace running smoothly. Many of the mandates give business the room to tinker with policies—and a few twists of wording can protect the employer, while still serving the employee.

For instance, in addition to policing the amount of time employees take off, HR can also control the period of time in which the leave is taken. This can be done by instituting a rolling year policy. The FMLA only demands that a 12-week leave period be granted within a 12-month period. This allows the possibility of leave stacking, in which employees take 12 weeks at the end of a year and then 12 weeks at the beginning of the next. There is nothing in the Act’s wording to prevent this. However, there is nothing in the Act that says an employer must allow it. By instituting a rolling year policy, the employer ensures that leave requests will be granted only if the time has not been used in the 12 months previous to the request. Such preventive measures as this can give the employer a little perk in a legal environment that tends to favor the employee.

 

Know the overlaps between the FMLA and other acts.
One thing that must be done is to look at the FMLA in the big picture. The Act has many overlaps with other federal mandates, and a failure to address this can cause serious problems. “If you look at the FMLA in isolation, you can get in big trouble,” says Outwater. “Anybody who’s reading the FMLA and saying, ‘Well, that’s all I have to do’ is making a serious mistake. If the employer has not carefully integrated its policies, that minority [of abusers] is going to be able to get away with significant amounts of time off.”

One situation that allows widespread abuse occurs when an employee is out on workers’ comp leave, and the injury—for instance, a serious back trauma—also is covered under FMLA. Unless HR ensures that the two leaves run concurrently, the employee may take workers’ comp, return to the job and then decide to take another 12 weeks of FMLA leave. Mandating that the two leaves are spent simultaneously is one of the aforementioned policy tweaks that too many employers ignore.

In fact, a lot of unnecessary leave taking can be headed off—and not enough companies are taking advantage of the situation. Here’s a common problem: A company has a clear-cut policy that if a worker is out for an entire year, be it short- or long-term disability, the employer will terminate the relationship. However, if the employer doesn’t explicitly include FMLA in this policy, it may not terminate a worker who decides to take 12 weeks in addition to the provided year. To do so would be viewed as retaliatory, in that the employer is considered to have taken adverse employment action in response to an employee’s use of FMLA leave.

The solution to this is simple: integrate your leave policies. Reword company documents. For example, if you want the total cap of permissible employee leave to be one year, revamp leave policy to be 40 weeks so that when the 12 weeks of FMLA leave is added, the total is one year. “What I suggest to employers,” says Block, “is to discard the concepts of separate disability, maternity and workers’ comp leave. Get everything under the same umbrella. If you don’t do that, you’re creating: (1) Confusion among your employees as to what leave they’re under and (2) The possibility of what I call double dipping: [The employee] takes disability now and later will take FMLA.”

Other acts must be considered in relation to the FMLA, even though they aren’t areas that invite employer regulation. One such act is the ADA, which overlaps the FMLA in several areas. For instance, a problem could show up as soon as an employee requests time off. Here’s what’s happening: An employee with a serious health condition applies for leave, and receives the mandated 12 weeks. At the end of the 12 weeks, the employee asks for another five. If the employee has a condition that is covered under both the ADA and the FMLA, the employee is indeed entitled to the extra five weeks. The EEOC’s current position is that FMLA leave is considered a right, so it does not qualify as reasonable accommodation under the ADA. There’s nothing that can be done to prevent this, but it’s something employers must know. “Sensitize management and supervisors to the interplay between the ADA and the FMLA, because sometimes they’re the ones out there interpreting the policy,” says Outwater.

Those not advised of the overlap between the FMLA and ADA can run afoul in other areas also. For instance, under the ADA, an employer is required to reasonably accommodate the worker by offering intermittent leave, a reduced schedule or a transfer to a less demanding position. However, under the FMLA, the employee is not required to accept the offer and may choose to sit out the full 12 weeks. Those implementing the policy must be aware that: (1) An employee who is covered by the ADA may very well be covered by the FMLA also; and (2) If this person does qualify for FMLA leave, the company can’t compel the employee to return to work.

In addition, if an employee does choose intermittent leave, he or she is entitled to take this for any time period. For instance, if an employee must be gone from noon to 2 p.m. every day, the employer must allow this. However, the company does have the option to temporarily transfer an employee requesting intermittent or reduced work leave to an alternative position, with equivalent pay and benefits, which better accommodates the employee’s recurring periods of leave.

Another careful balance is required when an employee announces the need for intermittent or reduced-time leave. Obviously, most employers want to know why. Under the FMLA, it’s fine to ask the necessary questions. However under the ADA, companies may ask only certain questions. “This is one of the areas that’s sort of a stickywicket with employers—just how far they can go in asking questions,” says Rosenow. She says that employers can handle the situation one of two ways. Employers may decide to play it safe and stick to the ADA line, or go ahead and ask the questions, citing allowance by the FMLA if an ADA complaint occurs.

 

Spread the word: Training and communication can head off trouble.
Successfully coping with the ramifications of the FMLA is still not the same as successfully using it to your company’s best advantage. Organizations that take proactive steps by training managers, informing employees and allowing appeals find that they can balance the employee-friendly spirit of the law with running a business.

To do this, HR must first ensure that management has been properly trained. Supervisors can’t protect their companies unless they know what the law allows and prohibits. “This statute is effecting the way managers have to manage, the inquiries managers have to make and the actions managers have to do,” says Block. “This requires HR to train their managers, because there’s no way you can expect them to know this.”

Unfortunately, corporate America by and large has been remiss in its commitment to educating its managers. Only 22% of respondents to the Mercer survey have trained supervisors on the FMLA, and what’s even more alarming is that 22% said that they probably would not do any training. This is precisely where companies will run into problems. Says Outwater: “Employers are not providing enough training for their first-line supervisors. The employers who are having a problem are having a problem because they are not educating themselves, they are not educating their key people. I feel that’s where the greatest vulnerability remains.”

Mercer’s Stanger, who co-authored the Mercer-Berkeley survey, advises that employers begin supervisor education immediately. She says HR should shape the program to fit its target audience. While some supervisors take to written material, others respond more positively to an ongoing education program. “I think different things would work at different employers,” she says. “There’s no one right approach that’s going to work for everybody.”

The most important issue to remember is that it’s not supervisors’ primary responsibility to inform themselves on the ins and outs of the FMLA—it’s HR’s job to inform them. That doesn’t mean managers need to be able to rattle off all of the FMLA’s provisions forward and backward. But they do need to be confident on the basics. As Seyfarth’s McLaughlin says: “When the red flag goes up, they need to know it’s a red flag.”

Outwater says that many employers are losing out simply because the people granting leaves haven’t been schooled well enough in the FMLA. “The [employee] doesn’t always say the magic words: Family and Medical Leave Act. They don’t use those terms. They just say, ‘I need time off.’ But [in doing this] they advise you of their illness,” she says. And all employees are required to do is inform an employer of their illness. If the employer is unprepared, it has only itself to blame.

Block says that managers must be drilled to handle situations such as this. “Someone hurts themselves at work, most managers say, ‘Jeez, this could be workers’ comp, get the workers’ comp form.’ You’ve got to train them to think the same way about FMLA. I don’t think a lot of managers out there have been trained in this,” he says.

That doesn’t mean that every time an employee gets the sniffles, a manager has to hover over with an FMLA notice. Block suggests that one practical way of preventing overuse of leave is to make it a policy to send out the forms as soon as a short-term disability is triggered. This makes a good compromise between giving employees room to breathe while maintaining control over leave practice.

“Employers must do more than cross their fingers in hopes the FMLA won’t do any damage. They must consider the FMLA in their business strategy.”

As HR embarks on this type of technical training, it must make the education as clear and interesting as possible. Greta Kotler, vice president of training for the American Society for Training & Development, says that the most important thing is to demonstrate what the FMLA means to supervisors in a practical way. “The real issue is to make it relevant to them and interesting to them,” she says. Kotler suggests using case studies to give managers a glimpse of what the FMLA really looks like in action. Don’t get stuck in textbook mode; instead offer examples, hypothetical or real life, of what can and can’t be done. Kotler worries that companies that don’t do this may not be offering the most effective training. “I think that—and this is what’s probably happening—if you give [information] to people in legal language, they just don’t understand it and aren’t interested. Make it real to them.”

Wyatt’s Rosenow says that unless supervisors are well trained, the ignorance can have a domino effect. Because employees look to their direct supervisors for guidance, a misunderstanding on the part of the supervisor can lead to a misunderstanding by a worker. And this, again, opens the door to unintentional misuse. “[Educating] supervisors is very very important. They are the ones out there on the front,” says Rosenow. “They are the ones getting and retaining and passing on information. If they pass it on erroneously, then you have a gap in the system. But also communication to employees is extremely important. If we miscommunicate to an employee, there’s another gap.”

Communicating with employees is definitely an important step in discouraging misuse. It also plays a large role in spreading the good will that enables an employer to put its foot down while keeping morale up. For instance, an employee who erroneously but vehemently believes that his or her FMLA rights are being violated can do a lot of damage before being convinced otherwise.

A clear communication effort can ensure that employees know that they’re receiving fair—and legal—treatment. New York City-based NYNEX, for instance, took pains in communicating to its work force when it tweaked its already generous leave program to comply to minor FMLA rules. It used several communications vehicles, but most importantly was the company’s commitment to ensuring that employees understood the Act’s implications on a personal level.

To address employees’ individual issues, work/family professionals in regional offices are designated to answer inquiries on an individual basis from employees. “We find that that’s a lot more effective than having one central number where people call in, because these individuals counsel both employees as well as supervisors, and they go through specialized training just to up-date from a benefits standpoint,” says Jacquelyn Gates, director of corporate culture initiatives. “We have a tremendous team of resource people whose major accountability is responding to individual questions from our employees.”

NYNEX also works closely with its union, the Communications Workers of America, to spread the word. Says Donna Dolan, director of work and family issues for District One of the union: “We will do something in terms of written communication, and offer speakers at a local union meeting or a workplace lunchtime meeting.”

Alana Kennedy, managing director of human resources planning, strategy and culture change, says that the company has no problem with the FMLA. This may be due to the fact that the organization, in almost every area, goes far beyond mere compliance with the Family and Medical Leave Act. For instance, it allows employees to take up to a year off, during which time the employee continues to accrue credited service. Because it maintains such a commitment to employees, is the chance of abuse limited? “Absolutely!” answers Kennedy.

