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Internship Program Helps Rebuild Los Angeles

On April 28, 1992, civil unrest broke out in Los Angeles. For three days, smoke and flames engulfed buildings in the heart of the city as people were killed and hundreds of small businesses were looted and destroyed.


Even large companies, such as the Los Angeles Times, couldn’t escape the riots. Two hours after the disturbance began, angry citizens started breaking windows of the newspaper’s buildings at Times Mirror Square. One employee was trapped in the offices and watched from the building’s upper windows as rioters overturned cars and started fires.


Concerned about the future of Los Angeles, EuGene Falk, executive vice president and general manager at the Times, decided to act. He called in the heads of four departments—training and development, the publisher’s suite, employment and community relations—and told them his idea. In response to the civil uprising, Falk wanted to provide jobs for youth whose lives had been affected by the violence.


This type of concern for the community wasn’t new to the Times. The newspaper has been around as long as Los Angeles, and it has a history of community-service projects. Bill Bradley, senior HR development consultant to the Times, says that this practice benefits the company in the long term. Because many cities are deteriorating, businesses have the ability to improve them with service projects that, for example, increase literacy levels among citizens or reduce tension among diverse groups. By empowering the community base in this way, service projects make the city—and ultimately the companies in it—stronger. “Los Angeles isn’t going to get better by our wishing it that way,” Bradley says. “It isn’t going to get better by waiting for somebody else to do it.”


In July 1992, the Times hired 50 area youths for its Summer Jobs Training Program. The eight-week program provides paid internships for high-potential/low-opportunity students. The 16-to 22-year-old interns come from ethnically diverse backgrounds and have varied levels of education. To meet their needs, the internship program is divided into four parts:


  • Work experience
  • Classroom training
  • Job-skill and computer literacy
  • A mentorship program.

Training is what makes this internship program work. Because the Times isn’t planning to recruit these interns for full-time jobs, the primary objective is to prepare them for future employment in any corporation. To best accomplish this goal, the program provides interns with 75% work experience and 25% life-skills training. Jeanne Hartley, manager of training and development at the Times, says that part of Falk’s plan was to provide the interns with more than work experience. “He wanted to help people get their next job,” she says. “He said, ‘I don’t want to throw pennies; I want to throw a lifesaver.’ “


Internal and external partnerships strengthen the program.
Before bringing in the interns, the Times had to prepare for them. Because summer was approaching quickly, the newspaper had only 30 days to develop the entire program, select the interns and put them to work.


The four department heads called on by Falk became the steering committee. This committee established the internship’s general guidelines, deciding the number of interns the company would hire, how long they would work and the type of training they would receive. That accomplished, the committee members negotiated with senior management for financial resources. (The first year, the program was funded by designated money from management. In 1993, the individual departments paid for the program from their operating budgets.)


From these first stages, the steering committee was concerned about attaining the necessary companywide commitment to the program. Marilyn Lee, vice president of employee relations at the Times, says that having Falk’s backing made the buy-in process easier. “A company needs a senior manager who’s really behind the program. This gives it the mandate to move forward on a new idea,” she says.


To gain support from department heads, Lee and the members of the committee explained the internship program to them in detail. Although such departments as editorial and advertising had hired a few college students as interns in the past, other departments had no experience with interns. “We tried to talk to department heads individually who hadn’t had summer interns in the past. Some said, ‘We don’t have the money to do this,’ ” Lee says. She worked with the committee to explain how the program would benefit these departments. For example, Lee reminded them that, once trained, the interns could contribute significantly to alleviating the departments’ work loads.


Hartley says that this type of over-communication was one of the committee’s goals. Employees at all levels were made aware of the program. To ensure that employees were informed adequately about the internship’s progress, the committee sent dozens of notes to everyone involved. This helped maintain a high level of trust throughout the organization and gave the program the commitment that it needed to assure that employees would support it (see “How HR Attained Company Buy-in for Its Internship Program”).


In addition to securing this commitment, the steering committee established several external partnerships. These partners provided expertise in areas in which the committee didn’t have sufficient background. They played an important role in making the internship program a success.


For example, Hartley says that the committee anticipated some ethnic conflict among the students because of the unrest in Los Angeles. They wanted help preparing the Times for this possible friction. “I’m very aware that we’re in the newspaper business, and our managers and supervisors are in the newspaper business,” Hartley says. “We aren’t social workers. We didn’t want to take away from the managers’ and supervisors’ everyday jobs by making them become social workers.” Their solution was an external partnership: They hired three senior interns from area universities to run the social aspects of the program. Two of them were doing doctoral studies in psychology; the third was working on a master’s degree in social work. These senior interns were influential in such areas as interviewing, hiring and diversity training.


Next, the Times established partnerships with volunteer agencies that represented the ethnic groups most seriously affected by the unrest. The Times asked for their help in selecting interns for the program. The agencies involved were:


  • Mexican-American Opportunities Foundation
  • Stuart M. Ketchum Downtown YMCA
  • Urban League
  • Chinatown Service Center
  • Korean Youth Center.

To find the most-qualified youth, the Times asked these agencies to screen applicants from their areas. One consideration in selecting the interns was how the riots had affected each individual. “We had people who suffered directly from the April crisis,” Bradley says. “One I remember very distinctly was a young woman whose brother was killed.” The agencies also recommended students based on such criteria as community leadership, financial need and limited previous opportunity.


The prescreening process worked. “All of the young people were involved in programs that those agencies were providing in their communities,” says Barbara Neder, who is involved in the internship program as the administrator of the Times Learning Center. “This wasn’t somebody just walking in off the street saying, ‘Give me a job.’ We really had the cream of the crop.”


To complete the selection process, each student took drug-and alcohol-screening tests—a standard procedure for prospective employees to the Times. Denise Burt, one of the senior interns, also interviewed each applicant. During the interview, Burt gave the students a list of job descriptions and asked them which sounded the most interesting and why. Using this information, the senior interns placed the students in jobs at both the Olympic Plant, which is the printing and mailing center for the newspaper, and Times Mirror Square, where the paper is produced. “We did the placement according to the students’ interests and what was available at the Times. We tried to match them up with the type of work they preferred,” Burt says.


Valuable on-the-job training makes students’ futures brighter.
The Times placed interns in virtually every area of the newspaper, from circulation to the supply room. The job skills that they acquired varied greatly from department to department. Some students loaded trucks with newspapers or performed other manual labor. Others primarily did office work: data entry, customer service or filing.


Regardless of where the students worked, someone had to teach them the skills necessary for the job. The interns learned these skills from supervisors assigned to them from within their specific departments. For many of the supervisors, this was a new—and challenging—experience. “This was really new for the organization,” Neder says. “We had a lot of anxiety among the employees: ‘What kind of work can we give them? This is an alien—it’s a teenager.’ “


The Times tried to calm these fears by offering a half-day training session for all supervisors who would be managing interns. In the session, the training staff concentrated on such issues as diversity, how to discipline, what to expect from the interns and how to communicate best with them. This was difficult in 1992, because the program was new. However, as the company has become familiar with running the internship program, training has become more complete. “Last year, it was more of a briefing, because we didn’t know what to expect,” says Burt, who now is program coordinator. “This year, it was much more interactive. We brought in supervisors from last year, who spoke about their experiences.”


Ken Jolly, mailroom supervisor at the Times, was in charge of six interns last year. This summer, he supervised 10. He says that the first year would have been much more difficult without the training staff’s assistance. “There was constant support from the staff who were overseeing the interns. They were always in contact with us, trying to work through any details or questions we had,” Jolly says.


Despite this guidance, Jolly says that managing interns differed from managing full-time, adult employees. SomeTimes when he asked the interns to do a job, he says that they responded ” ‘My mom won’t let me do this,’ or ‘My dad won’t let me do this.’ “


In one case, parental intervention was carried to an extreme. Jolly says that one student’s father pulled his son out of the internship program because he wasn’t living up to expectations at home. The intern left the Times two weeks before the program ended. Jolly says he was disappointed, because the student was working hard at the Times and was a consistent employee. “For me, it was a little frustrating to see that happen,” he says. “I didn’t know what my position was as far as talking to the father and saying, ‘Hey, this kid’s really doing well.’ I tried to an extent, but the intern’s a minor and I really had no choice in the matter.”


Other than this problem, Jolly says that his apprehensions were unfounded. The interns worked well together and acquired skills that he believes will help them attain future employment.


Classes offer interns training in life skills.
Not all of what the interns learn is job-related. One-fourth of the time, the interns receive other types of training through special life-skills classes, the Learning Center and a mentorship system.


When implementing the internship program, Bradley worked with the senior interns to develop eight special classes. Because many of the students had never been part of a company before, these classes covered general employment issues and life skills. The workshops were four hours long, once a week.


When planning the classes, Bradley and the senior interns looked at the big picture. One of the issues that they focused on was diversity. Because they wanted to improve communication among the students from various backgrounds, the staff divided the interns into groups that were diverse in terms of gender and race. The interns then attended the classes in these groups of 12 or 13 people each. “They always were interacting with people who were different from themselves,” Bradley says.


To provide the interns with the best instruction possible, the Times staff formed an external partnership with the Los Angeles chapter of the American Society of Training and Development. Through this organization, the Times contacted professional trainers in the area, who taught one class each. The eight sessions offered in 1992 were:


  1. Work Ethic and Employment Expectations: This class explained basic work expectations and helped the interns feel comfortable about working at the Times (see “The Times Teaches Interns Basic Work Behavior”).

  2. Life Skills with the Newspaper: To help the interns become familiar with the Times, the company showed them how to make better use of the paper. The students received such tips as where to find the most information in an article and how to use the classifieds to buy a car.

  3. Cultural Diversity Awareness: In this session, the interns discussed differences between the genders and among ethnic groups with a leading diversity trainer from the Los Angeles area.

  4. Times’ Employee Panel and Discussion: For this class, Times employees from various ethnic backgrounds talked about their career paths.

  5. Career Development and Interviewing Skills: This class offered the interns valuable advice and information on interviewing, resume writing and job hunting.

  6. Stress Management and Financial Planning: This session discussed ways to manage stress. Also, the class covered such practical financial information as how to balance a checkbook. This was particularly important because the interns were being paid $7.50 an hour, more than many of their parents were earning.

  7. Diversity in the Workplace: Because the Times considered diversity to be especially important, the company offered a second class on the topic. In this session, the discussion concentrated on workplace issues.

  8. Grand Finale Celebration with Guest Speakers: In recognition of completing the program, the final session was a party for the interns and a presentation by professional trainers from the Los Angeles area.

Interns receive necessary individual attention.
In addition to the classes, the senior interns schedule at least two individual career-counseling sessions for each of the program participants. In these sessions, the senior interns talk with the students about possible career interests and discuss the educational requirements for each desired job. This one-on-one attention helps the interns better understand their options. For this reason, Bradley says that this was one of the most successful parts of the program in 1992.


A similar facet of the internships is the mentorship program. To give the students individual role models in the work environment, the Times asks employees to volunteer to be mentors. To prepare the employees for their new leadership roles, the Times holds an initial training class. Like the supervisors’ training session, this class has improved over time. One addition this summer was a formal breakfast for all of the interns and their mentors.


The first summer, the mentors basically were on their own to make the relationship a strong one, according to Mitzi Yamaguchi, an employee in creative services. Yamaguchi says that she had a positive experience with her mentee. “We went to lunch and took walks,” she says. “SomeTimes the people in our department got together and walked around the building for exercise. I invited her to come along.” Although some of the mentors and interns had a more professional relationship, Yamaguchi says that she gave her mentee both career and personal advice. “I was more than her mentor,” she says. “We were friends.” Yamaguchi says that the mentorship program is most successful when both the intern and employee make a genuine effort to communicate.


