HRM 11 by GDS International

EMPLOYEE HEALTH GETS A CHECKUP LONG DISTANCE 20 years of wellness at Union Pacific (page 40)

COUNTING THE COST Is prevention cheaper than cure? (page 46) www.hrmreport.com • Q2 2009

WORKING OUT Fit people equals healthy profits at SAS (page 86)

THE MAIN COURSE Can McDonald’s redefine the McJob? We go behind the scenes at Hamburger University (page 32)

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EDITORS NOTE HRM:nov08 02/04/2009 11:07 Page 9

FROM THE EDITOR

Who’s responsible? Is it up to business to police employee health?

“It is one of our goals to be able to talk about McJob in a way that the general public sees it as a great entry point for people to be able to get strong development and gain life skills.” McDonald’s Rich Floersch (page 32)

“It’s key that wellness needs to be viewed as an investment rather than a cost if the concept is going to catch on across the business world.” Union Pacific’s Barb Schaefer (page 40)

“We have a strong focus on preventative care and maintenance. That’s all part of our strategy to keep a healthy workforce.”

“Eat your greens, or you won’t get any dessert.” It’s a refrain heard at dinner tables up and down the country on a nightly basis. Now a version of that bargain is also creeping into approaches to employee health. Wellness programs aim to limit costs resulting from the chronic illnesses that account for the lion’s share of healthcare expenditure and many companies are promoting ideas around exercise, healthy diet and smoking cessation in an effort to stop their people falling ill in the first place. Bringing these people on board can require some persuasion. On the face of it, a push to wellness seems entirely admirable. Who could argue against the idea that it’s better to prevent serious illness than try to cure it? If people are in good health, their general quality of life is likely to be better, they’ll live longer and they’ll enjoy themselves more as they do so. But staying healthy requires consistent effort both inside and outside of working hours, so employer sponsored wellness programs can serve to further blur the line between personal and professional lives. Smoking is a good example. As lighting up has become less and less socially acceptable, so companies have stepped up their efforts to stamp it out among their populations. At first, this took the form of simply banning smoking on company property, but it has now progressed to the point where certain organizations simply refuse to hire smokers. Cigarettes are an entirely legal product, taxed and controlled by the government. Now people face being denied employment as a consequence of what they do, quite legally, in their own homes and on their own time. In a nation like ours, which places such a high value on personal liberty, such intrusion seems particularly alien. In this country we ceaselessly defend our right to carry guns, items specifically designed to have a catastrophic impact on health, and suggestions of banks being nationalized or medicine being socialized are routinely met with howls of protest. But by rejecting a healthcare system overseen by government for one driven by the free market, we are ensuring that outside agencies have more and more say in our private lives. It is a simple matter of economics. If your employer is paying for your healthcare, they will pursue every opportunity to drive down costs. If that means being a non-smoker is a prerequisite of employment or enrollment in the company health plan, then you will just have to accept it. And it might not stop there. If smoking is in the crosshairs, why not drinking alcohol, or eating fatty foods? How long until people have to take a cholesterol test before a job offer is extended? Perhaps I’m being paranoid. Perhaps business only has our best interests at heart and we all stand to benefit. My main concern is that if a zero-tolerance approach to wellness is adopted, we will effectively disenfranchise anyone who doesn’t conform to its standards. Hopefully companies will continue to work with their employees to help them change unhealthy behaviors rather than simply refusing to deal with them. We’re constantly being told to eat more vegetables. This is a situation that calls for more carrot and less stick. n

Jennifer Mann of SAS (page 86) Huw Thomas Editor

CONTENTS HRMUS11:jan09

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CONTENTS FEATURES

Long train running For many companies, a focus on employee wellness is just the latest fad. For Union Pacific it’s been a 20-year journey, as Barb Schaefer explains

32 Food for thought Dead end job or career opportunity? At its Hamburger University, McDonald’s aims to make it the latter. HRM’s Huw Thomas gets schooled

86 Fighting fit Despite a shrinking economy, SAS continues to increase both its profits and its staffing levels. HRM caught up with VP of HR Jennifer Mann to find out how

The cost of living As healthcare expenditure spirals out of control, America is looking for new ideas. Wellness provides a possible solution, but what will it take to bring business on board?

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CONTENTS WELLNESS & BENEFITS

ASK THE EXPERT 52 Beth Lundholm, Ceridian 56 Dr. Deneen Vojta, UnitedHealthcare 62 Dean Mason, HSA Bank 116 Cathy Cassidy, Martin Training Associates

59 Getting better? Kelli Kolsrud sheds some light on the state of corporate wellness

64 Clean living Michael Roizen of Cleveland Clinic outlines the lifestyle choices that make healthy genes

72 Best laid plans Could the financial crisis derail workers’ retirements? Dallas Salisbury gives us the facts

78 Still lovin’ it Paul Facella who the valuable business lessons learned in his 34 years at McDonald’s

136

IN THE BACK 136 Working life 138 The optimist 139 Spotlight 140 The gossip column 142 In review 143 Comment 144 Final word Steven T. Cates, Texas Life Insurance Co

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CONTENTS LEADERSHIP & TECHNOLOGY

INDUSTRY INSIGHT

120

54 Liz DiGiandomenico, EyeMed Vision Care 68 John Buckley, Health Fairs Direct 82 Steven M. Stecher, Conseco Insurance Group 108 Jason Kerr, QuietAgent 124 Craig Watters, Capsim 133 Frances Martinez Myers, Employee Transfer Corporation

EXECUTIVE INTERVIEW 84 Derek Irvine, Globoforce 128 Josh Baron and Missy Alexander, Marist College 92 Getting the right results – part two Jody Thompson and Cali Ressler on their pioneering work with the Results-Only Work Environment

114 Showing the way John Baldoni tells HRM why leading from the front is intrinsic to business success

96 The secret of my success(or) What do Steve Jobs and Peter Gabriel have in common? Steve Anderson explains

118 Recruitment lessons

98 Virtually challenged

120 Breaking out of the shoebox

Terry Brake on how businesses can manage change and complexity while still remaining competitive

How Tony Hsieh transformed online shoe retailer Zappos into a multimillion-dollar empire in less then a decade

Kevin Kelly on hiring in challenging times

96 TROUBLESHOOTER

104 In the know

126 The art of e-learning

CSC’s Gus Sierkerka has seen plenty of changes. One thing that hasn’t altered is the need to keep on learning

How developing a real strategy for e-learning is the only way to provide real ROI

131 Picture perfect 112 An age of uncertainty Peter Cappelli dissects the current state of talent management in the US

HRM’s Leonard Nolan investigates whether the concepts of e-learning can go beyond training your workforce

134 All roads lead to home GOLD SPONSOR

Migration trends are changing and HR professionals need to acknowledge that when making talent-sourcing decisions

70 Dr. Gail Borgatti Croall, OptumHealth Care Solutions

ROUNDTABLE 75 Retirement

PROJECT FOCUS 102 Sue Marks, Pinstripe, Inc.

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CREDITS HRM:mar09 02/04/2009 08:04 Page 14

28-30 October 2009 The Ritz-Carlton Amelia Island, Florida

Chairman/Publisher SPENCER GREEN CEO JAMES CRAVEN Director of Projects ADAM BURNS Editorial Director HARLAN DAVIS

Editor HUW THOMAS Managing Editor BEN THOMPSON Associate Editor MATTHEW BUTTELL Deputy Editors NATALIE BRANDWEINER, REBECCA GOOZEE, DIANA MILNE, JULIAN ROGERS, MARIE SHIELDS

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The Next Generation Pharmaceutical Summit is a three-day critical information gathering of C-level technology executives from the pharmaceutical industry.

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A Controlled, Professional & Focused Environment NGP ’09 is an opportunity to debate, benchmark and learn from other leaders. NGP ’09 is a C-level event reserved for 75 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated R&D meetings.

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FRONTLINE ANALYSIS

BUILDING BRIDGES

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AT THE END OF FEBRUARY 2009, President Barack Obama spoke with the nation’s mayors to emphasize the importance of the recently passed American Recovery and Reinvestment Act. The act – a nearly $800 billion stimulus package created to get the economy out of the current crisis through job creation and other programs – was passed through Congress despite heavy Republican opposition, and was

signed into law by Obama on he added, noting how the act February 17. will also provide greater unemObama said the act ployment insurance for will, “save or create” nearly 18 million Obama said 3.5 million jobs Americans and prothe act will“save over the next two tect healthcare for or create” years, as well as the seven million help those hardwho lost their jobs over the next est hit by the ecohealthcare along two years nomic crisis. “It will with their jobs. “It inaid state and local govcludes the most progresernments in hopes [that they] sive tax cuts in our history,” can avoid excruciating choices,” Obama continued, “spurring job

3.5 million

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FRONTLINE ANALYSIS

NUMBER CRUNCHING

3.5million jobs will be saved or created in the next

2 years 18million Americans will have greater unemployment insurance

396,000 jobs will be created in California

While

215,000 With economic recovery esticreation and putting money into mates conducted by Christina the pockets of 95 percent of all Romer, chair of the hardworking families.â&#x20AC;? Council of Economic More details have The act will Advisers, and since come to light also provide greater Jared Bernstein, of just how the unemployement insurchief economist American Recovery ance for nearly for Vice and Reinvestment President Joe Act will work, with Americans Biden, the White the White House House says jobs will be breaking down the decreated in a range of industries tails on both a state-specific ranging from clean energy to and congressional district level.

18million

healthcare. More than 90 percent of these jobs will be in the private sector. Supporters of the stimulus bill say the funds will lead to investments in infrastructure, education, healthcare and alternative energy. Meanwhile, California will save or create the most jobs in the United States at 396,000 jobs, with Texas second at 269,000 jobs. New York is third, at 215,000 jobs.

will be created or saved in New York

90% of new job creation will be in the private sector

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FRONTLINE MARKET UPDATE

GETTING TO KNOW YOU

A LITTLE BIT OF PRIVACY

WITH ACCESS to billions of records worldwide, it would be easy for companies to do background checks on a contractor, supplier or vendor; however, new statistics show that a massive 90 percent of American companies neglect to run contractor screening. The results indicate that only one out of 10 companies do their homework and goes on to suggest that contractors are the Achilles’ heel of a company’s supply chain. The research suggests that companies need to understand that they cannot ignore the risk posed by such an oversight. Furthermore, while in the past contractors, vendors or suppliers could feign credibility – and that would normally work – today with fast, effective hiring and workforce solutions available, ensuring greater safety and security is a simple process. Companies can choose online safety training for new hires, order badges to prevent breaches, or run contractor screening and verification checks to reduce instances of resume fraud.

PRIVATE-EQUITY FIRMS are starting to catch on to the benefits of HR leadership, it seems. After decades of focusing on cost-cutting and operational issues in turning companies around, some private-equity firms have recently concluded that a focus on talent development is essential too. In fact, in the last year or two, they’ve been hiring high-powered HR leaders to work closely with their portfolio companies, making sure the right CEOs and other senior leaders are in place and working toward the right goals. Among those professionals now in these new roles at private-equity firms include Peter M. Fasolo, the former chief talent offi-

WEIGHT OF A NATION

Adult prevalence 15-19%

ACCORDING TO the Center for Disease Control and Prevention, roughly a quarter of all American adults, split relatively evenly between men and women, are obese. In medical terms, a person is obese when his or her body mass index is over 30. Mississippi is the fattest state in the union, with nearly a third of its residents considered obese, while North-East and Westerly are among the leanest. Meanwhile, Colorado is the only state with less than a fifth of adults reckoned to be obese.

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cer at Johnson & Johnson, who is now at New York-based Kohlberg Kravis Roberts & Co. (KKR), and Dennis Donovan, the former executive vice president of human resources at Home Depot, who is now the chief human resource officer for Cerberus Capital Management, also New York-based. Fasolo himself agrees that, in the struggling economy, talent development at portfolio companies is essential. “As the economy gets more challenging, it becomes even more critical,” he said in a KKR press release. “One really needs to focus on ensuring that the operating performance of the company is firing on all cylinders.”

25-29%

20-24%

>30%

WA ME

MT ND

OR NY

SD WY

CA NV

UT CO

NM TX

PA OH

KS AZ

KY OK

CT WV NC

TN MS

VA DE MD DC

LA FL

Source: Pew Research Center

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FRONTLINE MARKET UPDATE THE LOUDEST LEADER

NOT SO SEVERE

ACCORDING TO A NEW REPORT, the person who displays the most obvious characteristics of a leader isn’t always the best person for the job. The research is based on two tests devised to determine how easily someone could take over leadership of a small group – independent of whether they were qualified to do so. The first test involved 68 undergraduate students, who were broken up into groups of four and told to organize an imaginary nonprofit group. The work sessions of the teams were videotaped and members later rated each other on both their level of influence and their level of competence. In addition, independent judges also viewed and rated the team members’ performance. A second test, involving 100 different undergraduate students, was then undertaken to determine if the people who talked the most did so because they had the most to offer. This time, the four-member teams competed against other teams for a $400 prize by solving math problems taken from the Graduate Management Admission Test. However, before the problem-solving began, the team members divulged their realworld SAT math scores to the researchers, but not to their team members. In the first test, the researchers found that both the judges and the team members deemed the most outspoken team Four-member members as teams competed possessing against each other for a higher levels of general intelligence, by solving math problems among other traits; in the second test, the same results were found, with the people who spoke up most often were rated as leaders. But the researchers also found that those highly rated team members were not the ones who gave the most correct answers; nor were they the ones whose SAT scores suggested they would be the most competent in the test.

AS ONE HR LEADER recently said, “there’s a cost to treating people unfairly.” As a result many employers are being generous with severance benefits to laid-off workers and now, a major severance study, released by Chicagobased talent-management provider Lee Hecht Harrison, found that 65 percent of the responding employers not only maintained their severance at the same level in 2008, but nearly one-fifth made it even more generous. The survey, conducted every three years, polled 1072 human resource execu-

$400 prize

tives either through the mail or online. “Those employers realize the value of severance in maintaining a reputation as an employer of choice,” Rob Saam, senior vice president and leader of the firm’s Career Transition practice, explains. In a related survey, global human resources consulting and outsourcing company Hewitt Associates found that more than 80 percent of employers made layoffs in the past 24 months, and nearly half intend to make further reductions in the next 12 months.

PLAY THE GAME FOR MANY, the thought of employees playing online video games at their desks is a little stomach-churning. But studies have shown that certain games can actually improve brain power and can even delay the onset of Alzheimer’s and dementia. Some argue that cognitive brain exercises may be so helpful that employers should include them as part of their corporate-wellness programs. A recent study of 1300 people by the Mayo Clinic found that playing computer games, reading books or doing crafts during later years led to a 30 percent to 50 percent decrease in memory loss, compared to those who did not participate in such activities. “Much like exercising at a gym to improve physical fitness, cognitive exercises can help improve brain fitness,” says Laura Fay, CEO of HAPPYneuron, California-based company offering a host of cognitive brain games on its website. But these games are brain-teasing puzzles developed by a neurologist, an education expert and a computer scientist, specifically

designed to stimulate the five main cognitive areas of the brain: attention, language, visual spatial skills, executive functions and memory. Before playing the web-based games, users are asked to enter their gender, education level and age. After the game, they receive statistics on how their play compares to their peer group, along with comments about ways they can improve. In the US, health-insurance company Humana, already offers online cognitive games as part of its corporate-wellness offerings as well as providing the service to its own employees. “We believe brain health contributes to overall health, which leads to lower healthcare costs for everyone,” says Elona DeGooyer a consultant with Humana’s Associate Benefit Programs. The research comes at a crucial time. With older generations looking to remain in the workforce longer and people now developing Alzheimer’s at an earlier age, such cognitive exercises might prove to be helpful for all companies.

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FRONTLINE THE INTUITIVE LEADER

THE MISSING LINK? Is there really a leadership deficit? Or is it simply that many of our current leaders are missing a key ingredient to enhance and optimize their abilities to handle complex situations? Regular columnist Tony Lynn Chinoy investigates Today we have too much data available to pursue old decision models. We must remember that an algorithm for determining an outcome is still dependent on the human or humans who write it. Our current financial crisis is evidence of a serious over dependency on mathematical formula and sophisticated models for predicting outcomes. If we can assume for a moment that identifying the correct mathematical model for finding our way out of our current financial mess will be not just elusive, but impossible, then what are our options? We could perhaps allow events to unfold until the solutions become clear. However, it seems that allowing things to unfold could be a very painful process. Intervening, on the other hand, without clarity, as we seem to be doing now, also provides the very real possibility of making things worse. I believe that we have neglected an extremely important facet of preparing our leaders for more thoughtful and far-sighted decision-making. Our educational system is skewed toward a heavy reliance on linear, left-brained thinking. Can we improve our education of leaders to include right-brained, intuitive thinking? Imagine that when presented with two or more options, an intuitive leader could identify which path had the higher potential for success. Imagine this same leader could see pitfalls to a path that seemed, from an analytical point of view, much more appealing. Consider an intuitive leader’s ability to see through deception and self promoting agendas which might be well presented as analytically fool proof ideas. In other words, our leader would not be taken in by flawlessly presented, analytic arguments for action. He or she would simply ‘feel’that something was out of place and would relentlessly pursue the basis for that feeling. Note that this is not an argument for relying on intuition for decision-making. An intuitive leader with a well educated mind, would never simply depend on his or her intuition, but would instead be able to identify where to look for missing variables or flaws in the original thinking. The intuitive leader moves fluidly between left and right brain. Developing intuitive leadership calls for a very sophisticated curriculum in critical thinking along with intuitive skill building. It goes beyond an ability to see things, which are not visible, as in our government’s research into remote viewing. Intuitive leadership includes problem solving, identifying optimal solutions, and evolving levels of communication unavailable to the more linear, logical approaches, which we have learned to revere. Evolving our intuitive abilities may just be our next big move. Toni Lynn Chinoy is the founder of Harlan-Evans, Inc., a 23-year-old consulting firm with a focus on leading through crisis. She can be reached via the website www.harlanevans.com

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FRONTLINE MARKET UPDATE BOOST PERFORMANCE AND MORALE

DOCTOR DISTRUST

care organizations. Only 15 perACCORDING TO A NEW STUDY by Michigan State University, seven in cent of Latinas and 9 percent of 10 minority women do not take ad- Arab-American women sighted vantage of health-related screening mistrusting issues. The study confirms the findtests because they believe that ings of a more extensive surmedical providers and vey published last year , organizations We found which analyzed data sometimes dehigh levels of from the California ceive or misHealth Interview lead patients. regardless Survey of 11,245 The of the racial ethnic African-American, Michigan State group American-Indian/AlaskanUniversity study, Native, Asian and Latino men which surveyed 341 Araband women and found that nearly American, African-American and half of minority women who sensed Latina women found that AfricanAmericans were the most mistrust- discrimination by their healthcare providers were less likely to underful of the healthcare system, with nearly four in 10 distrusting health- go screening for breast cancer.

mistrust

MOTIVATION STRATEGIES OnPOINT CONSULTING, a leading organizational and leadership development firm recently released a report that identified strategies for motivating and retaining top talent during this current economic crisis, with particular emphasis on what to do when bonus payouts are no longer possible or appropriate. The report suggested the following survival strategies to achieve sustained motivation among employees: create a sense of purpose; provide meaningful work; solicit ideas; let people know where they stand; and enhance trust and communication.

The theory is that feeling connected to the people you work with also helps create a sense of purpose. The opportunity to learn and grow within an organization is the icing on the cake, and clear goals are really only part of the bigger equation. Employers already know that engagement and retention improves when people understand how they connect to the ‘big picture’, but now the advice is that people need both regular feedback, so they know when they are on track, and recognition, when they achieve key milestones.

IF YOU OWN A CORPORATION OR BUSINESS, you are continuously trying to maximize your potential and profit. It can be an endless struggle to research trends, boost marketing and boost employee morale while still endeavoring to maintain day-to-day operations. The struggling economy does not make this challenge any easier. Luckily, corporate team building programs, seminars and events were invented to help you achieve your short and long term goals for maximum efficiency in your business. A corporate team-building event can be any event that includes your employees with the end goal of better communication for enhanced company productivity and efficiency. These events typically occur at external locations such as retreats, conference halls and hotels, and create a teamplaying environment for employees through symbolic tasks, games, and troubleshooting activities. Studies show time and time again that employees involved in corporate team-building events come back to work noticeably more productive, enthusiastic, and

overall happier. Some of the most requested outcomes for businesses and organizations that enlist in one of these corporate teambuilding events is enhanced efficiency and a solid ROI. Your business can have hardworking employees, state-of-the-art equipment and technology, and a stellar product or service for your prospective customers. However, if your employees do not know how to effectively work as a team, your company’s objectives and overall efficiency will greatly suffer. The professionals involved in corporate team-building programs have been trained (the effective ones, that is – so make sure you do your research to find a good one!). They understand the basic personality profiles that make up any sample group of people, and can therefore use this to work with your employees in order to unite them. The team building tasks and games that they use have been tried and proven to best connect your team through better communication.

For more information please visit: www.magnovo.com

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FRONTLINE INTERNATIONAL NEWS

COME FLY WITH ME

UNITED IN UNEMPLOYMENT? 45,000 on the quarter. James THE UNITED KINGDOM’S UNPurnell, Secretary of State for EMPLOYMENT rate rose to 6.3 Work and Pensions, has said, percent – up 0.4 percent over “We know times are tough, and the final quarter of 2008. we need to continue doing While 29.4 milall we can to support lion people were The UK’s unpeople who lose in work beemployment rose to their jobs to find tween October another as quickly to December as possible. last year, acup 0.4% over “The Prime cording to the final quarter Minister and I are labor force surof 2008 meeting key national vey (LFS), the efemployers today to plan fects of the downturn in

6.3%

ETIHAD AIRWAYS’ HEAD OF PROJECTS, Abdul Basit Al Rawahi, has been presented with a Human Resources Leadership award at the World Human Resources Congress in India. The awards, which are governed by the Global Advisory Council, took place at the Taj Lands End Hotel in Mumbai and recognised in-

dividuals across the world that have excelled in the field of human resources. Abdul Basit was credited for his part in transforming Etihad’s HR with the use of best practices, while instilling a culture of continuous improvement. He was also commended for providing strategic leadership, management and guidance.

SHARING KNOWLEDGE IN THE PHILIPPINES, industry group Information Technology Association of the Philippines (ITAP) hopes that sharing a human resources database will cushion the blow of IT job losses that have resulted from the recession. ITAP president Victoria Agorrilla has said that its members have already started sharing resumes of their personnel for job matching opportunities. “As much as possible we want the IT people to stay in the industry before they consider moving to other sectors,” Agorrilla said. “As IT workers already have invaluable training, ITAP has rebuilt its website to facilitate the sharing of HR resources data.”

the economy continue to have an impact on employment figures, which are now down by

what more we can do to help get people back to work and into apprenticeships.”

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FRONTLINE INTERNATIONAL NEWS

A GLOBAL CRISIS FOR BUSINESS

AUSTRALIAN WOMEN LOSE OUT

identify effective responses to the A SURVEY RELEASED last month current economic downturn and 40 by Booz & Company explores corpercent questioned whether their porate responses to the global ecoleadership had a credible plan nomic crisis and the impact in place. on social responsibility 65 percent of agendas. The study, struggling compawhich surveyed nies were found of struggling compa828 senior mannies were found to to have respondagers from a varihave responded ed insufficiently to ety of industries insufficiently to ensure ensure their own their own survival across 65 counsurvival and onetries, asked responquarter of companies that dents to assess both their considered themselves financialcompany’s financial strength and ly secure were not taking advancompetitive strength. tage of opportunities to improve The survey revealed that their position. companies found it difficult to

AUSTRALIAN COUNCIL OF TRADE UNIONS (ACTU) President Sharan Burrow says that Australian women are risking loss of pay, skills and access to decent work because of the Global Financial Crisis. Burrow says that employers should do more to protect jobs and Government should fund a paid maternity leave scheme. Burrow’s statement marked 2009 International Women’s Day

65%

on March 8 following the release of international data indicating that women are being hit hard by the economic crisis. She said that the crisis could lead to Australian women losing important gains in pay equity, as seen in other countries deep in recession, unless appropriate measures were put in place. Women are already over-represented in vulnerable jobs, particularly lowpaid and part-time work.

TOUGH ON TOURISM

TRANSFORMING HR UK-BASED EMPLOYER SERVICES, a provider of payroll and benefits administration services, last month released a joint report with the Human Resources Outsourcing Association (HROA) revealing that the HR transformation movement is continuing to gain momentum across the globe. A full 90 percent of respondents are currently working on HR transformation, up from 75 percent in 2006. 64 percent of respondents said they intend to expand the scope of their HR transformation in the coming year.

CARIBBEAN TOURISM HR professionals will turn their attention to the current global crisis and its impact on the workforce at their fifth annual conference in May in Curacao. Sponsored by the Caribbean Tourism Organization (CTO), the meeting, which will take place between the 27 and 29 May 2009 at the Hilton Hotel in Curacao, will include a session entitled, ‘Learning from the Best Success Strategies in Tough Economic Times’.

In addition, delegates will participate in a workshop on ‘Managing Stress in Difficult Times’. “Like the rest of the workforce, tourism human resources professionals have to grapple with the impact of the global economic meltdown,” Bonita Morgan, the CTO’s director of human resources, has said. “It’s important that we explore strategies that work in difficult times and learn from each other’s experiences.”