 

Taking an active role in FMLA leave can give a company some control.
However, many businesses simply don’t have the resources to do more than comply with the FMLA. Just instituting compliance can be a serious burden for some. These employers must do more than just cross their fingers in hopes that the FMLA won’t do any damage. They must ensure that the FMLA is considered in their business strategy.

As part of a company’s further integration of the FMLA into the organization, Stanger suggests providing an appeals procedure. Not only does this allow the company to address a worker’s confusion or anger at being denied a leave, but it also gives human resources a chance to correct any wrongs it may have overlooked. “An appeals procedure can resolve disputes before they get to the let’s call in the lawyers level. They can provide a mechanism for a third party who hasn’t been involved in the dispute to look at it objectively,” says Stanger.

Institution of an appeals procedure is another low-cost, high-gain area that is part of a smart, proactive business plan. However, employers haven’t taken advantage of it much yet. Only 27% of companies responding to the Mercer survey have done so, and 53% said they probably never would.

Other initiatives are less policy oriented but still just as important. For instance, although the FMLA allows employees who need to be out the right to leave, it does not give employees the right to drop everything on their last workday and head out. For instance, employees who know that they will be out from May to August should put in the necessary time during April to create a plan for how their work should be handled. Job duties and training remaining staff to handle the extra load should be addressed.

At this point, it may also be wise to suggest the idea of intermittent leave to the employee. For example, at some companies, workers who leave for maternity reasons enjoy the idea of coming back to work slowly rather than staying off the entire four moths and jumping back into full-time hours. These women may take off completely the first two months, return for a few hours a week the third month, and come back for half days in the fourth month. Such resolutions benefit both the company and the employee.

Also encourage workers on leave to check in from time to time. The continued communication will allow co-workers to resolve any questions that may have arisen in the employee’s absence and will also keep the employee feeling part of the work community.

All this may not prevent abuse of the Act, but it may at least, lessen the detrimental effect of losing an employee for four months.

Successful handling of the Family and Medical Leave Act really comes down to what human resources is all about: Learning, communicating, training and keeping a pulse on the organization. It requires careful treading, yes, but it is possible to ensure that the FMLA assists employees without damaging business. Now quick: What do you say to that sales rep who wants mornings off?

Note: Issues discussed in this article are intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

Personnel Journal, September 1994, Vol.73, No. 9, pp. 36-45.

 

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1994 Partnership Optimas Award ProfileBRXerox Corp

With the days of the paternalistic corporation long gone, and downsizings now a common occurence, guaranteed employment is hard to come by. But, for approximately 4,000 unionized employees at Stamford, Connecticut-based Xerox Corp., job stability is a reality. On June 7, the workers at the company’s Webster, New York, facility ratified a union contract guaranteeing them jobs for the next seven years. This came to pass during a major restructuring, which includes projected layoffs of more than 10,000 people.


The job guarantees are in exchange for concessions made by the union membership to allow for measures that would help increase profit and productivity while reducing expenses and process redundancies in the manufacturing function. These measures include no wage increases for the next seven years except for quarterly cost-of-living adjustments to keep pace with inflation. In addition, the employees would have to allow Xerox to bring in temporary workers, outsource low-value-added jobs and exercise greater flexibility in promotional and transfer activities within the unionized ranks.


The contract was negotiated one year early to help support the organization’s restructuring plans and remove any barriers. The fact that both sides were willing to open negotiations early, and make compromises, reflects the strength of the company’s union/management partnership Xerox has been painstakingly cultivating during the past decade with the Amalgamated Clothing and Textile Workers Union (ACTWU), which represents the manufacturing, supplies and distribution workers at the Webster facility.


Since 1983, the two parties have been working together as business partners to bring about change in the manufacturing function that will help Xerox in its goal of being “The Document Company.” This partnership includes sharing all financial information, participating together in training sessions and serving as equal members on work teams. Through the partners’ combined efforts, the U.S. manufacturing function in Webster has enlisted greater employee involvement, installed increased flexibility and has transformed into focus factories that employ the use of work teams.


An old partnership rekindles out of a need for survival.
The foundation for today’s partnership between the union and its members and company management was established back in the 1940s when Xerox was the Haloid Co. The Wilson family, who was the prime stockholder in Haloid, believed in cooperation between employees and management. This philosophy continued through-out the ’50s and ’60s as Xerox established itself as the copy-machine maker. The company was making lots of money, so negotiations throughout this period were fairly uneventful as Xerox shared its profitability with workers through lucrative wages and benefits. And, “It was relatively easy to pass the additional costs on to customers who didn’t have many alternatives in the marketplace,” says Joe Laymon, director of corporate industrial relations for Xerox.


According to Laymon, the amiable relationship between the union members and management broke down in 1973 when the membership rejected a proposed contract and struck the company for two weeks. Both sides saw how detrimental this could be for the company — and in turn the workers — and agreed to work harder at avoiding such action in the future.


As the company moved into the 1980s, however, it became evident that simply avoiding conflict between the two parties wasn’t enough. The organization needed to establish a genuine partnership. It was vital for success; indeed, even for survival.


Facing stiff competition from Japanese companies that had entered the industry during the 1970s, Xerox’s market share had shrunk from 80% to less than half. Profits ceased to increase at the rate they had previously, revenue became flat, and expenses soared. “The foreign competition was selling products at a price that it cost us to make them,” Laymon says. “And the products were of outstanding quality. For the first time, the American consumer had a choice, and their choices were based on quality, price and delivery. In all three of those areas, we tended not to be the best provider.”


David Kearns, who was the CEO of Xerox at the time, and Paul Allaire, current CEO, who was then company president, determined that to take back its market share, Xerox would have to reduce the costs of doing business, become more efficient and produce better quality products. Employee involvement within manufacturing, they believed, would be one essential tool for meeting those objectives. Because the workers in this area were members of the ACTWU, union support would be essential for success.


Complete cooperation between the company, ACTWU officials and union workers wouldn’t happen overnight, however. Although the 1980 ACTWU contract contained a clause that the union would “explore the concept of employee involvement,” the document didn’t make any concessions for enabling the company to increase operating flexibility and productivity, and reduce labor costs. In fact, it stipulated that employee-involvement initiatives couldn’t affect wages, jobs and work rules. What’s more, managers wanted employee involvement to happen during employees’ off hours. And, workers weren’t sure that their input wouldn’t cost them their jobs.


Teamwork spreads across the company with union support.
It wasn’t until after the next labor/management negotiations, in 1983, when a real strategic partnership began to materialize. By this time, the employee-involvement concept had been in the air for three years at Webster. Workers already had received some problem-solving and team-work training — jointly paid for by the company and the union.


Then the company launched its Leadership Through Quality program, a TQM process. Through it, all employees, including the unionized workers at Webster, received more extensive training in such disciplines as problem solving and effective team skills.


Initially, the union wasn’t involved in putting together the program, says Gary Bonadonna, manager of the Rochester regional joint board of the ACTWU and international vice president of the main union, because it was a top-down initiative. However, the company included union officials’ input before the program rolled down to the union’s membership. They ensured that the program fully incorporated employee involvement.


This same year, the ACTWU contract was renegotiated. During discussions, union officials made a suggestion. “If you’re serious about getting the members’ support for resolving problems and reducing costs,” Laymon remembers them saying, “then take away their biggest fear, which is the loss of employment.” The union representatives said that the membership had to be assured that any ideas that they offered wouldn’t be used against them.


Xerox agreed, giving the workers three-year job guarantees. In exchange, the union members accepted a freeze in pay for the first year of the contract, a cut in benefits coverage from a 100% company-sponsored plan to an 80/20 plan, and a no-fault absenteeism provision, which would allow termination for four absences in any 12-month period. In addition, Laymon negotiated for the ability to hire a buffer, or temporary, work force and the opportunity to outsource any work that can’t be performed competitively inside. “At the time, plants were closing across the country,” says Bonadonna. “People were worried that Xerox was going to be forced to do the same things.”


Even with training and a contract to support employee involvement, however, the initiative didn’t take hold right away. “For approximately one year after the contract, employee involvement was stagnant [within the union membership],” Bonadonna says. “People were upset, they felt that the only reason they had to give concessions was because the company hadn’t managed right.” As a result, he says that workers remained uninvolved as a way to strike back at the company.


It’s ironic, then, that it was the manufacturing function at Webster that really gave employee involvement its impetus. Because costs of manufacturing remained high, Xerox management announced that the company could save $3 million by moving production of the wire harness — the configuration of strands of wires that delivers the current throughout the copier — to its plant just outside of Mexico City.


According to the contract, says Laymon, the company has to give the union membership within any area for which outsourcing is a possibility the opportunity to make it competitive. “A small study team, made up of company and union employees, will be appointed to work for three to seven weeks to reduce the cost of doing business in an operation to competitive norms,” says Laymon. “If they fail, the company reserves the right to outsource the work.”


The company commits to providing the teams with all financial, engineering and legal support that’s needed. There are very few areas that the teams can’t explore, wages and benefits being two of them. The teams work fairly autonomously and are allowed to work uninterrupted toward the objective of meeting the external benchmark.


For the wire-harness operation, a team of eight people, led by a management member and a union employee and made up of both members of management and union workers, did an analysis of where the manufacturing costs were higher in Webster and why. Ron Slahetka, vice president of Webster manufacturing operations, said that the team found ways to reduce overtime, redesign factory layouts to cut down on overhead costs and production redundancies, and implement more self management.


For example, the team learned that the wire-harness operation was being charged for one-sixth of its building’s electric bill, although it was using only a 50th of the electricity. It also was being charged fully for the overhead of the building’s lobby — including fees for security guards — because it was located closest to it. Other findings for savings included using cheaper material, purchasing new, more efficient equipment and employing different training techniques. The team’s changes resulted in $2.9 million in savings, and preserved more than 180 jobs. “I didn’t think they could do it at first,” Bonadonna says. “I was told by managers that there was no way. But they did it.”


Company and union partners redesign Xerox’s factories for improved productivity.
After this initial success, employee involvement in Webster caught on. But despite the improvements being made, the company realized in 1990 that it no longer could operate the manufacturing operations as it had in the past. “Many had grown to be large, unmanageable operations,” says Laymon.


The industrial-relations director took union representatives on benchmarking trips to focus factories in California, Texas and Europe. A focus factory replaces the assembly line with self-managed cells that produce narrow lines of products. The cells contain their own finance, engineering, HR and quality staffs, and reduce the number of management personnel, pushing decision-making down to empowered employees. “These factories were smaller, self-contained, quick-to-respond entities that were more manageable, had higher productivity, better team cohesiveness and higher quality of work than non-focus- factory operations,” says Laymon. The cost of their operations also was lower.