The final training aspect of the internship program is in the Learning Center, which Hartley calls “the jewel of the program.” The center, which houses 13 IBM-compatible computers, is available for use by the interns, as well as by full-time employees at the Times and people from the community. Interns use the lab during work hours; they talk to their supervisors to decide when, and how frequently, they want and need this training.


The primary function of the lab is to help interns become computer literate, or improve the skills they already possess. The computer programs that interns used most during the first summer were tutorials in typing, word processing and computer programming. “Many of the students who were college-bound immediately recognized the importance of typing,” Neder says. One student particularly benefited. He had taken programming classes in high school and wanted to continue studying computer programming in college. There was one problem—he didn’t know how to type. That student went to the center two or three Times a week to practice touch-typing.


There are other options available at the Learning Center. Some students use the computers to work on academic skills, such as English or math, that can help them pass the GED or finish high school. The Learning Center also assists interns who need job-skills training. Neder says that the interns came to her with their individual work concerns. “Maybe it was, ‘Gee, I have to cover the reception desk at lunch and answer phone calls and take messages. I’m a little nervous about doing that. I’ve never taken phone messages. What do I do?’ ” Neder could help—the Learning Center has videos on telephone etiquette.


Another common fear involved filing. “Interns said to me, ‘I have to file. How do you know where they go? I know my ABCs, but this is different,’ ” Neder says. She set up sample files and helped the worried interns practice their filing skills. Teaching basics such as these helps the students be more efficient on the job.


The Learning Center helps improve the internship program, too. In an initial two-hour visit of the center, each intern takes a skill-level assessment. This test helps the center’s staff know what programs the students will be using and how often they will come to the lab. It also helps the Times know what to expect from the group. This was especially true during the first summer, when employees were nervous about supervising teenagers. “When the supervisors called and wanted some confirmation, we could say, ‘It’s going to be OK. They’re pretty smart kids. They’ll be able to do it.’ That helped calm some of the anxieties the supervisors were feeling,” Neder says.


The computer lab also provides the interns with an added benefit. Time in the center gives the students a chance to get to know each other in a relaxed environment. Neder sees this as one of the best aspects of the computer lab. In 1992, six of the interns came to the center in the morning, twice a week, and called themselves The Breakfast Club. Neder says that they spent a lot of time talking, and that the computer lab became a type of peer-counseling center. “It wasn’t just being social or goofing off,” she explains. “It was really needed.”


The Times plans to continue—and expand—the internship program.
Although the initial implementation is out of the way, the Times continues to change and improve the internship program. For 1993, the newspaper changed the program’s name to the Youth Jobs Training Program. The company plans to expand the program and offer a winter session. Although the training staff doesn’t have any specifics on the expansion yet, Hartley says that the plans are definite. She says the winter session will have a double benefit: It will offer more employment opportunities to area youth and will provide the newspaper vacation coverage in the winter, a season when the Times is often short-staffed. “We think that it’ll be helpful for the Times, too,” Hartley says.


In the meantime, small changes are being made each year. In 1993, the Times increased the number of interns hired from 50 to 75. The company also added new program locations—placing interns in both its Orange County and San Fernando Valley facilities. Each facility now has a miniature Learning Center of its own for use by both full-time employees and interns.


“Some of the interns already ahve used their newly acquired skills to find jobs. One intern was hired by a law firm to fill a clerical position.”


The staff also shortened the training classes from four hours to three hours, after realizing that the students have shorter attention spans than adults. In addition, the staff increased the class size to about 25 students each. This was a change made, in part, because of intern feedback. The interns said that they wanted more opportunites to get to know the others in the program. By making this change, the Times could provide a better overall summer for the students. “They wanted to get a sense of wholeness, of ‘us, the interns,’ ” Neder says. “We took a look at that.”


In another attempt to make the interns a tighter-knit group, the Times initiated an orientation day in the Malibu Hills. The goals of this outing were simple. “We wanted them to bond with each other, gain self-esteem and feel comfortable talking with other people,” Bradley says. To accomplish this, the company bused the interns to the retreat atmosphere on the third day of their internships. There, the students played games designed to improve teamwork and cooperation. One of the games was a modified version of volleyball with new rules that required all members of the team to work together in order to win. This was successful in bringing the interns together and preparing them for the summer.


As the Times prepares for the third year of the Youth Jobs Training Program, positive results already are evident. Jolly says that he could see changes during the first eight weeks. “You could actually see the development taking place in some of these kids,” he says. “They really grasped the skills being taught in the program. It was like having a six-or eight-week summer tutor who was there helping them out constantly.”


Some of the interns already have used their newly acquired skills to find jobs. One such intern was hired by a law firm to fill a clerical position. “The young woman said she never would have had the confidence to apply without the Times experience,” Neder says.


The students aren’t the only ones who benefit. Jolly says that supervising the interns has helped him understand the city’s racial struggles. “I think that the tensions that take place in Los Angeles aren’t centered around our youth. They want to make a positive impact. It’s their environments and outside forces that work against them,” he says. Jolly says that he also can see how the Times internships help the students. “I think that these types of programs give these kids an option or a different way of looking at the future,” he adds.


The program also contributes to the improvement of the newspaper. In one way, the internship program serves as a natural form of recruitment. Lee says that when the interns return to college or high school in the fall, they talk to fellow students about their summer experience. This helps spread the word to other graduates that the Times offers a multitude of job opportunities. “It isn’t always understood what kinds of jobs are available here,” Lee says. “People think of reporting, or see a Times truck and think that maybe it’s people who deliver the newspaper. There’s a whole array of jobs here that are interesting and well-paying. By getting more young people inside the newspaper for work experience, they’ll be more knowledgeable and talk to friends. That way, we’ll get the best applicants.”


In addition, the internship program helps the newspaper serve as a role model for other businesses in Los Angeles. “If every big company here did this, you would see thousands and thousands of students being employed in these special programs,” Bradley says. This type of community involvement makes the city a better place, potentially creating a better future for the newspaper.


Meanwhile, the Times is becoming a stronger company. Bradley says that he noticed a difference in the atmosphere at the newspaper after the first group of interns. “Our supervisors became better managers and our mentors became better workers,” he says. “Overall, the Times became a better company.”


Personnel Journal, September 1993, Vol. 72, No.9, pp. 120-129.


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Recognition Can Bolster Quality Efforts

The quality-improvement process at Appleton Papers in West Carrollton, Ohio, began in 1988. Three years into the process, the effort had created no discernible improvements in customer satisfaction, morale, safety records or profitability.


“Quality had become more of a program than a process,” explains Wayne Reveal, the organization’s manager of organizational services. Why? “Because there was an obvious lack of recognition of employee behavior.”


Among other things, Reveal says, quality is an attempt to create or change behavior sets, yet Appleton workers who performed good work went unrecognized, and employees who performed poorly escaped disciplinary action.


In an attempt to reshape and reinforce its quality effort, Appleton implemented a comprehensive worker-recognition process in 1991. Today, each line manager receives a recognition budget from which he or she can buy gifts to reward employees for good behaviors.


The company’s basic rule is that recognition gifts must be personal in nature and something that the employees wouldn’t buy for themselves. The organization encourages managers to use the gifts as surprise rewards for good work, as well as incentives for special achievement.


Recently, for example, a department manager wanted to offer an incentive for several of the employees on his crew to acquire their GEDs. Thinking about other important aspects of high school, he realized that he couldn’t offer them the opportunity to attend the senior proms they had missed, nor could he give them an actual high-school diploma. What he could do—and did—was to give each worker who completed his or her GED successfully a class ring from the high school from which the person would have graduated.


There are no guidelines attached to the recognition process. Appleton simply encourages employees to recognize others when and where it’s appropriate.


“This isn’t a one-size-fits-all program,” Reveal says. Instead, the company encourages managers to think about what the individual being recognized would value most. Some employees favor public recognition, for example, whereas others find such accolades embarrassing.


Managers aren’t the only ones charged with the responsibility for recognizing good deeds. All employees are encouraged to give quality thank-you notes to co-workers, supervisors and subordinates in recognition of good work. Furthermore, the organization’s CEO recognizes individual and team achievement on an annual basis with lucrative, high-profile recognition items. “Employees used to think that recognition was only the job of HR,” Reveal says. “Now they realize that it’s everyone’s job.”


In addition to recognizing good deeds, Appleton’s managers must take the time to deal with inappropriate behavior as well. “We can’t just reinforce positive behavior without also letting the employees know what negative behavior looks like,” Reveal explains. This kind of response can range from brief verbal warnings to initiation of the progressive discipline process.


Before implementing the new recognition system, Appleton trained its managers in how both to give and to receive recognition effectively. “We didn’t want an employee to recognize his or her manager for a job well done and have that manager shrug off the compliment,” Reveal says. “We had to make sure that managers knew how to receive recognition gracefully as a way to reinforce the importance of it.”


Is the company’s quality effort more successful now because of its recognition process? Yes, according to Reveal.


Appleton has moved from an unfavorable to a favorable financial position, 75% less time is lost due to on-the-job accidents, and, though it’s hard to measure, morale has improved. As Reveal says, “Let’s just say it feels better around here.”


Personnel Journal, August 1993, Vol. 72, No.8, p. 48L.


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HR Is One Pillar of the Baldrige Award

The Malcolm Baldrige National Quality Award was created in 1987 to recognize companies that excel in quality management and quality achievement. The eligibility criteria are so comprehensive—the judges scrutinize nearly every management system in a company for quality—that only 17 companies out of 399 applicants have received the award so far.


Of the seven examination categories (otherwise known as the seven pillars of Baldrige) Human Resources Development and Management ranks third-highest in point value, having a total of 150 out of 1,000 possible points. Human resources clearly has a role to play in all seven categories, however. Such activities as training and development, for example, can influence such categories as Leadership, Strategic Quality Planning, and Customer Focus and Satisfaction.


Christopher Hart, president of the TQM Group in Boston, says that he believes that the Baldrige award criteria are an appropriate starting point for any organization embarking on TQM. Why? “Because the Baldrige framework was designed specifically for flexibility,” he explains, “so it could be used to assess the quality efforts and systems of any type or size firm.”


When evaluating the HR function, Baldrige judges examine how companies enable the work force to develop to its full potential. In doing so, they ask companies to describe their approaches and provide proof of positive results in the following categories:


  1. HR Planning and Management.
    How are the firms’ overall HR plans and practices integrated with their overall performance goals, and how does HR address the needs and development of the entire work force?

  2. Employee Involvement.
    What are the means available for workers to contribute effectively to meeting the companies’ performance goals and plans?

  3. Employee Education and Training.
    How do organizations determine what kind of education and training employees need, and how does the training support organization plans and employee growth?

  4. Employee Performance and Recognition.
    How do the companies’ employee-performance, recognition, promotion, compensation, reward and feedback approaches support the attainment of the companies’ quality goals?

  5. Employee Well-being and Satisfaction.
    How do the companies maintain a work environment conducive to the well-being and growth of all workers?

In conducting an independent assessment of HR using the Baldrige criteria, Hart recommends that professionals adopt the perspective that HR is an independent contractor serving the organization. “This will help you come up with a more objective answer to the question, ‘How well are we really doing in satisfying our customers?'” Hart explains.


The award’s emphasis on HR activities not only clarifies the role of HR in quality efforts. According to Hart, it also can help professionals make the case for a better allocation of corporate resources to the HR function.


Personnel Journal, August 1993, Vol. 72, No.8, p. 48J.


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Labor Unions Become Business Partners

Protestants have made friends with the Catholics in Northern Ireland. Palestinians and Israelis are rebuilding the Middle East. Bosnians, Croats and Serbs are reuniting Yugoslavia in peace. Unions and management are working together—as business partners—for the benefit of both groups.