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FRONTLINE BURNING ISSUE

PROVIDE BETTER HR SERVICES

THE GENERATION GAME For some time workforces across the US have been conscious of a shift in working cultures and now the time has come to bridge the gap between such attitudes AS BABY BOOMERS look forward to retirement, ‘Generation X’ and ‘Generation Y’ are filling their boots. Now, perhaps unsurprisingly, companies are struggling to balance the opinions of three different working generations and a comprehensive, new study has revealed just how Boomers, as

well as Gen X, are fumbling through their communications with Gen Y. While there are plenty of differences between these two younger generations, it often falls on Boomers to help navigate both groups through the workplace. Here HRM offers a guide for Boomers trying to deal with the generation conundrum.

GENERATION X Technology

GENERATION Y Technology

Gen X likes to keep up-do-date and motivated. Music at work, BlackBerry’s, IM and fast computers will help Gen X stay productive.

Gen Y is more comfortable with technology than any other group, so learn from them and stay on the cutting edge.

Collaboration Collaboration Limit in-person meetings. Offer alternatives like conference calls, video, and web conferencing. Alternatively, stick to small, productive groups and skip long planning sessions.

Gen Y started online social networks. Think about how you can leverage that in the workplace to encourage team collaboration and knowledge sharing.

Work ethic

Trust Gen Xers. Give them the flexibility to telecommute or work outside business hours to gain their trust and loyalty.

Now is the time to accept the inevitable. By the time Gen Y is fully in the workforce, the standard working week will be based on productivity, not hours at the desk.

Socializing

Invite them, but don't push them to participate. They're used to being overlooked by boomers and tend to dislike corporate politics anyway.

Appeal to overall goals as Gen Yers are more likely to attend a networking event that will expand their personal contacts.

Work ethic

Corporate loyalty Corporate loyalty Limiting bureaucracy and providing access to resources without burdening Gen X with corporate politics and excessive meetings will encourage loyalty. Source: Business week

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Be conscious of age discrimination, as despite a weak economy, Gen Yers still tend to job-hop: especially when they're being judged on ‘seniority’ as apposed to ‘quality.’

TRANSFORMING HR into a busiexisting costs turning quickly into onness partner role requires separatgoing ROI – while also improving eming HR leadership from ployee service and satisfaction. administration – and providing effi“At a time when HR professionals cient, effective HR services.This are challenged with cutting costs – challenge leads HR executives to often at the sacrifice of services – our ask tough questions: Can I provide customers are improving HR service quality services to a diverse workdelivery at costs up to 50 percent less force while lowering my annual per employee then what was preHR cost-per-employee? viously spent,” said Wally Our Can I help employees Smith, Enwisen’s CEO. customers are become more in“Our proven ability to improving HR service delivery at costs up to formed benefits put real-dollar return consumers to on investment belower health care hind the over-used less per employee than costs? Can I stream‘do more with less’ previously spent line onboarding and mantra, led to 2008’s still engage younger newgrowth of 233 percent in our hires who may have 20 jobs before service delivery model. We expect this they retire?With Enwisen’s trend to grow even more in 2009 due AnswerSource HR Service Delivery to the affordability of the solution and Suite, the answer to these queshow quickly savings can be realized.” tions is “YES.” In fact, customers’ AnswerSource has produced proven success drove 2008 licenses measurable ROI for hundreds of cusup 233 percent, with even higher tomers – like Yahoo!, Twentieth numbers expected in 2009. Century Fox, State of Montana, The suite – which includes Hershey Entertainment & Resorts, AnswerSource HR Nissan North America and Alegent Portal/Knowledgebase, HR Shared Health. For more information: Services/Case Management, www.enwisen.com Onboarding, Benefits Decision Support, and On-Demand Total Rewards Statements – is typically deployed in 16-20 weeks, with hard-dollar ROI soon after. Lower HR cost-per-employee comes from employees’ability to answer their own HR questions, via the Portal/Knowledgebase, 70-80 percent of the time or more; shared services/call center staffs’ ability to handle higher volume with fewer reps; streamlined onboarding; and more. The solution is hosted and maintained by Enwisen, so there’s a low cost of ownership: a deployment is typically an affordable replacement of

50% less

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FRONTLINE MARKET UPDATE

IT’S NOT ALL BAD

Innovation improves your organization, especially during economic downturns organization, and re-energize old YOU’RE STRUGGLING WITH THE products or services. ECONOMY, possible layoffs and To establish a culture of innovashort-term expense reduction. You think: We don’t have time or money tion across your company proven tools and techniques are required to for innovation now. examine internal and external prodThe common belief is that inucts, services, processes and pronovation is something you do in a jects; as well as a methodology that good economy, but innovation foyields the highest return on invested cused on internal improvement not only results in cost savings and time and money. That’s where The Innovation Tools Memory Jogger improved efficiency – it can posi(ITMJ) comes in. tion an organization to The ITMJ s a pracleap ahead of its Improve tical, hands-on competitors after product and processes across the pocket-guide to the downturn. organization and aid your teams, Innovation is whether they’re essential, espetasked with develcially in bad times. old products or oping new innovaClayton M. services tions from scratch or just Christensen, a Harvard improving existing processes, Business School professor of products or services. Innovation innovation, was recently quoted in Process is introduced followed by The Wall Street Journal, that this economic crisis “will have an unmit- detailed instructions and examples for 22 innovation tools that can be igated positive effect on innovaused in any sequence or repetitively, tion,” because scarcer resources forces innovation initiatives to cycle as needed. The ITMJ is ideal for introducing faster, thus reaching success faster. Innovation is not just for exter- innovation throughout your organization. Paired with the Martin Training nal product development. When focused on improving an organiza- Associates’Innovation workshops you can trim costs, improve customer tion internally, you can wring out satisfaction and gain a critical lead on excess cost and inefficiency from your competition while they worry fossilized processes, improve products and processes across the about the economy.

re-energize

For more information please go to www.martintraining.com

FOR LOVE NOR MONEY A NEW STUDY SHOWS that 51 percent of the global workforce would sacrifice status and pay for more meaningful work. The news comes as a surprising time, with the economy in peril and employees being laid off at an alarming rate. During this current, prolonged period of uncertainty, it would sound plausible if workers began putting less emphasis on finding meaning in their jobs and simply concentrated on earning a living. The study surveyed approximately 100,000 people in 34 countries in North America, Europe and

NEWS IN NUM8ERS

the Asia-Pacific region and found that the majority of people want their jobs to provide a degree of emotional fulfillment, even if that means sacrificing money and status to achieve it. Most notably, though, it is workers in the US who seem to be slightly less focused on meaning and more on the Almighty Dollar, with 43 percent saying they would take less pay for more meaningful work, compared to 49 percent of Europeans and 54 percent of employees in the Asia Pacific region. Source: Kelly Global Workforce Index

8 grown 6

Apple’s revenue has by 33% in the last year (p136)

Over 5000

employees per year attend Hamburger University (p32)

75% of healthcare costs result from unhealthy lifestyles (p40) In 2008 healthcare expenditure rose to

$2.4 trillion 16.3%

of US GDP was

on healthcare in

(p46)

spent

2008 (p84) www.hrmreport.com

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FRONTLINE IN MY VIEW

GARY STEEL The Executive Vice President and Head of Human Resources at ABB explains his strategies for people management and how he plans to win the war for talent.

To view this entire interview please visit www.meettheboss.tv/broadcast/Financial -Services/Gary-Steel-MeetTheBoss.tv

The focus for ABB people strategy is based on the foundation of values, leadership and performance. So we try to pay attention to these on a global level, as our baseline, and then there are three interlinking focus areas of business excellence, career development and reward and recognition. We find that it’s the whole that drives the way we think about people within the organization. It drives the way we think globally and it influences the way we act locally. Talent management is truly the thread that determines everything we do. Our strategies are designed to affect all 180,000 people who work in our company. Talent management is not restricted to high potentials or the top end of the organization. We’re trying to drive talent management through the organization at all levels and the reason for that is quite simply the same as everyone else: we want the best people.

We’ve introduced a number of veloped across the two because development programs, some of I want both halves to underwhich are exclusive for a certain stand the precious priorities and group of people in the organizaactivities of the other. In terms tion, and some of which are inof talent identification we use clusive for everyone in the the same leadership framework organization, but all of them are that we use for the identification building on the same concept of of talent across the whole comleadership, which is one pany. HR people need to of the foundational understand the Our principles of our business, they strategies are strategy. Talent don’t need to designed to affect all management is know how to deployed make every through training piece of our techwho work in our company and development nology, but they programs, assesshave to know what ment, career development the key drivers are. It’s through job moves and job rotacertainly in my view that aptions, global assignments and petite, enthusiasm and curiosity assignments outside one’s noraround business is a dominant mal business area. factor in the people that I

18,000 people

The other side of HR is our HR business partner, people who will consult, guide, direct and challenge line managers. What I’m trying to build is a global organization of two equal halves, and people’s careers will be de-

choose to work in my HR function today. I’m an HR person through and through, but I think most people would accept that I have a very strong interest and conviction towards the business, and that’s the kind of people we want need.

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FRONTLINE MARKET UPDATE

PAVING THE WAY FOR CHANGE Employers call on Univers for benefit communications and enrollment services WHEN ENERGY PROVIDER Calpine Corporation made the switch from a traditional PPO to a Healthcare Reimbursement Account (HRA) for their 2008 medical plan design, the company’s HR executives knew that a proactive communications effort was critically important. Calpine’s three-person benefits team relied on Univers, the leader in strategic benefit communications and enrollment services, to help make the transition as smooth as possible for their 2000+ employees working in more than 70 locations. Collaborating closely with Calpine’s benefits team, broker and local managers, Univers benefit specialists facilitated employee meetings at about 40 locations; hosted web-based group meetings for smaller locations; and provided comprehensive printed materials explaining the company’s 2008 benefits options, including the introduction of the new HRA plan. Univers provided another key service that really helped to head-off employee questions before they were even asked. The firm prepared a personalized worksheet for each employee showing a PPO vs HRA cost comparison, based on actual prior-year claims data under the old PPO plan. So how did Calpine’s employees handle the big change? “It was almost a nonissue, which is a good thing. It didn’t cause a big stir, so that’s indicative of Univers doing a good job,” said Ross Wiltzius, VP Compensation, Benefits and HR Systems, Calpine Corporation. Calpine is among more than 1700 mid- to large-sized employers who have turned to Univers to elevate employee benefit knowledge, improve the enrollment process, and increase the return on their benefits investment. Univers core services include strategic benefit communications; onsite, phone-based or assisted online enrollment; post-enrollment reporting; and dependent eligibility audits that have saved Univers clients millions annually.

KEEPING YOUR WORKFORCE ENGAGED DURING LAYOFFS workforce through this stressful time, eni eni, A NATIONAL LEADER OF CORPORATE wellness work in partnership to establish two-way comand productivity solutions including Employee munication by creating special promotions or Assistance and Wellness Programs, rises to the newsletters. To avoid harmful gossip, they eseconomic challenge by supporting employees, tablish confidential HR hotlines where emmanagement and Human Resource departments ployees receive valid answers to their through uncertain and stressful times. questions. This is a good time to conduct a In this time of uncertainty, corporations quick survey to assess issues and need the support of a proactive EAP concerns, with the confidential such as eni to keep their workTo avoid protection employees trust from force functioning at its maxiharmful gossip, we their EAP. establish confidential mum potential. Layoffs eni also suggests increascreate an undeniable ing the awareness of your EAP amount of stress on everywhere employees benefit to your employees and one involved, and attention recieve valid answers to their questions their family members who share must be paid to keeping your the stress. The company often surviving employees engaged and send our counsellors and trainers for onproductive to avoid future layoffs. site support or stress management training, The natural reaction to stress is to turn indedicating time to the ever-important frontward rather than reach out for help. Withdrawn line supervisors. employees will struggle with relationships, Most importantly, eni believes in supporthealth and motivation. The result employees ing HR executives, who often incur the most that were once considered top talent are now stresses during the layoff process. By underabsent, more susceptible to illness and depresstanding the customer’s situation, expectasion, and far less productive than this economy tions and pressures, eni work to provide a full will allow. Your employee suffers, your cusspectrum of support – professionally and pertomers suffer, and ultimately, business suffers. sonally – to keep you at your best during this Now is the time to be proactive before anxidifficult time. ety escalates. To help their clients lead their

HR hotlines

For more reasons to choose Univers, visit www.univers.biz

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FRONTLINE MARKET UPDATE

COBRA BITES HR LEADERS now need to underSeptember 1 2008 and December 31 stand the modifications to the 2009 due to an involuntary terminaConsolidated Omnibus Budget and tion of employment. Reconciliation Act (COBRA) conThese provisions are effective tained in the 2009 American immediately and require prompt Recovery and Reinvestment Act. compliance, including co-ordination The changes apply to all with COBRA and payroll companies that vendors to implement The provisions sponsor a group new payroll tax adare effective health plan and ministration rehave terminated quirements; or that have laid location and proviand require prompt compliance, including off at least one sion of affected indico-ordination with employee since viduals with an COBRA & payroll September 2008. additional COBRA noThe stimulus bill tice; and response to new modifies COBRA by creating a temgovernment reporting requirements. porary federal subsidy, for up to nine In now appears that many months, of 65 percent of the cost of employers are seeking guidance COBRA continuation coverage for from their attorneys abecause of employees (and their spouses fears that the Department of and/or dependants) who lose group Labor will closely scrutinize emhealth insurance coverage between ployers’ compliance.

immediately

FROM THE VAULT Back in Issue Eight of HRM, we spoke exclusively to Starbucks’ CHET KUCHINAD, who told us that during challenging times, companies have to dig in deep and stick to their values. “From the very early days of our company we had to balance profitability with benevolence,” he told us. “We always wanted to be known as a company with a social conscience.” To read the article in full, access an entire archive of past issues and subscribe to the magazine, please visit www.hrmreport.com

DEVELOPING ISSUES

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A NEW STUDY has shown how organizations set low expectations for employee performance and how managers currently only identify a small percentage of their workforce as performing at ‘go-to’ levels on a consistent basis. The study, entitled the ‘Talent Development Issues’ and conducted by Novations Group Inc, reveals that, at a time when organizations are struggling to

‘do more with less’, there is a real discrepancy between leadership expectations and management behavior. Additionally, the study revealed that almost half of these managers believe some employees have more potential than others and use that belief to give job assignments to a select few. And with respect to developing employee potential, 34 percent of managers believe everyone is capable of performing at higher levels, while 47 percent believe some employees have more potential than others and 15 percent don’t have one prevailing belief system. These findings indicate that most managers believe their job is to identify the employees who they think have potential and invest in that population.

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FRONTLINE MARKET UPDATE

NOTHING BUT NET

DEFINING ENGAGEMENT

ACCORDING TO A STUDY of 6000 collegiate basketball teams, those losing by just a little at halftime often came back to win the game. Now, it seems, HR leaders may be able to use these findings to help managers set better goals – and to help their companies win. The study goes on to suggest hat, in the corporate world where goal setting is an important management tool, it’s a good strategy to pick milestones that are within reach, such as passing a close competitor in sales. Focusing on goals that are close and achievable may be more motivating than lofty but unrealistic goals. A lot of tools are used in the workforce to motivate people, such as wages and bonuses, and while these things can have motivating effects, people should not underestimate the potential importance of psychological motivation as well. To highlight the point further, a secondary experiment was conducted in which people were paid to compete in a short, simple game that involved typing letters on a keypad. Midway through the game, one group of participants was told that they were close behind, slightly ahead, far ahead or far behind. A control group was not given any information at the break. Just as the real-life basketball results had suggested, the group that exerted extra effort was the one that had been told it was only slightly behind midway through.

LASTYEAR, authorsWilliam H. Macey and Benjamin Schneider, of theValtera consultancy firm, wrote an article published in Industrial and Organizational Psychology in which they discussed the meaning of ‘employee engagement.’They note its increasing popularity among HR consultants and the relatively recent interest in the notion among academics. However, they also consider that the notion, although compelling on the surface, is unclear in its meaning. MaceyandSchneiderconsiderthatemployeeengagementreferstopositivefeelings heldbyemployeesabouttheirjobsandalsothe motivationandefforttheyputintowork. Engagementleadstopositive employeebehaviorsthat leadtoorganizationalsuc-

cess. According to the article, engagement should not be confused with satisfaction or commitment and they identified two components of employee engagement, namely feelings of engagement (focus and enthusiasm), and engagement behavior (proactivity and persistence). The authors distinguish between engagement and satisfaction as engagement meaning energy and not satiation, and satisfaction meaning satiation and contentment, but not energy. They believe that employees will feel and act engaged when managers create the right conditions that allow them to do so and argue that the essential condition for feeling engaged is fair treatment, leading to a feeling of trust which, in turn, allows them to feel safe to be engaged.

A LITTLE AUTHENTICITY Authenticity has become paramount for IN A RECENT RESEARCH PROJECT, JWT brands as they look to regain credibility and Iinside collaborated with the Trendspotting trust during the current economic downturn group at JWT to connect societal trends with that has seen established institutions topple internal corporate communications best overnight and many others teeter on the brink. practices. One of the key trends, authenticity, So how does a brand exude authenticity? is critical for effective communications to Companies need to involve customers in the your candidates and employees. experience of the brand, allowing In the wake of a financial crithem to understand it in a way that sis, authenticity is the key to is organic, not contrived. For embrands regaining credibility ployers, this means your comand trust. Brands once conmunications need to focus on sidered unquestionably reis critical for effective communications connecting with employees and liable have lost their to your candidates communicating honestly. The dependability capital, and and employees most effective HR and branding reconsumers are clamoring for lated efforts will involve employee truth and transparency. generated content. People are seeking and demanding Creating a conversation that people want to reliability and accountability. The hunger for get involved with — and ideas that people want authenticity is rooted in people’s discomfort to spend time with — is the essence of branding with spin and packaging in their communicaand organizational communications today. tions and marketers will need to work even For more information, please visit us at www.jwtinside.com harder to prove their brand is an authentic one.

authenticity

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FRONTLINE COMPANY INDEX

LEADING THE WAY

20% 50%

14% 38%

Most important leadership traits:

males or females. Interestingly, while females only lost out to males on one of the tests – and another one was tied – in the end, more executives said they would still opt for a man in charge.

A RECENT STUDY at Pew Research Center looking into gender and leadership roles, asked executives across America to look at eight traditional leadership traits and state whether they felt such characteristics were more suited to C

28% 28%

44% 33%

34% 34%

A Honest B Intelligent C Hardworking D Decisive

E Ambitious F Compassionate G Outgoing H Creative

Source: Pew Research Center

5% 80%

28% 48%

11% 62%

COMPANY INDEX Q2 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned. ABB ACTU AIG Alliance for Wellness ROI Allied Van Lines Apple Arena Resources Baldoni Consulting LLC Berkshire Hathaway Best Buy Booz & Company Capsim Ceridan Cleveland Clinic CM Group Combined Worksite Solutions Conseco Corehealth Technologies CSC CultureRx David Meinz Dennis Donovan eCare Solutions Eithad Airways Employee Benefit Research Institute Employee Transfer Corp eni Enwisen EyeMed Vision Care GameStop Globoforce HAPPYneuron Harlan Evans Harris Data

16 16 16 46 134 96, 136 136 114 96 92 16 13, 124, 125 52, 53 64 126 81 82, 83 45 104 92 67 16 57 16 72 132, 133 15, 27 24, 34 54, 55 136 84, 85 16 20 8

Health Fairs Direct HSA Bank Humana IFEBP Incentives, Inc. Inside Management Intuitive Surgical ITA Group JobVent.com Johnson & Johnson JWT Inside Kiosk Information Systems Kohlberg Kravis Roberts & Co. Lee Hecht Harrison Magnovo Training Group Marist College Martin Training Associates McDonald’s MDA Leadership Consulting Michigan State University Microsoft Netflix Nike Novations Group Inc NutriSystem Online Rewards OnPoint Consulting Optum Health Pacific Union Railroad Pew Research Center Pinstripe Prescription Solutions Prudential Quiet Agent

68, 69 62, 63 16 59 91 78 136 58 138 16 30, 113 135 16 16 20, 123 128, 129 25, 116, 117 32, 78 95 16 96 136 96 16 136 74 16 IFC, 70, 71 40 16 102, 103 51 2, 75 108, 109

Rallis India Limited Sapien Software SAS Scarborough SEC SHRM SLDI Starbucks Staub Leadership Solutions Texas Life Insurance Company TMA World United Van Lines UnitedHealthcare Univers University of Illinois Virgin Western Governors University Wharton School Xerox Zappos

140 110 86 75, 77 96 140 101 16 107 144, IBC 98 134 38, 56 27, 29 127 96 130 110 114 120

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McDONALDS UNIVERSITY:mar09 01/04/2009 15:11 Page 32

COVER STORY

Dead end job or career opportunity? With its Hamburger University, McDonald’s aims to make it the latter. HRM’s Huw Thomas gets schooled

Food for thought

eing a globally recognized brand like McDonald’s does occasionally have its downsides. The Merriam-Webster Dictionary defines a McJob as “a low-paying job that requires little skill and provides little opportunity for advancement.” The term was coined by the novelist Douglas Coupland in his book Generation X and over the years has become shorthand for any kind of employment that requires little training and that is usually carried out by unskilled and largely temporary workers. It might then come as a surprise to learn that since 1961 (coincidentally the year of Coupland’s birth) the fast food

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giant has been actively involved with the training and development of its people, largely through its Hamburger University program. Starting out in the basement of a McDonald’s restaurant in Elk Grove Village, IL, Hamburger U has since grown to a 130,000 square foot facility at McDonald’s HQ in Oak Brook, IL, that welcomes an intake of over 5000 students a year. It is the central hub of a network of 139 training centers ranged around the world. For Diana Thomas, Vice President of Training, Learning and Development for McDonald’s USA, the image of the company as a provider of dead-end jobs is both inaccurate and outdated. “It goes back to our early history with Ray Kroc our founder,” she tells us when we

McDONALDS UNIVERSITY:mar09 01/04/2009 15:11 Page 33

catch up with her in early 2009. “His philosophy was, ‘I’m going to put money in talent.’ Our competitors can replicate products or processes, but they can’t replicate our people. This was understood as early as 1961 when he created the first HU in the basement of a restaurant. It’s something that we do continually at every level, whether it’s a new crew person starting to learn the register, the training that they go through to feel comfortable, interact with the customers or to run a shift in the restaurant, to run a restau-

“Before you can run a restaurant, whether you’re an owner or you’re a restaurant manager, you have to have come through HU” rant, to be a business consultant and to work with our franchisees or at any level in the company. Training and talent management is one of our CEO Jim Skinner’s top three priorities. So from the top down, it’s a priority that everybody dedicates a minimum of 40 hours to improve themselves on a yearly basis.” This sentiment is echoed by Rich Floersch, McDonald’s EVP of Human Resources, when we sit down with him a few weeks later. “If you think

about some of the aspects of what makes McDonald’s successful, it really does start with having people ready to take on new assignments,” he says. “We have to provide the kind of environment where people can feel like they can continue to aspire to great things within the organization.” Floersch highlights the company’s preference for promoting from within as one of the cornerstones of McDonald’s focus on training and development. In addition to Hamburger U, the McDonald’s Leadership Institute, a global community that helps drive McDonald’s business by guiding leaders to reach their potential, offers a variety of accelerated development programs for promising middle management and officers. “We’ve got almost 300 people now who have gone through these programs,” he says. “Our promotion rate since we put the program in place is somewhere around 40 to 50 percent, and the other great thing about it is that it’s enabled us to retain the talent. Our retention rate in that community is 98 percent.” It’s hardly surprising that Floersch and Thomas are keen to talk up the potential for development in a career at McDonald’s, and it would be easy to be cynical were there not so much real world evidence for it. On this front, Thomas is a particularly good example, having risen through the ranks of the restaurant chain from lowly beginnings. “I was a crew person many years ago,” she tells us. “I started off in high school, then I went to college. My dad was adamant about it, ‘You need to get a good education. I don’t want you to just stay with McDonald’s.’ But I was able to go get a four-year degree, and then I went back and got a Master’s and

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Lower Your Annual HR Cost-Per-Employee WHAT IF... Employees could answer their own HR questions 70-80% of the time? Your HR shared services center could handle higher volume with fewer reps? Employees had the communications they need to select more costeffective health plans? You could streamline onboarding while also reducing new hire turnover?

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Enwisen. HR Transformation through Better, Cost-Effective Delivery of HR Services. Find out how. Let us calculate the ROI you can expect from deploying Enwisen solutions in your organization. To get started, visit us at: www.enwisen.com/ROI or call us at (800) 685-5578 x240.

Enwisen.indd 1

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an MBA that McDonald’s helped pay for.” According to Thomas, even the very early stages of her career were preparing her to take on more and more responsibility. “I think about starting as a shy 16 year-old, and I didn’t want to be up in the front,” she continues. “I wanted to be on fries or do something where I didn’t interact, but the manager told me from the start that they were going to work with me. I think about how what I do today was impacted early on by McDonald’s giving me the training and the confidence to interact with customers and then to continue to grow throughout the system by always training and teaching me new things.” Thomas is far from being an aberration. Some 40 percent of the company’s top 50 worldwide leaders came up through the crew ranks. The benefits that students of Hamburger U can reap aren’t restricted to life within McDonald’s. The company is the only restaurant organization to be accredited by the American Council on Education. What this means in practice is that Hamburger U training can count to up for 46 credits towards a two- to four- year degree course. “I think it validates the quality of the training that we offer,” says Thomas. “We’re teaching the same kind of things and putting in that experiential level of learning that maybe even some colleges aren’t able to do, because we show and teach, and then role play. We actually have a working, McDonald’s restaurant that’s set up in this building, so they can go down in the restaurant and actually apply what they’re learning.”