The company set up a focus team made up of both Xerox and union officials to design and implement focus factories for Xerox. Laymon assigned an industrial-relations representative to the team, Slahetka represented operations, and Bonadonna and one other person represented the union.


The team began work on the project in late 1990, two years before the next contract negotiations. “We struck an understanding that because this was such a major deal and it would help in determining how much work would be assigned to Webster and how much work would stay in Webster, we wouldn’t wait until 1992,” Laymon says.


Because the company planned to implement the new factories under the existing contract, the union membership had to permit changes in work rules. Says Laymon, the company needed, “the ability to move people without regard to seniority, for the purpose of staffing a product line with the most qualified individuals to get the product out as quickly as possible and with as little cost and as high a quality as possible.”


For example, Slahetka explains that the focus factories brought together two previously separate plants — one that built new machines and one that remanufactured the same machines. With the new factory, the machines would be built and remanufactured on the same assembly line, “using one set of toolings and one set of people who had skill and experience on that particular product.” The union had to allow for job reclassifications for this to occur and had to protect the pay of workers who changed jobs.


The focus team created six focus factories by early 1991, used for consumer-replacement units, low-volume machines, mid-volume machines, high-volume machines, components and color machines. Slahetka says giving labor and management equal voice in the design of the focus factories had advantages. “You get the workers’ views and you also get the managers’ views in terms of the bigger picture,” he says. “And when you get both views, you get more data and can come up with more effective solutions. Also, if everyone’s involved, it’s easier to implement.”


Adds Bonadonna: “It wouldn’t have happened without [both parties]. You need labor and management working together to make these things happen.”


According to Laymon, the focus factories as designed by the company and the union have decreased product-development costs 30%, improved quality by 100 times and increased return on investments from 8% to 14%. Also, the amount of money spent on training and retraining has decreased. “The teams tend to be more cohesive than they were before,” Laymon says.


Most of the teams within the focus factories work autonomously or semiautonomously. Where once there was one supervisor for every 20 employees, for example, there now are four semiautonomous groups of employees who share one coach or facilitator. Other groups have no supervisors at all. The teams have within them group leaders who they elect themselves for various lengths of terms. The company provides training on company time for both the leaders and the team members. Many of the teams do their own scheduling, overtime balancing, ordering of parts and the assigning of employees to daily, weekly or long-term tasks.


To reach the level of a totally autonomous work group, a team must pass certain objective gates. These include:


  • Do the members know how to work as a team?
  • Do they know how to lead?
  • Do they know how to participate?
  • Can they deliver a product within a cost specification, and have they demonstrated this within a specific period of time?

The average team takes two to three years to get to this point. “The reason it takes this much time is because we’re looking at those objective measures,” says Laymon. “Can this team continue to deliver a product to a customer over a period of time that meets the customer’s quality and price specifications? Once we see that, and the team has made an appeal for autonomy, we make the decision to pull supervisors and overseers and all the other inspectors and checks and balances and let the team work autonomously.”


Union officials and management personnel embrace teamwork together.
During the implementation of the focus factories, Laymon was working on another project — smoother negotiations between the ACTWU and Xerox. Although relations between the two parties were strong, as witnessed by the successes of the partnership thus far, contract negotiations remained arduous. Talks often lasted up to four months, including weekends. Each side brought in as many as 40 representatives and 200 demands.


Laymon did an assessment of the negotiation process, looking at who usually was at the table for both sides, what skills were needed at the table and whether the people at the table had the right skills. “When we looked at the objective of the activity, we quickly concluded that we had too many people at the table and not enough of the proper skills,” Laymon says.


When the two sides came to the table in 1992, there were only seven members on management’s negotiating team and 14 on the union’s. The two sides set some reasonable working expectations to start every morning at 8:00 and to conclude at 5:00. They agreed not to work weekends. “We agreed to use discipline to get the job done within working hours,” says Laymon. “We also agreed that, unlike in the past, we wouldn’t inundate the system with frivolous issues. We would go to the table as a company only with those things that we needed to change to run the business more effectively. The union agreed that they would come to the table only with those things that their membership needed, and not a wishlist of wants.”


As a result of the preparation, the union’s needs only numbered 12 and management only had seven requests for change. Talks concluded after five weeks, with just one three-hour Saturday meeting.


The new negotiation process stuck. The contract ratified in June took just three weeks to deliberate. Preparation for its negotiation included the formation of a task team, comprising Laymon, Bonadonna and other management and union representatives, to look into bringing costs down and new business into the Webster plant.


The negotiation process is reflective of the partnership that Xerox and the ACTWU have worked so hard to cultivate. “This relationship has been successful because we don’t view each other as adversaries or enemies,” Laymon says. “We view the competition as a common foe, and we know that that foe will continue to beat us if we don’t act as a common friend or a team. This requires tremendous cooperation, dedication and a common vision that only when the customer is satisfied, we prosper.”


He admits that the relationship is growing still, as the two parties struggle through the restructuring. But Ron Slahetka sums up the motivation to keep it alive: “We’re working together to become the best manufacturer of copiers and duplicators in the world.”

Personnel Journal, August 1994, Vol. 73, No. 8, pp. 46-53.

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Stages of a Corporate Lifecycle

Growing companies come in all shapes, sizes and ages. Some have even been described as elephants, gazelles and mice. But regardless of their size and speed, a growing company must inevitably struggle with the interrelationship between flexibility and controllability. It must also confront each stage of growth as a welcome change. Below are some signs of a corporate lifecycle that were described in Corporate Lifecycles by Ichak Adizes, founder and director of Los Angeles-based Adizes Institute, an international management-consulting firm.


  • When organizations are young, they’re flexible, but not always controllable. As they age, they become more controllable, but less flexible

  • What causes growing and aging is neither size nor time. A company can be 100 years old and flexible. It can be 10 years old and bureaucratic

  • At each stage of the lifecycle, there are problems. You must learn to differentiate between normal problems, which emerge at a particular stage, and abnormal problems, which can lead to the demise of the company

  • Success comes from the inside out. You have to solve the problems on the inside so you can deal with the ones on the outside

  • The purpose of management is to provide for balanced growth or rejuvenation, bring the organization to prime and keep it there

  • Aging is a process that does not have to occur. An organization can remain in prime, if it can continuously rejuvenate itself.

Personnel Journal, August 1994, Vol.73, No. 8, p. 73.


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HR in Mexico What You Should Know

Rumors abound: The labor is cheap—compensation’s a snap. Nepotism is rampant—recruiting’s a nightmare. Workers are unmotivated—training takes forever. And the stories continue, twisting on themselves, contradicting until it seems that HR issues in Mexico are scattered sections of a puzzle that may never quite fit.


The truth is, as usual, somewhere in the middle. Work issues in Mexico are neither as sunny and simple as the pro-NAFTA rhetoric proclaims nor as gloomy and unnegotiable as anti-NAFTA forces would have you think. Some practices are drastically different and require some serious maneuvering, others are mild variations of U.S. notions. “You should expect differences in the details, but you should expect to be practicing the good basics of HR professionalism,” says Bob McIlmoyle, director of administration, Latin America Group for Wayne, New Jersey-based American Cyanamid Co., a Fortune 100 life-sciences firm that’s operated in Mexico for 30 years.


As more and more companies acknowledge the post-NAFTA business opportunities in Mexico, more and more HR professionals are feeling the pressure to prepare themselves. But how to begin? “The first thing is to get familiar,” says Arturo Fisher, an international consultant for Latin America with Hewitt Associates. Indeed, the key to HR in Mexico, the solution to the puzzle, may be found by simply understanding the pieces. Identify the issues, get to know the country and adjust HR actions accordingly.


Staffing in Mexico: U.S. recruitment amplified.
Obviously, one of the first HR concerns arising when a company opens operations in Mexico will be staffing. Recruiting for the low-wage workers is relatively uncomplicated, because these workers constitute the majority of the labor pool. At operations in cities on the U.S.-Mexican border, for instance, approximately 90% of personnel are low-compensation employees.


It’s not as cut and dried when it comes to staffing high-level positions. To begin with, there’s the usual question of whether to hire locally or use an expatriate. One thing to consider here, particularly for smaller companies, is that under current Mexican labor law, no more than 10% of a company’s employees may be non-Mexicans. So expats can’t be used simply as a back-up measure. Their inclusion in a start-up operation must be a planned, necessary choice.


But even when these key professionals are identified, many companies have difficulty getting their American employees to relocate. Expats worry about the pollution and its effects on children’s health, says Kevin Duffy, director of employee relations for Nabisco International, a division of New York City-based RJR Nabisco. Duffy says that other situations in Mexico contribute to its image problem: “The infrastructure in general, from roads to schools to sewers to housing, is a problem.” Does this mean that expats should be excluded from consideration? Says Duffy: “If you have critical areas of expertise that you need that do not seem to be available in the market, then it may require an expat, but it should be relatively short-term, say two to three years, while developing the local talent.”


Schaumburg, Illinois-based Motorola, which has had operations in Mexico for more than 20 years, has used expatriates, but views it more as a strategic choice than an act of desperation. “If you’re a start-up company, brand-new fresh, you might need to have some expats down there to get the philosophy and the training going—to make sure the ideals are instilled in the new organization,” says Rebecca Lotsoff, manager of international compensation. “That’s probably not something you’ll do long-term, because expats are very expensive.”


But that doesn’t mean that everything’s rosy in local recruitment either. Those deciding to focus on the Mexican market for their high-level talent may have some tough maneuvering ahead. Because of the generally low educational levels in Mexico and the past lack of management development, a good manager may be hard to find. “What makes it difficult is not that there are no good Mexican executives. In fact, I think the Mexican executives are excellent,” says Fermin Diez, principal and general manager of Towers Perrin’s Mexico City of- fice. “The problem is, there are so many companies opening doors and growing their businesses, there’s just not enough to go around.”


Certainly, there are ways of attracting talent: compensation, benefits, a good reputation. But recruitment in Mexico is further entangled by its intense emphasis on networking. Fisher says that this is the way a lot of business is done. “It’s very common in staffing in Mexico for one of the best sources to be networking, especially for professionals and supervisor levels, even manager levels. That’s because of the culture.” Of course, there is nothing wrong with networking itself, as long as it’s simply a way of guiding good people to good jobs. The problem occurs when networking turns to nepotism, or begins to reflect the It’s not what you know, it’s who you know attitude. Nabisco, which has maintained a presence in Mexico for some time, but initiated new operations two years ago, has run into this problem more than once. Says Duffy: “The problem is that even with executive recruiters, you may get a social referral as opposed to a person who’s been referred on his or her technical merits.”