These scenarios might seem pretty far-fetched. It’s difficult to imagine any of these traditional adversaries burying the hatchet—other than in each other—and working together for the common good.


Unions and management haven’t often tried to kill each other, as is the case with the other adversaries, but they often have been pulling in opposite directions, and there have been some hard feelings. Now some unions and the employers that they represent are learning to work together. In a highly competitive business environment, in which most firms are struggling to stay alive, the adversarial approach is counterproductive. “It isn’t what employees want, and it isn’t what drives success,” explains William K. Ketchum, AT&T’s vice president for labor relations.


On June 21, the cooperative joint efforts of General Motors and the United Auto Workers union paid off for both parties. The company announced that it will shift production of some of its automobiles from a plant in Mexico to one in Lansing, Michigan, creating at least 800 new jobs at the U.S. plant. This action resulted from a complete turnaround in union-management relations within the past year, according to UAW Vice President Stephen Yokich.


This isn’t an isolated incident, however. For many years, unions have supported—in one way or another—the industries whose employees they serve by providing day care, training and other services. Today, that service is taking on a new dimension. Today, the union is becoming a business partner.


One of the earliest cooperative efforts grew out of the Laborers’ International Union of North America (LIUNA) and the Associated General Contractors in 1969. This effort, called the Laborers-AGC Education and Training Fund, oversees the training that members of the union receive. The fund has provided safety training, workplace literacy and ESL training. It also recently worked with the EPA to combine training in the cleanup of hazardous-waste sites with the actual cleanup of public waste sites, including removing lead-based paint from publicly owned housing units and bridges, according to Arthur A. Coia, general president of LIUNA.


In 1987, the Oil, Chemical and Atomic Workers Union (OCAW) and the International Brotherhood of Firemen and Oilers worked with Rohm & Haas Kentucky Inc. in Louisville, Kentucky, to assist with the design of a new plant, by preventing design flaws and expensive retrofitting. The Design Committee grew out of a long-standing attitude of cooperation between the unions and management.


Stamford, Connecticut-based Xerox Corp. was struggling during the early ’80s, but has made a significant comeback, thanks in large part to union-management cooperation initiatives. Xerox became the first major U.S. firm to win back market share from the Japanese without government intervention, at the same time as its return on assets increased from 8% to 14.7%, according to Joe Laymon, director of corporate industrial relations in Rochester, New York. Cooperative efforts at Xerox have included an agreement with the Amalgamated Clothing and Textile Workers’ Union (ACTWU) that allows the union to bid on any work that Xerox wants to contract out, a leaner-but-friendlier contract-negotiation process and a new, jointly developed factory design, called a focus factory, which allows quick accommodation to changes in product demand.


Not to be outdone, AT&T and its unions—The Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW)—are refocusing the entire organization, using a framework called the Workplace of the Future, to make the unions and the company true partners in every aspect of the business. Company and union officials say that they expect to be able to work together to redesign the work environment and help AT&T meet the demands of the global marketplace, while giving employees a greater voice in decisions affecting their jobs and working conditions.


Coia says that the old us-versus-them dynamics have broken down. For years, the fortunes of union contractors and union workers have receded because of a focused challenge from the nonunion sectors. American companies and American workers have been battered economically by global competitors. The fortunes of both unions and management have taken a nosedive in direct relation to the growing challenge from these competitors. “The most-progressive leaders from labor and management have joined forces to compete against common enemies,” Coia explains. “In the minds of these new leaders, the old us meant unions and workers; today it means union labor and management working together. The old them meant management; today it’s our non-union competitors and international challengers who would take our jobs and underbid our corporate employers,” he says.


Martin R. Smith, president and CEO of Management Sciences International Inc. in Lawrenceville, Georgia, and author of Contrarian Management (Amacom, 1992), agrees. “The way it used to be done, the company would call the labor lawyer in, and the union president would get together with union people and plot and scheme,” Smith says. “Then they’d sit across the table from each other and try to get as much as they could. Those days are gone—or the company’s gone, and all the jobs with it,” he says.


The shift away from top-down management has helped move cooperative efforts forward because the unions often have more credibility with their members than management has. “If you fully integrate the union into these efforts, then you’re going to get a lot more cooperation,” Smith says.


Coia predicts that we’ll see an increased use of joint committees to solve problems on the job. These committees will help break down the old distinctions between union and management thinking. “The use of joint committees will have the effect of breaking down the old ways of viewing each other’s spheres of responsibility,” he says. For example, he points out that not long ago, the issue of competitiveness was viewed by management as within its exclusive decision-making sphere. “Today, however, our nation’s most innovative companies recognize that employees—and unions as their representatives—possess a lot of insight into how a company can compete better,” he says.


The tougher economic climate today is influencing similar changes in the ways in which unions and management in Canada operate as well. Gary Johncox, VP of HR for MacMillan Bloedel Limited in Vancouver, says, “Economic crisis seems required, and the more doctrine-rigid the union is, the greater the crisis must be to encourage change.”


To make this new partnership work will require all parties to change, according to Robert Reich, U.S. Secretary of Labor. “We must make change our ally and use it to create a just economy and a just society,” he says.


Change is difficult to accept.
Getting people to accept change is one of the greatest difficulties that unions and managers face when they begin cooperative efforts. “It’s very difficult to go from a pyramid, from a high-volume, static organization, to a dynamic, high-value organization,” Reich says. “It’s hard because it’s so threatening to everybody. It threatened the people on the top, because, remember, they got there because they were the font of all wisdom, daring and insight, and now, suddenly, they have to give up control. They have to acknowledge that they are no longer necessarily the fonts of all wisdom and daring and insight. It’s threatening to middle managers because they have to give up being in the control business. They have to be in the business of facilitating groups of people, making sure that they learn together and that they’re productive. They’re in the control-implementation business. It’s threatening for the people on the front line, because it means more responsibility,” he adds.


Coia agrees. “Anytime you try something new, there’s going to be some resistance to it,” he says. “In the labor movement as a whole, real schisms have developed between so-called hard-line unionists-who believe that the movement towards greater cooperation between labor and management isn’t good—and others who believe that the challenges of the 1990s are different from those faced in the 1930s and ’40s, and require a different approach,” he says, adding that most members of the Laborers’ include themselves in the latter camp.


Smith also points to change as a major obstacle to union-management cooperation. “Age isn’t a factor,” he says. “Young people can have closed minds, and 50- to 60-year-olds can be receptive.”


Another hurdle for union-management cooperation is the history of mistrust that grows out of the old adversarial relationship. “Trust is a fragile thing,” says Walter Trosin, managing consultant specializing in HR at Johnson Smith & Knisely Accord in New York City. “It can be destroyed more easily than it can be built.”


Before the new alliance could be formed between the Laborers’ International Union and the contractors, both sides had to summon the courage to think differently about each other, according to Coia. “To some extent, both sides had to take a leap of faith of sorts, to get the process rolling,” he says, although even he admits to “cautious optimism” during the early stages of any labor-management effort.


Coia says that the leaders of his union and the leaders representing the union contractors always had seen each other only from the opposite side of the table. Coia reports that they’re finding ways to work together. “Now we’re seated on the same side of the table, working to develop mutual solutions to our mutual problems,” he says. “The key to finding solutions to these problems is flexibility and innovation-from both sides, but you’ll never reach this point unless the trust element is firmly cemented into the process.”


The union can become a part-time business partner.
Every union-management cooperative effort is unique. Some programs address one-time concerns, but grow out of and leave behind a spirit of cooperation that affects other areas. The design committee at Rohm & Haas Kentucky Inc. is one example. Management at the 800-employee firm decided in 1987 to invest in a complex, computer-driven system in its polymer manufacturing unit. The company planned to recruit operators for the new facility largely from its plant already in operation at the same site. Rohm & Haas assembled the design committee, comprising one first-line supervisor, four operators representing one union, a mechanic who represented another union, a night supervisor, a facilitator, an internal consultant and an external consultant. The design committee went to Rohm & Haas headquarters and looked at the blueprints and the model of the new plant, and made changes before the firm broke ground for the new building. “We made tons of changes,” says Tom Connelly, training coordinator for Rohm & Haas Kentucky. All the changes involved design flaws or equipment that the committee knew wouldn’t work in the field, including everything from moving the stairs or putting in a door where there wasn’t one to replacing one pump with another that would work better in Kentucky’s climate. Connelly doesn’t know how much money the committee saved the company, but he’s convinced that the figure is high, when you consider the expense of tearing out walls or the reduced productivity that would have resulted from the flaws.


“The adversarial approach is counterproductive. It isn’t what the employees want, and it isn’t what drives success.”
William K. Ketchum,
AT&T


There were recruitment benefits for the new operation as well. Because committee members worked among the potential recruits for the new plant, it wasn’t difficult to get people to volunteer. They knew that the design of the new plant would address their needs because their co-workers had helped design it. They also were able to talk with committee members about the operation of the new plant, which they did in a series of meetings.


The design committee’s 80-page document covering the committee’s mission, functions, restructuring methods and cost savings is used as a model for other units at Rohm & Haas. The same committee approach helped during two plant-redesign efforts, although the results weren’t as dramatic as in the new-plant design.


Cooperative efforts can turn a business around.
Xerox Corp. turned to its unions for help when the company ran into difficulty in the early ’80s. “The competition was selling the product at the same price that it was costing us to make it. That was one reason that we lost market share,” Laymon says.


One area of cooperation at Xerox developed as a response to management’s realization that it could save money by moving production of the wire harness—the configuration of strands of wires that delivers the current throughout the copier—to the company’s plant near Mexico City. This would mean eliminating 182 jobs at its Webster, New York, plant. The company had just signed an agreement with the ACTWU that attempted to prevent layoffs by allowing a buffer of temporary workers of as much as 10% of the permanent work force. The union urged management to give workers a chance to bring costs down at the Webster plant to make it competitive with the Mexico operation. A study team found $2.9 million in potential savings, which management accepted as close enough to the $3 million that it said that it needed to stay in the U.S.


The same situation arose a few years later. This time, the study team was unable to get as close to the figure needed. The team pointed out, however, that it could reduce the quality and attain sufficient cost reductions. Management recognized that the quality of the harnesses produced in Mexico was not as high. In fact, it had moved some operations back to the U.S. because of quality problems in Mexico. In the end, managers decided that the higher quality, along with reduced shipping costs, was enough to make the difference. The jobs stayed in the U.S.—for now.


In 1989, Xerox and the union formed A-Delta-T teams to study the actual performance of each work process, in an attempt to identify the most cost-effective way to perform each job. The study teams are trying to reduce inventories and streamline production for a Japanese-style just-in-time manufacturing process. Managers at Xerox hope to improve the way in which the firm produces the more than 3,000 components that go into 200 types of wire harnesses for Xerox copy machines.


Perhaps the most unusual union-management cooperative effort is the sub-contracting provision that provides that if the work isn’t performed competitively in terms of cost, then the organization reserves the right to subcontract or outsource that work, according to Laymon, but only after a joint company-union team has had an opportunity to bring the cost of that business to within acceptable norms. “We provide for experts, finance information, handling and engineering to do the analysis for the team,” Laymon explains. If their recommendation doesn’t bring the cost down, Xerox reserves the right to ship the work out.


All these efforts are paying off. “We’ve had quality improvement, market-share gains and cost reductions,” Laymon says. “The numbers have been dramatic. We’ve had a tenfold improvement, measured by defects per 100 machines—from 60/100 to 6/100,” he says. “We’ve turned the corner on the loss of market share. Now we’re gaining in market share. The cost of building product X is competitive with what others can build it for, and we think we’ve built a better one.”