Hamburger U’s growth has mirrored that of its parent company and is a vital contributor in preserving and promoting a culture that extends across the globe. “As we’ve grown the number of restaurants, our attendance has gone up,” Thomas confirms. “Before you can run a restaurant, whether you’re an owner or you’re a restaurant manager, you have to have come through HU.” According to Thomas, this has the effect of enshrining the idea that ongoing development is an essential component of working life. “I think that creates the standard that training is important, and that the consistency of the training is critical to ensure that the customers get the consistency at the restaurant level,” she continues. “We have people

THE HUMAN TOUCH Diana Thomas on why getting up close and personal is the best way to learn We’re not only teaching the business skills, but what we’ve found is we’re able to teach people a little bit more about the company’s culture and the heritage by their coming here. In our university we’ve got flags flying to welcome students and represent all of the different nationalities and all of the languages of the people who are in the building that week. We’re able to show more about the diversity and the value of bringing people together. We’ve also got a heritage museum that goes through a chronological listing of McDonald’s history, for those people that weren’t around. I don’t think you’ll ever be able to replace the face-to-face interaction and the relationship building that happens when people who do similar jobs get together. You see that people from around the world can come together, and within days, they’re acting as if they’re best friends or family because it’s the brand that brings people together. So even though we leverage other means of delivering training, we truly use a blended approach to delivering training. You can see that there is a critical need to bring people together for that face-to-face interaction and the application of what they’ve learned through these other means, and whether it’s self-study or e-learning or virtual training, that it can’t be replaced.

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who come back to classes because they want to recycle and learn about things that have changed or just take a week for themselves to get even more reinvigorated about what’s happening and to learn how to do their job at the next level.” It’s a point that Floersch reinforces. “As an individual, you need to own your development,” he says. “Not that the company can’t provide a good support system but at the end of the day, we need to have people feel like they own their development, and then we need to provide the tools.” Floersch believes that about 70 percent of development takes place on the job, when staff assume new responsibilities and move outside their comfort zones. The remainder is taken care of in the more structured programs provided by the company. Floersch sees this support and potential for growth as a key player in minimizing the turnover levels that have traditionally been very high in the restaurant industry. “The number one reason why people stay with an organization is typically how they feel about their growth prospects,” he continues. “It’s not necessarily what attracts them to a company because that tends to be the company’s reputation or the compensation package. But the one thing that binds people to an organization and drives high levels of engagement is how they feel about their growth prospects. If you’re not delivering on that as a company, you’re either not getting highly engaged employees, or you’re not being able to hold onto talent.” Floersch clearly believes that this is something that McDonald’s is coping well with, as turnover levels in most major markets are declining. But

perhaps there are other factors? After all, we are in a downturn and such difficult times make changing jobs a fairly risky move. Not only that, but McDonald’s is one of the few companies that is bucking the global trend and still growing. Might these be the key reasons for the reduction in employee churn? “I think it is a combination of the work that we’re doing on delivering a strong employment value proposition and strong training and

70 percent of development takes place on the job development programs as well as the fact that we’re doing well,” he says. “People want to be with winning organizations.” Floersch tells us of a recent employee survey that asked the question ‘What are the top three reasons why you love working at McDonald’s?’ Leaving aside the somewhat leading nature of the enquiry, the response was telling: “One of the top reasons people gave were the career development opportunities that McDonald’s offers,” he continues. “That’s from our

IT ALL ADDS UP – The figures behind Hamburger University The first graduating class in 1961 comprised 14 people

Over 5000 employees per year now attend There are 6 other HU’s in Australia, Brazil, Germany, China, Japan and the UK

Roughly 300,000 people worldwide 36 www.hrmreport.com have graduated

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GLOCAL HEROES Rich Floersch explains the importance of local knowledge in a global organization It is important for a global company to have a well-defined culture and set of values. And we’ve done that. We’ve articulated our values over the last couple of years, which resonate globally. We also know that when we operate in 118 markets, our management teams in those markets, whether it’s France or China or Canada, need to feel like they have ownership. They’re in the best position to be able to understand what the customers or prospective employees in those markets are going to be interested in. So we need to provide them with a lot of accountability at that local level. I call it ‘glocal’. Organizations that can figure out the global piece but then allow a lot of room for the local organization to customize some things – for example, on menu – is absolutely important in a global organization. It combines the best of both. Training, learning and development have to be one of the pathways for people to understand our values and what our culture is. Because at the end of the day, you want to reward people, you want to select people, you want to develop people, you want to fill jobs based on those cultural aspects and values that you hold as important to McDonald’s.

The Oak Brook Campus boasts 17 teaching rooms, a 300-seat auditorium and 3 kitchen labs

Course materials are printed in 28 languages

crew and our managers at the store level.” What is certain is that reducing employee churn has definite benefits from both a cost and efficiency perspective. “We know that when you have lower turnover rates, you actually can run better stores,” he confirms. But it remains to be seen whether all this can effectively put an end to the lingering curse of the McJob. “There are a handful of our markets where that stereotype is very negative right now,” confirms Floersch. “But I suspect, as we’re seeing some of the data come in from our customers and from our employees, who can be the strongest brand ambassadors, that people will start to understand that we do have this strong training and development.” In fact, the approach seems to be to reclaim the term and retool the McJob as something to aspire to. “I look at it as a positive and I’m so happy I have a McJob,” says Thomas. “I’ve grown, and I’ve learned, and McDonald’s has provided so many opportunities. It is a misnomer; people don’t understand the possibilities that are offered within the company.” Thomas mentions her father once again and his initial reluctance about his daughter joining the organization. Starting from this position, he has slowly come around. “He learned about the company as I learned about the company,” Thomas continues. “His paradigm shifted and he’s now one of the biggest fans of McDonalds.” If one man can be brought round, maybe there is a hope for a wider realignment of the overall attitude to a career at McDonald’s. Floersch certainly thinks so. “I think we’re at it, and I think over time we are going to lose some of those stereotypes,” he says. “It is one of our goals to be able to talk about McJob in a way that the general public sees it as a great entry point for people to be able to get strong development and gain life skills.” n

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FEATURE

Longtrain

running For many companies, a focus on employee wellness is just the latest fad. For Union Pacific itâ&#x20AC;&#x2122;s been a 20 year journey, as Barb Schaefer explains

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e really started our health promotion programs in the late 1980s. The president of the railroad at that time got very interested just from an intuitive standpoint in health promotion. He was physically active himself, and he put in our first fitness center. But as a railroad, most of our 50,000 employees are very mobile and not based in a single location. As a result, the first efforts at expanding beyond the fitness center in the headquarters building involved putting fitness centers on railroad cars and moving them around the system. But after a while we figured out that didnâ&#x20AC;&#x2122;t work as well as just getting memberships at places like 24-Hour Fitness and Goldâ&#x20AC;&#x2122;s Gym for our employees. We now have arrangements with 600 facilities around our system where Union Pacific employees can go in and exercise. Our wellness efforts really started with the fitness centers. We expanded from that to a program called HealthTrack in 1992, and we went out and really started measuring the fruits of our labors. Again, we started with just the fitness center idea, which was relatively novel concept at the time. Then we went out and really began examining how our employees were doing. We started with a pilot in North Little Rock, which later expanded around the system. We had a consultant at that time who looked at the HealthTrack pilot program and they found that we were reducing our healthcare costs as well as reducing our personal injury numbers. As you

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Disease Control until just recently. She gave me the statistic that 75 perBarbara Schaefer was named Senior Vice President, cent of healthcare costs are directly related to chronic illness, almost all of Human Resources of Union Pacific Corporation in April which is a result of smoking, exercise or lack thereof and poor diet. So it’s 1997, and corporate secretary for Union Pacific pretty easy to extrapolate from that if 75 percent of your healthcare costs Corporation in June 2004. She has 28 years of are a result of those lifestyle choices, you can make the business case very experience with the company. Prior to joining Union easily. Pacific, Schaefer was an attorney in private practice in But making the business case is only half the battle. You also have to Omaha. Schaefer is active in the community and has bring your people with you. Happily, I think our people absolutely get that served as a board member of many nonthis is a win-win for us. We want them to go to work, profit organizations. She is currently vicework safely and come home and be able to enjoy the chairman of the board of Children’s fruits of their labors. We want them to have a good, Hospital. Schaefer holds a bachelor’s long life with their kids and get the best from their redegree from the University of Nebraskatirement, and they understand that. So, we really Lincoln, a J.D. from the University of tried to focus on three things, which are the exercise, Nebraska College of Law, and has smoking and diet. We do whatever we can to help completed the Program for Management people with that, whether that is promoting a Weight Of healthcare costs Development at Harvard University. Watchers plan at work or providing gym member-

75%

result from unhealthy lifestyles may imagine, railroading work can be dangerous if not done well and according to guidelines. We found that employees who were less fit or who were overweight, not only were they more likely to get injured, but they were more likely to get seriously injured. That gave us a lot of impetus for continuing with the program. Obviously, programs like this have to demonstrate real value for money and that is something we have seen, certainly on personal injury and healthcare costs. The best information I got on this was from when I attended a meeting with Dr. Julie Gerberding, who was the head of the Centers for

ships. Just as an example, since we started our smoking cessation program, we have gone from a prevalence rate of 50 percent smokers down to 11 percent of our employee population smoking in 2008. Obviously society in general is smoking less, but it doesn’t have a rate anywhere like that. We have banned smoking on all of our property, which is 32,000 miles of railroad. Anyhow, it’s not like banning smoking in a manufacturing plant. We’ve banned it on all right across our network. We have put people through smoking cessation programs. We have offered nicotine replacement. We’ve offered pharmaceutical assistance outside the healthcare plan. In states where it’s legal to do so, we don’t hire smokers.

A platform for health

1992

20 years of wellness at Union Pacific

HealthTrack Pilot – high-risk identification and risk reduction program. Targeted cardiovascular disease risk factors – weight, blood pressure, cholesterol and smoking

1987 Fitness Center opens at headquarters No smoking in offices – smoking rooms established

1988 Union Pacific sponsors usagebased contracts with exercise facilities

1995 HealthTrack pilot results published

1996 Smoking rooms closed

1990 First lifestyle claims analysis to determine percentage of health care dollars spent on lifestyle-related behaviors

1997 HealthTrack expanded to 10 risk factors; obesity, asthma, high blood pressure, inactivity, stress, fatigue, diabetes, high cholesterol, smoking and depression

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A LITTLE HELP A guide to Union Pacific’s range of health and wellness benefits • EMPLOYEE ASSISTANCE Provides counsellors to help employees address personal issues and be more effective at home and at work. • HEALTH ASSESSMENTS AND HEALTH COUNSELLING Assesses risk for certain health problems and offers targeted counselling with a registered nurse to help decrease that risk. • HEALTH CONSUMER INFORMATION A 24-hour nurse line provides online information about healthcare topics, along with regional price and quality ratings for providers. • WELLNESS AND FITNESS SERVICES An on-site fitness center in UP’s Omaha headquarters and a network of fitness centers across the country for employees to use. In some locations, employees also have access to personal training and exercise classes. • SMOKING CESSATION A subsidized tobacco cessation program which includes prescription medication to reduce the urge to smoke, along with telephone counselling and educational materials.

1999 Smoking cessation program launched Prohibition of smoking at all enclosed sites and on all equipment

2002 Diabetes management pilot Weight control pilot DeSoto Project – study on environmental policy changes, community outreach and local physician outreach

2003 Health Index pilot

2004 Prohibition of smoking on headquarters property and adjacent sidewalks First healthy cooking demonstrations First Health Expo – integration of health and benefits providers and topics

2005 Prohibition of smoking on all company property Begin hiring only nonsmokers where practicable

2008 Expansion of Occupational Health Nurse model for health promotion delivery Weight management grants

2009 HealthTrack expanded to 11 risk factors, added nutrition Redesign of health index Team-based weight loss competition

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You are what you eat One of the major things that we have done in our headquarters building is based around healthy catering. We went all over the country to find a specific vendor to operate our dining facility so that we could try and make it the healthiest dining room in corporate America. We now have a menu where healthy items predominate. Forty percent of our menu items are sold from the healthy list. We have nutritional content information on everything in the cafeteria. We have also asked the vendor to put in healthy snacks in our vending machines, so a minimum of 50 percent of the items in our vending machines have to be healthy. When they cater meetings in the building you can’t just have donuts and cookies. If you are going to have things like that, you have to have a healthy alternative such as fresh fruit or granola bars or other things that would be viewed as healthy at the same time. Even outside of work we try to focus on nutrition. For example, we run things like healthy cookery classes.

We’ve really been very aggressive about it. Quite frankly, I thought when we started down this road that I would get a very negative reaction, but in fact, I get way more emails from people saying, “Thank goodness you’re doing this. You’ve changed my life. My wife’s quit smoking along with me.” We really have had an extraordinarily positive response to it, which, frankly, surprised me. We also have done things such as supported the Omaha Smoking Ban, because we recognize that we are a player in a bigger community. Right now we’re participating in an effort to try and make Omaha healthier in general. It’s our headquarter city, and we’re not limited just to what’s happening at Union Pacific for our own employees because we realize they only spend part of their lives here, and there’s a huge influence by what’s going on in the communities as well.

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We have been recognized a number of times with the C. Everett Koop National Health Award and with the National Business for Health Platinum Workplace Award. That kind of thing really adds to our brand as an employer. We’ve hired 29,000 people since 2003 and one of the things that people look for in an employer is a place that’s going to be concerned about their health status, as well as everything else. One important factor if you’re asking your people to embrace this focus on health, is that it has to be backed up throughout the company. Out of our whole senior staff, there isn’t a single overweight person. They are all into fitness. They walk the talk and they support these initiatives when they’re in the field. It’s key that wellness needs to be viewed as an investment rather than a cost if the concept is going to catch on across the business world.That’s something that we are getting some positive signals about. We get benchmarked all the time, and I would say that is definitely an indicator. That indicates there are a lot of people that are interested in what we’ve done and want to replicate it. Frankly, we get a lot of ideas from other companies too about what they’re doing. So I think it’s definitely catching on. For a new administration that is expressing a great deal of interest in bringing down healthcare costs, promoting wellness has to be a factor. Our view is that the best way to get healthcare costs under control is to reduce consumption. That brings us back to the statistic that 75 percent of healthcare costs are a result of lifestyle choices. You can really resolve the healthcare in the country if you go after these things. From what I’ve heard, I think that both parties may be at a point where they can reach agreement. Who can argue with just having people stay healthier in the first place?

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IN FOCUS

The

cost of living As healthcare expenditure spirals out of control, America is looking for new ideas. Wellness provides a possible solution, but can it prove its worth, and what will it take to bring business on board?

illian Petty tells a story that serves as a stark illustration of America’s gathering health crisis. “I was making a presentation at a conference and this guy came up to me and interrupted the group,” she recounts. “He worked for a casket-making company and he told us that his costs were increasing because they were having to make larger caskets for everyone from babies to adults.” It’s a morbid illustration of the intersection between life, death and money in the US. But one anecdote can’t really sum up the true enormity of the situation. In 1980, healthcare expenditure in the US sat at $253 billion. By 1990, that figure had hit $714 billion and in 2008 it had risen to a staggering $2.4 trillion, or 17 percent of our nation’s GDP. If this trend continues, we will be spending $4.3 trillion a year on healthcare by 2017. In light of these figures, wellness seems to be a concept whose time has come. While wellness was traditionally dismissed by cynics as a woolly and illdefined approach to health issues, these mounting costs are forcing a rethink. The statistics become even more compelling when you consider that as much as 75 percent of these

costs are attributable to illnesses caused by lifestyle, such as smoking, poor diet and a lack of exercise. Suddenly the simple act of stopping people becoming ill in the first place looks like a banker. The big ‘but’ comes in the challenge of effectively measuring the financial benefits of wellness programs. Business is motivated by the bottom line, never more so than in difficult times like these. If you can’t confirm that an investment is paying off, then don’t expect it to get much play in the boardroom. It’s an issue that Petty, former manager of corporate benefits at Schlumberger and current President of the Alliance for Wellness ROI, is only too familiar with. The formation of the Alliance for Wellness ROI came about directly to counter the uncertainty that has prevented business from buying into wellness. “There’s no standard definition for wellness, so we’re pushing that in companies,” says Petty. “Are you doing family support programs, or a comprehensive physical program? Just comparatively deciding what a wellness program is has been a huge challenge.” Steve Villella, Vice President and Health and Welfare Practice Leader at employee ben-

efits firm Touchstone Consulting, echoes this concern. “The problem with wellness ROI is you’re trying to measure something that never happens,” he says. “You essentially say by virtue of participating in this wellness plan than these claims never happen. It’s somewhat of a dubious task because you’re trying to calculate something that it’s really hard to get your hands around.” Petty’s interest in preventative health goes back quite a while. While working at Schlumberger, an engineering and services firm heavily focused on the energy market, she became aware of the amount that was being spent on life insurance. “In Schlumberger, people would come to work pretty much at the beginning of their career, some of them right out of college and high school working on oil rigs,” she says. “They’d work very, very hard, and I kept seeing that these people would drop dead five to seven years after retirement. It led me to ask the question; if we’re spending this much on life insurance, what are we doing on preventative? The more I dug down into what they were doing, the more difficult it became to find out what was actually happening in the area of preventative healthcare.”

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Creating standards about what exactly constitutes a wellness program is key to ensuring their wider acceptance. At Schlumberger, Petty’s answer to this issue was to build the program around one key spoke. “We carved out a comprehensive physical exam done by one company throughout the US,” she says. “If I sent all our people to different doctors, who’s to know what we’re getting is really the preventative exam?” Schlumberger partnered with a company called EHE International as the sole provider of physical exams. Having all the information from these exams in one place and one format allowed Petty to see a far more complete picture of the company’s overall health. Problems like high blood pressure and high cholesterol were prevalent; in short, conditions largely associated with lifestyle that had the potential to cause serious illnesses as employees aged. Petty is clear that health and wellness needs to be tackled aggressively, and she sees parallels in the way that business has approached another major issue. “It’s like substance abuse management in companies,” she says. “They have begun to say if you are abusing substances, you can’t work for us. So you begin to build a culture that is free of substance abuse. The exact same thing has to happen in health. My prediction is that we will get to a point where if people don’t begin to participate in some of these voluntary programs we will begin to say that they have pay more to be in a health plan. We’ve not done that at this point.” For Petty at least, these more heavy handed tactics weren’t required. At Schlumberger, the carrot was employed more frequently than the stick and the response from employees was generally favorable. However, any idea that a wellness plan can be set up and immediately

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start showing results is misguided. “The biggest challenge is that most employers think they will put in a program, and next year their costs are going to go down,” Petty says. “This has to be a three-to five-year continued program, and it has to be a strategic population impact plan approach, not just one program.” This means offering employees plenty of choice, and even

being more behavioral and socially grounded, I thought that this wasn’t going to go away with a silver bullet of a strategy. To me, it has to go with managing population health over time.” Petty then went to the members of the CEB to find out if they wanted to join together to tackle the issue. Five came on board. The next challenge was taking data from a disparate range of companies and beginning to build a financial model for valuation. Even with only five companies on board, the amount of information that needed to be collated was huge. “It’s taken us almost four years to just gather every healthcare claim, every pharmacy claim, every wellness program, information on who’s participating and who’s not,” she continues. This work involved not only actuaries but also epidemiologists from Columbia Presbyterian Hospital in New York. Getting these different perspectives was essential, claims Petty: “That was the big difference, because we wanted to have the science of the epidemiologists, the actuaries, as well as the benefits strategic HR people, involved in coming up with this whole approach.” To crunch the data the nascent Alliance turned to Touchstone Consulting. Steve Villella was involved from the start. “We were able to

“Just like you invest in making sure the tools run well and the buildings are kept up-to-date, there has to be investment in the people” offering rewards for those that sign up. “It’s amazing what people would do to get a cap or a T-shirt,” continues Petty. But while it is possible to draw certain conclusions on the value and effectiveness of wellness programs by looking at a single company, to get a full picture you need bigger numbers. It was this understanding that led to the formation of the Alliance. “I had been participating as a board member for the Council on Employee Benefits, going to meetings every year with the top 200 companies,” Petty explains. “All I kept hearing was, ‘cost shifting.’ My background

take the data from the Alliance’s five founding member companies, which is about 250,000 lives,” he says. “It’s a pretty good data set. We took three years of data, did our analysis, and we came up with ROI. Now, although that’s a great number, what we want to do going forward is start producing ROI for multiple combinations of programs and the effect of one program on the other. With 250,000 lives you can start doing that, but we would prefer to have 2.5 million lives. The more lives we get, the more we can do with it, the more credible the results.”

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Standards are at the very core of changing the perception of wellness from touchy-feely adornment to a valuable business tool. Currently there is no clear definition of what constitutes a wellness program. Two companies could offer a program that bear very little resemblance to each other. Correctly putting a hard dollar benefit on something with such widely differing parameters is a virtual impossibility. To address this issue, the Alliance employs a standards group to annually consult on the factors used to run its ROI modeller. This group once again takes in a wide range of expertise to get a full spectrum picture. “It’s not just the science of the consultant or the science of an actuary, it’s looking collaboratively at those and coming up with the factors that measure,” Petty says. “We think those standards are what’s going get the C-suite to recognize the value of these programs and understand the fact that they’re managing population health and not just something cutesy like a wellness program.” The statement that ‘people are our greatest asset’ crops up so often when speaking to HR and business leaders that it is in danger of becoming nothing more than a platitude. If companies are really serious about the value of their people, then helping them stay healthy should be a no-brainer. “It’s an investment in your population,” Petty confirms. “Just like you invest in making sure the tools run well and the buildings are kept up-to-date, there has to be investment in the people. In these challenging economic times and even before, we push people all the time to give their best. And they spend more and more time in the world of work.” But all that’s gone before means nothing if the figures don’t stack up. The commitment to a company’s people will only exist as long as the profit and loss figures are arranged in the right way. The good news for the Alliance, and those employees that stand to benefit from its work, is that early indications demonstrate some very positive results. “For the first five founding member companies in three years of analysis we have looked at individual programs, and we found some really interesting things,” says Villella. “Certain programs take longer to yield a positive ROI. A program may be a good program, but you’re not going to see any return on your investment in the first three

RAISING THE STANDARD The Alliance for Wellness ROI was founded in 2005 as non-profit corporation by BMW North America, Henry Ford Health System, Kraft Foods, MasterCard Worldwide and Schlumberger. The Alliance has identified several key components that should be present in any wellness program. Adoption of the these standards is seen as key to building a comprehensive understanding of the true value of wellness. Disease management Employee assistance programs Fitness programs Health risk appraisal Onsite medical program Personal wellness profile

Screenings/preventive care Smoking cessation Telephonic wellness services Weight management Wellness education/communication Work/life balance

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years, whereas with other programs such as disease management programs, you see a much quicker return on your investment. The other thing we found is certain wellness programs by themselves don’t really achieve much of a return on their investment, but when coupled with other programs, they boost the return for them, and a good example of that is a health assessment.” According to Villella, this failure to take the impact of multiple components into account has been one of the key reasons that efforts to study wellness ROI in the past have had unsatisfactory results. “They looked at typically individual wellness program components, and what the Alliance wants to do is see what kind of synergies may or may not lie in participating in different combinations of these programs. They call that an integrated ROI,” he explains.

tiously optimistic: “There’s a leadership group that’s been working in the area,” she says. “Obama uses the words ‘prevention’ and ‘wellness’, and I’m seeing that as definitely a good thing.” Nonetheless many of the hard yards will still have to be made by business. “It’s a huge elephant to turn around, that that’s why we started the alliance,” she continues. “We can’t wait on Washington. Companies pay the money, so if they’re going to wait on government to bail us out it could be quite a long wait.”

what’s really producing the claims costs. The old axiom in our actuarial world is 20 percent of the individuals make up 80 percent of the claims. If you really want to affect your claim cost, you’ve got to go after those 20 percent of the people. A way of doing that is through wellness programs.” Ultimately though, a change will have to come. Current healthcare spending is unsustainable and, even if it weren’t, surely it’s better to use funds to prolong and improve their

This sentiment is echoed by Villella. “The government, although they seem to push wellness, you don’t see them really giving individuals an incentive to be well,” he says. “But the biggest reason why I don’t think we’ll see anything in the short run is they have bigger fish to fry right now with the economy. So, I think healthcare is going to take a backseat to that. But even if it were not to take a backseat to that, it seems like the government is more interested in whether we should have socialized medicine and less interested in

people’s lives rather than just paying off their dependents when they die early? But money is only half the picture. People themselves have to want to make this change happen, to alter the lifestyles that are contributing to health problems. Petty remains optimistic but agrees that the road ahead will be a long one. “It will require a big change in our culture,” she says. “Look at smoking. We’ve had success there, but it took years to turn it around. Now if you see somebody smoking, you wonder what’s wrong with them.” n

1980, healthcare expenditure in the US sat at $253 billion. By 1990, that figure had hit $714 billion and in 2008 it had risen to a staggering $2.4 trillion Even though the Alliance’s study is at a reasonably early stage, Villella is still able to supply some fairly striking results. “Spend one dollar on a wellness program and you’re going to get two to three dollars back in claims savings,” he says. “That’s pretty good. Even if you were just getting your money back, it’s probably not a bad idea to offer these programs. You talk about a 15,000-employee company and they’re incurring medical claims of $100 million a year. You could be talking about $5 million in savings just by offering these wellness programs above and beyond what you’re spending on them. Five percent of your claims is a good chunk of money.” But even in the face of results like these, much needs to be done for wellness to take center stage in business’s battle against healthcare costs. Perhaps a new administration will provide the required impetus? Petty seems cau-

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ASK THE EXPERT

Don’t just survive, thrive Beth Lundholm explains how managers need to push forward despite the financial crisis

ight now you need optimal performance from each and every employee, yet fear and stress caused by economic woes can seriously hamper health and productivity in the workplace. As a manager, you may worry about losing your own job. You may also be coping with the difficult tasks of carrying out layoffs and cutting costs. The workday comes with distractions, malaise, missed opportunities, forgotten deadlines and average results. As stressful days weigh on you and your employees, health, productivity and attendance suffers. How can you turn yourself and your team around? Look to your employee assistance program (EAP) and health and wellness programs for the support and guidance you need. You likely used your EAP to help employees who were let go cope with their loss; now you need to use your EAP to help with your remaining team. Not only do you need to lead with less, but you need to refocus and motivate your surviving workforce quickly in ways that will remove obstacles, reduce stress and create a vision of strength for the future. Boosting your team’s resilience and minimizing the toll on you and your employees is something that you can do with the help of your EAP. Here are some ideas for helping you and your employees move forward:

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• Help employees see the positive side of change. Start by building a positive culture of gratitude and strength. Something as simple as stating, “thanks for a job well done”, or, “we will get through this”, can go a long way toward focusing on the positive outcomes and opportunities that change can bring. • Build an environment of trust and communication so channels will become more open and transparent. For example, when you empower your team to make decisions and demonstrate that you don’t need to be copied on every email, you develop a strong foundation of trust. • Be available as a manager and make sure that your employees understand that they are free to come to you with questions, concerns or ideas.