The solution to this problem is that HR professionals simply must recruit more actively, more diligently and more creatively. For instance, Lotsoff warns that it’s important to screen individuals for their actual experience and abilities, and not their executive status. Don’t put blinders on when a vice president’s resume crosses your desk. “Really find out what that person’s responsibilities were and what their talents are,” she says. “Because job titles can be inflated in Mexico; they don’t necessarily reflect the job abilities.”


Also, HR recruiters need to look beyond what’s presented them. Locals and U.S. expatriates are not the only options. Diez suggests investigating other Latin- American countries: The cost may be less than for other expats, because they already have the language and cultural background and so require little training. Also, many Latin-American executives view a move to Mexico as a career stepping stone, and so may be willing to take a more modest compensation. Recruitment can also be successful closer to home. Nabisco hunts down entry-level professionals at such U.S. colleges as University of Texas and Texas A&M, which have high populations of well-educated Mexicans with every desire to return to their home.


Compensation involves more than meets the eye.
Although the inexpensive low-skill labor in Mexico has been a recurring theme in NAFTA talks, this picture has been slightly obscured. In truth, the “cheap” labor isn’t as cheap as many have been led to believe. For one thing, the numbers are not necessarily indicative of real pay. Under Mexican labor law, employees’ pay is figured to include compensation for holidays and weekends, so the concept of per-hour pay is one that doesn’t translate. As a result, straight comparisons between hourly pay in the United States and Mexico can understate Mexican wages by 40%.


In addition, as crowds of companies snatch up available cheap labor and call for more, lower-skilled workers are beginning to have more leverage in pay demands. “One of the long-term expectations that people have about NAFTA is that the salary levels, particularly for lower-echelon employees, will rise,” says Diez. “And the advantage that presumably Mexico has of having cheap labor will evaporate.”


Other factors about the low-pay labor force also have been misrepresented. “[Labor] may be cheaper, but it’s not as cheap as originally believed,” says Fisher. “I remember people saying [pre-NAFTA] that in Mexico, minimum wage is low. In practice, you must be aware that in Mexico, almost nobody works for minimum wage. And on top of minimum wage, there are a lot of cash allowances.”


Cash allowances definitely play a major role in compensation in Mexico. Employees receive them as part of their total compensation package in addition to base pay. Some are required by law, many are customary. Those required by law are:


  • Christmas Bonus (Aguinaldo):
    Fifteen days’ pay to all employees with one year or more of service. The majority of employers, however, provide a month of pay

  • Vacation Premium (Prima vacacional):
    An additional 25% of pay is the required minimum. Most employers provide 80%, although on the border it’s common to see only the minimum provided

  • Profit Sharing (Reparto de utilidades):
    Most companies (new operations are sometimes exempted) must distribute 10% of their pretax profits each year among all employees, excluding the CEO.

In addition to these statutory cash payments, many other pay practices are so common that they’ve become vital to a competitive compensation package (see, “An Overview of Legal and Compensation Practices”).


As for executives in Mexico, they too have been underestimated in terms of compensation. A 1994 Hewitt report states that executives in Mexico may earn 10% to 25% more than their U.S. counterparts. This, of course, is due to supply and demand. And this limited supply is expected to be able to demand more as companies continue to flood into Mexico. This is particularly true for execs with skills specific to industries becoming more prevalent in Mexico: telecommunications, computer hardware/software companies, consumer products firms and banking.


But in addition to base pay and cash allowances, Mexican executives are accustomed to a generous sprinkling of perks. “One thing that is very much rewarded is prestige,” says Lotsoff. “A Mexican compensation package for an executive includes such things as a club membership and a big fat title.” Although Motorola hasn’t used such gifts, Lotsoff says cars were often a major part of the package also. This practice has been dwindling since 1992, however, when company cars were ruled to no longer be tax-deductible.


“Work issues in Mexico are neither as sunny and simple as pro-NAFTA rhetoric proclaims nor as gloomy and unnegotiable as anti-NAFTA forces portend.”


Alejandro Palma, intercultural business specialist for Redwood City, California-based Clarke Consulting Group, says that the craving for status perks is particularly true at middle-management levels. This, he says, is because in Mexico’s hierarchical culture, mid-level managers have a very limited decision-making role. “They are very interested in personal status and the semblance of authority, because in reality, they don’t have that authority,” he says.


Although it’s important to recognize the practice of adding extras, experienced companies warn newcomers to first take a step back, and figure in such labor laws as profit sharing and acquired rights before issuing a compensation package.


Under the acquired rights law, if an employer provides a benefit, bonus or other term of employment two years in a row, the employees have a right to continue receiving it. This is true even if the employer hasn’t formally agreed on continued provisions. “You can’t reduce salary, you can’t take away benefits. You simply can not,” says Fisher. To do so would be considered a breach of contract, unless each individual employee’s contract is renegotiated.


The prudent HR professional starts small in such things as benefits and bonuses. “We advise companies not to go overboard, not to have the most sophisticated package on the market,” says Diez. “You can always do better, but you can never go back. Be conservative in what you provide at first. At the same time, be aggressive in the amount you’re going to provide. It’s a delicate balance.”


The same consideration should be taken in view of the 10% of profits that are funneled to employees under the profit-sharing law. Duffy warns that for a small, high-tech, low-labor company, 10% can amount to quite a lot for each employee, and should be figured accordingly into the compensation package.


Once you get employees, how do you keep them?
Just as executives can demand higher pay in Mexico, they can also flow easily from company to company. It’s difficult to forge loyalty among the dizzying amount of competition and constant wooing of execs by rival operations. Oak Brook, Illinois-based McDonald’s Corp., which has approximately 80 franchises in Mexico, knows this all too well. “We’re experiencing a little bit of pirating right now,” says Rudy Mendez, director international HR. “We’ve had to look at our benefits and compensation structure to ensure that we’re positioned competitively.”


Yes, it’s back to compensation. Because as much as the right pay and benefits can attract good executives to a company, better pay and benefits can lure them away.


Lotsoff agrees that pay is an important feature of employee retention. With approximately 2,600 employees in Mexico, Motorola keeps a watchful eye on the market to ensure it’s keeping up to speed. “You have to benchmark,” says Lotsoff. “You have to do market surveys on a regular basis on your competition.”


She warns that salary surveys should compare job duties rather than job titles. Titles in Mexico are often mismatched with the actual level of responsibility. For example, the power and decision-making capability of a senior vice president at one company may make a counterpart seem like an administrator in comparison.


Although a company can lose workers if it ignores their monetary needs, a refusal to understand family needs can also cause execs to bail out. Fisher says that one touchy area is relocation: It’s difficult, generally speaking, to uproot Mexicans because of Mexicans’ strong family ties. A move doesn’t involve just the typical nuclear family, but often aunts, uncles and parents. And the problem is, if an executive doesn’t want to relocate, another company is generally waiting with open arms. “We’ve had some instances of trying to get workers to relocate from Monterrey to Mexico City, and we’re not too successful at it,” says Duffy. “Workers can jump pretty quickly if they want to.”


So what else can HR do to forge loyalty? Companies are still experimenting, says Diez, but he sees a pattern beginning. “I think the fastest-growing trend, as far as retention, is providing deferred pay—through stock grants or stock options. In the last year and a half that has increased tremendously.” Motorola is one firm that has used this type of golden handcuff. It offers stock options to some workers, in addition to performance-based pay issued at the end of the year. Lotsoff says that Motorola is also exploring pension plans. “But we need to do some work in that area of long-term retention tools.”


For some managerial staff, long-term retention may be achieved simply by giving that person what no amount of pay can provide: specific recognition as an important member of the company. It goes back to acknowledgment of status. For instance, Palma says that mid-level managers generally act more as buffers between upper execs and line workers than as strategic business partners. Accordingly, loyalty can be encouraged simply by giving them a taste of power, such as membership in the memo loop, even if the information or decisions made are completely out of their areas.


Ensuring long-term executive loyalty takes on increased importance in Mexico, because losing executives often means losing several of their direct reports. This is because in the vertical orientation of Mexican business, loyalty is very often forged to one’s immediate superiors rather than the company as a whole. Says Fisher: “It’s very common when managers move to Company B that, six or eight months later, a good portion of the staff also moves to the other company.”


With the correct incentives, however, retaining employees is not as daunting as it may sound. Lotsoff says that Motorola has had very little trouble with employee loyalty in its many years in Mexico. Duffy also reports success at retention: “Our business hasn’t been all that healthy, but folks have certainly stuck with us during some very difficult times.”


Train, incent and introduce corporate culture—carefully.
As with any sort of non-U.S. operations, Mexico has its share of host-country issues when it comes to aligning workers with company goals. In this arena, Mexico’s long-standing business and cultural practices collide with more “Americanized” programs such as TQM and participative management. It’s not impossible to transfer a company’s culture to Mexico, but such a transaction must be negotiated thoughtfully. “You can’t just export whatever you have in the United States and try to adopt it as-is in Mexico,” says Fisher. “You have to customize it a bit.” Fisher gives an example of a U.S. company that had a strict policy against drinking on the job. The company was, of course, entitled to continue that policy in Mexico, but it instituted it with no explanation of the reasoning behind it. Workers who were accustomed to having a beer at lunch continued to do so, and the company fired many employees. As a result, it lost a large part of the work force that it may have saved with a more reasonable policy introduction.


Implementation of corporate culture goes more smoothly if it’s done in steps, says Palma. For instance, to get buy-in at the line level, it should be those workers’ direct supervisors who explain a policy to them. Because these two groups share a loyalty, workers are more likely to take the policy seriously if it seems to originate from their direct superiors. Fisher agrees that culture must be phased in with care: “Don’t just put something on the bulletin board that says ‘You can’t do this, because this is the way we do business.’ “


The way Americans do business is an important point: HR professionals need to keep in mind that what may be clearly acceptable or unacceptable business in the States may not be so clear south of the border. For example, Lotsoff says that Motorola has made special efforts to provide a clear message on one of its corporate policies: No gifts, tokens or allowances should be taken in exchange for anything. Although this is an obvious statement to most American business people, in Mexico, the practice does occur. To ensure workers understand Motorola’s key beliefs, each employee—on all levels—receives a card stating the company’s code of conduct, and posters with the information repeated are plastered all around operational facilities. “It’s communicated since day one,” says Lotsoff.