AT&T seeks the workplace of the future. Perhaps the most ambitious attempt at bringing unions in as business partners is the Workplace of the Future effort by AT&T, the CWA and the IBEW. The Workplace of the Future (WPOF) was rolled out at two conferences, one on March 8 with the CWA in Randolph, New Jersey, and the other on June 16 in Chicago with the IBEW. Keynote speakers for the two conferences were Secretary of Labor Robert Reich and Bernard E. DeLury, director of the Federal Mediation and Conciliation Service, respectively. Both men are long-time proponents of union-management cooperation.


The WPOF grew out of the problems resulting from divestiture in 1984, after which AT&T had to transform itself from a domestic monopoly into a global company of communications products and services in highly competitive markets. The resulting climate created a strain on union-management relations. The WPOF resulted from last year’s bargaining agreement between AT&T and the two unions, during which all parties realized that the fast-paced and dramatic change in the marketplace, technology and competition required cooperation and collaboration, instead of adversarial labor-management relationships, for AT&T to survive and for workers to have job satisfaction. Window-dressing wouldn’t do; the changes had to be sweeping and permeate the entire organization.


Ketchum says that WPOF isn’t a program; it’s a framework for change. “I’ve been a line manager for the bulk of my career. We tried to implement self-management teams and found that a management style that supports the concepts has to have enough of a support system to allow it to be systemic, rather than just to rely on leaders,” he explains. Management and the unions wanted a framework that wouldn’t become too bureaucratic or burdensome, but would be supportive and help drive some of these systems, and, at the same time, turn the relationship into one that was more cooperative, more information-sharing and less adversarial and restrictive in nature, according to Ketchum.


The new framework has four levels, which differ by focus and time frame:


  1. The Workplace Models develop new ways to manage change. They encourage union officers and AT&T managers to identify and develop new approaches to managing change in the local workplace. Their focus will be on quality, customer satisfaction, quality of work life and competitiveness. They may involve self-managed or self-directed teams, continuous quality-improvement efforts, flexible work environments, union involvement in the development of new systems of work organizations and other initiatives.

  2. The Business-unit/Division Planning Councils involve unions in key business-unit decisions, such as the assessment of market conditions, the deployment of new technology and future work-force requirements. They influence decisions that determine production technology, work organization, job content and employment, worker education and so on.

  3. The Constructive Relationship Council (CRC) reviews existing and pilot programs that relate to national contract agreements. The existing Council comprises two management and two union representatives from each of the national bargaining committees. It also oversees the Workplace Models and the Business Councils.

  4. The Human Resources Board reviews AT&T’s worldwide HR issues and provides input to the firm’s senior management. On the board are three AT&T executives, two union officials and two outside HR experts, agreed to by both the company and the union. The Board’s mission is to address a broad range of strategic issues that affect employees. It makes recommendations directly to the executive committee of AT&T in areas that include all aspects of working conditions that impact employees, including education and training, future work force needs and benefits problems, like health care.

“It will be interesting to see how much progress has been made a year from now,” Ketchum says. “It’s a long-term effort, not something that’s the project of 1993. We see it as having a lasting effect on how we operate. I’m sure that how it’s going two years from now will impact our bargaining in 1995. It’s a crucial component in our ongoing relationship,” he says.


Union-management cooperation isn’t easy.
There are a lot of problems to overcome during implementation of any union-management cooperative effort. “When you look at improving productivity, there’s a sense of insecurity due to the potential loss of jobs or assignments,” Laymon points out. “If we improved in the way we needed to improve, there was going to be a need for fewer people, and people would need to be retrained,” he says. Laymon remembers that the cooperative approach at first had an unanticipated impact on first- and second-level managers. “We hadn’t put together an appropriate response to their needs and concerns,” he says.


Something interesting happened at Xerox that gave a new twist to the issue of job security. The efficiency that developed from the cooperative efforts did require fewer people to perform a given job than were needed before, but the expanding markets brought about by the increased market share have created more jobs than would have been given up, according to Laymon.


Choosing the people to become directly involved in the cooperative effort should be undertaken with great care, according to Trosin. “It’s important to have the right players—new players who can be positive, who can walk the fine line between representing people in the union and management,” he says. Just because there’s friction doesn’t mean that your cooperative effort isn’t working. Trosin explains that you have to recognize that there’s going to be friction, but that this friction can be a benefit to both parties if dealt with responsibly. Trosin also recommends bringing in people who aren’t encumbered by the history of union-management relationships.


“The cooperative efforts allowed Xerox to do the same job with fewer people, but it increased market share created more jobs.”
Joseph W. Laymon,
Xerox Corp.


When choosing people to participate, don’t overlook someone who has been branded as a troublemaker, Smith recommends. Sometimes people earn this kind of reputation because they have ideas and press for change. “As long as the person is bright and focused, the old ground rule of ‘This person’s a troublemaker’ doesn’t fit today. You may be missing a valuable resource,” he says. It’s important to work on the relationship with the union. This means looking at the old emotional baggage that collected because of the long-standing adversarial roles. “You have to take on the union as an equal, but in the framework of a cooperative relationship,” Smith says. “To get the most out of them that we can doesn’t work anymore.”


“Unions need to feel that the employer respects them,” says Edward Wytkind, executive director of the transportation trades department for the AFL-CIO in Washington, D.C. “Build up the union instead of tearing it down,” he says. Recognize that the union is an asset. If the union members flourish, so will the company. This approach will build trust and foster cooperation.


Coia recommends focusing on the areas of common ground that will help the company compete, rather than dwelling on the legitimate, but different, interests. Show the union how the company’s interests are also union interests. “Working together to benefit both groups, first and foremost, means recognizing how the old dynamics have changed,” Coia says.


You can’t develop a good relationship with the unions without keeping them informed. That means that information sharing must be timely. “Don’t come to the union at the eleventh hour, just as you’re about to go into bankruptcy court,” Wytkind says. By then it may be too late for the union to help.


The information sharing that’s part of cooperative efforts may require some education of union leaders, especially at first. “If the management group lets the union group become more aware of what the business is, what it’s all about and who the customers are, then the union is in a better position to work together with the company,” Connelly points out. Connelly’s local plant has been exceptional for having this kind of two-way communication.


Don’t assume that union leaders don’t know much about your business. Find out from them what they don’t know; show respect for their abilities. “The union individual is becoming more articulate, better-educated, more reasoning in terms of global competition, and has a better perception of the company as a team,” Smith says.


To have a true partnership, according to Laymon, the information sharing with the union leaders must occur on a regular basis, the way you would share information with the board of directors. “Treat them as a business partner. Assist them in the representation of their membership,” he says. He recommends giving unions free access to:


  • Research-and-development data
  • Profit data
  • Sales-revenue data
  • Employee-satisfaction data
  • Customer-satisfaction data
  • Sites on which you plan to build products and why.

Don’t overlook the informal or unintended messages that the union may be receiving from management. “Remember that actions are communications,” Trosin says.


Implementing any kind of change in the way you interact with the union requires education—both of employees on the line and managers. Show how the change benefits them. Managers may need the training more than the line employees, according to Smith.


“Management understands the team concept, but on up the line, it gets away. Problems don’t come as much from resistance as from oversight,” Connelly says. Managers are accustomed to having the control and the responsibility. “We have to let some of the marbles slip out of our hands,” he adds.


Some people will adapt to drastic changes better than others. Connelly says that it’s the most difficult for people who have spent the past 20 years working under traditional management styles. “A cooperative effort isn’t something you put in on June 1, and by June 2, people are happy with it,” he says. He says that most people want to see the results too quickly. “When you’re changing the whole philosophy of how you’re going to do business, it isn’t going to change overnight,” he says.


The National Labor Relations Board (NLRB) is looking carefully at employee committees. In a ruling in the recent DuPont case, the Chemical Workers Association complained that DuPont’s employee teams circumvented the legal bargaining process. AT&T’s contract with the union contains safeguards that should help it avoid similar problems (see “AT&T’s Agreement with the Unions Sets the Criteria for Cooperation”).


The reason that the cooperative efforts at AT&T, Xerox and Rohm & Haas aren’t likely to run into trouble with the NLRB is that these companies are involving employees by going through the unions, not around them. The government isn’t inherently opposed to union-management cooperation. In fact, Reich indicates that the Clinton administration plans to do what it can to encourage such efforts. “We’re entering an era in which economic progress depends to an unprecedented degree on collaboration in our workplaces and consensus in our politics,” he says.


Cooperative efforts simplify contract negotiations.
Coia says that the trust built up during union-management cooperation can be a benefit to both groups during contract negotiations. “On the most basic level, the success of both processes (cooperative efforts and contract negotiations) hinges on establishing a relationship based on trust. Once that bedrock has been established, each process can feed off the other,” he says.


This cooperative relationship at Rohm & Haas Kentucky has smoothed the way for collective bargaining, according to Connelly. “Because the cooperation has been what it has been in the past, contracts are smoother. The company knows what’s important to the union, and the union knows what’s important to management,” he says, adding that this understanding makes the negative aspects of negotiations much more palatable. “Both sides are honest about saying what their needs are. This approach has evolved over the years, so that the union doesn’t think that the company has a hidden agenda, and vice versa.”


Many problems that develop during collective bargaining are the result of misinformation. “If you deny me access to the books, and I see you paying shareholders thousands of dollars a year, but then you come to me and say, ‘I can’t pay you’—uh-uh,” Wytkind says. “It’s tough for me as a negotiator if you’ve been giving the shareholders a rosy picture,” he says. Once unions become business partners, the understanding of the business needs of the organization can influence collective bargaining and make union members more receptive to the firm’s needs.


Ketchum agrees that contract negotiations with a business partner will be easier. “It consumes a lot of energy to work in an adversarial role. The framework for collaboration has to make it easier to deal with times in which we have honest disagreements and conflicts,” he says.


A history of positive contract negotiations can have a positive impact on union-management cooperation as well. Coia says that this is the situation that exists between the Laborers’ and the contractors’ associations. “I believe that the collective-bargaining process has set into place the basic building blocks of trust. With trust comes the ability to work together as a team, and to plan the new strategies and programs necessary to compete and move forward,” he says.


Laymon was selected by CEO Paul Allaire and the former CEO, David Kearns, to make changes in labor relations at the organization. His efforts have led to a cooperative approach to negotiations. He trains collective-bargaining participants in negotiating techniques and limits bargaining to needs, not wants. Using this approach, the negotiations were completed in record time, and both sides were pleased with the contract.


Unions can provide a competitive advantage. A union that has a good working relationship with the organization can be an asset. A union can provide the bridge to employees that companies need to remain competitive. “In this day and age, with everybody seeing fewer high-paying jobs, less security and the company failing in the marketplace, I think that the union is better able than management to relate to its members just how important productivity and quality are,” Connelly says. Union leaders also are in a better position than rank-and-file members to see what the organization has to deal with in the marketplace. “The union can relate the information on a gut level, that this is what we have to do, and we’re all in this together. If union members see how much union management cares about these issues, then they’re more likely to care about them, too,” Connelly says.


“This plant has always had exceptional cooperation between unions and management, and I’m spoiled,” Connelly says. “We don’t have a problem talking to the union steward and asking for help. They always bend over backwards to help,” Connelly says. He adds that his plant has had fewer than three grievances within the last year. “We talk about our problems. Our productivity has gone up by leaps and bounds; it’s higher than ever,” he says.


“Trust is a fragile thing—it can be destroyed more easily than it can be built.”
Walter Trosin,
Johnson Smith & Knisely Accord


Coia maintains that union facilities are more productive than nonunion facilities. If the union and management become business partners, then that benefit is enhanced. “I believe that the numbers speak for themselves,” Coia says. “In the late 1980s, for example, a study of 1,000 manufacturing plants was conducted by the Massachusetts Institute of Technology and Carnegie-Mellon University. The study found that union facilities that utilized labor-management problem-solving committees in the 1980s were much more efficient than their nonunion counterparts,” he says.