• Help your employees regain a sense of control by finding ways that they can produce excellent results fairly quickly. This might look like a team brainstorming meeting to explore ways to cut costs or to boost productivity with a follow up meeting to put those ideas into practice. • Formulate strategies for dealing with the impacts of change with your peers, other managers and with employees. For example, two departments could equally share a resource with a similar skill set following a workforce reduction. Perhaps a labor-intensive report is no longer needed or could be created less frequently. • Remind yourself and your team of challenges you’ve successfully faced together in the past. The current financial crisis probably isn’t your first managerial challenge, and it probably won’t be your last. Talking about past challenges and the successful outcomes will help boost morale. • Stay mentally and physically healthy and encourage your team to do the same. Watch for signs of stress in yourself and in the people you manage, and take advantage of resources to learn strategies for addressing these issues before they become limiting factors to your team’s success. • Nurture your own resilience. Give yourself time to get rejuvenated and renewed so that you can be a positive role model for your team. Much is currently being asked of your employees – and of you. Supporting employees with resources for coping with stress will help build individual and team resiliency. Taking advantage of the same resources for yourself will help you stay strong and succeed as a manager. Use this crisis as an opportunity to turn to your EAP and health and wellness resources. Armed with the tools to transform these events into your own personal success, your organization’s success will naturally follow. n

Beth Lundholm, Ceridian LifeWorks Manager of Management Services, is a licensed psychologist with expertise in addiction and behavioral health. With over 20 years of experience as a clinician and manager in various industries and private practice, she offers knowledge and creative leadership in responding to challenging workplace issues.

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INDUSTRY INSIGHT

What to look out for Liz DiGiandomenico explains how companies who offer vision benefit plans are using them to their own advantage

ith healthcare costs rising and budgets tightening, now is the perfect time for benefit managers to consider a vision plan.Whileaddingalineofcoverageisprobablynot top of mind, vision benefits are uniquely positioned to add perceived value to employees without adding a great deal, if any, expense to the company. The number of companies offering vision plans continues to increase. The Society of Human Resource Management, which conducts a comprehensive national survey on employee benefits, reported that 79 percent of employers offered vision benefits in 2007. This represents an increase over the past several years. Several factors – including the many advantages to employers – contribute to this trend.

Eye exams equal better health During a dilated eye exam, the doctor has an unobstructed view of the blood vessels. In addition to revealing the health of the eye, this exam can also detect symptoms of serious health conditions like high blood pressure, diabetes and heart disease – sometimes before the medical doctor has made a diagnosis. With early diagnosis comes better treatment and potentially lower medical costs in the future. By offering a vision plan with eye exam coverage,yourcompanypromotesoverallhealthand,according to a recent study published in the Archives of Ophthalmology, employees with vision benefits are more likely to have an annual eye exam. Companies frequently offer vision plans on a voluntary basis. In this scenario, even though employees fund the cost of the plan, the company still reaps the rewards of offering employees a means to save money on eye care and eyewear – without impacting the company’s budget. Vision plan rates are among the lowest overall, so an employee-paid vision plan can help take the sting out of reductions in other lines of coverage by simply offering it as an option. To realize the most out of a vision plan, look for characteristics that ensure the highest return on investment.

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Liz DiGiandomenico is the President and General Manager of EyeMed Vision Care. She has served in several executive and managerial level leadership positions in her 13-year tenure with EyeMed and its affiliated organizations. DiGiandomenico is president for the National Association of Vision Care Plans. She was twice recognized as one of the Most Influential Women in Optical by Jobson Optical Group.

Seek an organization that offers flexibility and multiple plan design options. The vendor should be willing to work with you on developing the best plan design for your company and its employee demographics, ultimately maximizing your spending. Be sure to consider usage of eyeglass lens upgrades such as anti-reflective coating and progressive multifocals, and look for plans that can fund these options upfront if they are heavily used by your employees. Make sure the plan includes a health and wellness component, including ICD-9 code reporting, so you

can link plan usage to chronic conditions like glaucoma and diabetes. Examine the network composition to make sure it offers diversity in location, type of provider (retail or private practice) and specialty (optometrist or ophthalmologist). Members desire choice. They also like the option of having their eyewear prescriptions filled at a dispensary other than where they have their eyes examined. Understand exactly what administrative support will be offered. Most vision plans want the benefit to be hassle-free for the client and offer a variety of turnkey support solutions. Specifically ask what kind of self-service tools (online and via phone), communication and awareness materials (including identification cards) and other member support will be offered at no additional charge. Look for a plan that provides face-to-face contact with employees. According to the MetLife 2008 Open Enrollment Survey, 82 percent of those with access to resources were satisfied with their company's benefit offerings, while only 51 percent of those without access to resources were satisfied. Vendor support for on-site health fairs and meetings educates members about the benefit from those who know it the best. Analysts may be predicting more economic challenges throughout 2009, but adding a voluntary vision plan could have many positive returns for you and your employees.

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ASK THE EXPERT

Fighting fit Dr. Deneen Vojta discusses how individuals and companies alike can attempt to combat diabetes to help better manage both its overwhelming health and financial costs

lthough diabetes cannot be cured, there are ways individuals and employers can work together to help improve employee health and help control employer costs. Early detection, early treatment and effective care can be crucial to diabetes management, but these actions are hard to promote without the involvement and motivation of the individual. To help encourage employees to seek out diabetic or pre-diabetic care, employers should consider implementing a targeted health plan fueled by employee participation incentives. This type of plan, currently in pilot-mode at UnitedHealthcare, can empower individuals to take control of their health by reducing or eliminating out-of-pocket expenses for routine diabetic services, medications and supplies in exchange for adherence to the American Diabetes Association’s (ADA) preventive care guidelines. Paired with personalized health plans designed to meet the specific needs of diabetics, pre-diabetics and their eligible family members, UnitedHealthcare’s Diabetes Health Plan pilot can allow individuals to take a proactive role in learning about and managing the disease. Value-based plans like the Diabetes Health Plan can be an effective way to help motivate employees to make informed decisions and seek routine care because individuals must meet specific, evidence-based preventive care requirements to remain in the program and receive

Dr. Deneen Vojta serves as both a product lead and thought leader in the domain of consumer engagement. Vojta joined UnitedHealth Group in 2006 after MYnetico, a company she founded to offer a network of obesity-related solutions, was acquired. A native of Philadelphia, Vojta graduated ‘Senior of the Year’ from the University of Pittsburgh in 1986. In 2003, she was named ‘Top 40 under 40’ by the Philadelphia Business Journal.

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as standard diabetes, preventive and wellness care testing in order to remain in the plan. Education, preventive care and treatment are not the only benefits of the plan. Financial incentives, such as reduced or zero out-of-pocket expenses for certain evidence-based standard diabetic care and medications can be strong motivators for compliance. A recent study shows that nearly three-quarters of employees would be very likely or extremely likely to enroll in a plan designed to encourage health care self-management through incentives. Another incentive for employees is that their family members are also eligible for enhanced coverage, whether they are pre-diabetic, diabetic or non-diabetic.

enhanced benefits. Because these compliance requirements are proven to help reduce the risk of diabetes and improve both clinical and financial outcomes, this ultimately may help employees avoid expensive chronic complications and can help employers manage long-term costs. To implement the Diabetes Health Plan, the first step is diabetes screening. Historically, about 20 percent of the employee population with chronic conditions is responsible for 90 percent of health care costs. By identifying at-risk employees and enrolling them in a proactive care plan, an employer may save thousands of dollars per year per individual. Once employees are identified as pre-diabetic or diabetic, they can enroll in the plan and are introduced to the ADA preventive care guidelines. Education plays a vital role in the success of this plan, because if individuals do not understand the disease, they are less likely to adhere to the program or remain compliant with the care plan. This plan works in tandem with existing medical management programs to help individuals understand the disease and its implications, and it provides practical ways to manage the condition by converting knowledge into action. Enrolled employees, or members, are required to complete a health assessment as well

“20 percent of the employee population with chronic conditions is responsible for 90 percent of health care costs” To help employees meet their compliance requirements, the plan includes a personalized, secure web portal that stores individualized health information such as personal health records, activities, health status and other areas related to pre-diabetes or diabetes care. This information is an aggregate of medical claims, lab results, pharmacy records and employees’ personal updates. The portal is also a tool to track employee compliance by monitoring required health activities. By bundling compliance with effective preventive and treatment programs, incentives, and educational tools, employers can help their employees more effectively manage diabetes while also help managing costs. n

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WELLNESS

Getting better

? Kelli Kolsrud of the International Federation of Employee Benefit Plans sheds some light on the state of corporate wellness

he IFEBP recently completed a major survey into wellness programs, focusing on the design of wellness programs and what employers are offering, and if they offer them at all. We looked at what types of initiatives were out there, whether organizations were getting adequate participation rates, whether or not theyâ&#x20AC;&#x2122;re offering incentives and if so, what kind of incentives? One of the first questions we asked was what is their motivation for offering wellness. fortysix percent said they want to control healthcare costs. Another primary reason is they just want to help employees have better overall health. Thatâ&#x20AC;&#x2122;s not really startling, but it confirmed what we expected.

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Then we asked about a lot of different initiatives. Screening and to do studies, but the trick with wellness is it’s a long term investment. health risk assessments and appraisals are popular, near the top of the You don’t institute a program and then six months later have a huge drop most commonly offered. Weight loss and fitness are also popular, as well in healthcare costs. It takes years and it’s a difficult task to try to change as some informational initiatives where companies arrange health fairs or behaviors and convince employees that it’s worth their while, both for give employees web links to useful rethemselves and for the organization. All in all, it’s sources. Unfortunately a lot of the programs a pretty complicated challenge. they institute do not have high participation I think sometimes employers institute plans Kelli Kolsrud is Senior Information/Research rates and that that’s a problem for employers and they look upon them maybe as a perk or a nice Specialist for the International Foundation of that leads them to offer incentives to try to to have. But for wellness programs to succeed they Employee Benefit Plans. The IFEBP is a increase those participation rates. have to be an integral part of the health plan and nonprofit organization, dedicated to being a We asked about specific initiatives and the culture. You need to have support from upper leading objective and independent global whether employers include incentives or not management to realize the full potential. You need source of employee benefits, compensation and also whether they believe they derive a commitment from the employer to budget for it, and financial literacy education and certain benefits from wellness. That brings allow time for employees to participate and reward information. The Foundation delivers up an issue that’s a challenge with wellness. them if necessary. Sometimes getting them started education, information and research, and A lot of employers are not measuring the rein the program isn’t so hard, getting them to continnetworking opportunities to benefits and turn on investment. Therefore they don’t have ue is the real challenge. People don’t necessarily compensation professionals. a sense for whether they add value or help want employers dictating what they consider their control costs. When we have an economic cripersonal lives and they are sometimes just used to sis like the current one, the main challenge for eating less healthy foods or not making the time to wellness programs is that employers don’t have a good sense of how much exercise. We’re creatures of habit and a lot of people don’t feel they have they save money or add value. These programs are then perhaps vulnerathe time to exert effort in that regard. Plus, some of those unhealthy foods ble to reductions, budget cuts and problems like that. taste really good. But if employers see the value of wellness plans and can Understanding the true value of wellness programs is going to be key realize that value then they’ll want to continue to support and enhance to their ongoing success. Academics have gone into companies and tried these programs. I certainly think the interest and popularity is growing. We

Healthy figures

• Control costs of high-risk conditions

Highlights of the IFEBP’s recent survey into corporate wellness programs

To a very great extent 1%

• Types of incentives 39%

Non-cash incentives/raffles/prizes Gift cards or gift certificates Cash rewards Insurance premium reductions Gym/fitness center discounts Contributions to health accounts Reimbursement of costs Waivers/reductions for deductibles Additional time off Other No Incentives offered

32% 22% 22% 21%

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To some extent 18%

To a little extent 12%

Not at all 6%

• Improved worker health

11% 10% 5% 4% 4%

To a very great extent 1%

20% 0

To a great extent 3%

Not sure 60%

To a great extent 6%

Not sure 50% Not at all 3% To some extent 27%

To a little extent 12%

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The concept of wellness isn’t something that should only be the have seen that, but their success may be closely tied to whether wellness concern of employers. News stories today in this country are heavily plans are able to show their value. populated with items about childhood obesity and lack of fitness in Wellness is not purely a financial issue. Another element of our suryoung people and children. Obviously, if you have that problem at a vey addressed the impact it can have on other factors within a compayoung age it’s only going to be worse as they age and enter the workny. We asked the participants in the survey whether they thought some force. It’s a social issue in this country and in Europe. and elsewhere in of the benefits derived included things like improved morale, worker industrialized nations. I think even health, increased productivity and reJapan is having problems. Fast food duced absenteeism. The areas where has taken over the world. they saw the most benefit is in worker “Weight loss and fitness are popular, as well As for who is going to take the health and morale and not as much in as some informational initiatives where lead on this going forward, the jury is controlling costs in general for healthcompanies arrange health fairs or give still out. It certainly seems like the care or of high risk conditions. A lot of employees web links to useful resources” new administration is interested in respondents to the survey just said they healthcare reform and many healthweren’t sure whether they derived bencare reform proposals include wellefits or not. That’s telling in itself. ness initiatives, improving quality of healthcare and reducing costs. A public health message is certainly part of healthcare reform proposals that are being introduced, but it remains to be seen whether or not they will come to pass. We just heard in Obama’s budget that he has set aside a healthy chunk for healthcare reform, but of course it has to get through Congress. There are a lot of people who will be clamoring for that money as well. It’s not a done deal yet.

• Increased productivity

Not sure 61% To a very great extent 1%

• Screening and treatment initiatives Flu shot program

To some extent 20%

To a little extent 10%

To a great extent 4%

82%

Health risk assessment/appraisal

Not at all 3%

73% 69%

Health screening

• Improved worker morale

60%

Smoking cessation program 34%

Stress management program Complementary/alternative medicine

23%

On-site massage therapy

21%

On-site healthcare clinics

Not sure 41%

12%

None of the above

To a very great extent 2%

100

To a great extent 11%

Not at all 5%

To a little extent 12% To some extent 29%

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ASK THE EXPERT

GROWTH REMAINS STRONG

percent increase in accounts. A Kaiser Foundation report cited eight percent of covered works in 2008 have HSA-compatible plans, up from five percent in 2007. While there are many factors contributing to these increases, cost savings appear to be the strongest driver. HSA-compatible health plans are on average 16.6 percent, or $782, less expensive for single coverage and 20.2 percent, or $2559, less expensive for family coverage.

Economic impacts

DEAN MASON

here is no question that the economy is bad and likely to get worse. Nearly every industry feels the negative effect of our current economic condition, and the healthcare and health insurance industries are no exception. For more than a decade, healthcare costs have been growing at twice the rate of inflation. In 2008, healthcare spending in the United Sates reached $2.4 trillion, and is projected to reach $4.3 trillion by 2016. Health insurance costs are not any better, with employer health insurance premiums rising five percent in 2008 to an average of $4700 for an individual and $12,700 for a family of four. Employers are scrambling to find ways to manage these increases, and even cut costs, while still offering an attractive health benefits plan. Health Savings Accounts (HSAs) are leading the way in a new era of consumer directed healthcare. They help employers and their employees realize immediate premium savings, tax savings on medical expenses and account funding, and reduced claims experience when combined with a comprehensive focus on healthcare and wellness.

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How an HSA works HSAs work in combination with an HSAcompatible health plan. The health plan features a high deductible and covers medical expenses incurred above the deductible. The HSA is available to pay for eligible medical expenses before the deductible is met and other medical expenses not covered by the health plan. Many employers’ first instinct is to shy away from a ‘high deductible’, but in most cases, employers who offer a high deductible health plan are able to save money on premiums and have enough savings left over to contribute to employees HSAs. When trying to overcome the fear of a high deductible, it is important to remember that HSA-compatible plans come with a maximum outof-pocket, which includes costs for prescription drugs and expenses incurred towards the deductible. After reaching the maximum out-ofpocket, the employee’s medical expenses are generally paid by the health plan at 100 percent.

A growing healthcare choice Health Savings Accounts continue to experience strong growth rates. Industry account growth figures from September 2007 to September 2008 indicate that the top 10 HSA administrators have experienced an average of 70-80

While HSA growth has remained strong, HSAs have not escaped the current economic downturn. Recent data from HSAs Bank’s accounts suggests there is a slight decline in account funding from employers. Statistics drawn from January 2006 to January 2009 show that, on average, employer contribution amounts are down nearly 11 percent. However, as of January 2009, employers are contributing to almost 40 percent more accounts than they were in 2006. The rise in the number of employer-funded accounts suggests that HSAs are taking hold as a mainstream option to reduce healthcare expenditures. In addition to employer contributions, accountholders also have the option to fund an HSA themselves and pre-tax employee contributions are on the rise, with nearly 70 percent more employees making contributions this January, compared to 2006 with the average contribution amount remaining stable. The bottom line is that HSAs are affordable for both employers and employees, while still providing quality healthcare. An added bonus is that their cost effectiveness will increase over time. Research shows that HSAs provide an incentive for individuals to embrace a healthier lifestyle and control preventable medical costs. In a tight economy where an employer’s leading cost is health benefits, it only makes sense to consider Health Savings Accounts. Dean Mason is recognized as a leader in the Health Savings Account (HSA) industry and joined HSA Bank as the Chief Executive Officer in January of 2009. His extensive experience in strategic planning, operations, finance, information technology and public policy will assist HSA Bank in building upon its current industry position.

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WELLNESS

Clean

living

Michael Roizen of Cleveland Clinic tells HRM’s Natalie Brandweiner about the lifestyle choices that make healthy genes

ichael Roizen knew as early as nine years old that he was destined for the world of healthcare. A home visit from a pediatrician to cure a brief, sudden illness gave him enough motivation to work toward a career in health, culminating in his current role as Chief Wellness Officer at Cleveland Clinic. An optimist, Roizen believes in the possibility of great change – in structural reform from the current model of disease care to one of preventative care, a change championed by the new administration in Washington. This is a change so drastic that it has been met in some quarters with great criticism, with opponents claiming that it is an unrealistic policy that cannot be implemented in the current economic climate given the funds that would be needed. However, Roizen holds firm to the notion that such a change makes economic, as well as health-related, sense. “Last year in the United States we spent one out of every six dollars, 16.3 percent of our gross domestic product, on healthcare. In eight years we’re projected to spend 19.6 percent. That obviously lowers our standard of living and makes us less competitive. We’re twice as expensive as the 10 developed countries in Europe, not because we’re more expensive per episode of care, but because we have twice the chronic disease. “If you look at heart disease for people aged 55-65 in Europe it’s 11.4 percent. It’s 21.8 percent in America. If you look at arthritis it’s 21.3 percent in Europe, including Great Britain, but it’s something like 53 percent in the United States. If you add all the major chronic diseases up, we’re twice as expensive. There are three

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things that cause 70 percent of chronic disease in both the United States and Europe: tobacco use, physical inactivity and food choices. Not to criticize sick care – a lot of improvements have been made because of a great sick care system – but it makes more sense and is much less expensive to have great preventative care. There’s no reason in the United States why we can’t reduce our total healthcare budget by 50 percent, or at least not increase it, as long as we focus on those three areas,” explains Roizen.

Incentives In order to bring about a system such as this, Roizen proposes that instead of paying physicians solely for treating patients who are ill, incentives – both monetary and otherwise – should be made to favor prevention. “We need to make people understand that they control the quality and length of their lives, and that they can influence their genes if they want to. It is much less difficult than most people assume,” he says. Cleveland Clinic has begun a program, under the leadership of CEO Toby Cosgrave, to take a tough stance and propel the clinic into the limelight for preventative care, as Roizen explains. “We have banned smoking on campus, along with offering a free smoking cessation program to the community and our employees, and we will cease hiring smokers. We’ve started with something relatively tough but that was the biggest and most immediate thing.” Cleveland Clinic’s strategy has been successful so far, with nearly 16,000 people in the community quitting smoking, and an additional 4000 employees and 1000 of their dependants quitting. In order to bring about such a high rate of reduction, Cleveland Clinic initially used two programs. It now has 12, and one of the ways in which it encourages its employees to quit is through the support of family health centers. The practices are run by between three and 20 people, offering internal medicine offices with some sub-specialties distributed in various places in Northeast Ohio, and a few located internationally. There are now smoking cessation programs in 10 of those locations rather than just one at the main site. The clinic’s main site is a 1300 bed inpatient facility and cares for around two million outpatients a year. Roizen explains, “We did a number of things to encourage smoking cessation at the main site, one of those being reimbursement. “It costs roughly $600 for us to get someone to quit smoking, and most smoking cessations were not covered by health insurance. With our own employees we paid the dollars for it. In most programs the employee has to pay and then gets reimbursed. “Smoking is a very interesting thing, as are most habits. Most people hold pleasure money in the left pocket and medical money in the right pocket and the two don’t mix. The savings from not buying cigarettes would have easily paid for the program, but the smokers don’t consider those interchangeable pockets. Our method was brilliant because it allowed us to do things that meant all the employees responded very positively.” This was not the only method Cleveland Clinic used to rid the workplace of toxins. In the various vending machines located around the clinic, all available snacks were made healthy, with a clear labeling of foods. Baked chips replaced fried, chocolate bars were made from cocoa and not milk chocolate – with no more than four grams of sugar per bar. Nuts, fruit and fruit drinks were also introduced.

“Last year in the United States we spent one out of every six dollars, 16.3 percent of GDP, on healthcare”

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Labeling is also a major focus of Cleveland Clinic, in an attempt to meet the peer-reviewed criteria they have set, such as decreasing saturated fat and trans fat, and the removal of simple sugars and syrups. Sales from vending machines fell during the early stages of the healthy criteria implementation, but increased as both patients and staff became used to the changes. The same thing happened with inpatient meals. “We went through a serious menu makeover and worked with our vendors and within the hospital to break down the line between what most people consider healthy food on one side of the line and great tasting food on the other, so that great tasting and healthy could be the same. “The purpose of the whole program is to allow us to be more competitive for jobs by driving healthcare costs down, and also to enrich the lives of all the people we touch by letting them live longer and healthier lives, with a higher quality of life,” explains Roizen.

Community care

Healthy living

A farmer’s market was also started on campus, referred to as ‘community-supported agriculture’, located at the outlying hospitals and sourcing locally grown vegetables for both staff and patients. Roizen notes that for each of the first 5000 visitors to the market, the clinic donated $1 to a community food bank so it could to buy fruit and vegetables for people using the community-supported grocery and food items. “Therefore, although a lot of it was to invest in our employees to help them get healthier, help them walk the walk of health, it was also to invest in patients in our communities and show that we can make this area of the country more competitive, lowering not only our own health costs but the health costs for everybody in our community,” says Roizen. The farmer’s market program must certainly make the farmers happy, as the clinic guarantee full sale of all their products: any product not bought by staff is purchased by the hospital’s cafeterias, which use the food over the next few days. The reaction was overwhelmingly positive from patients, employees and the community. Only one negative comment was recorded regarding wheelchair access, which has since been rectified.

There are 21 chronic diseases in which lifestyle changes have a bigger effect than drugs. However, the majority of Americans tend to be quick to take a pill to make themselves well, rather than pursuing a better lifestyle – eating healthy, exercising and reducing stress levels – and this is why the clinic has responded with a program of lifestyle change. Along with the benefit of a program that is more compelling and fun than a simple dose of medication, there are the added advantages of a less expensive option when avoiding the outcome of treating a chronic disease. Cleveland Clinic’s commitment to providing this healthy program to their staff is displayed by the free access it provides to the Weight Watchers program. “We sent 31,000 full time employees covered by our health plan, and in six weeks 7200 employees had signed up for Weight Watchers either at work or at an offsite location. In the first four weeks roughly 3000 people lost a little over 12,400 pounds,” says Roizen. The only criticism of the program came from male participants, who felt overwhelmed by the number of women in attendance com-

“We need to make people understand that they control the quality and length of their lives, and that they can influence their genes if they want to”

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pared to men. “As a healthcare organization my guess is we’re probably 60-70 percent female, so we started some male-only classes in Weight Watchers.” The impressive results generated by the program have continued with the non-Weight Watcher employees who are encouraged to attend sunrise-sunset yoga classes on campus. There are currently six at the Cleveland Clinic sites, with 47 classes each week, with 1000 employees participating.