Nabisco has also had its share of misunderstandings. For instance, Duffy says that workers at some plants were taking the product and either using it themselves or selling it to supplement their income. He says they weren’t being deliberately dishonest, but rather continuing an already established practice. “We fully believe that the [former] owners had paid at an unsustainable level and knew workers were taking product,” says Duffy. “So when you correct wages, you also have to correct certain culturally accepted practices.”


Other problems such as attendance also must be addressed. Duffy says that, because of the importance of family to most Mexicans, if a child is sick or a special family need comes up, work will take a back seat. Nabisco is spending extra time on this issue because it is so closely linked to culture. “What we’re trying to do,” says Duffy, “is to make the workers understand that the health of the business affects the health of the family. We’re trying to tie the two together. We’ve got a lot of new workers, so it’s going to take some time.”


Once the corporate culture has been established, training is often necessary to meet actual business goals. “Even though the cost of labor is low on a unit basis, the cost is not necessarily lower, because of the low productivity in Mexico,” says Diez. “Many companies are finding that cheap labor is not enough, it has to be effective labor for it to be worthwhile having plants down here.” Statistics back him up. In a 1993 Towers Perrin survey of more than 150 Fortune 1000 CEOs and senior executives, three-fourths said that a skilled work force would be critical to the success of companies in Mexico whose strategies depend on quality or know-how.


Training plays a significant part of readying the work force to compete. Diez says that up to 3% of a company’s payroll is currently being spent on training, mainly getting lower-level workers up to speed on working on teams, statistical control measures and computers.


“Executives in Mexico can flow easily from company to company. It’s difficult to forge loyalty among the dizzying amount of competition.”


McIlmoyle suggests that training for line workers should be done by a person who is comfortable in the Spanish language, so the information doesn’t come across in a stilted manner. As for upper-level employees, emphasis is being placed on bilingual and bicultural skills.


Training also plays a role in improving performance. Most line workers have never been involved in participative management, so they’ll need more background on what’s expected of them, and may need to be coaxed from time to time. Because line workers tend to be more interested in pleasing their direct boss than striving for the company as a whole, there tends to be a wariness of instituting change. “There’s a lack of initiative to take risks,” says Palma. “You know what your boss wants, you know what your boss likes, so this has fostered a lack of accountability [to the company] among most employees.”


Continued reinforcement of the value of employee ideas can help to alleviate apathy—and when employees are empowered to do their best, they usually do. For instance, Nabisco had a problem: Every time it switched cutters at its cookie operation to change the shape of a cookie being made, changeover time for the heavy, awkward equipment was about 35 minutes. It videotaped the workers in the activity, played the tape for them and asked them what to do. Workers had the solution: A handrun crane to lift the cutters and a guide to fit the rollers easily onto the equipment. Changeover time is now seven minutes.


Duffy adds that employees who are given a little support can go a long way. “When the effort is put in to train the people and to recruit, any preconceived notion that people are unwilling to work or unable to work or low in motivation are not true at all.”


Of course, with employee involvement comes employee incentives. But here too, HR must step carefully, because again success depends on balancing group dynamics with the perception of importance. For instance, such popular initiatives in the United States as performance-based pay may ruffle a few feathers in Mexico. Palma says that the practice isn’t impossible to implement, but companies must keep close track of employees’ reactions. This is especially true of line employees, who may resist more. Why? A worker receiving more pay could be viewed as having connections to the higher echelons. It creates a distance. “It’s much more important for a Mexican person to have a congenial working environment than it is to make more money,” says Palma. “There have been cases where very good workers, ones who have performed well and received [pay] recognition for that, have left the company because they felt ostracized by their co-workers.”


Although Fisher knows of variable-pay plans that have worked, he too expresses concern at their use. “[Mexicans] are more oriented to guaranteed situations, guaranteed pay. So, pay at risk is OK, but you have to communicate it a little bit more.”


Instead, Palma suggests other reward strategies, such as making the outstanding worker a team leader. This plays into the desire for respect without isolating the worker, he says. “Employees-of-the- month programs, where it’s on a rotating basis, not permanent like salary compensation, seem to be OK, because everyone has a chance.” Other incentives include family days or other activities including workers’ families.


Palma says that so much depends on—what else?—a respect for the work force. HR has a major stake in a company’s success in Mexico, he adds. Because, rather than profit figures or business growth, it’s such things as con sideration for culture, family, performance and pay needs that employees look for when deciding the company for which they’ll work. “Word spreads,” he says. “Word spreads very quickly, and the reputation increases.”


The trick is to make all the pieces of the HR puzzle combine to form the picture of a successful business and a healthy, satisfied work force. Certain policies and procedures may have to be held up to the light, looked at from a different angle. But with the proper HR tools, some dedication, elbow grease and imagination, human resources can make the pieces fit.


Personnel Journal, August 1994, Vol.73, No. 8, pp. 34-44.


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Birkenstock Braces To Fight the Competition

If you think geography, Arizona is a state. If you think feet, Arizona makes your toes curl. “It’s what everyone thinks of when they think of Birkenstock,” says Mary Pischke, human resources manager at Novato, California-based Birkenstock Footprint Sandals, Inc. The two-strapped sandals have been called everything from Jerusalem cruisers to tree huggers and shoes for granola eaters, says Pischke, who used to be among the city-slicker name callers. That is, until she was hired by the company a few years ago.


She still remembers the day of her job interview. During a fortuitous stroll nearby the company, she passed a shoe store that displayed Birkenstock’s paddle-shaped sandals. She peered into the window and thought to herself, “Oh, God, who would ever wear those?” The next day, she was hired. Then Pischke was introduced to Margot Fraser, the founder and CEO, and learned the philosophy behind the shoes: health, comfort and function before fashion and style. Today, Pischke owns 27 pairs of Birkenstocks. She even wears a pair of bronze lame’ Birks to punctuate a classy silk suit for business calls in the city. “Coming from high-tech computer leasing and banking, it was a real stretch,” she says.


But stretching and learning is what the company is all about. “We can’t rely on what has worked for us before,” says Fraser. “As the marketplace changes, we need to be flexible enough to change with it.” Unlike other growing companies that are massive as elephants or fast-paced like gazelles, Birkenstock is a smaller company with 130 employees. It has grown slowly and steadily since it was incorporated in 1971. Because Fraser’s earlier background was in fashion design, not business, the company’s values embody a mixture of heart and sole. Nestled among the gentle-rolling hills of Marin county-23 miles east of the Pacific Ocean-the company embraces kindness, integrity and respect for the earth as an integral part of the day-to-day business environment. Its mission statement reads: “Birkenstock’s purpose is to share with the American people our heartfelt belief that comfortable, healthy footwear is important to everyone because it can contribute to happiness and well-being. Through our distribution of high-quality Birkenstock footwear, we strive to create positive, harmonious relationships with employees, customers and vendors, emphasizing honesty and integrity in all that we do. Within our company, our goal is to provide an atmosphere that stimulates growth and creativity among employees and rewards and encourages their contributions.”


If it sounds a bit too touchy-feely, consider Birkenstock’s business success over the years. After inching along for two decades, the company’s sales, reputation and authority in the shoe industry have become the envy of earlier naysayers. You know, the ones who said, “No one will ever buy those ugly things.” Although it took the company until 1988 to reap sales revenues of $8 million, Birkenstock’s sales revenues for 1992 were reported at $50 million. The sales target for 1995 is $100 million, according to Mary Jones, vice president of administration and the company’s first-hired employee. “But now, there’s a lot of competition. We’ve been a leader for a long time, and we’d like to stay there,” she says.


“Birkenstock meets competition by expanding its product line, increasing the skills of employees and ensuring the success of its first national sales team.”


So did Birkenstock create or ride the wave of the comfort-shoe market in America? It did a little of both, says Bill Boettge, executive director of the Columbia, Maryland-based National Shoe Retailers Association. “At first, it created a cult. As more people saw [the sandals] and liked them, others got on the bandwagon. Fashion designers like Perry Ellis have even shown them on the runways,” he says. The comfort-shoe market, Boettge adds, also grew out of or simultaneously with the athletic-shoe market. Many consumers, he explains, buy athletic shoes but don’t even wear them for the sport for which they were designed. Moreover, in 1993, the majority of shoes purchased by men and women were in the comfort or casual-oriented footwear category-82% for men and 66% for women. “We have a lifestyle that’s changed dramatically over a 10-year period, and I don’t see a trend away from leisure living,” he says.


Jones says that Birkenstock is prepared to face the increasing market and competition of such name brands as Naot, Josef Seibel, Mephisto and Teva. Growth in the ’90s means expanding the product line, increasing the skills set of its employees and ensuring the success of its first national sales team after the company laid off about 14 employees in the distribution center. Thus, HR has been challenged not only to manage product growth, customer service and a new sales team, but to ensure that the philosophy and values of the company remain intact. “I really believe that from the early days-when we sat and talked about where we wanted to go-the values important to us then are still important to us now,” says Jones.


It all began with a pain in the foot.
Back in 1966, Fraser first discovered the orthopedic Birkenstocks while visiting her native Germany. Amazed that her feet felt considerably better after several months, she began ordering several pairs at a time. She recommended them to friends and sold them to Northern California health-food stores, hole-in-the-wall retailers and outdoor fairs. Several years later, she expanded her informal business to a San Rafael, California, warehouse. By 1971, on a handshake, Fraser incorporated and became the sole U.S. distributor of Birkenstock products. That status has its pros and cons. “You’re not totally in charge of your destiny,” Fraser says. Although the Birkenstock family has been producing footwear products for more than 200 years, Germans and Americans have different business traditions and consumer tastes. Also, inventory can be delayed, as it was during the dismantling of the Berlin Wall in 1989. In the past, Fraser has been the principal liaison with the German counterpart, spending many of her visits discussing product development. Initially, she only sold a few styles. But as she developed a savvy for American tastes and needs, she began to import a greater variety and even influenced the design of sandals manufactured specifically for the American consumer. For example, the taupe, suede Arizona was developed for distribution in the United States and now is quite popular in Europe, says Fraser. Today, the U.S. distributor sells more than 80 style and color combinations for people of all ages, including children and senior citizens.