Unions and management that already have been working as business partners can see the benefits. “This relationship of trust has created long-term stability for both organizations,” Coia says of the LIUNA and the contractors’ association. “It has allowed us to grow and expand in ways that, working alone, we might never have achieved. That’s something the nonunion side should consider as the union sector continues to make inroads into new markets,” he says. The example that Coia gives is the early recognition of the need for ridding the environment of lead-based paint products. The union is ready for the jobs. “In fact, at this time, we have more workers trained in lead abatement than there are jobs. Our relationship with our employers has enabled us to plan far ahead so that our members and our industry can be ready to capture the work when the work begins,” Coia says. This provides an obvious benefit to the contractors who expect to see the need increase dramatically, but the surplus of workers who have received this training doesn’t create a problem, because these laborers do other jobs for contractors as well.


“We continue to have jobs,” Connelly says. “We’re the leader in the marketplace and won’t maintain that position unless we work together. No amount of the best technical expertise will help if your productivity isn’t worth a crap. People down on the floor have to care as much about the product as the people sitting up in the big offices,” he says.


Participation in a union-management cooperative effort is a learning experience for the people involved. “It was a tough nine months, but I wouldn’t trade it for anything,” Connelly says.


Another reason for encouraging cooperative efforts is to ensure that the unions are positive players. Ketchum says, “The alternative is that they’ll be negative—not value-added. To get them to be value-added, you have to respect their rights as the representatives of the employees, and give them involvement that isn’t hollow.”


Effective cooperation shows up in the change in the interaction between unions and management. “I think what labor and management at Xerox have done—and what similarly positioned companies have done—is to divert resources from fighting each other to jointly fighting the competition,” Laymon says. “We’re nowhere near where we should be, but we’re going to struggle to get there,” he adds.


What’s the future for unions?
Some pundits have forecast the death of labor unions. Most predictions are, however, that the unions will remain on the scene for some time, but that their roles will evolve. Unions that are able to evolve will find survival easier. “The unions’ role of influence will change,” Laymon says.


The influence of some unions will diminish. “They’ll diminish in the private sector as large firms outsource to small firms that are difficult to organize,” Johncox says. “The growing service sector is also tough to organize because unions are amazingly clueless about how to appeal to such people. The current role model is public-sector unions, and they’re mostly far too noisy, social-issue-centered and in love with the traditional tools of trade unionism to attract service-sector people,” he adds.


When unions actively seek a partnership role, it’s easier for human resources to foster the cooperative effort. Encouraging such involvement in the absence of any interest may be more challenging and require HR to use all its educational, diplomatic and sales skills. “Unions need to find cooperative roles, and we in management need to help them do so,” Johncox says.


Personnel Journal, August 1993, Vol. 72, No. 8, pp. 54-63.


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How HR Drives TQM

There’s a story being told in quality circles. It involves an interview with an astronaut upon his return from a successful space mission. Asked what he was thinking as he sat in the capsule during the launch countdown, he replied, “I was thinking that all parts of this spacecraft had been built by the lowest bidder.” In other words, not by the best supplier but by the cheapest supplier.


Until recently, it was the American way to worry about price first and quality second—but not anymore. The pursuit of quality is almost a given in today’s marketplace. If your company isn’t pursuing technical excellence, reductions in cycle time and increased profitability, then it’s already on its way out of the game.


Product excellence is becoming vital in the era of quality. The difference between business success and failure will be the people who make up an organization. Who’s responsible for the people? Human resources, of course.


“Total-quality management is a culture change,” explains Jean Ferketish, senior consultant with Development Dimensions International in Bridgeville, Pennsylvania. “A culture change means a collective behavior change on the part of people in the organization. HR is the owner of many of the organizational systems that can create that behavior change.”


Unfortunately, HR systems often get in the way of cultural shifts. If you compensate employees only for acquiring new customers, for example, you can forget any idea of developing an orientation toward customer service. If you reward people only for individual achievement, then there’s no reason for employees to work hard at team building.


HR professionals aren’t necessarily the ones to blame when personnel practices interfere with quality. In many companies, it’s the low status of HR that’s at fault.


“What does HR have to do with turning out a quality product?” line managers ask.


“Everything,” Ferketish answers. “HR plays a significant role in supporting and driving a continuous-improvement culture. Keeping systems aligned with quality strategies will be the HR challenge of the next decade,” she says.


This doesn’t mean that HR should lead a quality effort, however. According to Ed Lawler, professor at the Center for Effective Organizations at the University of Southern California in Los Angeles, staff groups rarely lead any key strategic initiative successfully. “Line management should lead the effort,” he says, “but HR has to be involved as a partner from the beginning.”


Xerox, in the early stages of its quality effort, made a conscious decision to exclude human resources, according to Jerry Finnigan, manager of HR at the company’s plant in El Segundo, California. “In the past, HR has managed all cultural-change strategies,” he explains, “and management felt that if HR led the quality effort, it would be perceived as just another flavor of the month.” Instead, line managers and vice presidents carried the quality torch.


It wasn’t long, however, before Xerox managers realized that they had made a mistake. The company had to align its HR systems with its quality goals for the effort to be a success. Xerox invited HR to the table, and asked its HR professionals to share, among other things, their expertise in training and in the area of rewards and recognition. Today, few would deny that the function’s involvement helped Xerox win the Malcolm Baldrige National Quality Award in 1989. “HR is an integral part of making quality a reality,” Finnigan says. “Maybe we shouldn’t lead the effort, but we have to be partners early on.”


Every HR system has the potential to influence employee performance and thus the success or failure of a total-quality initiative. From hiring and compensation to training and performance management, HR must work to ensure that its systems reinforce the company’s quality message.


The first HR system to come under scrutiny in a start-up quality effort is employee communication.
The purpose of communication of a TQM program isn’t to sell quality, but to recognize quality. Unfortunately, many firms introduce TQM with a lot of hoopla, according to Tom Varian, VP of communication for Organizational Dynamics Inc. in Burlington, Massachusetts.


“The natural tendency is for managers to get the total-quality message out as quickly and forcefully as possible,” he says. It may take months or even years, however, for a company to see results from its quality efforts. “This creates a situation in which the employees perceive of the communications as a lot of commotion about nothing,” Varian explains.


Ferketish agrees. “Introducing TQM with banners, T-shirts, mugs and newsletter articles about the greatness of quality is disastrous for TQM,” she says. “All you’re doing is building a credibility gap, because no successes have been realized.”


How should a company communicate about quality? According to Varian, there are three basic principles:


  1. Recognize that communication isn’t a check-the-box exercise. Don’t publish one newsletter story each month for six months and consider that you’ve explained quality. “Understand that communication about quality is a strategic effort, as is TQM,” he says.

  2. The purpose of communication isn’t to explain quality to employees but to involve them in the effort. Newsletter articles shouldn’t discuss quality tools, for instance, without explaining why employees should be interested in those tools.

  3. Companies should take pains to shape quality messages from the receiver’s perspective. To do this, Varian recommends that communicators uncover the employees’ alarm-clock concerns. “What do your employees think about in the morning as they’re getting ready for work?” Varian asks. “They probably aren’t thinking about how to achieve technical excellence or customer satisfaction. They’re probably thinking, ‘This job is a hassle’ or ‘My boss treats me like a child.’ You must learn what employees are thinking and then connect quality to issues that really matter to them,” Varian says. (See “Communicating TQM to Small Groups Improves Understanding.”)

Volkswagen of America Inc., in Auburn Hills, Michigan, used this approach in developing its quality communication plan earlier this year. According to John Madigan, corporate communication specialist, Volkswagen surveyed its employees about their alarm-clock issues and then anonymously printed some of their responses in the internal newsletter. A typical alarm-clock comment was, “Boy, I wish I had more influence over getting things done around here.”


In the same issue, Volkswagen printed a story about how the company’s total-quality effort, Total Quality Focus (TQF), might address these concerns. For this story, Madigan asked employees who had attended TQF training to explain to their peers how TQF would affect them. These employees said such things as, “The most exciting thing about TQF is that it opens the door for each employee to make changes within his or her area of responsibility.”


Madigan believes that using comments from actual employees lends credibility to the communication process. Furthermore, by printing the real-life alarm-clock issues, employees get the impression that the company genuinely cares about what matters to them. Thanks to this communication approach, Volkswagen employees are well on their way toward understanding what TQF means and toward understanding that TQF has the potential to address some fairly prevalent concerns. According to Madigan, the company hopes that this approach eventually will help create buy-in for the quality effort.


Training should focus on building quality skills.
Many companies fall into the same trap with training that they do in communicating. These companies invest all their resources in up-front awareness building, instead of looking at what individuals need to know for quality to become a long-term reality.


“Many companies that have finite training budgets dump all that money into awareness training,” Ferketish says. “You need a touch of awareness, and you want employees to learn about quality tools, but you also need to feed them skills that they need for handling conflict, delegating for results, reaching agreement in teams, and so on. Too many companies place their training emphasis on awareness and process improvement, ignoring the behavioral skills needed to create the change that they’re looking for.” (See “Coca-Cola Learns from Its Training Mistakes.”)


Ferketish adds that managers need to understand that awareness training takes less time than skills training. They need to realize that it’s a critical first step, but one that seldom leads to the behavioral changes that are necessary to support continuous quality improvement. “I may be aware that I shouldn’t have dessert because I’m counting calories, and I may know how to put my fork down, but unless my behavior and attitude about dessert change, I’ll probably eat it anyway.”


According to a survey conducted by the Olsten Corp. in New York City, many companies are beginning to understand the importance of behavioral-skills development. Of the survey participants that provide quality training, 54% offer courses in teamwork skills, 47% provide training to enhance communication and 45% offer workshops in decision making and problem solving. Far fewer companies provide training in traditional quality tools, such as quality control, statistical-process control and benchmarking.


Tellabs, a telecommunications equipment company in Lisle, Illinois, completely revamped its training program two years ago to bring it into alignment with the company’s total-quality effort. According to Dan Stolle, Tellabs’ director of HR, the company abolished its generic technical-training curriculum in favor of courses focusing on skills that are related to the company’s critical success factors. With a skill-based pay program, technical training still is important for employees in manufacturing. Tellabs, however, felt that employees could acquire those skills just as effectively from co-workers as from trainers, according to Stolle.


By shifting the responsibility for skills certification to employees, the company was able to reallocate its training budget for courses like leadership training, team problem solving and decision making. Furthermore, the company now emphasizes real-time training, by requiring that attendees bring real issues to the training sessions. For a workshop on team problem solving, for example, employees must attend with their team members and resolve a current team problem.


“This way,” Stolle says, “training doesn’t take time away from employees’ jobs; it is their job.” Practicing new skills during training also helps employees learn the behaviors that they need for applying those skills effectively.


The other significant shift in Tellabs’ training program is that company trainers now work as internal consultants who assess training needs, and as brokers who find experts outside the company to meet those needs. Little training is done by staff trainers. “This allows us to move quickly as needs change,” Stolle explains.


For companies that are beginning to revamp their training programs as part of a quality effort, Ferketish has this last bit of advice. “Quality principles should be woven into every course offered. If a course doesn’t show employees how to live the company values or how to meet its critical success factors, you’d better get rid of it,” she says. Introducing concepts and principles of quality to employees is relatively easy. Training workers to apply the concepts and principles of quality in a way that affects the bottom line is much more difficult.


Just as training needs to reinforce the behaviors necessary for quality, so does an organization’s performance-management system.


W. Edwards Deming, the quality guru, believes that most appraisal practices focus too much attention on individual achievement, although most quality problems are the products of systems or processes. As Deming’s argument goes, focusing on individuals is counterproductive and ignores the causes of poor quality.