Changing habits The clinic has also launched Realage.com, a free website available to everyone with information that can help each individual ingrain themselves with at least one healthy living habit. Roizen explains the purposes of the website, the first being a ‘do-over’: a

Michael Roizen was named Chief Wellness Officer at Cleveland Clinic in 1997. Prior to that he was CEO of the Biotechnology Research Corporation of Central New York, before accepting the position of Chair of the Anesthesiology Institute at Cleveland Clinic. Roizen is also the Cofounder and Chair of RealAge, Inc.

focus on the good genes that determine a healthy life. He notes the function of genes is to make proteins, which invariably govern your life, and it is the changing of both the quantity and quality of these genes that can affect your health. “Second, walking 30 minutes a day and calling a buddy after doing so keeps you motivated. Third is to avoid the five aging foods: saturated fat, trans fat, simple sugars, syrups and high fructose corn syrup. The fourth one is talk to your doctor and see about taking five pills and flossing. The pills are DHA, which is the omega 3 that’s active in the brain. Calcium, magnesium and vitamin D, that’s the second pill; the third pill is a multi-vitamin, the fourth pill is aspirin, and the fifth pill ensures the right amounts of calcium, magnesium, and vitamin D are delivered. Flossing is important because the periodontal disease causes inflammation in your arteries, in your immune system, and leads to both heart disease and more serious conditions,” says Roizen. Cleveland Clinic’s success is found not only in the statistics of pounds lost or the number of people no longer smoking; its employees are demonstrably happier, according to Roizen, and as a result, patients are better served. Employee health costs are also coming down due to healthy employee living. The clinic is consistently rated in the top five best hospitals in the US, so it’s easy to see how employee wellness can make a positive impact.n

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INDUSTRY INSIGHT

A healthy affair Do you know how much your Free Health Fair costs you? And how much does it cost your company? John Buckley of Health Fairs Direct explains

our Free Health Fair can cost you, personally, anywhere from $250 to $650 per year, along with every other employee in your company. Your Free Health Fair can cost your corporation an additional nine percent increase in your medical insurance premium every year. How could this be? You love your health fair salesman and they told you that they will give you a fun event that will motivate your employees and improve morale. They offer you free screenings, free massage and will

The secret is that the majority of health fair providers are out of network medical doctors who use corporate health fairs to get new patients for their personal medical practice. Since these health fair companies are owned by a specific medical practice, the entire event is designed to create the most business for that medical practice as possible. This is where expensive freebees come into play. Doctor’s offices give away free services as an investment in their marketing strategy, which is ‘Get Corporate Employees with Good Insurance’.

“The health fair industry is so new that corporations have not yet scrutinized the backend profiteering” even provide lunch for all of your employees; their event looks good and since your company does not have a budget for health fairs, you need to get whatever you can for free. Sound familiar? It should. The majority of the health fair companies across the US operate this way and chances are, at one time or another, your corporation has said yes to all sorts of tantalizing freebies without asking.

What’s the catch? Why would a health fair company give away thousands of dollars worth of free services just for the privilege of running a health fair at your corporation? The answer is simple: personal profit for the doctor who owns the health fair company.

Here are the most common money making gimmicks used by doctor-owned health fair companies who make their living from corporate events: • F ree cholesterol and glucose screenings • Free lunch for all of the staff • Three to six free massage therapists during the event • F ree massage therapy for any employee who shows up at the doctor’s office • Out of network doctors who do not bill your employees according to medical insurance industry regulations

rations would not accept them under any circumstances. Unfortunately, the health fair industry is so new that corporations have not yet scrutinized the back-end profiteering. When 10 percent of a corporation’s employees utilize out-of-network medical doctors they will have a minimum of a nine percent medical insurance increase at their next renewal. Every employee’s personal contribution toward their medical insurance will also be increased by a minimum of nine percent. In this economy, are you willing to personally pay an extra for your medical insurance? Your best protection is to apply your HR hiring skills when choosing your health fair provider: do your due diligence; trust but verify; negotiate your best deal that does not involve kickbacks; create a health fair budget that co-mingles with your medical insurance premium; do not hire a company based on the personality of their sales representative. Most of all, use your common sense and look for the catch. Pay attention to back end profiteering. If it would be too good to be true in another part of your life; then it is too good to be true for the health fair industry as well. Remember: There’s no free lunch! n

John Buckley is the CEO and a co-owner of Health Fairs Direct, a division of OpenHouse Direct Inc. He purchased the company in 2000 and has grown it to a full service national corporate health & wellness fair coordination company. He has been working to educate corporations and bring much needed reforms to the health fair industry.

In other industries these ‘freebies’ are clearly identified as kickbacks, and corpo-

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OPTUM TRBL:feb08 01/04/2009 15:00 Page 70

TROUBLESHOOTER

TOP OF THE CLASS DR. GAIL BORGATTI CROALL

As employers look for ways to control the cost of healthcare benefits, they often partner with organizations that offer ‘best-in-class’ programs. But can organizations reap the benefits while gaining a better view of health and productivity within their entire population?

member’s overall health. The vast array of data it draws upon includes medical claims data, lab results, pharmacy information, self-reported data, as well as behavioral and segmentation information. All this data lives in one system, so it can work as one and uncover relationships between the data. This produces a more personalized picture of each member and results in more personalized care. The personalized care management recommendations and view created by eSync are the foundation of all interactions between OptumHealth nurses, coaches, advocates, educators and the individuals they serve. This means that all members of a population, regardless of their individual situation, will receive coaching and information that is consistent from interaction to interaction and are specifically targeted for that individual to help them improve their healthcare outcomes and live their lives to the fullest.

o optimize the health of a population, employers need to implement programs that take a holistic look at the health status of each member. These programs engage members by creating personalized action plans for all levels of health, whether it’s maintaining health and wellness, reversing diseases through lifestyle modification, or teaching self-management to those with irreversible illness. ‘Best-in-class’ service health management vendors sometimes focus on a single detail, yet may not see the big picture. These providers often view and address members in terms of the problem or condition that they are tasked to solve. For example, each provider would view a 55-year-old female smoker, with a body mass index (BMI) of 32, cholesterol 254 and an average blood pressure of 180/110 differently. A disease-management program would evaluate her needs related to her specific conditions – her blood pressure and cholesterol level, and would likely focus on blood pressure monitoring and medication compliance; a tobacco-cessation program With the power of the eSync Platform to guide the interaction, the would view her in terms of the number of cigarettes smoked per day; a wellmember described above would be addressed not as a collection of ness coach might view her in terms of her BMI and focus on exercise and symptoms but as a person with inter-related issues that require an indinutrition to lose weight. Unfortunately, each of these ‘best-in-class’ apvidualized approach. The most significant drivers of medical cost would proaches misses the connection between these health factors and lack true be addressed first. This could be medication compliance, a missing lab synchronization. test or chemical dependence – it all depends on the individual. Her coronary artery disease is related to her weight and physical acArmed with a comprehensive view of the aggregate population, HR tivity levels. Her weight and physical activity levand benefit directors can easily and accurately els are related to stress and nutritional lifestyle, determine the care services to offer their employDr. Gail Borgatti Croall is the which might also trigger the smoking. The increase ees, and can make decisions based on prioritized OptumHealth Care Solutions Chief in weight and heart disease has likely caused dehealth needs and financial objectives. Medical Officer. Croall joined pression, which is currently not being addressed. eSync also allows HR professionals to accuOptumHealth in 2002 as a medical How can all of these issues be addressed? rately measure health care and value by providdirector. Previously, she was named They can be addressed by creating a whole-person ing a consolidated view of operational and one of the Top Doctors in view of the individual that includes the medical, financial performance. This view provides a new Cincinnati. Her medical degree from behavioral and work/life components of health. level of performance reporting that allows comthe Medical College of Virginia and OptumHealth’s eSync Platform does just that. panies to design programs that quickly impact is a board-certified fellow of the The eSync Platform brings together hundreds the bottom line and improve the health of the orAmerican Academy of Pediatrics. of data points to create a holistic view of each ganization. n

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RetiReMent

Best laid

plans

Could the financial crisis derail workers’ retirements? HRM sat down with Dallas Salisbury, President and CEO of the Employee Benefits Research Institute, to get the facts

What impact is the economic downturn having on the value of retirement investments? Dallas Salisbury. Clearly it’s caused them to decline for the vast majority of participants. The United States has for decades had a diversification bias, and diversification means allocation to some proportion of the portfolio into equities, and into alternatives. When equities and alternatives get decimated as they have in the last 15 months, that obviously damages people’s plans. In terms of the amount that plans have fallen in value, there is a wide variation. We’ve done analysis looking at US 401(k) participants, and what we find is that certain individuals have lost a great deal. Long tenure workers have lost about 30 percent of their portfolios at the median. Relatively young workers have lost less than that. If one looks at this in a longer term context and also factors in the new contribution flow into plans, then on that basis you again see people with small account balances over the last six years, even with the market declines they have higher account balances. But those 200,000 and more, in spite of new contributions on an ongoing basis, have about 25 percent less than they did have. Like so many things in life, everything is personal, and you do get very wide variation depending on how an individual is invested. For example, I have my 401(k) plan totally invested in federal treasury inflation protected securities, so my account is up for the year, up last year, up for the last five years. I have not suffered. There are about 14 percent of participants in US 401(k) plans who had no money in equities at all, so for that 14 percent, they’ve done quite well. On the other hand, 43 percent had 80 percent or more of their account balances in equities, and those individuals are sitting in relatively high-loss character. With the economic situation being what it is, are there risks for individuals who are on employer backed plans? If companies go out of business, as is increasingly common, are there dangers that workers benefits will suffer? DS. Under the rules in place in the United States, for the vast majority of 401(k)s, the individual has their money invested with a third party trust institution. So even if the plan sponsor goes away, the account remains. There are about 17 percent of assets in plans in employer stock, and out of about 600,000 defined contribution plans, there are about 3500 that still include employer stock. So for the vast majority of participants, they would not be damaged severely. But there is a small

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group of participants whose account balances would be substantially damaged were their employer to go under because of the investment level in employer stock. Do you think that because some people have lost value in their plans as a result of the downturn, there might be some knock on effects? Might people be less confident about investing in their retirement? DS. Well, available data at this point does not suggest that. Available data suggests that individuals are continuing to contribute to their programs. It suggests that they recognize that if your investments are down, it means that the necessity is to contribute even more.

“The proportion of current retirees who had signiﬁcant exposure to the markets is very small in the United States” How do you see things developing in the next year or so with regard to this? Do you think there are going to be more big hits on pension funds? DS. I think the real question is what happens to the market? If the pessimistic assessments are correct, then the US markets lose another 40-50 percent of their value. Obviously that will have an impact. If the optimists who say that the markets have hit bottom and are now about to turn around, that’ll obviously have a very different effect. I wouldn’t put it in terms of a retirement crisis. In the United States, the vast majority of workers get most of their retirement income from the Social Security program. You do have about 20 percent of retirees who do rely heavily on what they or their employer have set aside. For that 20 percent, it may well require them to work an extra one, two or three years. At this point, a relatively small number of additional years of work for the vast majority of US workers would more than make up for any negative impact of what’s happened in the market or the economy. The proportion of current retirees who had significant exposure to the markets is very small in the United States, so again, for maybe five percent of those already retired, this has created some short-term problems. But frankly, for 95 percent of retirees, it’s almost a non-event. For them, the bigger risk is what happens to inflation over time; the bigger risk is what happens to Medicare and Social Security over time. You mentioned Social Security. What do you think the future is for the program? Can it cope in its present form, with the aging population of retired baby boomers? DS. The Social Security income program is very sound. Minor changes in it over time will provide it with financial efficiency. The bigger challenge for the United States is not the design of Social Security; it’s the overall fiscal situation and the ability of the government to meet its overall

commitment over time. And that’s not a Social Security issue; that is a broader, general economic issue. Do you think the new administration is going to be looking to these issues of retirement and Social Security, or do you think it’s got other things on its mind more at the moment? DS. Well, I think that the Social Security issue is a relatively small and easy fix, and if they can take the time to do it, they probably will. The big issue is healthcare, and for retirees, the big issue is medical and retirement, not income and retirement. That is an issue that the President’s made very clear is very high on his list. So if they can deal with the health issue and the Medicare issue, then frankly Social Security will pretty much take care of itself. Do you think that in general, people are aware enough and are doing enough to make sure that they’re fully prepared for retirement? Do people really take an interest in the issue? DS. Well, I would say that the vast majority of the American population has never done that. That is the reason that such a small proportion of the population has substantial income supplementing Social Security. We have about roughly 35 percent of our retirees who for practical purposes their only income source is Social Security. For two thirds of our population that’s retired, Social Security is their primary income source. If there’s a possible positive effect out of the current economic situation, it is that it likely will cause the American population to focus more on what they may have to be doing. They will no longer be able to assume that house values will always go up by 10 percent per year and that equity markets will always go up by 12 or 14 percent per year, and that because of that, you don’t have to save very much. There’s reason to believe that people will conclude that, “I guess I have to actually spend a little less in my early years in order to put some money aside.” That is probably positive for individuals; it may or may not be positive for the broader US economy. 

NUMBER CRUNCHING 43 percent of 401 (k) holders have 80 percent of their money in equities Long-tenure workers have lost a median figure of 30 percent from the value of their plans 14 percent of 401(k)s have no involvement with equities Of 600,000 employer defined contribution plans, 3500 include stock 20 percent of employees rely on personal or employer back savings

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ROUNDTABLE

Happy ever after? As the US population gets older and lives get longer, having a plan for retirement is increasingly important. HRM sat down with Mike Scarborough of Scarborough Capital Management and Brent Walder of Prudential to hear about getting ready for the postwork world With an aging population of Baby Boomers approaching the end of their working lives, there is a growing focus on planning for retirement. What options are available for both employers and individuals with regards to retirement planning? Mike Scarborough. There exists a huge assortment of options for retirement planning; options that either the plan sponsor can provide or the individual can access on their own. The internet has been a big driver in providing access to retirement planning tools. Articles and calculators are everywhere. Unfortunately, I’ve always believed that the majority of people out there, who are investing through their company’s defined contribution plan, just don’t have the interest in learning about the fundamentals of retirement planning and investing. I don’t blame them. I have no interest in learning how to repair my car. Is it essential to my life? You bet. Could I learn to repair it if I needed to? Probably. Does it cost more to send it to a qualified mechanic? Absolutely. The best option that’s available is one where the individual can select a qualified advisor to help put in place the retirement plan roadmap, make adjustments along the way as necessary, and provide information to the individual as it relates to their specific situation.

“Most participants are not equipped to be effective investment managers” Brent Walder Brent Walder. It is not just the Baby Boomers approaching the end of their work lives that is causing the growing focus on retirement planning, but also the shift from traditional pension plans to 401(k) plans as the primary source of employees’ future retirement income. Compared to traditional defined benefit pension plans, with the 401(k) plan the individual bears not only more risk, but more of the responsibility in managing his or her retirement plan. Plan sponsors are starting to see new options become available to help their pre-retirees plan for retirement. These options include managed advice plans and flexible guaranteed income options that are made available within 401(k) plans. Is the current economic situation having an impact on attitudes to retirement planning? If so, how is the market responding to the situation?

BW. The impact has been great. And we should expect nothing different as individuals have suffered greatly in their 401(k) plans with a stock market drop of nearly 56 percent (as measured by the S&P 500) over a very short 17-month period. Many individuals responded by locking in losses and moving their money into more conservative investments. In fact, the Hewitt 401(k) Index reported for the first time in March 2009 that more money is in fixed income investments than in equity investments. This is understandable. But it’s a real concern when interest rates are so low and individuals can easily expect to live three or more decades in retirement. Unfortunately, investors do tend to be driven by emotion and often buy high and sell low. MS. When I hear someone say, ‘I guess I won’t be able to retire now,’ or ‘There goes my nest egg,’ I know they didn’t start with proper retirement planning. The current economic situation is where qualified financial advisors really earn their money. Their most important role is calming the nerves of retirement plan participants. Internet articles and calculators can’t do that. There is a comparative study out there, including data from Dalbar and Morningstar, that shows that over a 20-year period from 1986 to 2006, the average equity mutual fund returned 10.7 percent. Over that same period the average investor, as defined by Dalbar, achieved an average return of only 3.7 percent. The difference can only be attributed to investor behaviour. Individuals tend to move in and out of the market as fear and greed dictate. Certainly plan participants and sponsors can pay an advisor to give appropriate allocation advice. However, my feeling is that advisors really help managing the participant’s behavior.

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How important is education and access to the right information when making decisions about retirement planning? MS. The right education and information is critical to success. When I talk to participants and hear them repeat information they heard on CNBC the night before, I know they’re losing sight of their retirement goals and focusing on the short term market movements. That’s because so much of the information out there is focused on the short term. Proper educational information constantly needs to remind participants that what the market does today, tomorrow or next week will have little impact on their success or failure as a retirement investor. BW. It depends. Individuals who need to take action on their own do indeed need help with decisions such as how to draw income from a 401(k) plan and when to start receiving Social Security benefits. So access to education and the best information is very important for this group. Yet, there is a strong movement – that we wholeheartedly endorse – that says individuals left on their own will too often make poor decisions. Therefore individuals should be defaulted into a participant ‘glide path’ – from the moment they join a company, to the time they die, in order to help them save enough, invest appropriately, and guarantee that they have lifelong income through old age. Individuals should always have the option to opt out of this path, but most individuals would have their retirement plan created for them. By staying in their 401(k) plan for life, they would have access to lower-cost investments resulting in a higher likelihood of retiring securely. What can be done to ensure that individuals take advantage of the options available to them to guarantee an income after retirement? Do you think employers and providers are doing enough in this area? BW. I’m not sure that sponsors are aware of the choices open to them. Now, not all sponsors will agree that helping a participant make sure their 401(k) assets generate a lifetime income is their responsibility. But we know from talking to plan sponsors that many indeed do care and want to assist as much as they can. Most sponsors today have a default solution in their 401(k) plan that sends their retiring employee

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Brent Walder is Senior Vice President and Director of Prudential Retirement’s Institutional Income Innovations group. Previously, Brent was Vice President of Business Finance for Prudential Retirement’s full-service retirement business. Before joining Prudential, he was a Business Financial Officer for CIGNA’s retirement business, and has held several financial roles as a member of CIGNA’s Financial Leadership Program.

Mike Scarborough is President and CEO of Scarborough Capital Management Inc. As one of the leading pioneers on 401(k) management and advisory services, author and entertaining speaker, Scarborough travels the country advising 401(k) participants and plan sponsors on proper 401(k) account management.

out into the world with a lump-sum check which is often in the six figures. Unfortunately, the newspapers are filled with stories every day about how many of these seniors have lost their retirement wealth and have to return to work or cut back on their lifestyles. Most participants are not equipped to be effective investment managers, and they are unable to generate income for multiple decades. If sponsors want to help their plan participants enjoy a secure retirement, they should give them access to institutional funds that make it possible to generate guaranteed lifetime income. Handing them a check as they head out the door has been disastrous for hundreds of thousands of the first generation of 401(k) retirees. This needs to change. It has to change. And I am quite convinced that it will change.

“The right education and information is critical to success” Mike Scarborough MS. I don’t believe enough is being done, but I really can’t blame employers or plan providers. There’s so much focus on fiduciary responsibility for the plan and participants; and I think the real term is fiduciary liability. Companies are scared to provide their employees with education and advice when it could potentially come back to bite the employer. I want to see more emphasis being put on responsibility. Someone has to take responsibility for seeing that Americans are preparing for a retirement income. Whether that’s the individual, the employer, the government, the provider, it has to be made clear. Right now, the onus is clearly on the individual. However, everyone else keeps getting in his or her way. Providers make it difficult for an individual to get advice from anyone but the provider; employers make it difficult to get advice for fear of potential liability; and the government won’t make it clear that companies have nothing to fear for helping their employees. I don’t blame human resource managers for feeling frustrated. n

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ome people find that they stay in the same job because they become complacent. They are content in their day-to-day lives and can’t face the stress and pressures associated with looking for another job – often despite the fact that they feel trapped in their current role, with no prospect of promotion or development. Some people remain at the same place of work for their entire working lives for a very different reason, as some often find a job that is, in many ways, the job of their dreams. In these instances, the benefits, perks and development available to them far outweigh any of the downsides of their daily toil. McDonald’s might not be the first company that comes to mind when thinking of places that fit into the latter category, but for Paul Facella, who began working behind the counter at age 16 and, over 34 years, worked his way up to vice president of the New York Region, McDonald’s fits here quite perfectly. For he witnessed the winning strategies of McDonald’s at work from the ground up and – as a pupil of the legendary leaders Ray Kroc and Fred Turner – Facella took their teachings to heart. Working as a team with his staff, operators and vendors, Facella managed to apply Kroc and Turner’s teachings to the New York region, growing it to $650 million in revenues – a four fold increase in profit, a 90 percent increase in store count, and one of the strongest performing regions in the country. Today he is the author of the criti-

HRM’s Matt Buttell speaks exclusively with Paul Facella who explains what valuable business lessons he learned at McDonald’s – and why he stayed there for 34 years cally acclaimed book, Everything I Know About Business I Learned at McDonald’s. So what exactly did he learn? And what is it about McDonald’s that managed to keep Facella so engaged for 34 years of his career? “I think what kept me there, and quite honestly, what keeps so many folks there, is a number of factors,” he explains to me when we speak in New York. “I think first of all it is the opportunities that are there. I mean, there are few organizations that have a constant track record of developing people from within, but if you look at McDonald’s, it just goes on and on. Today you’ve got Jim Skinner, who left the Navy and walked into McDonalds 35 years ago – and now he is CEO. “The other piece that keeps people there is that there is a tremendous amount of recognition for what you do as an individual, and as a team. As well as that McDonald’s is a very exciting environment and is always creative. There are always new ideas and it’s a fun place to work when you’re dealing

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PAUL FACELLA

with so many people and so many personalities. It kind of pulls you in and keeps you there.” In Facella’s new book each chapter discusses one of seven leadership principles that drive business success: all of them formed at McDonald’s. The first is honesty and integrity, which is something that Facella thinks is particularly lacking in organizations across both the US and the wider world. “The power of being honest and showing integrity is really key,” he

“McDonald’s has never been about how many diplomas you had, or whether you went to Cambridge or not, it has always been about a meritocracy”

ON THE MENU

Facella identifies the big issues currently facing HR I think it’s very clear that number one on the hit parade is the challenge of HR professionals to understand the global market, which really takes them into some uncharted territory. This economic situation we’re in is going to be around for a while, and it has some unique challenges. We’re going to be talking more and more, to those folks in HR about expense reduction, combining of jobs, staff redeployment, downsizing, those kind of things. One of the other things that I'm seeing in talking to some people from HR is that because of technology and the economic situation, there’s such a flood of resumes coming in. And while that’s good, we’ve got to make sure that we have the support and the resources within our own organization to sift through that and make sure the job descriptions of what we want are very definitive, so we can get through this mountain of resumes now. That’s really becoming an issue.

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notes. “It’s a foundation for a culture within an organization, and it needs to thrive.” He notes that early leaders all the way through to present-day McDonalds have always exemplified that kind of a behavior, whether it be through their franchisees, their suppliers, or their customers. Facella explains how the second leadership principle lies in the relationships that a business creates, and how powerful those relationships are. “Let’s face it, a business is a social structure,” says Facella, “but developing deep relationships where you earnestly care about each other was very unique to McDonald’s. I like to talk about the threelegged stool concept, where each leg is an integral part of supporting the other, and I see those legs as the franchisees, the suppliers, and as the company people.” The third point Facella references are the standards that an organization is measured by. At McDonald’s, those standards are about the measurement of every activity that can be, from speed of service, to temperature of product, to consumer information. “Everything is assessed and looked at, and the organization is constantly trying to re-innovate and keep current,” says Facella. Leading by example is the fourth point that the book looks at, and Facella believes that that idea came from the culture that Kroc and Turner created. Kroc never graduated from high school, for example – he simply took the McDonald brothers’ system and ran with it. “These were fairly simple guys who took a system and grew it, and they were very humble,” says Facella. “Ray worked till the day he died, and Fred Turner’s still there today as honorary chairman, some 54 odd years on.” The fifth principle is courage, and while in the book Facella chronicles several episodes where leadership at McDonald’s took the high road, here he notes one particular instance when Fred Turner was still CEO: “Fred turned down what was probably about $1 billion in sales because it didn't fit with the licensing principle that the McDonald’s system had been started on,” explains Facella. “It took courage to do that, and there are few people that would do that today.”