The first stage of growth defined the market and created a niche.
During the company’s earliest days, there was no HR department, except for Jones helping to manage the small operation and Fraser being “a loving person,” says Pischke. The working environment was still homey and informal. It wasn’t uncommon to find four to eight people doing all the packing, shipping and answering the phones. “It was run like a family operation then,” she says. Among its earliest devotees were consumers who were willing to take a chance on something new and different. Quite often, the sandals would turn up at Carole King concerts, sawdust festivals or transcendental meditation centers. But the predominant buyers, she says, were middle-class women in their 30s who wanted comfort and could afford the higher price point. (Birkenstocks today are priced between $50 to $190.) Men wore them too, but their numbers have increased more recently. She describes the archetypical Birkie as someone who is self confident, function-oriented and unswayed by trendy fashion statements.


As the sandals gained popularity, Fraser began to learn more about running a successful business. In the early ’80s, the company expanded and moved to its first facility in Novato. That move set the stage for entering the retailing market-establishing Birkenstock-licensed stores, listing with catalog companies and working with other independent outlets. Still, Jones was the only person handling basic administration and payroll functions. But from the beginning, she and Fraser had eagerly enlisted the help of consultants for everything from marketing, legal advice, accounting, management and training. “We’ve had a myriad of people coming through here with new ways of doing things,” says Pischke.


By 1989, Birkenstock had hired 80 employees. Three of them were full-time customer-service representatives who served the growing number of department-store accounts such as R.H. Macy, Inc. and Nordstrom, Inc. A year later, the Birkenstock family had grown to 100. It faced a major growth spurt-not unlike the stage of adolescence when the hormones are popping and the parent figure must establish stronger rules and policies, on the one hand, and also begin to let go. “We started out very small…with two people. But somewhere, somehow, I had to change and let people take on more and delegate. Sometimes it was difficult because of my personality. I’m introverted and introspective. And I realized that I had to voice more of my ideas,” says Fraser.


At that point, Fraser and Jones also realized that they needed to hire an HR manager. Jones had been spending 16-hour days overseeing finances, operations and all HR-related functions. Hiring was decentralized, salaries were out of whack, and the company was facing a high turnover because of some poor hires. Like many smaller growing companies, Birkenstock had hit a complexity point. It needed to focus, not just do things when there was time. Enter Pischke, who had previous HR experience in payroll, recruitment, training and customer-service management. “The crying needs were for someone to take HR functions under one wing and centralize them and provide some consistency and controls. For the first year, that was the mad rush,” Pischke recalls. “When I joined, the employee handbook was only four pages.” Today, Pischke manages three other HR staffpeople whose functions are divided into payroll and pensions; health and safety and benefits; recruitment and employee relations.


New recruits need skills and people values.
When Birkenstock was first established, it wasn’t difficult to find employees who shared Fraser’s feel-good business vision. The social and cultural milieu of that period had spawned a whole generation of self-actualizing youth. This first generation of Birkenstock employees were people “who wanted a familial, low-key, nurturing environment,” says Pischke. Many of them were jacks-of-all-trades, but few had any specific skills that would become vital in the decades to follow. Today, there are about a dozen of the original cadre of employees who provide a necessary bridge between the company’s long-standing people vision and today’s market demands. “We’re looking for individuals with a non-profit mentality in a for-profit world,” she says. Now, HR screens candidates for specific skills: marketing, advertising, sales, public relations and traffic inventory. However, in order to cradle these skills in the company’s corporate environment, Pischke has helped to institutionalize interview procedures, orientation and training and performance evaluation standards.


Teamwork plays a major part in the interview process, she says. The more empowered an employee becomes, the easier it will be to ride the wave of change. It may take more time, but “we see so many payoffs later on.” HR begins the process by developing a job description. Depending on the level and skill of the position, an interviewing team may consist of three to 12 individuals. The smaller teams usually interview candidates for entry-level positions in the distribution center. But for positions such as the national sales director-now occupied by Tim Black-HR set up an interview team of 12 staffpeople. That included two representatives from HR, Fraser, several department directors and representatives from the sales, accounting and credit departments. “Before we hire, we look for a fit. That’s very important,” says Jones. “Today’s market makes maintaining our culture real tough.”


Even before the interviews, the selected team meets to determine their questions. Once the interviews are completed, they reconvene to discuss the candidates’ responses. If anyone has any questions or reservations, they’re raised at that time. Then a decision is made to hire, not hire or interview further. “Decisions are made by consensus,” says Pischke. She initiated the team process for two reasons. The company was hiring at rocket speed, and HR was “taking the hit” for some unsuccessful hires. “I thought, ‘I don’t like this. I need buy-in. How can I get it?’ So I started to involve more people.”


So far, the hiring process has worked. Once they’re on board, HR also ensures that employees are brought into the company’s fold. During their first day of work, all new employees are given a basic two-hour orientation on the company’s philosophy, goals, policies and procedures. The orientation is led by Daniela Zazzeron in HR, who is in charge of recruitment and who serves as the company’s liaison to employee candidates. Then, the new employees are given a one-hour presentation on benefits and health and safety before being led on a tour of the facility. After meeting fellow employees, the new recruit is introduced to his or her immediate manager. “We also point out the various bulletin boards and information centers to encourage involvement,” says Pischke.


In terms of reviews, Birkenstock’s approach toward performance planning and evaluation is collaborative. Although the company always had a review system, only recently did a task force update the process. After a nine-member group met for two months and gathered feedback from fellow employees, they made several suggestions for improvement such as upward appraisals, on-time reviews, simpler forms and recognition of departmental goals.


Now, reviews are conducted three times a year. Supervisors and employees fill out the same form before they meet, rating themselves and each other. Some of the performance factors for employees include:


  • Customer service:
    Thinks and acts in support of the customer, internal or external. Meets customer needs in the most effective way possible, by providing timely response and resolution of customer problems

  • Team spirit:
    Provides support and help to others, recognizes contribution of others and actively tries to resolve differences. Fosters a cohesive, supportive work environment by contributing to team goals and sharing information, ideas and solutions. Encourages positive, harmonious relationships among co-workers

  • Continuous improvement:
    Seeks new and better ways to perform job; aspires to higher levels of performance. Shows willingness to change and supports/encourages others to be innovative

  • Accountability:
    Accepts responsibility and ownership for own actions. Exemplifies honesty, integrity and ethics

  • Safety/Health:
    Adheres to safety policies, safe working conditions and promotes health and welfare.

Management is rated in four main areas: performance management; delegation/accessibility; coaching/guiding; and team building. By allowing supervisors and employees to evaluate each other at the same time, reviews aren’t dreaded as they are in many other workplaces, says Jones. Managers like the process, too. “Once they come to an agreement, that’s it,” she says.


The company faces its first layoffs.
In spite of its strides in human resources development, Birkenstock didn’t escape its own set of problems. At the end of 1992, there were 170 employees. But a combination of factors forced management and HR to make some hard decisions in 1993, according to Pischke. It was the most difficult year the company had ever faced. Projected sales were higher than what the company actually sold. Also, there was too much inventory. Add to that a fragile economy and a series of natural disasters that seemed to sweep the country all at once. “If you have a major flood in the Midwest, that stops sandal sales. It really does. People can barely afford to buy sandals, much less find the store in a flood,” says Pischke.


Management knew that the company would have to undergo some reorganization. Continued growth, they learned, did not preclude some downsizing. Not all of the reasons were negative, however. The changes also were spurred by fierce competition and the increasing accessibility and popularity of comfort shoes. Earlier this year, economic forecasters also predicted that department stores were making a comeback in their sales revenues. Birkenstock’s strategy of stepping up distribution in both department stores and independent retailers was placing even greater demand on the company’s work force.


Hence, in mid-’93, management and HR held several meetings to assess the current jobs, job descriptions, required skills sets and productivity of various departments. The most identifiable department in which to streamline was the distribution center. During some parts of the year, the department hummed. Other times, employees were basically twiddling their thumbs. “We knew if we could flex the work force, it would save us in the end,” says Pischke.


Once the decision was made to cut back to a core staff in the distribution center, human resources determined how many would be laid off. It was an arduous, but well-handled situation, she says. Six months before the layoff in October 1993, all of the employees were informed that the company was struggling to meet its goals. Three months later, employees were prepared for the possibility of the layoff. By the time the actual cuts were determined, Pischke had four days to announce the layoffs, organize management teams to reassure the remaining employees and provide unemployment and counseling services for the departing workers. “We brought in representatives from the Employment Development Department (EDD), a temporary-service agency and an employee-assistance program counselor.” Approximately 14 employees were laid off from the distribution center, and they received severance packages based on their tenure with the organization. Most have found other jobs, Pischke says.


During this same period, the company also had decided to keep its temporary work force to a minimum. Contingents had been used since the ’80s. But now, the company needed to cut those numbers back as well. One of the innovative ways in which Birkenstock managed the cutbacks was through the Help Program. Pischke describes it as an in-house contingent program to contain costs. The most apparent need, of course, was in the distribution center. Employees throughout the company were asked to volunteer four hours a week in a department other than their own. “We had more than 40 volunteers who helped in shipping and receiving. They came from advertising, marketing, customer service and even HR,” she says.


The Help Program-although a one-time effort-not only forged the camaraderie between the departments, it gave the organization more flexibility during fluctuating seasons. “Now we know we can go back and use internal help if we need to,” says Pischke.


In spite of the layoffs in the distribution center, Birkenstock continued to grow in other departments. The process of restructuring the sales department was prompted by the need to focus more on customer service nationwide. Once Black was hired as national sales director, the company formulated a strategy to build stronger partnerships with the retailers. The sales department decided that:


  • The national accounts department would oversee national, mail-order and specialty-store accounts
  • Sales representatives would be based in their respective territories. (For the first time, Birkenstock placed sales reps in 17 regions throughout the nation. Many of the new hires were natives of the respective areas.)

By placing sales representatives in the field, Birkenstock retailers now are expected to receive more one-on-one attention. They will receive help in assessing their inventory, promoting the merchandise and training the store’s employees on properly selling Birkenstock products.


Birkenstock’s advertising strategy mirrors the sales strategy. There are no single national TV advertising campaigns. Most ads are tailored to the needs and tastes of each region. For example, sandals can be advertised year round in Florida. But during the winter months in the Midwest or Northeast, Birkenstock shoes are more popular, and the ads must reflect those distinctions, says Pischke. The new sales team, therefore, is critical to keeping the company in touch with its customers nationwide, she adds.