For this reason, many U.S. companies are considering scrapping the individual performance appraisal. But as Ferketish asks, “Is no system really the right system?” Performance appraisals may conflict with continuous-improvement cultures, but only in companies that stress quantity on the appraisal without regard for quality.


Companies should revise their performance-appraisal processes to focus on the behaviors required to achieve objectives. It isn’t enough to evaluate whether or not an employee has met a deadline or managed a budget well. HR professionals have to look at the behavior that the employee has exhibited in achieving those goals. Did he or she exert a lot of pressure on co-workers in meeting deadlines or managing budgets? If so, that person probably isn’t in concert with the company’s goals of teamwork and mutual respect.


The performance-management system is the program that needed the most radical redesign at Harris Corporation’s Electronic Systems Sector in Melbourne, Florida, as the company pursued its quality goals. Like many companies, Harris previously had used the performance-management process only to justify compensation decisions. But as the company began to focus on continuous improvement and customer satisfaction, managers realized that the appraisal process was blocking the development of these new values instead of reinforcing them.


For example, in a continuous-improvement culture, employeess must be willing to take risks, but the performance-management process rewarded workers only for doing what they were told. “This wasn’t the behavior that we were looking for, yet it was the behavior that we were reinforcing,” says Terry Geraghty, director of organizational development.


In revising its performance-management system, Harris first had to identify the skills and values that were crucial to the company’s success—customer service, teamwork and technical knowledge. Harris calls these values dimensions.


For each dimension, the company then listed the key behaviors associated with it. For instance, behaviors that would support the dimension of customer service include:


  • Encouraging customer involvement in problem solving
  • Meeting or exceeding customer requirements
  • Taking action to remedy misunderstandings or inconveniences to the customer.

Managers then rewrote each job description, incorporating the behavioral dimensions necessary for a worker to be successful in that job. All employees have access to this information so that they know what supervisors expect. “Our dimensions were guiding company decisions, but for employees to become involved, we had to explain what those dimensions meant in behavioral terms,” Geraghty says.


Today, the company evaluates employees on how well their accomplishments relate to the objectives set earlier in the year, and on how well they exhibit the behaviors listed under the dimensions for their jobs. Behaviors are assessed through a combination of the employee’s self-appraisal, peer review and manager’s observations.


According to Geraghty, Harris went this route because, to be effective, organizations should have both a management-by-objective type of system and a system of facilitating dimensions. Organizations also should integrate them. Using an MBO-type system alone results in employees’ receiving feedback on accomplishing goals and nothing on what they did to accomplish them. People who fall short of goals receive encouragement to work harder but little guidance on what to do to achieve the goals.


“How can individuals increase productivity or cut costs if they already are trying as hard as they can?” Geraghty asks. “The only way for them to improve is to change their behaviors.” To put it another way, he says, “I may want you to improve your golf score, but I can’t tell you just to go out and make it better without telling you how to make it better. I can’t coach results, which is what the old performance-management system attempted to do; I can only coach behaviors.”


The addition of behavioral dimensions to Harris’s performance appraisal greatly contributes to employee development as well. By focusing on behaviors, workers can understand more clearly what the company expects of them and how they can contribute to its overall goals. This, in turn, helps them set individual goals, and it helps the firm identify areas in which workers need training.


The quality revolution underway in the U.S. has created a corresponding revolution in compensation.
The growing popularity of skill-based pay, broadbanding and variable-pay programs is a direct result of quality-driven efforts to pay employees based on what they contribute, not on what a narrow job description says they’re supposed to contribute. If your firm is preaching quality and hasn’t changed the compensation-and-rewards systems to support those lessons, don’t be surprised if quality results are less than you’d hoped.


As Lawler writes in an article in Organizational Dynamics, “In the past, most pay systems have focused on individuals. Job descriptions spell out what an individual is to do, job-evaluation systems suggest how much the job is worth, and merit-pay increases reflect how well the individual has done the job.” Yet there’s a direct conflict between these traditional practices and TQM’s emphasis on collective responsibility.


For this reason, an overwhelming number of companies are revamping their pay systems to reward people based on how well the company or unit performs as a whole. Many consultants are calling this revolution new pay because the changes underway are destined to replace existing compensation practices. New pay, according to many pundits, isn’t a fad that will pass in time.


The new-pay view is that organizations should use all elements of compensation effectively, including salary, benefits, rewards and so on, to help form partnerships between the company and its employees. These partnerships help employees:


  • Understand the goals of the organization better
  • Know how to help accomplish those goals
  • Be involved in decisions that affect their jobs
  • Receive rewards for their contributions.

“Powerful messages are sent to employees through the rewards system,” says Jan Wilkinson, director of HR systems at Duke Power Company in Charlotte, North Carolina. “It’s a major reinforcer of company values.” For this reason, the compensation-and-reward structure was one of the first HR subsystems to undergo a major overhaul as Duke Power began its quality quest in 1989.


Many companies look at pay and benefits as individual items and adjust them to curb costs or meet workplace demands. Not Duke Power. It chose to view rewards as an interrelated system that could be reshaped continually to support the business needs of the company, Wilkinson explains. Duke Power’s first strategic decision along these lines was to package compensation and benefits together under a single reward system. “We looked at what was rewarding to employees about working here and then put all those things together under one heading,” she says.


Today, Duke Power’s reward system includes:


  • Salary banding
  • Variable compensation
  • Hourly pay for performance
  • Increased opportunities for career development
  • Individualand team-incentive plans that are tied to organization performance
  • A shift in performance-management measures and accountabilities
  • Awards for excellence
  • Flexible work-and-family benefits.

The organization is using the new reward systems to encourage customer satisfaction, cost-consciousness, innovation, risk taking, teamwork, employee involvement, information sharing and ownership. Furthermore, by linking rewards to company performance, Duke can provide greater rewards during good years and contain costs when the business isn’t as successful.


According to Wilkinson, the new integrated system sends the message to employees that there are ample recognition and rewards for those employees who help Duke Power reach its goals. It has taken extensive communication and training for employees to understand the new reward process and to realize the impact that they can have not only on the company’s bottom line, but also on their own. The communications effort has been successful, however. In a recent survey, employees gave high marks to the new system, proving that well-thought-out rewards can contribute greatly to employee satisfaction and thus to the achievement of quality goals.


Teamwork is important in TQM efforts that involve unions.
The egalitarian approach is extremely necessary in the labor-relations arena. Unfortunately, the us-versus-them mentality found in many unionized companies has the potential to undermine a total quality effort. It’s the responsibility of HR to communicate with union members and to coordinate team-building efforts.


Gary Schroer, manager of business systems for Armco Worldwide Grinding Systems in Kansas City, Missouri, describes his company’s relationship with the union as having been one of “periodic noncooperation.” That’s until the company implemented its TeamWorks program last year. Developed under the direction of the HR department, TeamWorks is an effort to give all employees an equal voice in developing ideas to make Armco more productive, more profitable and more fulfilling for its workers. It’s the latest step in a quality process that has been underway for 10 years.


With TeamWorks, employees volunteer to serve on seven-member teams that research and suggest ideas to improve quality and productivity, reduce expenses and generate additional revenue. When the company approves an idea, team members earn recognition and awards. Since the program began:


  • Close to $4 million in cost savings have been realized through team ideas
  • Nearly 500 ideas have been submitted for consideration from 80 employee teams
  • Grievances have decreased by approximately 40%.

Until the company developed TeamWorks, Schroer says that employees spent more time thinking about “how the company is going to get to me next,” than they did about working on solutions to real business problems. By developing employee teams, encouraging open discussion and giving employees financial rewards for savings generated from their ideas, Armco has been able to turn this situation around.


“I’m uncomfortable with how simple this all sounds,” Schroer adds, “but it really comes down to talking with the union about what’s important. In our case, HR was the driver in generating management understanding of the need for TeamWorks and employee involvement.” Before TeamWorks, managers mandated all programs and workplace changes. Today, employees do.


An important part of TQM is hiring the right employees.
Although the primary concern of HR in a quality initiative obviously is the existing work force, HR professionals shouldn’t give short shrift to employee candidates and the hiring process. One of the first steps in delivering a quality customer-service orientation is selecting and developing the right people to provide that service.


The Ritz-Carlton Hotel Co., based in Atlanta, won the Baldrige Award in 1992. According to Patrick Mene, the company’s corporate director of quality, the company’s selection process especially impressed the Baldrige examiners. “Selecting people who are capable of serving others in a warm, genuine manner is critical,” explains Mene. For this reason, Ritz-Carlton focuses on finding people who are ladies and gentlemen.


But the hotel chain doesn’t rely on an interviewer’s opinion of how a lady or gentleman should act—far from it. Working with Talent+, a selection-and-management consulting company in Lincoln, Nebraska, Ritz-Carlton conducted research of current employees to learn what personal characteristics were likely to lead to success in the organization. Once the company identified the characteristics, it developed an applicant interview to solicit responses that would reveal if a candidate possessed these characteristics. All questions are job-related.


The Ritz-Carlton calls this approach its Quality Selection Process and claims that it has contributed significantly to the company’s 47% reduction in turnover and 27% decrease in customer complaints during the last three years.


Harris Electronic Systems Sector has taken a similar approach, applying the behaviors identified for its performance appraisal to a targeted-selection process. “Using dimensions to interview candidates will help managers identify the persons who exhibit the behaviors known to be important for the particular job. This will eliminate much of the guesswork and bias involved in the hiring process,” Geraghty says.


Because employee characteristics that spell success at one company may doom another company to failure, it’s important that HR professionals research the success characteristics of their own employees. This requires organizations to commit more resources to the selection process, and to structure the process so that it includes a realistic preview of expected behaviors and encourages self-selection whenever possible.


Perhaps the best quality principle for human resources professionals to keep in mind is the principle of integration. All HR systems must be integrated with and reflect the values and vision of the organization for quality to become a reality. In addition, the human resources function must be integrated. Don’t use one set of criteria for appraising performance on the job and a different set for selecting and hiring employees. Don’t train employees to behave in one way and then compensate them for behaving in another.


“Historians say that battles are won and lost on logistical support, not on the more glamorous parts of the effort,” Ferketish says. “The TQM battle will be won or lost on systems alignment. It may not be glamorous, but it’s a critical part of the emerging role of the HR function.”


HR is important to nurturing change, but it can’t lead the effort. “HR must have expertise in organizational change to get people excited and involved in total quality,” Lawler says, “but HR professionals can’t do it alone.”


Personnel Journal, August 1993, Vol. 72, No.8, pp. 48A-48O.


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Well-designed HR Policies Improve TQM Initiatives

Question:
What can Granite Rock Co., a 380-employee manufacturer of road-construction materials, teach larger organizations about quality human resources management?


Answer:
Just about everything they need to know. As a 1992 winner of the Malcolm Baldrige National Quality Award, the Watsonville, California-based company knows all about quality and how to obtain it. But as Laura Junod, personnel representative, explains, “We didn’t restructure our personnel policies because of any TQM process. Instead, quality happened because we were people-focused.” In other words, quality was the result of well-designed HR policies, not the motivator for them.


Everything that the quality consultants tell HR people to do, Granite Rock has done and done well. From communication and employee recognition to training and team building, each one of the small firm’s HR practices is a study in perfection.


Employee development:Granite Rock has eliminated conventional performance reviews in favor of Individual Professional Development Plans (IPDP), which may be its most original contribution to HR development. Every year, each worker sits down with his or her supervisor and maps out a series of goals for the coming year in such areas as skill development and actual job accomplishments. The IPDP process is voluntary, but at last count, more than 75% of all employees, including the union members making up two-thirds of its work force, had chosen to participate. Instead of emphasizing past performance, the IPDP allows the employees to set developmental goals in conjunction with the firm’s needs. It’s through this process that the company’s quality plans and HR systems come together.