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Communication, which Facella notes as the sixth leadership principle, particularly looks at how powerful communication can be. “I think what started in 1972, when the first real McDonald’s office opened in Oakbrook, Illinois, it was open air, and there was a lot of communication between management and employees – today that’s the norm, but back then it was revolutionary. “The last point is recognition,” adds Facella. “Recognition is a huge, huge motivator in McDonald’s and there are over 23 national awards that are given out each year, to franchisees, to company employees and to suppliers, so that recognition is a very powerful tool.” One thing that should be noted about McDonald’s is that the company isn’t driven by ego. Even today employees can call CEO Jim Skinner and get a call back within 24 hours. There are even unwritten contracts between long serving vendors. In many ways, there’s a real element of quirkiness to the culture of the quick-service restaurant, and Facella believes this plays a critical role the way day-to-day business is carried out. “McDonald’s has never been about how many diplomas you had, or whether you went to Cambridge or not,” he stresses. “It has always been about a meritocracy, so that regardless of seniority, regardless of diplomas, regardless of age, regardless of sex, it didn't matter.” Outside of McDonald’s, Facella’s current role is as the President and CEO of Inside Management, a group of passionate, results-oriented senior consultants with expertise in every facet of business and commerce. “We work with various organizations, from large to small companies, government, private, public organizations, from Fortune 100 to startups – and I kept using the seven principles, so I figured, let me write a book about them.” However, what Inside Management really does is help with, what Facella calls, ‘reorganization’. He explains how that could be through management or supervisory training programs, or it come be through a review of some of the HR policies that are already in place and how to get employees better engaged in what an organization is doing. “The goals and objectives that need to be met to try and get a more collaborative, engaged workforce tend to be Inside Management’s area of expertise,” says Facella. Furthermore, he believes that human resources have a role to play in creating these kinds of workforces. “In fact, in my opinion, they should be at the C-level of executive leadership within an organization. I know that doesn't always happen, but I think HR leadership is more tactical instead of being strategic and it tends to have a long-term view of where an organization is going and what an organization needs to be doing. “Saying that,” he adds, “once they get a place at the table, so to speak, I think they have to be careful to make sure that they’re still able to be an advocate and understand what’s going on in the employee ranks. If they get up there on the board, and they’re spending too much time in that office, and not enough down being an advocate, then that can be detrimental.” Ultimately, Facella believes there is a balance that HR leaders have to play, and, he notes that that balance is very important. “But if the right person is in there who understands that balance, then that role can be a very effective tool.”

It’s no secret There are many companies that want to provide your organization with voluntary benefits. What makes us different? At Combined Insurance’s Worksite Solutions division we believe the secret to a successful voluntary benefits program goes beyond offering only supplemental insurance products. That’s why we created the U-Select® benefits program. Products are just a part of this comprehensive program. It also includes benefit communication, program customization, customer service and support, and much more. Let us show you more about how implementing the U-Select program can enhance your current employee benefit plan. For information, call Combined Worksite Solutions at 847-953-8072 or visit our website at www.combinedworksite.com.

Combined Worksite Solutions is a division of Combined Insurance Company of America. 09-3704

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INDUSTRY INSIGHT

FEELING THE BENEFITS? Could voluntary benefits be the key to successful execution? Steven M. Stecher explains further

n their best selling book Execution, Larry Bossidy and Ram Charan tell how to convert aspirations into reality and succeed as business leaders. As they describe, successful execution requires linking a company’s people, strategy and operations. The People Process is one of the three core processes of successful execution — having the right people in the right jobs, with the right behaviors, and a culture that rewards execution. Without an excellent People Process, they counsel, even the most successful strategies are likely to fail. Leading a company’s benefits program in a contracting economy is a tough job made even tougher by the fact that healthcare spending has grown faster than the overall economy since the 1960s. From 2002 to 2007, health premiums for employers grew by 78 percent. As employers have found it necessary to cut benefits and eliminate coverage options, employees must carry higher deductibles, higher co-pays or lower coverage levels. The American Cancer Society reports men have nearly a one-in-two lifetime risk of developing cancer, while one-in-three women will likely develop cancer at some point in their lives. The prevalence of heart disease, stroke, other major illnesses and accidental injuries is also significant, and the implications can be severe. Medical debt is a leading cause of personal bankruptcies in the US. In an October 2008 study by the Kaiser Family Foundation, 31 percent of survey respondents said they skipped recommended medical tests or treatments to save money. Another factor is the high incidence of major illnesses or accidents. All these changes can have a significant impact on your employees, with a downstream impact on your business.

The missing link So how can you support your People Process in the face of these changes? By providing your employees the healthcare safety net they need. Your employees are right to be con-

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While rates vary by level of coverage, premiums are on par with what many of us pay over the course of a year for two lattes or two fast food meals a week. Benefits are typically paid directly to the employee, regardless of other insurance already in place. Examples of supplemental health insurance coverage include a choice of ‘lump-sum’ benefits, such as a $30,000 cash benefit upon diagnosis of cancer; indemnity benefits, such as a daily $200 benefit for hospitalization; and wellness benefits, such as coverage for diagnostic tests to detect illness.

“31% skip medical tests or treatments to save money” Steven M. Stecher, President, Conseco Insurance Group, joined the Carmel-based insurance company as Executive Vice President of operations and information technology in September 2004. He became Chief Operating Officer in February 2005, Executive Vice President of Operations for Conseco, Inc. in December 2006, and President of Conseco Insurance Group in August 2008.

cerned about increasing gaps in their coverage, and deserve to have an option to protect themselves. You can provide that option by including supplemental health insurance products as a voluntary offering in your benefits program at no cost to the company. Supplemental health insurance can cover unexpected bills and help maintain financial solvency for employees, at a price employees will be surprised to learn can be affordable.

Conseco provides supplemental health products through voluntary benefits programs to thousands of companies, ranging in size from five to over 1000 employees, and has served the worksite market for over 20 years. We specialize in supplemental health products, providing a broad portfolio of group and individually underwritten products, and a premium-return rider. Our Worksite Integrated Services processes over 175,000 premium transactions a year with a dedicated staff providing one-stop service support for payroll directors and worksite brokers. Conseco’s EZApp technology facilitates new business processing, and our Express Pay claims payment gives policyholders immediate financial assistance. Now is the time to take action. Your role is critical in proper alignment of the People Process. Learn more about the Voluntary product options and provider services that are available to you, and include this important option in your benefits plan for this year’s enrolment.

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EXECUTIVE INTERVIEW

Getting recognition Globoforce’s Derek Irvine answers our questions about the real value of strategic recognition programs Could you give us a little background on the company? What are your key areas of business and what type of clients do you serve? Derek Irvine. At Globoforce, we say we’re in the ‘thank you’ business. To our customers, that means we give them the tools necessary to empower their employees to thank and appreciate each other regardless of company position, geographic location and language. Our strategic recognition programs affect culture change within the largest of organizations, uniting employees under common company goals and values and behind strategic objectives, which will then ultimately establish a true culture of appreciation focused on success within the walls of these organizations. These programs are powerful and proven. We primarily run peer-to-peer employee recognition programs – those accessible to all employees and not just the top performers – and serve large, multinational companies that have thousands of employees located all around the world, such as Amgen, Dow Chemical, Intel, Procter & Gamble and Symantec.

“A strategic employee recognition program can provide a cost-effective way to rescue employee morale during tough times”

In the difficult economic climate we currently face, there could be the temptation to neglect recognition as a cost saving measure. Do you believe that would be a mistake? DI. Absolutely. In fact, many companies are slashing their budgets for merit increases and bonuses this year, and a strategic employee recognition program can provide a cost-effective way to rescue employee morale during tough times by re-engaging disconnected employees, galvanizing them around core values and raising

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productivity levels throughout the organization. Companies can spend as little as one percent of payroll on these programs and indeed several of our existing clients are looking to increase that figure to three percent of payroll because of the high return on investment the program provides, in addition to the tremendous psychological boost it can give a workforce crippled by fear and uncertainty during a recession. In rewarding employees traditionally, management relied on the classic combination of salary and bonus. In this structure, the bonus was intended to cater to esteem and recognition needs while also clearly being about performance pay. In Maslow’s classic hierarchy of needs, the bonus – typically given as cash – would cater to the higherorder needs for self-esteem and self-actualization. But company leaders are now scratching their heads trying to figure out how to keep employees motivated and productive while merit increases and bonuses disappear. The human needs illustrated in the upper segments of Maslow’s hierarchy cannot be met through cash compensation or bonuses. If, because of the recession, HR leaders find they have a gap in their Total Rewards Package, now is the ideal time to meet their employees’ higher level needs through a strategic recognition program. How can recognition bring real value to a business? Is it possible to measure the true ROI of recognition programs? DI. Our customers have saved millions in three ways: by consolidating multiple disparate programs, by eliminating cash rewards, and by turning to a gift-card model over a merchandise model. But aside from these tremendous savings, recognition brings value through increasing productivity and employee engagement – an employee’s desire to give additional discretionary effort. After the massive layoffs we’ve seen reported in the news, we know many companies are trying to accomplish the same amount of work with fewer employees – all

Derek Irvine is Chief Marketing Officer and Vice President of Global Strategy at Globoforce, a leading worldwide provider of global strategic recognition solutions. Globoforce was founded in 1999 in Dublin, Ireland, and is now dualheadquartered in Dublin and Southborough, Mass., USA, with employees on the ground in many parts of the world. Irvine can be contacted at dereki@globoforce.com

while trying to hold onto market share or even gain a competitive edge. But employers are fighting an uphill battle against the fear and torpor induced from the layoffs and the general news climate today. Recognition is a powerful, positive tool to inspire workers and unite them behind common goals, ultimately driving increased productivity in precisely those areas employers need to succeed in today’s challenging economy. And yes, this can be measured, but only if objectives are clearly defined with associated metrics for success at program initiation. Then, by its definition, strategic recognition requires constant measurement and reporting against those metrics to show the return on investment, both in real dollars and in improved morale and productivity.

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FEATURE

Jennifer Mann

PROGRAMMED FOR GROWTH 86

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Despite a shrinking economy, SAS continues to increase both its profits and its staffing levels. HRM caught up with VP of HR Jennifer Mann to find out how

AS is one of the largest software companies in the world. Currently it is listed as twentieth on Fortune’s 100 Best Companies to Work For list, up nine places from its placement in 2008. What’s more, with consistent revenue growth and profitability since 1976, SAS continues to provide its clients, and its employees, with the depth of resources required to sustain excellence in product development and customer support. While many competitors have merged, changed ownership or simply vanished altogether, the privately held compa-

ny has remained focused on its primary mission of delivering superior software and enhancing customer relationships for the last 30 years. For Jennifer Mann, SAS has been her happy home for the last decade. She joined the firm as a Human Resources manager in 1998, and became VP of HR last year. In her new role, Mann is responsible for developing and guiding SAS’s HR vision and articulating the organization’s strategy to help acquire, develop, reward and retain the best talent. She currently leads a team of 113 employees, who partner with SAS business units to maximize the potential of SAS’s greatest asset – the employees – to deliver quality advisory services.

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And at SAS, employees really are the greatest asset. Despite the current market circumstances, the firm has seen no layoffs at all over the last 12 months. In fact, while many organizations continue to flounder, the firm continues to grow. One question: How? You had been at the company for about 10 years before you became VP of HR a year ago. Could you give us a little background about your time at the firm? Jennifer Mann. I actually have over 16 years of HR experience in three main industries: academia, high-tech and in the software industry. My focus has been in several main areas throughout those 16 years, primarily in aligning HR with business objectives, and serving as a change agent – not only within the organization to drive business results, but also with helping change the way HR works with the organization. At SAS specifically I have led three key initiatives that have been focused in the areas of performance management, organizational effectiveness and leadership development. I think there are three things that are important to being able to achieve those things successfully. The key is to build a strong working relationship with the leadership team, with an emphasis on truly understanding the business and operating with trust and mutual respect.

“Over 90 percent of our employees use the healthcare facility as their primary medical facility” How have you found your interactions with the heads of the business? Do they see HR the way you see it? JM. Absolutely. I think SAS’s culture and strong focus on our employees reflects that HR is integral to all of that. It’s very important for us in human resources to understand what has made us successful, and how important the culture is so that HR can align our initiatives to meet the needs of that culture. What are the main challenges you have faced in this first year? JM. It’s important to look at the growth the company has experienced in recent years, which might help put some of the challenges into context. Over the past 10 years, the company has doubled its revenue, as well as its staff. In 1998 when I joined the company, we had about $800 million in revenue with 5600 employees. Now, we have over $2 billion in revenue and over 11,000 employees globally. So we’ve seen incredible growth. Our global reach, our brand recognition and our employee and customer loyalty has just been incredible. These are coveted results in any business setting, and it’s important to acknowledge that. With that being the case, the main areas that I have spent my time on this year have been ensuring that our HR initiatives are aligned to support the business. We have grown significantly over the past 10 years, so it’s been important this past year to set up a structure that will help us continue in our success.

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HEALTHCARE: ON YOUR DOORSTEP mployees at SAS’s headquarters in North Carolina have a number of onsite amenities. These include healthcare, daycare, recreation and fitness centers, and a lot of other programs that reward employee wellness. Here, Jennifer Mann details why these things are so important – both from the perspective of employer and employee. “Our goal here is to foster a culture that has a strong focus on trust and flexibility for our employees – and many of our HR programs are based around that philosophy. But our onsite amenities are there to help foster an environment of innovation and creativity, and we believe that the way to do that is to eliminate stressors and distractions for our employees, making it easier for them to focus on work. Having onsite healthcare facilities, so that if they need to be seen for an illness they can be treated quickly, and having good quality care means that our employees are able to come back to work and be more productive quickly. We have been able to see a true cost benefit to having those types of services available and we have a pretty extensive work/life department that focuses on relevant issues that may be top of mind for our employees. So this means having programs focused on elder care, financial planning, or parenting of teams is very important to us. Having onsite recreation and fitness facilities, so that our employees can go exercise and stay healthy, and having a campus that has walking trails so that they’re encouraged to be physically fit are all very important to us at SAS.”

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ployee. He’s actually stated, ‘We will not have layoffs this year, even if that means less revenue for SAS.’ We often hear people saying, ‘People are our greatest asset’, but you really have to put your money where your mouth is to back up comments like that. JM. Oh absolutely, but we believe that if our employees are happy, then our customers will be happy, and that seems to be working for us. We’ve had less than five percent turnover in an industry that typically sees more than 20 percent. And likewise, our customer retention is key to our success and we have a 90 percent renewal model with our customers. In addition, we license all of our software, so our business model is really set up for long-term relationships with our customers. Ultimately, the way we treat our employees is with our customers in mind. Healthcare isn’t cheap, but you’re one of the few companies on Fortune’s 100 Greatest Companies to Work For list that pays 90 percent of its employees healthcare premiums. Does that provide a real return on investment in terms of attracting and retaining people? JM. You know, the two main reasons that we provide these things is because we have a strong focus on preventative care and maintenance, and the levels of coverage and reimbursement are really above average. That’s all part of our strategy to keep a healthy workforce. It would be completely normal for a healthcare program to cover, say, 20 physical therapy visits in a year. SAS covers 80. Implementing programs that are focused on increasing employee and company performance has also been very important; and, being a software company, we’ve focused on leveraging our HR technology to improve efficiencies within human resources, as well as helping our organization make better business decisions. So the company is still growing, and there haven’t been any layoffs at SAS at the moment. Is that true? JM. That is correct. And I think we’re very fortunate at SAS to have a CEO who is committed to our employees. We’re privately held, and he believes our employees are the company’s greatest assets. And as such, he believes it’s our job in HR, and as managers throughout the company, to keep employees engaged and motivated so that they’ll come to work every day. Our CEO has continued that commitment even during these difficult economic times, by putting measures in place to protect the jobs of our em-

And do you find that your staff respond positively to wellness initiatives, or do people see it as an interference in their own personal lives? JM. Actually I think they’re very appreciative about having these facilities and amenities available. We don’t force anyone to participate, but we certainly try to make it easier for them. I know for me personally – working long hours, with two small children – the fact that I can walk right out the door and have a beautiful walking trail makes it easy for me to take a lunchtime jog, which would not otherwise happen. Also, having the healthcare facility, which is not only available to employees, but also to their dependents, makes things so much easier. In fact, over 90 percent of our employees use the healthcare facility as their primary medical facility, and they don’t have to. It’s just an option that they have open to them. With the way wellness and healthcare costs are rising in the US, do you think it’s likely that employees will be compelled to change their diets, or

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that? How, at SAS, do you find the employees of tomorrow who are going to keep the company successful? JM. Well, the beauty of the things that I’ve shared, the benefits and the programs that we offer, has certainly gotten us a lot of employer brand recognition, not only here in the US, but across the globe. And so, right now, while our recruitment efforts are limited in core areas – we’re currently focused on research and development, for example – and we may not see that growth this year, we are going to continue to hire in key areas and continue our commitment to our customers to innovate in our R&D efforts.

SAS: THE FACTS

At the moment, with the economic situation being as it is, does that make • SAS has customers in 114 countries things easier or more difficult for you and has more than 45,000 business, in terms of finding new people? Is it government and university sites the case that there more good candi• SAS is 91st on the 2008 Fortune dates, or is it the case that are just Global 500 list and 20th on the 2009 more candidates and it’s hard to filter Best Companies To Work For list the good from the bad? • There are current 11,142 SAS JM. That’s a very good point. Certainly employees worldwide we see an increase in interest when we • The company was founded in exercise every week if they are to receive healthcare have more people in the labor market 1976 and is the world’s largest benefits? Do you think that’s something that’s likely looking for jobs, and our research and privately held prepackaged to happen in the not too distant future? development jobs are typically very software company JM. I think over the weeks and months ahead, we’re all highly skilled and very specialized, so • SAS has more than 400 offices and going to learn what the impact will be as the current that’s a tough thing to manage. alliances globally administration makes its proposals and plans for I don’t know that the increased ophealthcare reform. portunities in the market, and more All I know is that SAS already has a wonderful plan candidates looking for jobs, is helping in place that, in my mind, would be a model for healthcare provided by orin those areas, but certainly in some of our other positions, you absoluteganizations across this country. I’d love to have the opportunity to share the ly see an increase in candidates and that’s very healthy to see. wonderful things that we’re doing here at SAS and be an example to other organizations. As you come to the end of your first year as VP of HR, what have you got planned for the next 12 months? And do you think that the administration is going to come to businesses JM. Again, we are continuing to staff, so we’re continuing to make sure that we to see how they respond to these challenges, as a way of guiding the counare attracting the resources to meet our business objectives.With a strong focus try as a whole? on helping our customers optimize their business, we are looking for talent in JM. Absolutely. In fact, that has already happened here at SAS. We have operations research, so we’ll continue to have strategic hiring initiatives. been contacted by our state governor’s office to give information about We want to continue to develop and grow our staff so that we can meet SAS’s healthcare plans and healthcare benefits, and as a result of that we our demands now and in the future, and we will put a strong focus on rehave been invited to one of the regional healthcare reform forums that are tention of our key talent: identification of our high potentials, and building being held over the next month. out development plans for those individuals. Another key area for us is on employee and overall company performance initiatives. Things like perforSo obviously, to continue to grow in the way you have over the last decade, mance management and organizational development efforts will always you need to try and hold onto the best people. How are you going about doing be a focus for us.

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CULTURE

Getting the

right results part two

Imagine going to work and finding yourself so frustrated with the culture of your office that you completely turn it around. HRM discovers that, in essence, that is exactly what Jody Thompson and Cali Ressler did when they pioneered the Results-Only Work Environment (ROWE)

ne of the first things with Jody Thompson and Cali Ressler is that they are quick to explain how times have changed in today’s modern workplace, and they explain how it now takes considerably more creativity, energy and effort to stay ahead of the curve in the global marketplace. What’s worrying them, however, is that the culture of the modern workplace is not keeping up with the times. In fact, Ressler and Thompson predict that office cubicles and desktop computers will soon be the workplace relics of our time – just like mimeograph machines, While-You-Were-Out pink slips, and typewriters are relics of the Industrial Age. They say the time has come for a ‘serious solution’. When we last spoke to Thompson back in October, ROWE was currently operating across 80 percent of the population at Best Buy – the corporation where Ressler and Thompson met and founded ROWE – and the ladies were now running their own company, CultureRx, with plans to expand the culture of ROWE to several other organizations across the US. “The CIO of a company we’re currently working with recently said to us, ‘ROWE is so simple that it’s elegant’,” explains Ressler when we sit down to speak to the two women this time around. “That sums up ROWE perfectly. It only focuses on one thing – results. That’s the simple part. The elegant part comes in because it forces compa-

nies to start changing the behaviors that haven’t been supporting a Results-Only environment.” Just who this mystery CIO is, and which companies Ressler and Thompson are currently working with, they remain less than candid about. As Thompson pointed out last time we spoke with her, many companies are afraid of ROWE and are skeptical about whether it can work in an environment outside of Best Buy. Of course, Ressler and Thompson know that it can, and Ressler actually goes on to suggests that it is really only a matter of weeks before more companies are likely to unveil ROWE.

“Ressler and Thompson predict that office cubicles and desktop computers will soon be the workplace relics of our time”

Critically aware

“We continue to be contacted by people from all over the world that are interested in bringing ROWE to their respective areas,” Ressler explains. “Underneath it all, ROWE hits on a fundamental desire we all have – to have control over how we spend our time. How the process looks in different cultures and countries will be slightly different, but the outcome will be the same.” It is also an interesting time for business in general, with the economic crisis plundering on and affecting workforces across every sector. While some may scoff at a drastic overhaul such as ROWE, thinking it would be difficult to achieve such a fundamental change during a prolonged downturn, Ressler and Thompson are keen to argue the complete opposite: “During this crisis, ROWE can actually play a role in turning people’s attitudes around, making

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Jody Thompson and Cali Ressler the ‘Manage by Walking Around’ practice extinct,” Ressler explains. “ROWE will challenge managers to have better clarity of goals, to clearly and regularly communicate them to employees, set deadlines and attach tangible metrics to effectively measure results.” Thompson suggests that any weariness of ROWE only exists because of a misguided belief that managers who continue to control their employees are going to remain successful during this climate; instead Thompson says this is having the adverse effect. “That’s what they don’t realize. People are getting more apathetic, they’re getting disgruntled, they’re hopping from company to company, and they don’t really care because they feel they are being treated like children. These companies are cutting off their nose to spite their face, when they could be getting so much more out of their people. “When you go into this kind of environment, if you want productivity to increase, if you want people to focus on the right thing, if you want all the wasted time in the work environment to go away, this is the environment you need to move towards, and companies are starting to realize that.” Ressler agrees, noting that managers migrating to ROWE realize that they no longer need that (false) sense of security that comes with seeing their employees at their desks every day. “Now more than ever the ROWE philosophy is important to embrace and maintain, and Best Buy and other companies are doing just that. There is a huge competitive advantage related to ROWE because, when leadership expects teams to ‘tighten their belt’, everyone is able to voice whether certain activities are actually adding value or are a waste of time.” Another issue for companies during hard times is the need to reduce labor costs and save dollars, and with ROWE managers are very clear about the real results-based value that employees bring and can clearly articulate what the team is achieving and what resources are necessary to drive clearly articulated business outcomes. “Practice has proven that ROWE also strengthens teams and, in a recession, teams need to step up to get the work done, to deliver what the business needs to continue to be successful,” adds Ressler.