Birkenstock strives to maintain its corporate values.
Soon after last year’s layoff and sales restructuring, the company newsletter, Birki footnotes, featured a column about change. It said that the company’s transition period is about linking the old way with the new. Somewhat like “a swinging rope bridge that crosses a land gorge.” Crossing that bridge causes a bit of anxiety for most. And how much one resists or hesitates before crossing the bridge will be different for everyone, depending on how difficult the passage is perceived, the column said. Whether a growing company is large or small, change is constant. But for smaller companies such as Birkenstock, facing a land gorge is threatening.


“The challenge is to achieve balance. In a small company, it’s much easier to operate informally. Most companies in growth mode try to protect and cherish the culture where people understand they’re significant,” says Jim Spoor, national president of the Bethesda, Maryland-based Council of Growing Companies. “They like the feeling of smallness, that I matter.” That sensibility would be shared by most U.S. workers. Spoor says that by the end of the decade, 85% of the American work force will work for companies with less than 100 employees.


For the most part, Fraser says that she welcomes the organization’s recent changes. She describes them as exhilarating, but understandably scary. But once a learner, always a learner, and that’s precisely how she views Birkenstock. She describes a learning organization as:


  • Being open to finding new ways to solve problems
  • Evaluating new ideas by their impact on the whole company.

“Sharpening our skills is one way to remain flexible,” Fraser says. In that context, the human resources department has charted this year’s training and education courses to include such topics as quality, productivity and innovation. The reason is to ensure that all employees have a chance to contribute ideas and solutions, improve their efficiency and communication, reward creativity and value those committed to making a difference.


Pischke says that employees also are encouraged to join one of Birkenstock’s task forces or teams. They address areas such as cultural diversity, health and safety, special events and investment. One of the most active teams, she says, is the Green Team. Established five years ago, it focuses on raising the environmental consciousness and practices of the employees at the workplace and as members of the Novato community. “We recycle as much as possible,” she says. Last year, the company recycled a heaping nine tons of mixed paper, 143 pounds of glass and 135 pounds of aluminum. And on Earth Day, the Green Team purchased indoor plants for everyone with a little spade that says, “Be aware of your world.” Taking that message to heart, about 40 employees-including Pischke-also tend their vegetables and flowers in the Birki Garden.


But cucumbers and marigolds aren’t the only benefits sprouting up at Birkenstock. Last spring, the company announced a new Alternative Work Arrangement policy. Barring any business limitations, department time constraints or labor laws, employees are offered a variety of work options. Again, they are intended to be kind to workers and the environment. Flextime is offered to those who have special needs or want to avoid rush-hour traffic. A compressed work week is available for those who want to work 10 hours a day, four days a week and gain an extra day off every week. This plan, HR reasons, helps reduce traffic congestion and driving expenses. A reduced work time also is offered for those seeking part-time employment who have a new non-work interest or need such as a newborn or college classes. And finally, some employees can take advantage of a flex-place option by working part or all of their work hours at an alternative worksite, usually at home. “We’re very proud to offer this progressive policy,” says Jones, known by her colleagues as the company’s cultural guardian. “It’s really great. People are experimenting with what works.”


In terms of the future, Fraser says she expects the company to continue growing at a steady pace. She believes there aren’t any mass markets-only multiple-niche markets-so the sandals are expected to continue attracting millions of new consumers. “There’s more men, kids and elders. Today’s [seniors] are healthier and have more money. They’re active and travel. That’s a good thing,” she says. Also, she learned a lesson during Birkenstock’s rapid growth in 1991 and 1992. “It brought some problems. We hired more people than could be assimilated into the Birkenstock family,” she says. When you proceed with balance, fit happens.


Personnel Journal, August 1994, Vol.73, No. 8, pp. 68-75.


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Team Input Shapes A College’s Sexual Harassment Policy

A school, like any other organization, is concerned with providing an appropriate environment for work and learning. This means, for one thing, protection from sexual harassment. Many educational institutions are finding the need to develop or fine-tune existing policies in this area to communicate that their organizations won’t tolerate abuse of authority or position in obtaining sexual favors.


As the grievance officer at the School of the Art Institute of Chicago, I participated on a team that worked on refining this school’s sexual harassment policy approximately two years ago. Because the school is both an employer and an institution of higher learning, implementing and communicating such a policy was uniquely challenging. Here’s why: Employers only are responsible for regulating the conduct of staff members as that conduct’s directed at other staff members. But because schools also are learning institutions, they must regulate the conduct of faculty and staff as it’s directed at faculty, staff and students, in addition to the harassing conduct of students as it’s directed at faculty, staff or other students.


As such, two separate federal anti-discrimination laws apply: Title IX of the Educational Amendments of 1972 and Title VII of the 1964 Civil Rights Act. Although both laws require adopting policies on sexual harassment that establish grievance mechanisms and prompt appropriate action on charges that are found to have merit, each law protects a specific group of individuals and requires different procedures and remedies for sexual harassment.


Title VII prohibits sexual discrimination by an employer, but extends its protection only to those individuals who have an employment relationship or are applying for employment. In an academic context this covers faculty and staff. Students would be covered only if they’re employed by the school. Title IX prohibits discrimination on the basis of gender of students in institutions of higher learning that are receiving federal funds. Its scope is broader and covers all students, not just those who are employed at the facility.


Title VII provides reinstatement with back pay and limited compensatory and punitive damages to victims of sexual harassment. Title VII victims also are entitled to a jury trial. Under Title IX, neither damages nor a jury trial are available. An institution in which members are guilty of violating Title IX must discontinue the prohibited action or face elimination of federal funding.


The policy in place prior to two years ago pertained to the Art Institute and was outlined in the museum’s employee handbook. It wasn’t explicit enough to encompass all of these elements. It also didn’t address how victims from each of the communities—staff, faculty and students—should report and handle misconduct directed toward them.


“Regulations prohibiting sexual harassment could restrin expression of opinion. In contrast, the purpose of a school of art is to promote new thoughts.”


To ensure that all issues pertaining to each group would be addressed in a revised policy, a policy-formation team was assembled, comprising myself, the dean of students, the assistant dean of multicultural affairs, a member of the faculty senate, a staff senate member and a representative from the student body. The team not only sought input from each of the communities affected by the policy, it also created a sense of ownership and a willingness to get the policy through the approval process.


The team defines sexual harassment as it pertains to the school’s various communities.
The team concluded that the first thing any policy should contain is an understandable definition of sexual harassment. We found that altering EEOC’s definition by deleting verbiage pertaining specifically to employment and adding language to include advancement or academic success fit our purposes. The definition as we refined it reads:


Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when (1) submission to such conduct is made, either explicitly or implicitly, a term or condition of an individual’s employment, advancement or academic success, (2) submission to or rejection of such conduct by an individual is used as the basis for decisions affecting such individual, or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment.


We determined that the first and second elements of the definition pertain to supervisory personnel and faculty as potential harassers. The third element expands the list of potential harassers to include co-workers, non-employees and students.


The issue of harassing conduct of student to student is less clear. Regulations prohibiting hostile-environment sexual harassment have the potential of restraining a student’s expression of opinion. In contrast, the purpose of an educational institution is to promote the development of new thoughts, and expressing opinions is encouraged. In a school of art especially, where such discussion as the form and figure of the human body often takes place, having restraints raises difficult First Amendment issues. The Office of Civil Rights currently is developing policy statements to provide guidance to academic institutions on this issue. In the meantime, if such an incident should occur, we would rely on a Student Concerns Committee Hearing Board.


Having defined sexual harassment as it pertains to our communities, we worked on developing a formal reporting process for victims of sexual harassment. We determined that besides stating the school’s position on sexual harassment, the most vital part of a policy is to detail the procedure of how an individual can file a complaint and bring the matter to the attention of management.


Many individuals who’ve been victims of sexual harassment feel traumatized and violated. If the reporting mechanism for this type of situation clearly is delineated and advertised with a contact person identified, the reporting of incidents of harassment would be made substantially easier for the victim. We believed that having a designated person as the recipient of complaints would encourage individuals to come forward. In addition, this will help make victims of sexual harassment feel that the organization considers this issue important enough to assign a specific individual to handle it.


We identified the highest positions responsible for each category of victim (student, faculty or staff) to serve as the initial points of contact. If the victim is a student, he or she would contact either the dean of student affairs or the assistant dean of multicultural affairs. Faculty members who are victims would contact either the dean or associate dean of the school. Staff members would contact a supervisor, their department head or the organization’s grievance officer.


These individuals would then enlist the help of the other most appropriate contact person for the case to assist them in an investigation. For example, if a faculty member complained to the dean about harassment from a student, the dean would contact the dean of students, and they would investigate the charges together.


Sexual harassment policy addresses confidentiality issues.
Because of the various reporting structures, First Amendment issues and classifications of victims, how we respond and investigate such complaints becomes more complicated. Therefore, in developing a policy on sexual harassment, we took care to clarify the process on how complaints are managed.


During our formulating sessions, the issue of confidentiality and its usage in the policy raised concerns and lengthy discussions. There was concern that any individual coming forward to challenge the harassing conduct of another person would sacrifice his or her privacy. Likewise, the person charged with harassing conduct would risk his or her reputation and possible ridicule by peers in the academic community while an investigation was being conducted.


So, we determined that it was important that the policy clearly convey how the issue of confidentiality would be handled.


In our attempts at conveying this information, we included a segment in our initial drafts under a section titled Suggested Responses that read: “Students also may seek the advice of the dean of student affairs to determine whether the matter can be resolved satisfactorily on an informal basis. This discussion is confidential with no written record.”


This verbiage eventually was dropped for the following reasons: First, this wording implies that a student could raise his or her concerns about possible sexual harassment to the dean of student affairs and be assured that the issue would go no further. Second, the statement that no written record is made of the conversation implies that the dean of students has the discretion to choose whether or not to investigate. This isn’t the case.


So we replaced the original statement with one that explains that the school must investigate, at least informally to begin with, the incident that’s brought to its attention, and take appropriate corrective action if indicated. The statement also indicates that we’ll attempt to protect from unnecessary disclosure the details of the incident being investigated and the identities of the complaining party and alleged harasser. We felt that by describing the limits of the school’s ability to maintain confidentiality, we would prevent misunderstandings, and this in turn would enhance the credibility of our grievance procedure.


There certainly will be situations in which the identity of the complaining party needn’t be disclosed. This occurs, for example, in a situation in which a student in class is offended by the conduct of the teacher. Because this situation of environmental sexual harassment occurs in front of a class, it can be verified easily by interviewing other students. In the majority of cases, however, the identity of the complaining party and details of the harassment will need to be made known during the course of the investigation.