Once the employee and manager agree on the goals outlined in the IPDP, management reviews the plan confidentially at a roundtable meeting. By reviewing these documents, managers can determine what types of education and training their workers need to reach their goals. The company uses the IPDP strictly for employee and organizational development; compensation decisions are made separately.


This emphasis on employee development would be just talk if it weren’t for the tremendous investment that the company makes in training. Each year, it spends more than $1,000 per employee on various training programs.


Through its Graniterock University, the organization covers the cost of internal and external seminars. These seminars include topics ranging from interpersonal skills to business law. The organization has brought high-caliber business consultants, such as Tom Peters, in to speak to employees.


Granite Rock covers all costs of employee education, whether it involves taking a course at the local community college or attending a professional conference 2,000 miles away. Moreover, employees receive paid time off to attend the courses.


Communication and recognition: Placing so much emphasis on training requires that the company communicate regularly with employees about the developmental opportunities being offered. Granite Rock does this in a variety of ways. First there’s Tuesday Facts, a weekly news bulletin that the company faxes to all 13 locations.


There also is RockTalk, a glossy, three-color employee newsletter that’s published quarterly. Furthermore, the organization frequently mails out letters from the president with employee paychecks.


These are more than just communication vehicles. They serve as a means of worker recognition, which the company takes seriously. Other ways of recognizing employees include:


  • Recognition Day—An annual celebration at each location in which individual employees and teams are recognized publicly for their accomplishments

  • Incentive Recognition Awards—An annual monetary award for excellence above and beyond normal job duties

  • Seniority Recognition Program—A program in which every employee receives a card and small gift on the anniversary of his or her date of hire.

Labor relations:One of the distinctive features of Granite Rock’s human resources program is that the program makes no distinctions between exempt and nonexempt employees. The organization has 15 separate labor contracts, but all employees are able to participate in any human resources program, from the IPDP to training.


The organization surveys union members about their opinions right along with salaried employees. Union members participate in the employee-suggestion program, and they can attend the Front-Line Leadership Training regardless of whether or not they have any supervisory responsibility.


The access to training is especially important, according to the company’s management, because it undermines the us-against-them mentality of employees and management in many union shops. White-and blue-collar workers attend the same training sessions, hear the same ideas and live in the same lodging when they travel. This way, it’s easier for them to identify and solve problems together.


Skeptics might disregard Granite Rock’s success in human resources as the luck of a small organization. As Junod explains, however, “We’ve done all this with just a three-person personnel department. A larger company with more staff and resources could do even more.”


Personnel Journal, August 1993, Vol. 72, No.8, p. 48N.


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Retirees Control Their Benefits

When The Jesup Group Inc. bought Uniroyal Plastics Company Inc. in October 1986 for $110 million, it was counting on the newly acquired firm to bring in $13.5 million a year, based on information supplied by the seller.


The buyer and seller based the purchase price and funding on this amount—an amount necessary to help The Jesup Group cover not only the interest payments from the acquisition but also the acquisition’s retiree benefits, pension obligations and environmental liabilities. As The Jesup Group began to total the year-end figures, however, it discovered a terrifying truth: Uniroyal Plastics had brought in less than $5 million.


For the next four years, The Jesup Group, then based in Stamford, Connecticut, sold off its operations to make ends meet, but it wasn’t enough. Although the company’s total annual sales in 1990 were $200 million, it was paying out $17 million a year in health-care costs alone, $14 million of which was for benefits for retirees of Uniroyal Plastics. (Employees of Uniroyal Plastics belonged to the United Rubber Workers (URW) union, which had negotiated a lifetime, fully paid medical-insurance plan for its members and their dependents.)


The high benefits costs, combined with a greatly underfunded pension plan, large environmental liabilities and an income that was much lower than had been predicted, meant financial doom for The Jesup Group. Efforts to restructure the company proved unsuccessful. In November 1991, the operations of The Jesup Group filed Chapter 11 in South Bend, Indiana.


When the case reached the courts, the interests of retirees became a major topic. While it was in financial trouble, The Jesup Group had failed to pay for many of the medical claims that retirees of Uniroyal Plastics had filed. (The plastics company had been self-insured.) Some former employees had bills that were outstanding from medical practitioners that totalled between $20,000 and $50,000, which the practitioners were unable to collect from either Uniroyal Plastics or The Jesup Group. One retiree owed nearly $150,000 in medical bills.


The court and the company’s trustees appointed 25 retirees to serve on an official retirees’ committee and represent the retirees’ interests. The court also authorized the committee to hire legal counsel and consultants. Committee members hired Randall Light, a senior manager in the Human Resources Management Consulting Group of Crowe Chizek, based in South Bend. Light attended committee meetings and asked the retirees what they wanted.


“Those meetings were pretty emotional,” Light says. “The retirees didn’t trust the company.” The retirees indicated to Light that they felt that the firm had lied to them and cheated them out of money, and that they weren’t happy at all about the way in which things were handled.


The bankruptcy code required that if the operating organizations of The Jesup Group were providing benefits to retirees at the time during which their parent company filed the bankruptcy petition, then part of their reorganization plan must include benefits for retirees. The code didn’t specify the amount of funds that The Jesup Group had to allocate to the retirees or how much time was allowed for it to continue payments.


By December 19, the company, the URW and the retiree committee agreed on a new, scaled-down benefits plan. The organization would pay only for prescription coverage for retirees older than 65 who were eligible for Medicare, and only for catastrophic medical coverage for those retirees who were younger than age 65.


Although the retirees agreed to this plan, they didn’t like it. They wanted more-extensive benefits than what the company could give them.


They also had strong opinions about what they wanted for their future benefits. They didn’t want the same situation to occur again. They no longer wanted their former employer to self-insure their benefits but instead wanted a plan that was fully insured by an insurance company. That way, even if The Jesup Group ceased making payments, it would have already paid for the premiums until that point, avoiding unexpected debts for the retirees. Also, because of their distrust of the company, the retirees wanted the company to have as little involvement with their insurance plan as possible.


Retirees take control of their benefits.
The retiree bankruptcy committee negotiated a plan with The Jesup Group. The committee members persuaded it to pay them, as an entity, the amount that it would spend on their benefits. The retirees would then buy and administer their own benefits. The company agreed.


“Given the cost of bankruptcy, the only way that the operations could have survived was to have a rapid bankruptcy proceeding,” explains Oliver Janney, vice president, general counsel and secretary of Uniroyal Technology Corp., which is the name that The Jesup Group took after the bankruptcy process. “To do it quickly, we had to work out an arrangement that got everybody at least something.”


Besides wanting to appease the retirees, the organization also saw the benefit of giving control of administration to the retirees. Uniroyal Technology emerged from bankruptcy as a much smaller company than The Jesup Group had been. It didn’t have the people to administer the retiree benefits effectively. The group of 3,000 retirees is nearly three times larger than the company’s group of 1,200 active employees. Martin Gutfreund, vice president of human resources and administration for Uniroyal Technology, says that the retirees, most of whom still reside in the local area, can plan and manage their program much more effectively. “You have a group that’s capable—like a cooperative—of determining what’s in their collective best interest—and they have a very democratic process for deciding that,” he says.


Janney agrees. “We have retirees who have time on their hands,” he says. “They probably can do a more thorough job of managing their benefits than a company can that has to serve its active employees. Retirees have different needs for medical support from those of active employees,” Janney adds.


Having gotten the organization’s agreement, the committee members filed an application with the Secretary of State’s office to establish a nonprofit organization, and wrote bylaws with help from their hired counsel. On October 1, 1992, the same date on which Uniroyal Technology emerged from bankruptcy, Uniroyal Retiree Benefits Inc. was established. Its purpose would be to administer all the medical and life-insurance benefits for the retirees of Uniroyal Plastics.


The committee of retirees that had negotiated the retiree corporation in bankruptcy court selected seven of its members to serve as the board of directors for Uniroyal Retiree Benefits Inc. The board members have sole authority in Uniroyal Retiree Benefits. The board members volunteer their time every Monday afternoon for board meetings, and, as needed, they work in the office. In the first months, however, they met frequently.


“It has been difficult to assume our roles and to know what to do,” says Earl Burkhart, president of Uniroyal Retiree Benefits’ board of directors. “We didn’t have any experience with this sort of thing. It’s also difficult getting some of the retirees to understand what we’re doing.”


The board members hired two administrative workers to help take care of the bookkeeping and to track coverage. During the first three months of operation, the scaled-down benefits plan negotiated during the early stages of bankruptcy court was in effect while board members searched for an insurance company to handle their benefits. It proved difficult because the group that the retiree corporation was trying to cover is high-risk. The group of retirees includes many people who are younger than 65 and therefore not yet eligible for Medicare.


Any insurance company with which the retirees contracted probably would be this group’s primary source of coverage. “The insurance companies realize that [the retirees] aren’t the healthiest population in the world,” Light points out.


American Medical Security, located in Green Bay, Wisconsin, agreed to insure the retirees beginning in January 1993. A key factor for the insurance company in agreeing to a fully insured plan for the group was an agreement that the retiree corporation has worked out with the local medical community.


In the South Bend area, where approximately 65% to 70% of the retirees still live, three out of four hospitals have agreed to accept what Medicare pays as full payment. This lowers the risk for the insurance company. Eighty percent of the doctors in this area also have agreed to these payments.


“The community has really gotten into this,” Light explains. “A lot of the people either are related to or know someone who’s involved in this, so there’s a lot of compassion going out to these retirees.”


In addition to getting practitioners in the South Bend area to participate, the board of directors has persuaded some hospitals and a large physician group to participate in Madison, Wisconsin, where many retirees have relocated. Regions in which the company is working on similar agreements are Florida, Pennsylvania and Ohio. “Many doctors who understand the plan agree on an individual basis not to bill the patient the balance,” Light says.


HR helps implement the benefits plan.
Once the retiree corporation had secured an insurance carrier, Gutfreund and his HR staff at Uniroyal Technology helped the retiree board of directors put the new benefits plan together. They helped the retiree corporation’s board members transfer the medical benefits from one company to the other, and provided them with general assistance until they were able to take full control. After that, Uniroyal Technology broke all ties with the retiree corporation except for its role as funding agent.


The responsibility of Uniroyal Technology is to contribute a fixed amount to Uniroyal Retiree Benefit Inc.’s benefit fund. It bases the amount that it contributes on an estimate of what the scaled-down benefits plan that was negotiated during court would have cost per year, per retiree.


For example, the estimated amount that benefits would have cost Uniroyal Technology in 1993 for each retiree younger than 65 is close to $1,050. For retirees older than 65, the individual amount would be approximately $560. Multiplying each of these amounts by the number of eligible retirees in each age category determines the amount that Uniroyal Technology must contribute to the fund each year, which it pays in monthly installments. The company’s contribution for 1993 is $2.4 million ($2.2 million for medical insurance and $.2 million for life insurance).


Uniroyal Technology’s contribution covers approximately two-thirds of the benefits cost. Retirees must contribute the other one-third themselves. Retirees who are younger than 65 pay between $40 and $120 a month, depending on coverage, and retirees who are older than 65 pay between $68 and $136 a month. The cost to the younger retirees is lower because they don’t yet qualify for Medicare and therefore incur greater out-of-pocket expenses than the older group.


When setting up the plan, retirees negotiated for a two-month premium reserve. During the next two years, Uniroyal Technology’s contributions will include payments in addition to the monthly installments that the retiree corporation sets aside in reserves. At the end of the two years, the reserve should have enough money to cover two months’ worth of the company’s contribution. The retirees hope that this reserve will serve as a cushion, should Uniroyal Technology fall into financial difficulties—as The Jesup Group did—and stop paying into the benefit fund.