Generation gap ROWE may also be instrumental in solving another major issue currently facing HR professionals namely, the war for talent and the changing dynamics of our workforce. “This is the environment that the next generation will operate

most effectively in. They’re already untethered in the way that they approach technology, they are global thinkers, already operating globally, and are just a much more collaborative generation. If we put them in an office building in a cube and tell them that they have to sit in a meeting room in order to collaborate, we’re just completely killing them,” explains Thompson. Ressler echoes this sentiment, saying that while every generation cares about workplace freedom, the difference is whether they feel people deserve it. “With the Boomers,” she explains, “they want workplace freedom in a bad way, but most of them won’t say that out loud. They’ve given their lives over to work and they’ve missed out on a lot of happiness because they were being slaves to the clock. Because of their beliefs about the way work needs to happen, however, ROWE rubs many of them the wrong way. They often don’t think the

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The ROWE bio

belief that companies can utilize ROWE as a business strategy for retaining that knowledge. “Gen X also has a ROWE is a bold, cultural lot more to give, but they want to give it on their terms,” transformation that Ressler comments. “With ROWE, companies can get permeates the attitudes more productivity from the same workforce. Gen X is and operating style of being throttled by the way the work environment is an entire workplace, operating – ROWE will solve that. When it comes to leveling the playing Gen Y, ROWE is the answer to recruiting them in field and giving people complete the first place. Soon, their question in the inautonomy – people do whatever they want, terview room will be, ‘Are you ROWE?’ And whenever they want, as long as the work gets done. that’s where the talent will go.” The truth is, everybody adopts This can be in the park; in a coffee shop; in the ROWE at their own pace, which is often shower; at midnight; at 3am or on a Sunday afternoon. dependant on their generation. Thompson explains how Gen Y tend to adopt it With ROWE there is no need for schedules, nobody faster, while the traditionalists, along focuses on ‘how many hours did you work?’ Nobody feels with Gen X, though they do adopt it overworked, stressed out or guilty, and work is not a as well, have different things that place you go, it’s something you do. People at all levels they need to let go of. “It might stop wasting the company’s time and money; teamwork, take them a little longer, but once morale and engagement soar and there’s no judgment on how they’re all through the change, it’s people spend their time. interesting because it levels the playing field,” says Thompson. ROWE is just about results. “It creates a better platform for communication across all generNo results, no job. ations. It doesn’t feel like such a big divide anymore.” So just how bright is the future for ROWE? Actually, if Thompson is proved right, very bright indeed: “There are so many reasons Gen Y whippersnappers should get freedom right out of the starting why people are more productive in a ROWE environment. If I know gate – they need to put in their time first. No pain, no gain.” exactly what I’m supposed to deliver and how my employer is going It is an interesting point, which stretches over both Generation to measure it, I’m much more focused and I can actually get the work X and Generation Y too: “Gen X are exhausted,” done. If you think of the way the office is set suggests Ressler. “They grew up watching their up today, you get up and you don’t think parents work themselves to the bone and swore about doing work, you think about getting they’d never do the same thing. And here they are, ready for work. So by the time you get to the trying to put in their time at work, while managing office you’re already disgruntled because a household of their own – and, many of them, of traffic or other nuisances on your way in, caring for their parents, too. They can taste workthen you have a cup of coffee and you talk place freedom – and they want it now.” to your co-workers, you read the paper, and As for Generation Y, Ressler highlights how you’ve already taken three hours of your this generation have always lived a ‘free life’ and day before you’ve even done any work. With that they have often had the world at their fingerROWE, people aren’t just putting in time tips, know how to build and foster relationships anymore, they engaging in their work. without ever seeing people face-to-face and not “Management innovations in the coming only care about workplace freedom but expect it decades will follow ROWE’s footsteps of because it’s all they know. “To them,” she says, keeping managers in a coach/mentor role “it’s not a privilege – it’s a right. vs. being a hall monitor,” concludes Ressler. “In the end,” continues Ressler, “companies will need to imple“They might not end up calling it ROWE, but that coach/mentor role ment ROWE to appease all generations.” Boomers won’t be ‘retiring’ has such potential and it will shape more and more as the shift to as such, but will want to continue working, just not in the same capacresults continues. It’s that simple, and this has to be the future for ity as they have for the last 40 years. It is Ressler and Thompson’s the workplace.” n

“In the end companies will need to implement ROWE to appease all generations”

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Better Leaders Create Better Results

Leadership Matters. Today’s leaders are being stretched in this turbulent economy. HR professionals know that even the best leaders need a strong partner to manage talent, develop leaders, and execute organizational strategy - especially now. MDA Leadership Consulting partners with HR to provide effective assessment services, executive coaching programs and accelerated development solutions understanding the need to do more with less. MDA helps organizations: • Utilize High Impact Conversations™ to get results • Lead sustainable change • Build high performance teams • Develop high potential talent

With Great Leadership, Anything is Possible

MDA Leadership Consulting

Assessment • Coaching • Leadership Development • Succession Planning • Team Development To learn more about how to support your leaders in these challenging times, visit www.mdaleadership.com. Contact Scott Nelson, VP of Leadership Development 612.332.8182

MDA.indd 1

snelson@mdaleadership.com

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SUCCESSION PLANNING

What do Steve Jobs and Peter Gabriel have in common? Steve Anderson explains

The secret of my success(or)

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t first glance, there might not be a huge amount of similarity between the challenges currently faced by tech giant Apple and those confronting the rock group Genesis at the tail end of the seventies. Look a little closer though, and certain correlations do begin to appear. Genesis had built considerable success with flamboyant frontman Peter Gabriel providing an unmistakeable focal point for their live shows and records. When he quit the band, his departure left a void that the remaining members had to quickly fill. Gabriel was the face of the Genesis ‘brand’. Maintaining momentum without him would be one heck of a task. Turning to Apple, the parallels are clear. Steve Jobs is the visionary figurehead who turned a second-tier computer manufacturer into one of the most recognizable and well-loved brands in the world. His presentations and product unveilings at the annual Macworld events caused hysteria among his audience that wouldn’t have looked out of place at a rock concert. So, when Jobs was forced to take a leave of absence last year as a result of his battle with pancreatic cancer, the impact on Apple’s fortunes was dramatic. Stocks plunged and the firm’s investors began to get edgy, fearing that the Apple cash cow couldn’t function without its talismanic leader. So news at the beginning of 2009 that Jobs was to step back from the company’s day to day running while he dealt with his ongoing health problems has caused further consternation. Along with investor unrest, there have

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even been calls for an SEC investigation into Apple’s failure to disclose details of Jobs’ health. When Genesis lost their figurehead, they promoted from within. With Phil Collins at the helm, the band went on to achieve their biggest successes. The uncertainty surrounding Jobs’ future and the lack of a clear successor for when he does finally depart, make Apple’s leadership future far more murky. Quite simply, Steve Jobs is Apple. He has been the driving force, totem and evangelist for the company for years. He’s a control freak who, even if he is taking a back seat, won’t relinquish control until he is forced to. Obviously a leader like that can be a tremendous boon, but there comes a time when everyone must be replaced. Human lives are measured in decades, successful companies can be measured in lifetimes. It is fair to say that Apple is a special case. There aren’t too many CEOs as long serving or as closely identified with their companies as Jobs, particularly in these times of financial downturn. However, the challenges faced by any organization in replacing a charismatic and successful leaders are broadly similar whether that organization is multinational company, an SME or even a rock band. But perhaps it’s time to take a step away from the slightly tenuous Apple/Genesis comparisons and look at a more directly analogous situation. Microsoft also recently faced the departure of a talismanic architect and leader in the shape of Bill Gates. But the way that Apple’s rival handled this regime change should serve as an object lesson for any organization planning the replacement of an influential leader. Microsoft set the date for Gates’ departure years in advance, allowing current CEO Steve Ballmer to gradually take on more and more responsibility. Gates began to take a back seat well in advance of his departure, so that when he finally did leave there was very little drama. By the time it actually happened, the transfer of power was a virtual non-event. Of course, every organization and leader is different, but comparing Microsoft and Apple’s approach clearly highlights some key considerations. First of all, the subject needs to be discussed well before any changes need to be made. While that can be difficult for the person on their way out, it is essential if their successor is going to be able to hit the ground running. It’s also important to develop any potential candidates for leadership even if no obvious successor has been identified, so that you have a pool of possible replacements available. If too much power is concentrated at the top of the pile, finding someone with the ability to lead can prove extremely difficult. A power vacuum can have seriously unbalancing consequences. Managed correctly, a change of leadership can even have positive effects for an organization, allowing new ideas and new energy to reinvigorate. After Genesis’s change in leadership, the band went on to enjoy hitherto unseen levels of popularity and success. Unfortunately, Apple’s protracted and uncertain change of power is less likely to bring such a positive outcome. Though it might be hard for the visionary creators of the iPod to accept, when it comes to succession planning, it looks as though Microsoft have the best ideas.

Follow the leader Aside from Jobs and Gates there are a few other business heads who would prove hard to replace

Warren Buffett – CEO, Berkshire Hathaway Know as the ‘Oracle of Omaha’ because of his astonishing knack for making the right moves in business. Starting out with a paper route, he filed his first tax return at 13 and was worth roughly $60 billion in 2008. Though his fortunes have taken a few knocks as a result of the credit crisis, he is still widely regarded as one of the most successful investors in history. That he has bequeathed a significant part of his fortune to charity only makes him more singular.

Richard Branson – Chairman, Virgin Group Branson’s face is as familiar as the logo of his company. Rare among business leaders, he has never shied away from putting himself in the picture and, whatever people may think of him, the identification between the man and his brand is incredibly strong. With nearly 400 companies under the Virgin umbrella, Branson has been involved with everything from publishing, to air travel, to soft drinks. His frequent World Record attempts and the launch of space tourism business Virgin Galactic highlights Branson’s love of column inches as well as profits.

Phil Knight – Chairman, Nike Inc. As co-founder and long time CEO of Nike, Knight progressed from selling running shoes from the back of a car at US track meets to leading one of the largest and most recognizable brands in the world. Knight’s canny identification of stars such as Michael Jordan and Tiger Woods as ambassadors for the brand helped to elevate the athletics shoe to the status of a fashion item. Despite stepping down as CEO in 2004, Knight remains a vital component of Nike’s aggressive business strategy.

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In our current business environment there are high levels of turbulence, high rates of change and even higher levels of complexity. How can organizations manage while still remaining competitive? For Terry Brake, the answer lies in leveraging global talent, as HRM’s Matt Buttell found out

s an author and professional program developer, Terry Brake tells me that his biggest problem when he writes a book is putting too many ideas into it. “I get carried away,” he admits. “Very often business books are one idea stretched over 200 pages, whereas I tend to have 200 ideas stretched over the same amount of pages. So my biggest challenge right now is to go back and say, ‘Well, let’s dig deeper into this issue.’” And while Brake details several issues that he is now interested in exploring further, it is with his current work, the critically acclaimed book, Where In The World Is My Team? that he explores one (or rather, as Brake acknowledges, a few) of the most important issues currently facing businesses in the modern world. “I’ve been working with global virtual teams for about 15 years now,” explains Brake, who is also President of TMA World-Americas – a provider of global talent development solutions. “My main responsibilities within TMA World are around innovation and product development, and I’ve been working in the training area since back in 1983. Before that I was an education researcher in curriculum development over in London, then I came to the US and worked with a corporation over here, before joining a consultancy firm.” After this, Brake began writing about various topics of interest related to culture – based on things he had studied at the University of London – and, as the topic of globalization began to gain more prevalence in the business environment, Brake combined his cultural interest and the growing interest in globalization to move into writing about doing business across cultures. “With TMA World, what I have been doing is very much within the innovative aspects of product development, particularly associated with the three main areas of global cultural diversity, global leadership and global teamwork,” notes Brake. “That takes me onto questions such as, ‘What are the mission-critical learning content areas in the current environment?’ and, ‘How can we package and deliver that content in ways that are both cost desirable and learning im-

VIRTUALLY CHALLENGED

COLLABORATION

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Terry Brake pactful, given the current circumstances and economic turbulence?’” But Brake hasn’t only been working with global virtual teams – at TMA World he is also part of one, which sets his findings up in good stead. “What struck me most about these teams was the challenges they face,” he comments. “I was able to reduce those challenges to three: team member isolation, team fragmentation of effort, and team member confusion when working across distances and cultures.” Starting there, Brake then tried to develop some of the antidotes that could be used to overcome such challenges, which is where the ‘Six Cs of Collaboration’ came from. Essentially the Six Cs are six performance zones that are critical in terms of global virtual team success. They are: Co-operation, Convergence, Co-ordination, Capability, Communication, and Cultural Intelligence (see figure). He notes: “What I found with many of the virtual team leaders was that they didn’t really have any kind of ‘scaffolding’ on which to think about how to get the best performance from their teams.” So now, as Brake explains, the thinking is that when setting up a team, leaders can think about those Six Cs and say, ‘Here I am, working in this virtual space, I’ve got this team that I’m forming and developing and what do I need to pay attention to so that this team is running as effectively as it can? How do I develop co-operation, etc., virtually, within this team?’” The Six Cs was developed to provide leaders with a ‘mental model’ for tying all of these success factors together and, subsequently, one of the things TMA World has done is develop two behavioral questionnaires based around the Six Cs program. “Now both the team leader and team members can rate themselves in relation to the Six Cs: What are their strengths? What are their developmental challenges as a team? Then,” says Brake, “they can strategize around building on those strengths as well as strengthening their developmental areas – it provides a way of the team looking at itself as a comprehensive unit.”

The leading role

“In some ways, leadership today is more important than ever because of the challenges of working across distances and cultures”

The concept of leadership is clearly critical to Brake’s work, and within HR markets there is currently a huge focus on the relationship between the HR function and whether it needs to instigate itself further as a leader. “I think it’s potentially a huge area. It’s something I think some organizations haven’t really grappled with yet, in terms of when you think about our current environment,” says Brake, stressing that with such uncertainty in the marketplace the only way business can remain successful is through the exchange of knowledge and expertise. “It’s essential that we encourage innovation and leverage the talent we have within our global workforce,” he adds. It’s a fair point: while most organizations have talent all over the world, what is lacking is the ability to bring that talent together in cohesive units. “We’re in a tough economy, so we really need to be leveraging this,” Brake explains. “We need to get that talent working in collaborative relationships. That’s the engine of innovation for our future.”

This unity is likely to be only achieved through the use of technology, which has already vastly changed how we work in recent years. “The technological revolution is already upon us,” notes Brake, “and while new collaborative tools and Web 2.0 technology are already available, to enable those technologies to truly deliver we need to work very hard in this virtual space to develop a degree of trust, and a role I see for HR is as a huge contributor to the development of trust and collaboration. “I remember when I was growing up in England and my father would walk six miles to his place of work, work there all day and then walk back home,” Brake reminisces. “But what we need to understand now is that when we talk about the ‘workplace’ it’s very often not really a place at all; it’s a virtual network space.” Rather than talk about the workplace anymore, Brake tends to talk about, what he calls, ‘work webs’, and his belief is that when operating in these work webs, we have to think about how our working relationships are different. We need to think about how we organize and synchronize our work together; how we connect across cultures and communicate with one another. All of that, explains Brake, means we need to do some

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The 6 Cs - A closer look at the six performance zones for global virtual team success: 1. Co-operation Ability to build and sustain trusting relationships over distances

Co-operation

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C int ultu ell ige ral nc e

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2. Convergence Ability to align with shared purpose, principles, plans, priorities and performance indicators

Global team performance

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Capability

rethinking because old issues in the workplace suddenly have a new context. “For me,” he continues, “a lot of leadership success is about understanding the context in which you’re operating. It’s not just a case of being able to say, ‘I’m a leader because I have a vision and I have a strategy and can influence others to implement that strategy’. For me, its much more about the context in which a leader does that.” In fact, while many things Brake reads about Web 2.0 excite him, he admits that he doesn’t fully buy into it. “Don’t get me wrong, I think that Web 2.0 is very valuable and there’s a lot of opportunity with social networking technologies in business and wikis and blogs,” he stresses. “But while it is invigorating and inspiring, there’s an unrealistic utopianism about how we’re all going to be collaborating freely and equally in this open-source world. “In some ways,” he goes on, “leadership today is more important than ever because of the challenges of working across distances and cultures. Virtual teams can’t succeed using a command and control style, but they must receive clear guidance and be well facilitated. Leaders must do that otherwise these teams can easily drift off into virtual space.” Brake also illustrates his point in another context, talking about the challenges associated with actually having to produce a project with concrete results whilst working across massive distances and spaces. “You can’t assume that that team is going to come together naturally in any meaningful, cohesive way,” he says. “I’ve seen virtual teams who have been working together for three or more years and the results are just appalling, the relationships on these teams are appalling; and part of that is because the leaders have withdrawn from leading in the virtual context. We can’t assume collaboration will emerge without leadership.” This needs to change. Our current economic situation is already driving an increased virtualization within the workforce and there

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3. Co-ordination Ability to negotiate a common workplace with clear roles and responsibilities, shared tools, processes, systems and methods 4. Capability Ability to leverage knowledge, skills and experience across borders 5. Communication Ability to generate shared understandings across distances through effective creation, sharing and accessing of electronic information 6. Cultural Intelligence Ability to leverage cultural differences to create value

can be no doubt that we are already seeing a tremendous amount of virtual training already being implemented across the globe. What’s more this need is growing exponentially. “I’ve never seen such demand as I have recently, and we’re simply just going to need to do more work on competences for leading and working virtually,” says Brake. “I remember a few years ago that if you looked at the adverts in back of The Economist you wouldn’t have found business school ads for international, global MBAs,” Brake says. “Then suddenly a revolution happened, and the magazine was full of these types of adverts. I can imagine a point in the not too distant future where the business school ads will really be pushing hard on developing yourself as a virtual global leader. “We mustn’t get carried away though because there is often a huge lag between the technological capabilities that we have and the human uptake. Yes, I think this is a huge area for development, but perhaps the ‘workplace revolution’ tag is somewhat exaggerated. I think it is going to be more like an evolution than a revolution, but it’s one that is happening rapidly nonetheless.” One final area that Brake thinks is very important for HR is the field of reward and recognition, and the fact that leaders have yet to figure out how to reward and recognize work within collaborative virtual teams. “You know,” he laughs, “I like to think of Where In The World Is My Team? as a fairly tactical book in terms of the ideas around making these teams function effectively, but in all seriousness we need to look at this at a more strategic level.” Brake is right; with greater emphasis on these issues, HR needs to find a way to handle global teams more strategically, rather than in the ad hoc functionality in which they current work. And while Brake is still “just throwing ideas around”, this could in fact be the next topic he finds himself writing about: Watch this space. n

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PROJECT FOCUS

Half the cost, double the results Leveraging process redesign and technology tools to supercharge sourcing, screening and talent management in the new economy, by Sue Marks

he bad news is that you have to cut staff and implement a hiring freeze, but the good news is that there is no longer a ‘war for talent’ so you’ll cut external recruiting expenses, right? Wrong. You may have fewer openings, but you have many more people applying, which will significantly increase the time spent screening and responding to applicants. This will exhaust your HR team and hiring managers, particularly if you have reduced staff recently. The last thing you want to do is further damage your brand by becoming a ‘black hole’ of candidate inquiries. You need to adopt a dual recruiting model for processing a high volume of candidates in a time of fewer job requisitions, while at the same time mining passive candidates for those strategic positions in divisions that are hiring. If yours is like most companies, you don’t have the technology to automate the screening process. However, many recruiting specialists do. This is the time to take the burden off your internal teams and utilize the latest available solutions with an external recruitment partner. Strategic partnerships with technology companies and RPO companies can be a proactive and effective way to address your talent challenges and get a jump on the competition. In February, Pinstripe announced the selection of Jobs2Web’s RPO 2.0 technology for improving the inflow of passive talent and building talent communities and pipelines. Jobs2Web’s technology enables companies to tap into those passive and semi-active candidates who are using search engines, like Google, to conduct more than 200 million job- and career-related searches each month. Jobs2Web delivers sourcing advantages by building interactive talent communities and pipelines, which deliver lower cost sourcing; shorter time-to-fill; higher-quality talent pipelines; significantly strengthened employment branding; and improved search engine visibility.

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Sue Marks is founder and CEO of Pinstripe, Inc., one of the nation’s top RPO providers. Previously, she established Wisconsin’s largest independent staffing company and an enterprise-wide RPO firm; both were sold to a Fortune 500 company. The President of Competitive Wisconsin, Marks earned her Bachelor of Science in business administration from Marquette University and is an annual participant in YPO’s Harvard Business School program.

Pinstripe’s research has uncovered a shift in job seeker behavior. Instead of going directly to specific job sites, candidates are conducting their job searches through major search engines. This trend makes it more critical than ever for employers to enhance search engine optimization to better anticipate their ever-changing search criteria. Jobs2Web enables Pinstripe to advance recruitment marketing strategies and keep clients on top of next-generation recruiting techniques by leveraging the latest innovations. In another strategic technology partnership, Pinstripe joined forces with HarQen, a web-telephony company, for their VoiceScreener technology to optimize the pre-screening of eligible candidates through customized, automated phone interviews. This is an extremely important tool in the current environment; jobs are at a historic low, but applicant flow is approaching historic highs. The technology pre-screens and qualifies applicants through a web-based process for generating pre-recorded phone interviews. The result is a significantly narrowed funnel of applicants who have been communicated with promptly and personally.

The technology and process redesign enables Pinstripe to better manage the unprecedented influx of applicants by improving the speed, accuracy and quality of the candidate experience. Recruiters are able to distribute custom VoiceScreener interviews to job applicants for open positions and integrate their responses into the screening process, significantly increasing throughput while improving candidate service during the initial screening phase. Responses can be seamlessly shared with clients for their review, anytime, anywhere. Well-designed self-service is always viewed as better service in consumer surveys, and it’s high time we took a page from the consumer marketing and service books. Millions of people are losing their jobs, and many of these people are highly skilled, talented individuals looking for new opportunities. Today, the availability of great talent is extraordinary, but finding that talent is harder than ever before. Technology has never been more valuable to our industry. Tools like those described above are transforming the way HR services are delivered and will make the difference between those HR and talent acquisition functions that just survive and those that thrive. n

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THE INSIDER

In the know Approaching four decades in the business, CSC’s Gus Siekierka has watched HR evolve. One thing that hasn’t altered is the need to keep on learning

aving been in human resources for the last 36 years, Gus Siekierka has witnessed first hand the ways the HR function has changed. “When I first got into human resources all those years ago, people just thought of HR as hire-and-fire,” says Siekierka, “but what’s happened over the last few decades is that the whole HR field has blossomed from an essentially employment-oriented function to one that is really very vibrant, that gets involved in corporate strategy, and in learning and development.” Siekierka also remembers when he was studying, before his career at CSC, how very few courses in HR were available to students. “The only courses in HR I remembered were courses in labor relations, because at that time the field was already mature,” he explains, “but over the years, with the developments that we’ve had in benefits, with

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ERISA, compensation plans, training and development, succession planning and thought leadership, HR has really become a satisfying career field.” Siekierka joined the company as a recruiter in 1973 and began working across all the different areas of HR. “I’ve worked in the federal part of CSC, commercial outsourcing, and have had global responsibility. And ultimately have become the head of HR for the corporation,” he details, before laughingly adding this had always been his goal and how it has only took him 30-some odd years to get there. Along with Siekierka’s career, so too has the company grown. When he joined CSC in 1973 there were maybe 6000 people working at the company. “I think our annual revenues were about $200 million,” he says. Today there are about 92,000 people at the company, and revenues are about $17 billion.

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As a global consulting, systems integration, and outsourcing company, CSC prides itself on its mission to provide customers with solutions that are crafted to meet their strategic goals. In addition, one of the things the company really focuses on is its approach to benefits and compensation planning. This is based on the concept of, “we know we’re only as good as our people.” As head of HR, Siekierka is quick to acknowledge the importance of such a principle. “It has often been said that CSC is a services company,” he explains. “We don’t really build anything as such, but the real expertise we offer is the services of our employees. That’s what really makes CSC run. Our business is in providing IT solutions to clients around the world, and

“People want to see a future, and to the extent that we can provide that for people, that’s really of critical importance to us and that’s why we place a lot of focus and emphasis on learning”

jority of learning that we offer is online. We have an award-winning portal, called the Learning Place, which provides fantastic assets for our people. In addition to this we have thousands of computer-based programs where people can take courses in virtually any technology or business field,” he adds. “We also offer certification programs online and ways to apply for outside educational assistance. We provide seminars, online books and just about any kind of learning asset you can imagine.” He also explains how the Learning Place has been recognized by many industry groups for its online learning assets; adding that while CSC does still have some classroom training, because of the sheer size of the company, it is best to do the majority of training online, in real time. Another issue that is critical to Siekierka is understanding that the majority of learning actually occurs on the job: “We spend a lot of time incentivizing people to look for different jobs in the company, by moving people around to different types of assignments, where people pick up a different set of skills.” To illustrate the point further, Siekierka explains how someone who might be sent offshore may well pick up skills that are related to cultural appreciation or language training. “They may then move into a staff assignment, where they might learn about how to influence without real authority; next they’ll

CSC – the Siekierka years the approach of taking care of our people is very important.” Siekierka admits that he ensures he never loses sight of this issue, saying that today the workplace has to be about more than just coming to work every day. “In this environment you have to do certain things just like any other company would do – you have to be competitive in your compensation and competitive in your benefits offerings.” Siekierka also believes that today’s economic climate means it is essential for company’s to be attuned to providing growth opportunities for its people. “By that I mean training programs, opportunities to move into different assignments, promotions, the learning of different skills,” he explains. “It’s important that companies incentivize people to get education within the company, and get additional education through attending college courses That’s very important, and I would say that at CSC, while compensation and benefits is certainly a baseline to incentivize people, more is necessary to motivate and retain them, and, as a company, we need to realize that we have to go beyond that and provide real growth. “After all, people don’t want to be stagnated,” he continues. “People want to see a future, and to the extent that we can provide that for people, that’s really of critical importance to us and that’s why we place a lot of focus and emphasis on learning.”

Lessons in learning In many ways, learning is everything at CSC. While Siekierka acknowledges that being an information technology company, learning is likely to play a larger role in the life cycle of a CSC employee than at some other organizations, he really does believe in CSC’s continued investment in employee training and development. “The great ma-

1970s

In the early 1970s, CSC created an innovative computer time-sharing network in association with the Department of Defense and by 1978 the company had won the California Medicaid contract, the largest contract the State of California had ever awarded.

1980s

By the end of the 1980s, CSC was a major player in the commercial marketplace, but the company continued to retain its leadership in the US government market, winning 90 percent of all recompeted government business and many large, new contracts.

1990s

By the time the 1990s were over, CSC had changed the perception that outsourcing was a last resort for financially troubled companies and the company expanded its outsourcing offerings to include web and application hosting, as well as business process outsourcing.

2000s

Major acquisition activity to expand competencies and industry expertise continues and new opportunities to earn trust develop every day, with new clients Swiss Re, NASA Shared Services, Zurich Financial Services and the UK National Health Service.

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move into a startup assignment where they’ll have to learn team building; then they’ll do a fix-it where they have to learn how to pull together,” he details. “If you were to combine the learning assets with respect to online courses with rotational assignments and on-the-job training, and put them all together, that’s how you provide growth and opportunities.” In fact, it is CSC’s dynamic and concentrated focus on learning that is one of the reasons the Gus Siekierka company has seen such tremendous growth over the last few years. “Our clients come to us and they want solutions. They want the best solutions at the best price. It’s not that they couldn’t do it on their own necessarily; it’s just that it’s better to go to an expert, an IT company,” suggests Siekierka. “The commercial outsourcing business was built on the idea that you have your IT done by an IT company rather than build the capability inhouse,” he continues, “because an IT company focuses on that, they can leverage assets, do it more efficiently, and have more specialized training. I do think the nature of the business we’re in – providing solutions for clients – would mean that the programs we offer for developing people would have to be several notches above the programs offered at client companies.” He also suggests that client companies rely on CSC to keep up with the latest technology. “It’s hard for them to do that, and so we

have to make sure that our people are very well prepared to serve these clients, and that’s why learning is so critical to us.”