Once a situation of possible harassment is reported, the contact person must at least begin informal investigations to see if there’s validity to the charges. This informal approach can consist of something as simple as asking discreet questions to individuals who may have witnessed some of the inappropriate behavior.


If the informal investigation indicates that there is validity to the charges, management then must proceed with a more formal investigation. During this process, the appropriate contact people would interview both the accused and the accuser and any possible witnesses, getting statements from all parties and rendering a decision.


New sexual harassment policy receives positive remarks.
Because the team had representatives from each segment of the academic community, the sexual harassment policy easily was ratified. And, despite the academic community’s resistance to any policies that control behavior or expression of free thought, the individuals who have championed the cause of free speech and expression as it relates to this issue have been in the minority. Most agree that sexual harassment isn’t expression of free thought—it’s offensive, illegal and a misuse of power.


All in all, the policy—encapsulated in brochures that we distribute to students, faculty and staff, and post throughout campus—has been well received. After it had been in effect for approximately one year, the committee that created the policy got back together to evaluate it. The policy has been used three times at the school. Among these people who used the policy and followed the reporting procedure, there have been no complaints. In fact, committee members who handled the cases said that they received congratulations for clarifying how to handle a difficult and confusing situation. The people to whom they talked found the policy useful and were glad to see it in effect.


We feel that by having a strong, clear, well-defined and enforced policy on sexual harassment, we can empower the members of the academic and school community to step forward and declare their intolerance of this type of behavior. When this occurs, all members of the community benefit.


Personnel Journal, August 1994, Vol.73, No. 8, pp. 76-79.


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New Technologies Provide Agents for Change

One of the more fascinating aspects of work-flow automation is the emergence of agents—powerful software programs that automate tasks. They’ve been likened to robots and described as the next great breakthrough in computer software. These mini-programs are able to monitor a computer system, and when they detect a specific set of conditions can tackle tedious and time-consuming tasks in ways of which humans only can dream.


For example, Palo Alto, California-based Hewlett Packard Co. uses an agent supplied by Santa Clara, California-based Edify Corp. to automate quarterly wage reviews for 13,000 salespeople. The PC-based software dials into the personnel system and downloads a list of whom works for each of 1,200 sales managers. Then, using electronic mail, it sends each a list for verification. Managers e-mail changes back to the system, which automatically updates any changes. Finally, the agent repeats the process—this time sending proposed salary changes for review. The managers either can approve the raises or make modifications by calling into an interactive voice-response system that uses telephone buttons to update records. The end result? H-P has a computer handling the work of 20 HR administrators.


Agents can manage dozens of tasks. Like Edify’s Electronic Workforce, they can scan the highways and byways of cyberspace, scheduling meetings, creating dynamic to-do lists, managing highly efficient “in-boxes” and automating information retrieval. They can even send out faxes or mail when a predetermined set of conditions occur. “The tools are powerful for moving information in and out of HR systems,” says Edify’s president, Jeffrey Crowe.


Atlanta-based Dun & Bradstreet Software, which markets a program called HR Stream, also has introduced agents into its software. Using an embedded workflow approach, the program not only collects and organizes data, it automatically routes activities, reports, mail and other information to users who need it. It can collate work, create to-do lists and even complete tasks while employees are at lunch or at a meeting. And, the software is driven by user-definable tables, which means it easily can be configured and reconfigured to meet constantly changing needs.


Although agent software can vary from the invisible to the obvious, it almost always mimics what humans do, but with far greater endurance and accuracy. For example, Santa Clara, California-based National Semiconductor Corp.’s Career Opportunity Program System—which provides 25,000 employees with online job listings—automatically updates itself by logging on to the HRIS computer every night. It can grab open requisitions and make them available online. Anyone who accesses E-mail and applies for a position generates electronic forms. Often, this data blaze through the system with little or no human handling.


Not surprisingly, all this is having a profound effect on how workflow automation affects human resources. “The days of the centralized, departmental hierarchy are fast disappearing,” says D&B’s Bill Busbin, director of HR product management. “An HR department needs to get information to the true end-users—line managers and other personnel—so they can perform their functions more efficiently. Just because people have client/server systems hooked into local or wide area networks doesn’t mean they’re cutting through the information bottleneck. The software has to fit their specific needs.”


Personnel Journal, July 1994, Vol.73, No.7, p. 32M.


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Big Blue Gets the Red Out

In the history of corporate America, few companies have been forced to endure such a cataclysmic restructuring as Armonk, New York-based International Business Machines. And when it embarked on a thorough examination of the entire organization, human resources was near the top of the list. “It was immediately clear that we were terribly suboptimized,” says George Krawiec, general manager of IBM’s WFS Workforce Solutions Group. It turns out that IBM’s 36 human resources centers around the United States each had its own information technology department—something that contributed to plenty of repetition. Krawiec says: “We were a technology company that was not using technology effectively.”


So, in 1991, IBM set out to revamp human resources. One of its first decisions was to consolidate its benefits administration department. The firm immediately moved staff from the 36 locations around the U.S. into a new state-of-the-art service center in Raleigh, North Carolina. The firm equipped representatives with PCs capable of conducting powerful hypertext searches on benefits policies. It then divided the representatives into two work groups. Tier 1—the largest group composed of generalists—would receive the most basic questions, which make up the majority of the calls. Tougher questions would go to a smaller number of Tier 2 specialists. The result: IBM found that it no longer needed to staff to the highest level of need. Using call-path technology and a redesigned workflow, it was able to cut 40% of the original staff and handle a record number of calls.


And that was only the beginning. Today, a new salary system routes pay-increase requests to the proper person for approval. Once it’s signed off, the confirmation returns to the manager initiating the request and is sent automatically to payroll for processing. A 24-hour interactive voice-response system processes upwards of 170,000 benefits requests a year. Within 24 hours, it provides an employee with data on his or her retirement plan. In the past, a clerk had to pull the file, sit down with a calculator and figure out the employee’s status and mail the information out. That could take several days.


Some of the workflow automation the company’s using is downright innovative. For years, IBM operated a paper-based employee suggestion program. When a good idea came in, it could languish for weeks or months before being routed to the right department. But two years ago, it opted for technology that could fully automate the program. Now employees log onto E-mail, type in the word idea and access a menu that prompts them for information. Once they send their ideas off, the information is zapped to the appropriate department for evaluation. If ideas have merit in other divisions or departments—whether it’s Austin or Boca Raton—the computer sends them there automatically.


All this new technology is beginning to make its mark. Since 1987, IBM has slashed its HR work force from 3,300 to 900—and it hopes to make further cuts in the future by leveraging the technology even more. “We have pushed administrative tasks downward and outward,” says Krawiec. “We’re forcing the people who should be responsible for an action to handle it.” Yet, he’s also adamant about not merely dumping human resources work on to others. “I’m not interested in transferring the work of five HR people on to others in the organization. I’m interested in making things easier and more streamlined. Technology serves as the underpinnings for achieving that goal.”


Personnel Journal, July 1994, Vol.73, No.7, p. 32F.


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Notes from Lotus Development on How To Empower HR Through Groupware

When it comes to the latest corporate buzzwords, groupware—software that allows a group of employees to freely exchange data and collaborate on documents and projects—definitely is at the top of the list. And there’s no groupware program that has garnered as much buzz over the last few years as Lotus Notes—an integrated program that allows users on networked personal computers to share information and work together in real time.


Its appeal is obvious. Workers are able to use PCs in much the same way they would interact in the non-cyber world. As easily as using the telephone, they can connect to whomever they choose and pass information—text files, images and sound bytes—to anyone else who’s tied in. Group-ware also can automate certain tasks and provide valuable links to mountains of data. And it offers remarkable reporting capabilities. A manager quickly can determine where an electronic document is in the system, and then approach an employee to find out why the document is still sitting on his or her desk.


But groupware—at least in its current version—offers only a limited form of workflow technology. Nevertheless, Cambridge, Massachusetts-based Lotus Development Corp. has managed to build a system that shows the power and efficiency of groupware in the HR setting. Every form used by human resources now is electronic instead of paper. A clerk may initiate a transaction, send it to a supervisor for approval, who can then pull up a file using a document link. Those who are out of the office can use their notebook PC to access E-mail—in which a list of current requests might be stored. “A piece of paper that previously had to go through a series of signature loops and could get stalled for a week or two now is processed in minutes or hours,” says Kay Meckes, director of HR at Lotus.


The software giant has used the technology to improve other processes as well. It used to be that Lotus had no idea how many callers were dialing into HR or in which topics they were most interested. However, after setting up a Notes module that could track calls—human resources representatives simply type in a name or category on their PC and the system queries the data base to automatically populate much of the remaining data—it now knows what its strengths and deficiencies are. “We can see that if 40% of the calls are from people confused about the benefits program, we need to design better procedures and training,” Meckes explains.


Employees use the same technology to update their employment records. From their own PCs—or even from hotels across the country—they can pull up a change-of-address form via E-mail. They simply type their name, and the system automatically fills in other data, including employee number, social security number, department and date of birth. Once the changes are made, the E-mail messages are returned to the data bases, where they’re updated.


According to Meckes, groupware has made HR faster and far more professional. Without adding a single employee to the human resources payroll, the department has handled the addition of 700 new employees in the last year. That’s in addition to the 3,500 that already were working at Lotus. The company, meanwhile, is feverishly at work on a new version of Notes that will embrace sophisticated software agents (see “New Technologies Provide Agents for Change”) and full-blown workflow automation. Says Meckes: “The future of HR is wide open. Groupware technology is going to drastically change the way work gets done and the roles people play.”


Personnel Journal, July 1994, Vol.73, No.7, p. 32J.


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Values Differ Nation By Nation

Here’s a little chart that shows some differences between the United States and other countries:


IN THE UNITED STATES

IN OTHER COUNTRIES

Time is to be controlled

Time is fluid, malleable

Change

Tradition, continuity

Individualism

Group orientation

Personal privacy

Openness, accessibility

Informality

Formality

Individual competition

Cooperation

Equality/egalitarianism

Hierarchy/authority

Short-term tendency
(in relationships)

Long-term emphasis
(in relationships)

Work emphasis
(“One lives to work.”)

Leisure + work emphasis
(“One works to live.”)

Task-emphasis

Social emphasis
(human relations)

  

Direct/explicit communication style

Indirect/implicit communication style

Action bias or emphasis

Planning and preparation bias

SOURCE: Chart prepared by International Orientation Resources


Personnel Journal, July 1994, Vol.73, No. 7, p. 46.