The plan works in a fashion similar to an HMO. It doesn’t require traditional deductibles but instead requires that retirees make copayments for service. For example, retirees pay $15 for a doctor visit, $150 for a hospital stay, $5 for lab tests and $15 for prescriptions. The insurance company pays the balance and issues prescription cards to beneficiaries. Many of the retirees who are older than 65 have discovered that this plan costs them less than private Medicare supplemental insurance that covers drug costs.


To control utilization and keep premium rates down, the insurance plan pays treatment costs based on Medicare fee schedules (determined by DRGs, or diagnostic-related groups). If a hospital charges $5,000 for a particular treatment, and the Medicare fee schedule indicates that the treatment is worth $4,000, the insurance company will pay only $4,000. The insured is responsible for paying the balance. Because of the corporation’s agreement with practitioners to bill only the approved Medicare amount, however, often there’s no balance to pay.


Benefits plan proves beneficial to both sides.
The plan is working out well. The board members of Uniroyal Retiree Benefits are proud of what they’ve done. Having control of their own benefits comforts the retirees. “Because they’re on their own now and the contract is issued to them,” says Light, “if their former employer again discontinues its payments, they could deal with it. They would have the opportunity either to contribute more to the plan themselves or to trim the benefits. They’re totally in control.”


Gutfreund adds that Uniroyal Technology also is pleased with the way in which the retirees are managing their benefits. Having the retirees control their own benefits offers several advantages to the company. Not only does the program spare Uniroyal Technology the responsibility and the time-consuming chore of administering the retirees’ benefits, but it also saves the company a substantial amount of money in administrative costs. Gutfreund estimates that the administration of these benefits could require as many as two people working full-time.


Because the organization’s contribution to the benefit fund is equal to what it would have been spending on retiree benefits anyway, the absence of administrative costs means that the organization comes out ahead financially. “The retirees are able to get the benefits they want and we pay the money we would have paid anyway, except that we don’t have the administrative costs,” Janney says.


The fact that the retiree corporation fixes the costs of funding for Uniroyal Technology offers another advantage. The annual increases that the retiree corporation has built into the plan to cover rising costs are much lower than the trend in the insurance industry. Light says that of the 15% to 25% increase in cost that insurance companies charge each year, only 5% to 10% of the increase relates directly to goods and services. Having more people using more services causes the additional increases.


“The company’s obligation in this case is to fund only the increased cost of goods and services,” Light says. “It’s up to the retirees to control those utilization rates so that if they use the plan less, they’ll come out ahead.”


Light says that this element of fixed costs and increases has prompted people from other companies to take an interest in what Uniroyal has done. “Companies are interested in limiting and defining costs,” he explains. “It takes the guesswork out of their post-retirement liability calculations.”


Light believes that the plan offers a viable solution for a company in a situation similar to The Jesup Group’s. In bankruptcy situations in which retirees’ interests are jeopardized, retirees already have organized for negotiation purposes. (Although it would require more work to organize retirees who haven’t organized already for bankruptcy negotiations, it isn’t impossible.)


Setting up an organization from which the retirees can administer their own benefits means going just one step further. For organizations that aren’t facing bankruptcy but are having financial difficulties, Light explains that this approach offers a preferred solution to terminating benefits outright, as some organizations do.


Janney explains that a plan like that of Uniroyal Retiree Benefits most likely would work better in certain industries than it would work in others. “In companies within industries that have generous retiree benefits, such as the rubber industry, I think that it offers a lot,” Janney says. “It may be a way of meeting expectations for more-expensive retiree benefits than most companies are able to make available to retirees. It’s the same concept that most companies have today with their active employees—the concept of sharing the costs of insurance,” Janney adds.


Gutfreund believes that Uniroyal Retiree Benefits Inc.’s solution for meeting retirees’ needs could be the wave of the future. “Uniroyal Technology now is financially sound, we’re providing superior employment opportunities for more than 1,200 employees throughout the country, and we have met the medical-insurance needs of our retired employees,” he says. “All of that came about because of some very creative and effective work.”


Personnel Journal, August 1993, Vol. 72, No. 8, pp. 49-53.


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Coca-Cola Learns from Its Training Mistakes

Few, if any, companies that embark on a quality journey know exactly how to reach their destinations. Sure, they have some idea about what customer service means and how to attain it. More often than not, however, organizations charge headlong down one path only to realize that another path might have been more efficient.


It’s practically a given in the pursuit of TQM that mistakes are going to be made. These mistakes can include ineffective quality communication, a compensation structure that rewards the wrong behavior, or, as happened at Coca-Cola USA in Atlanta, a training program that fails to provide any useful new information.


Coca-Cola USA launched its quality effort four years ago with a massive top-down training effort, in which all 1,300 workers learned about the tools of continuous quality improvement. Covered were such techniques as problem solving, statistical-process control and process management. As Ken Levine, division manager of continuous improvement, explains, training came in “a burst of awareness” for employees.


What was the problem? Three years later, the majority of employees had forgotten the tools they had learned because they never had had an opportunity to use those tools.


Today, the company is in the midst of redesigning its training effort to provide employees with training as they need it. Levine explains, “Rather than training all associates in the beginning of a TQM initiative to understand a myriad of tools they may never use, it’s useful to train teams as they form. Using this just-in-time training approach, real problems can be used to illustrate tools and techniques. This will accelerate the ability of teams to begin to solve problems and improve processes.”


As teams form, Coca-Cola now will provide training in meeting-management skills to team members. This includes:


  • Training to improve listening skills
  • Brainstorming
  • Consensus decision making and agenda setting
  • Training to help members establish their mission and determine individual roles and responsibilities.

The focus on meeting the skills goals is important, Levine explains, because “you have to improve the quality of team meetings before members can think about using quality tools.”


Once teams are up and running, the company will provide training in quality tools as it becomes necessary, while requiring employees to bring real-life issues to the training sessions. In a course on problem solving, for example, the organization will require team members to solve an actual team problem.


Just-in-time training can work especially well in a TQM environment that hosts a diversity of teams. Why? Because the training needed for a cross-functional team of salaried workers, for example, is different from the training needed for a naturally occurring work team on the shop floor.


“I believe that just-in-time training will become a model for training in the future. We no longer can afford to send employees to three-day classes that may or may not have anything to do with the real issues that they’re dealing with, and hope that they can apply what they’ve learned after the fact,” Levine says. To be effective, companies must provide training when it’s needed and how it’s needed.


Personnel Journal, August 1993, Vol. 72, No.8, p. 48H.


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Quality Within the HR Function

Human resources professionals have two requirements to fulfill when their companies start chasing quality. They must ensure that:


  1. All human resources subsystems—training, communication and compensation—are aligned with the overall quality effort.

  2. The quality function is using quality principles.

Ken Levine, who’s division manager for continuous improvement for Coca-Cola USA in Atlanta, interviewed 30 companies as part of a total-quality benchmark project. In this survey, he wanted to determine the various roles that HR plays in organizationwide quality efforts. Levine was astounded to learn that none of the HR departments surveyed had implemented quality strategies within the HR function. “If HR wants to be a leader in the quality movement, HR professionals have to walk the talk. They have to begin to pursue quality themselves,” he explains.


According to Ed Lawler, who’s a professor at the Center for Effective Organizations at the University of Southern California, the quality principles that human resources must follow are:


Quality work the first time: “Scrap and rework on the shop floor,” he explains, “has a counterpart in HR management.” For example, if a company wants to redesign a bonus system or benefits program because employees can’t understand it, this is rework. This takes time, costs money and erodes the credibility of the human resources department. By attempting to produce quality work the first time, HR professionals can begin living up to the standards that they’re encouraging employees to meet.


Customer satisfaction:
The HR department exists to serve the organization. It’s the function’s sole purpose to understand and meet internal customers’ needs. Anytime that HR puts its own needs above the needs of line managers or other workers, it has failed to provide customer satisfaction.


A comprehensive approach to improvement:
TQM may require changes in the mission, structure and management practices of the HR function. HR professionals need to be open to changes within their own departments. For example, it may behoove human resources professionals to pursue cross-training for the same reason that workers on the shop floor are being asked to learn each other’s jobs. If an employee can’t come to your department and get all questions answered by one person, then you aren’t providing quality customer service.


Continuous improvement:
One basic tenet of TQM is that continuous improvement must be ingrained as a value in the corporate culture. A company must apply it with equal emphasis in the HR department. Training programs must become more effective as time goes on, for example, and HR specialists must be willing to learn from their mistakes.


Mutual respect and teamwork:
Teamwork is important everywhere in today’s quality-driven companies, but it’s absolutely necessary for HR professionals. As a staff function, HR, by design, must gather information and respond to the needs of every department in the organization. The only way to learn these needs and respond to them effectively is by working with the people in those different departments.


The HR department at Milpitas, California-based Solectron Corp. embodies the quality principles exhibited elsewhere in the organization. As a 1991 winner of the Malcolm Baldrige National Quality Award, Solectron managers know what it takes to create and sustain quality. For HR, this means reviewing the function’s quality rating on a quarterly basis.


Every three months, according to J. William Webb, vice president of human resources, the department rates its achievements numerically in such areas as:


  • Communication
  • Staffing
  • Performance reviews
  • Overtime tracking
  • Absences.

“It isn’t enough for us to know how well we’re doing. We must stand up in a management meeting and publicly report our results. We have to identify any problems and explain the quality process that we’ll undertake to solve those problems,” Webb says.


Webb says that Solectron keeps its HR department flexible so that it can respond quickly to organizational changes. “We perform a systematic review of all HR programs to make sure that they’re effective, contribute to customer satisfaction and have value-add to the business,” he says. “If they don’t, we do away with them. “


Personnel Journal, August 1993, Vol. 72, No.8, p. 48F.


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An Ombudsperson Can Improve Management-labor Relations

Grievances can be a serious deterrent to labor-management cooperation. Unions play an important role in grievance management. Mediation is becoming more common in U.S. companies. North of the border, however, some companies are trying out a special type of mediation approach. Some companies tackle this problem by providing an ombudsperson to workers to help settle all types of disputes, especially in nonunion settings.


“We were concerned that our salaried, nonunion employees might not feel comfortable with the company’s complaint process,” says Gary Johncox, VP of HR at MacMillan Bloedel Limited in Vancouver. “We thought that an independent, outside, professional and neutral person might provide a safer, more confidential complaint avenue,” he says. MacMillan Bloedel chose a lawyer for the ability to investigate and question, the discipline of thought process, and the knowledge of law and arbitral jurisprudence. The company specifically chose a woman, hoping to reduce any reluctance on the part of women employees to use the program.


Johncox says that the program has been more successful than expected. Complaints get handled quickly. The company’s treatment of people has been exonerated often, and some real problems have been identified and are in the process of being resolved. The company has added another ombuds-person, also a female lawyer.


Some members of management didn’t see the need until the pilot program proved a success. They thought that if managers were fair, then employees would discuss their problems openly. They also were reluctant to advertise the program. Johncox said that he had to explain to managers that the ombudsperson is neutral, not an employee advocate on the lookout for management wrongdoing.


Whenever an ombudsperson has received complaints from union members, she has let union leaders know. “The union leaders were quite willing to include her or hand a problem over to her, if it was a member-versus-member issue,” Johncox says.


The union is also happy to have expert help in cases of sexual harassment-an area in which union leaders aren’t fully competent-or in other cases that the union can’t resolve. The ground rules for involvement were worked out in advance.


The program was set up in 1991. Since then, it has been expanded to include all 3,300 of the company’s employees.


Personnel Journal, August 1993, Vol. 72, No. 8, p. 62.