For your benefit But it’s not just about learning at CSC. Siekierka also details several other initiatives that have taken place under his tenure at the company. “I believe we were one of the first companies who really used technology to help with recruiting,” he explains, “particularly the internet. I think we were one of the first companies to set up websites for employees to upload resumes as well as scanning resumes and using keyword searches. I think we were ahead of our time with that.” Siekierka acknowledges that everybody does that today, but he maintains that CSC were one of the first companies to really understand the benefits in of using technology through the recruitment process. “I think we were also one of the first companies – maybe even the first – that offered certain benefits to employees. For instance, when personal computers first came out, we immediately installed a program that gave employees the ability to buy a PC for their personal use, taking out a loan. After all, the initial desktops were about $3500; people didn’t have $3500 cash to lay out. So they would put down a very small payment, and we paid for it. The company wrote a check, and then employees just paid us back over the years, through small salary deductions with no interest.” It sounds like a great program, particularly when you now consider how important technology has become to the modern workplace. “In fact,” Siekierka says in his closing comments, “of all the communities in CSC, a lot of people over the years have said that HR has been one of the closest in terms of knowing one another, networking with one another, helping one another and communicating with one another.” Of course, having only been in the position of head of HR for the last three years, Siekierka is quick to acknowledge that this closeness started many years ago, well before he was in the position. He insists that this is really to the credit of the people that preceded him. “At CSC we have always been about that uniqueness,” he concludes, “we’ve always been that close-knit community.” n

“We also offer certification programs online and ways to apply for outside educational assistance”

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INDUSTRY INSIGHT

Empty space Jason Kerr explains how companies need to fight back against the vast emptiness that jobseekers often fall into

t’s called ‘The Black Hole’. At least, that is what jobseekers call it. It’s what happens when a jobseeker arrives at your company’s employment website, applies for a job, gets a pithy ‘thank you for applying’ email, and then nothing. Nothing for days, nothing for weeks, nothing at all. Most companies don’t realize the negative message this sends to the jobseeker, who is also a prospective customer, or even an existing one. One major bank recently discovered that two-thirds of its applicants were account holders at the bank, so imagine the damage that can be done to a business’ brand, its relationship with its customers, and its future revenue, by perpetuating The Black Hole. The current economy is only increasing the recruitment black hole. More and more candidates are applying for fewer jobs, increasing the pool of unqualified applicants. In normal times, companies have trouble coping with the volumes of applicants, but with the current recession, amid record layoffs, candidate volume is massive and demands a huge change in approach.

huge benefit to future recruitment efforts as well as providing a positive experience for current and prospective customers. In addition to the brand protection benefits, the Members of AllianceQ get dramatic recruitment benefits. Utilizing unique matching technology from QuietAgent, members are able to source candidates from each other, lowering costs substantially. Most importantly, the candidates are precisely matched to the members’ job openings based on skills and career ambitions. This matching is done in an automated fashion, which hugely increases recruiter capacity and simultaneously reduces time-to-fill and overall recruiting cost. In the current economic environment, the increase in unqualified applicants is causing other problems for corporate recruiting departments. Costs of ATS systems, data storage and compliance are increasing, and the capacity of the recruiters to fill urgent positions is decreasing due to the additional volume QuietAgent’s Q-Filter technology offers companies a solution to address these problems. By reducing the candidate flow to only the best matched candidates, Q-Filter significantly increases the performance of an ATS system, reduces ATS hosting and data storage costs, can reduce privacy and data compliance issues, and significantly frees up recruiter time, in some cases, by more than 80 percent.

“With the current recession, candidate volume is massive and demands a huge change in approach”

To combat the brand damage caused by the recruitment black hole, one hundred of America’s leading companies have come together to form AllianceQ, powered by online recruitment company QuietAgent, Inc. AllianceQ enables the member companies to provide jobseekers with the opportunity to be matched to more appropriate positions with other employers. By providing ‘continuing care’ for candidates, AllianceQ members ensure that the candidates’ opinions of the company remain favorable, a

Jason Kerr is the founder and CEO of QuietAgent. His vision is to ‘empower everyone with an equal chance to recruit and be recruited’. As a serial technology entrepreneur, his past 18 years have been spent challenging the status quo and directing his team’s energy towards developing new business models that can be delivered through technology.

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Q-Filter enables recruitment to be a laser, not a shotgun. Employers can search to find jobseekers who are well qualified, and who want to do the job. Utilizing advanced matching technology from QuietAgent, both employers and jobseekers do less work for a more relevant result in less time. AutoSearch agents continually look for your definition of the best candidates and can automatically ‘invite’ them to apply to the jobs in your ATS. Your ATS now contains only those candidates who are qualified and interested. A recent Deloitte study Aligned at the Top finds that, although HR leaders and executives view people as a critical issue, there continues to be a disconnect between the strategic needs of the business and HR’s ability to deliver. The survey results suggest that there is still a gap between the senior business executive’s view and the perceived capabilities and programs being promoted by HR. At the moment, most HR functions appear to have the administrative side pretty well covered. But the survey shows the strategic people agenda is not being addressed by HR. QuietAgent provides recruiting departments with the ability to use advanced technology to shift focus and increase ability to deliver the strategic human capital objectives of the business. n

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TALENT MANAGEMENT

An age of uncertainty In such a turbulent time, Peter Cappelli looks at how talent management is changing for HR leaders

alent management is the process through which employers anticipate and meet their needs for human capital. Getting the right people with the right skills into the right jobs â&#x20AC;&#x201C; a common definition of talent management â&#x20AC;&#x201C; is the basic people management challenge in any organization. In the context of the US recession, many companies are no longer paying attention to their talent management programs, especially the signature programs associated with management and career development. They argue that their current problem of trying to cut costs is so preoccupying that there is no time or energy to work on talent issues.

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The irony here is that their immediate challenge – having more employees than the work that is available – is itself the most basic failure in talent management. And that is the mismatch between supply and demand. Many employers lurched from a panic over shortfalls of talent just a few years ago, to a surplus of talent. Most talent management practices, especially in the US, fall into two equally dysfunctional camps. The first and most common is to do nothing – making no attempt to anticipate your needs and developing no plans for addressing them. Recent survey data suggests that about two-thirds of all US employers are in this category. Making no attempt to anticipate and plan for needs means relying on outside hiring, a reactive approach that has begun to fail now that the costs and difficulty of finding candidates has risen. The second strategy, which is common among older companies, relies on complex bureaucratic models of forecasting and succession planning from the 1950s – legacy systems that grew in an era when business was highly predictable. These models fail now because they are inaccurate and unresponsive, as well as costly. The most important problem faced by virtually all employers is uncertainty and the need that results respond quicker to changes in competitive environments. How many of us planned for the 2008 financial meltdown? We cannot expect to plan for all the important contingencies that affect our businesses, so we need to be upfront and acknowledge both the uncertainty and our need to manage it.

The greatest risks in talent management are, first, the costs of a mismatch in employees and skills (not enough talent to meet business demands or too much, leading to layoffs or a poor fit between individual attributes and requirements) and, second, the costs of losing your investments in talent through the failure to retain employees.

“Many employers lurched from a panic over shortfalls of talent just a few years ago, to a surplus of talent” The risk management problem facing talent management is analogous to problems already analyzed in the field of operations research. For example, the practical definition of talent management, getting the right person in the right job at the right time, is identical to the basic task of supply chains. Risk has two aspects: the uncertainty of a given outcome occurring, and the costs of that outcome. It may be possible to reduce the uncertainty associated with business outcomes through better forecasting, but it is

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easier to make progress in managing risk by understanding and then reducing the costs of mistakes. For example, it is hard to forecast how many units of some product will be needed, but it is relatively easy to know the costs of not having enough product and services to meet demand (losing opportunities as a result) versus the costs of exceeding demand (producing inventory). Cost effectiveness demands that we choose the amount to supply that minimizes both costs. In other words, it is not enough to simply estimate the demand: to minimize costs, you need to know what the costs will be when you are wrong, as you inevitably will be in an uncertain world. It is also important to have an idea of how wrong your forecasts have been in the past and how likely it is that they will be wrong again. The way to deal with the costs of uncertainty above is ‘make and buy,’ choosing the mix of internal development for the number of positions that we are absolutely certain we will need, even in the least rosy scenarios, and then making up any shortfall through outside hiring. Many employers right now are in the midst of tough decisions about whether to cut jobs and employees and, if so, where to do it. We can get a great deal of insight about that decision by applying a tool from finance: options theory. With options, we turn the problem around, rather than asking what the savings might be from cutting them, we ask, what’s the benefit from retaining them? The difference is that the lat-

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ter is forward-looking and helps us manage uncertainty in the future. Using this approach against the costs of retaining the employees generates a very clear measure of whether it is worth doing. For our purposes, the key here is that we are trying explicitly to address the uncertainty in the future. We can do something similar with planning for succession. Long-term succession plans are mistakes because they assume that we know which jobs will need to be filled in the future and which current employees will be around to fill them. Many companies update their succession plans every year to try to keep up with the fact that jobs change and individuals leave. As a practical matter, how useful is a plan if it must be changed every year? What problem is it solving? A better approach is to use the principle of portfolios. To apply this concept to talent management, consider the idea of talent pools, where you avoid developing employees to fit narrow, specialized jobs. Instead, you develop a group of employees with broad and general competencies that should fit into a range of jobs. Once the candidates are developed, you can allocate them to the actual vacancies, as opposed to trying to guess years in advance where vacancies will occur and which individuals should slot into them. The fit between candidate and specific job may be less than perfect. But just-in-time training and coaching can help close the gap. Peter Capelli is the George This new approach to managing talent is fundaW. Taylor Professor of mentally different from what has come before beManagement at the Wharton cause it takes seriously the most important problem School and author of Talent facing business today, and that is uncertainty. We on Demand: Managing Talent don’t have to reinvent the wheel to address this chalin an Age of Uncertainty. lenge, but it is necessary to think about talent manHarvard Business, 2008. agement challenges through a different lens. n www.talentondemand.org.

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LEADERSHIP

Showing the way

John Baldoni, author of Lead By Example, tells HRM why leading from the frontline is so intrinsic to business success

n my field of leadership development you become aware of certain skills and attributes that make leaders successful and keep them in control, and given the current climate there is an even greater amount of pressure being placed upon business leaders. Subsequently, what leaders need to do is assert themselves enough so that they become ‘true’ leaders. But what does this mean? Well, it means that leaders need to maintain their vision, maintain their mission and strive for alignment, while at the same time pushing for innovation and risk. The other part that goes in hand with this is the human element, where you have to work overtime to keep the team together. That really calls into the issues around whether leaders are being seen, being heard and being present in the workplace. Leadership is about letting people see you out there, meeting and mingling with your people and listening to what they are saying; yes, leaders need to stay on message for themselves, but they also need to ensure that they are listening to their people. Leaders have to be prepared to be available to do whatever the organization needs. So if you’re in a small enterprise or a small publishing firm for example, this might mean helping pack boxes to get the orders out. Leaders have to understand that they need to be there for the organization and do whatever it asks of them.

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In truth, every executive probably knows this already, but there is a backside to a recession that says that as things slow down this is the optimum time to develop your people. Leaders need to be thinking about things like coaching, mentoring, career development, job rotations and cross-functioning roles. These things don’t have to cost money either, which is of course a huge concern given the current state of the economy. Every manager should be doing these things anyway, but there are other career development opportunities out there that leaders need to explore. Some of these may involve going back to school, and that does provide a financial consideration, but things like job rotations aren't going to cost any money, cost-functional training isn't going to cost money, and pairing people up in senior/juniorteams requires no extra funding. Leadership is about having the assertiveness to make these things happen.

The real cost of leading Regardless of this though, sometimes the only way to save on dollars is to cut back on labor costs, and that’s a really terrible thing for a manager to have to face. No manager likes having to do that, and if you do you’re probably shouldn’t be working with people in the long-term, but sometimes you do have to make these though decisions. For me, a

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definition of leadership is, knowing to do what is good for the organization – even if what you really want to do is what’s good for the people. As a manager and a leader, the other thing that you have to do is focus on what is left behind after the layoffs. You need to really shore up the morale of the people who are left behind, because they’ll be struggling with the dual emotions of fearing that they’ll be next and the sense of guilt over why it wasn’t them getting laid off in the first place. All that is then mixed with the sense of relief they feel when they don’t also become victims of further layoffs and are still in a job. Some organizations are currently looking to get rid of non-value adding activities, such as preparing reports for senior management or an excessive numbers of meetings, so that job roles can ultimately run more efficiently, but the push for leadership development is still strong. In fact, it was recently reported in the Wall Street Journal that while many training programs are being cut to save on costs, leadership development is not, and this is because companies now realize how critical leadership development is to the future of the enterprise. Again, leadership development does not always mean spending money. There is often a misconception that leadership development programs have to be formalized for them to matter, and I don’t think that is necessarily true. For example, you can coalesce a team, give them special projects which relate to furthering the enterprise and then you come back and work on that. How are we doing? What have we learned? Those aren't cost intensive, but they still add value and give people greater levels of responsibility, which in turn prepares your people for greater roles

COMMUNICATING LEADERSHIP Leadership involves both communications and learning. We look at John Baldoni’s Leadership Communication Model – a key tool in his teachings. Leadership process

Communication action

Vision

Visualizing and verbalizing the message

Plan

Describing the steps the organization needs to take to fulfill the vision

Delegate

Defining individual roles and team reponsibilities

Coach

Advising, counselling and listening

Motivate

Recognize the contributions of others

John Baldoni is a recognized thought leader in leadership and communications, as well as a motivational speaker, author, executive coach and communications consultant. Baldoni’s work is designed to help managers create, plan, manage, recognize, motivate and lead more effectively.

of leadership as they progress in the company. The other thing that organizations need to understand is that you can actually teach leadership. It is true that you can’t just make someone a leader – it has to be earned, but you can teach it. In other words, while you can teach someone the principles of it, actually becoming a leader has to be a personal decision. That said, most leaders in our world never went to any sort of a leadership development institution and never will, nor should they need to. I like to define personal leadership as the sense of autonomy, initiative and responsibility, that sense of willingness to step forward and make positive things happen – and that has to come from within us. What’s more, with the economy we’re experiencing right now, we could be seeing the emergence of new leaders because people often to have to step up and really show their worth during difficult times. In fact, in many ways, crisis is the crucible of leadership. It generates something in people. If we look back at history – George Washington, Abraham Lincoln, Winston Churchill – these are all people who step forward in moments of crisis and society has always benefited from that. I expect we'll see that same mentality happening within our corporate environment as we continue through this recession.

A shining light One person’s story that I really like is Anne Mulcahy at Xerox. She was someone from within Human Resources who is now running the company. When she was given the job, I remember all the financial people saying, “You’ve got to break up the company and bring about some drastic changes,” and there was a remarkable amount of pressure. Of course, the thing is, Mulcahy is a Xerox-lifer – she had grown up with the company, and she said, “I know the values of our organization, I know what we are capable of doing,” and while there was a significant amount of downsizing that Xerox went through, Mulcahy really helped to right the ship. She’s a wonderful communicator, she went out and listened and she asked, “What can we do here? What can't we do?” and she focused on core competencies. It’s a wonderful story of someone who worked – and I’m a great admirer of her leadership ability. Leadership development isn’t always easy. Sometimes people need to have the door opened for them, or they need permission to do those kinds of leadership things, especially within a large corporate infrastructure. “Oh, you mean I can do that?” That’s leadership. And we have to go and do it, we have to make it happen. n

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ASK THE EXPERT

Out with the old,

in with the new

It is no longer enough for organizations to simply follow the old management style of control and authority, explains Cathy Cassidy

he pressure to produce results and global competition is changing the organizational landscape – from silos and individuallybased goals to cross-dimensional operations and shared goals. The new generations of workers – Millenniums who thrive in team-based environments, and Gen Xer’s who crave independence are also demanding change. No longer can leaders and managers use outdated management systems based on old paradigms of authority and individual incentives. We must use a new management model that is designed to create alignment with organizational strategy and will enable leaders to effectively lead new generations of workers for the long- term. Like new generations of workers, this management model is next-generation too: it is New Matrix Management (NMM) and it’s the 21st century management system organization’s need to execute multi-dimensionally, multi-generationally and globally. First generation Matrix Management had the right goal in mind, but it was rooted in old ideas of authority-based management and individual optimization. These principles have been shown to not serve the whole organization and thus an updated approach is needed. NMM integrates different managerial components (systems, practices and processes) so an organization’s structure and operations are optimized to execute strategy in any environment. From improving alignment of organizational goals to improved execution of work across functions and between dimensions, to enabling leaders and workers to engage in a powerful way that doesn’t require authority, NMM

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will successfully tap the talent of these new workers to help the organization better compete in the changing environment. Often, I find that organizations are executing one or more of these components already, but are not integrating them

Cathy Cassidy is CEO of Martin Training Associates, global expert in leading and working effectively in a matrix organization. Martin Training provides workshops, consulting and publications on New Matrix Management, including project and portfolio management, accountability, horizontal governance structures, and collaborative leadership skills.

properly or applying them enterprise-wide, and as a result, sub-optimize the entire system. Implementing NMM must be about improving the entire organizational system and since every organization is different, the starting point will change. Through the use of organizational assessment, leaders within the organization can determine the best place to start. Once identified to the leadership teams, the changes in thinking and behaviour can begin. Thus, leadership buy-in is key to effective implementation of NMM. We have seen organizations realize benefits from operating with this new paradigm almost immediately, with commitment from every leadership level. At the core of the matrix organization’s challenge is the reality that an individual’s ability to meet their individual goal is dependent on others outside their area of authority and the desire to implement a management system as comprehensive as NMM doesn’t make it doable at once, so here are some quick tips for using the NMM components to begin creating the buy-in you need to move forward in helping the organization execute strategy: • E nsure there is buy-in from the leadership at your (starting) level. • Begin utilizing and identifying ‘shared goals’ when working with your business partners and look for ways to measure those goals. • Bring the organization a collaborative method for project management that you standardize across the company. • E ducate everyone on the definition of ‘proactive accountability’. Change the dialog from reactive finger pointing to proactive commitment and relationship building. Today, organizations no longer resemble the silo-based environments of our predecessors and workers no longer come to organization accepting things ‘as is’. As new generations of workers become past generations, new expectations will always evolve. NMM is the management system that when correctly applied positions the organization to achieve goals no matter what generation is joining your workforce. n

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STAFFING

RECRUITMENT LESSONS FOR A DOWNTURN

All businesses have cycles but when a recession hits, recruitment plans will naturally be affected. So how should firms approach recruitment during a downturn?

recession may seem an odd time to talk about recruitment. Since the start of the downturn in December 2007, 4.4 million jobs have been lost, with more than half the losses coming during the past four months; 651,000 workers lost their jobs in February alone, the third straight month in which more than 650,000 people were made redundant. The fact that unemployment has climbed to 8.1 percent is only the latest sign that the economic crisis is getting worse. But traditional layoffs and hiring freezes – the most obvious recruitment responses to a recession – may not necessarily be those that will help a firm most. All businesses have cycles – periods of sustained growth followed by downturns and periods of quiet – and it is how you manage through these cycles with an eye to emerging stronger and more agile that sets you apart from the competition. And in fact, experts insist that a carefully considered recruitment strategy is integral to surviving the difficulties of a downturn.

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As CEO of Heidrick & Struggles, the world’s largest executive recruitment firm, Kevin Kelly sees his fair share of corporate staffing plans up close. His verdict? “I think firms need to look at this as an opportunity to rebuild their talent pipeline,” he asserts. “For instance, we’re seeing the best organizations moving out those individuals who, long term, aren’t necessarily going to get them where they need to go in terms of their strategy; they’re upgrading their reserves of talent, rather than simply laying people off.” It all comes down to productivity, and ensuring the people you have are the best candidates for the job. “Even if you let go a certain number of individuals, in the current climate you could probably rehire senior level individuals who are more productive than some of the individuals you let go,” says Kelly. Such an approach means that companies need to focus more closely on identifying where their top talent lies, and incentivizing those with the right skills to stay and contribute to the future success of the firm. According to Kelly, it’s about demonstrating to your employees that you are

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committed to whatever strategy you have embarked upon. “Show them a clear future and how they are a part of that future,” he says. “You can’t hide in a bunker right now; get out to your offices and talk about the future of the firm, what it looks like, what you’re planning to do as an orgaKEVIN KELLY nization and how you want to get through the next 12-18 months.” For Kelly’s firm, it means a growing emphasis is being placed on retention and loyalty strategies as opposed to just executive search. “We’re seeing a fundamental shift in terms of what we’re doing as a firm,” he explains. “When companies come to us today, they no longer just want us to provide them with a shortlist of candidates, because in today’s market, candidates are fairly easy to find. Instead, they’re asking us how we can help make their company successful, and what makes a certain person the right fit for their organization. In the recent PricewaterhouseCoopers CEO survey, 95 percent of executives were concerned about retaining their key employees. So we’re focusing more and more on retention, development, assessment and succession planning

for those key individuals. It’s not only providing an individual in the first place; it’s helping ensure their success and developing the next generation of leaders.” He sees clients falling into one of two camps. “Some are being aggressive and using the current climate as an opportunity to go out and upscale and retool their businesses. Others are going back into the trenches. However, I think those that are focusing on being more proactive – assessing and developing their people and retaining them – are going to be much better off when we finally get out of this downturn.” It’s one of the great dilemmas whenever we enter a downturn: whether to invest in future growth or hunker down and ride out the storm. So does he see any trends in terms of how companies are responding in different industries? “Biotech, technology and pharma have been more aggressive in using this opportunity, yet you still have some boutique investment banks using this as an opportunity as well,” he says. “The challenge they all have is sifting through the vast number of candidates that are out there. And that’s where firms such as ours come into play, in evaluating all those different candidates and sorting the top talent from the rest.” Other potential beneficiaries could be current business school students – along with industries outside of the typical consulting/investing sectors they generally serve. “One of the best things business school students could do for themselves is to go out over the next couple of years and get broader experience in a different industry – whether it’s technology, renewable energy, or the environmental sector – because banking will come back and they’ll be better off for having gained that broader experience.” He explains how a lot of individuals who find themselves in a leadership role grow up in a silo, whether it be marketing, finance or operations. However, more senior roles require much broader experience and a number of key skills – not least an ability to work well with people. “Around 95 percent of what you learn in business school is operations, finance, accounting and marketing, with only five percent of your time spent on people. Yet when you become a leader in an organization you spend about five percent of your time on those things and 95 percent of your time on people. Therein lies a huge problem behind some of the leadership issues we are seeing today.” Kelly believes staff development is going to be an increasing part of his business over the next few years. “There are going to be beneficiaries out of this recession and the companies that are going to do best – and I think history shows this – are those individual organizations that use this as an opportunity to grab market share,” he concludes. “Globally it’s going to be a very challenging year, yet it provides us as an organization – just like our clients – with a great opportunity to go out and potentially capture a bigger share of the market. And that’s really exciting.”

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CULTURE

outside

Thinking

the shoebox

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In less then a decade Tony Hsieh transformed online shoe retailer Zappos from quirky startup into a multimillion-dollar empire. How? By focusing relentlessly on customer service and building a company culture based firmly on fun. Rebecca Goozee caught up with the CEO to find out what’s next on his agenda.

ocketing to success as an online shoe retailer, Zappos is in order to filter out egomaniacs as well as wallflowers. The individual famed for its legendary customer service that has not only has to pass both in order be hired. “We’ve actually passed on a lot of exwon the praise of Fortune, Forbes and Fast Company, but has perienced and talented people that we know can make an immediate imalso led the company to regularly share its ethos with Fortune pact on our bottom line, but if they’re not a culture fit, then we won’t hire 500 companies. So what’s behind them. One of the things we’re looking for is Tony Hsieh’s passion for service? people who are passionate about the compaIn 1998, fresh out of college and aged just ny vision, which is to provide the very best cus24, Hsieh sold his first business, the ad company tomer service,” says Hsieh. LinkExchange, to Microsoft for $265 million.Why? However, while ensuring that he has the Mainly because the company got big pretty quickright people is crucial to the business, this also ly and because he soon learned that while he means that the company goes through a lot of Deliver WOW through service – do hired the right people in terms of skill set, he hadpotential employees. When the company holds a something beyond what’s expected n’t built a company culture. “When it was just five job fair for the call center for example, 200 people or 10 people it was a lot of fun, but by the time we might show up, but only around 20 will be offered Embrace and drive change – in order had 100 or so employees I dreaded going to the a place after the initial interviews. After that there to stay ahead of your competition office,” says Hsieh. are four weeks of training, beginning everyday at A year later he invested in an idea nobody 7am, to learn about the company culture and how Create fun and a little weirdness – else would touch: selling shoes on the internet. to use customer service tools. New recruits are one of the side effects is innovation “I got involved around two months after the even offered $2000 to leave the company during Be adventurous, creative and opencompany started. I started off as an investor training, in order to weed out the half-hearted. minded – develop and improve and part-time advisor, and was actually inAnd to keep his employees happy once they are decision-making skills volved in 20 or so different internet companies hired, Hsieh throws a weekly costume party at the at the time. Over time it became clear that main office. Pursue growth and learning – stretch Zappos was both the most fun and the most inZappos employees, or Zapponians as they yourself teresting, so within a year I ended up joining full are called by those in the know, are required to be time,” explains Hsieh. just a little bit crazy, but mainly open-minded and Build open and honest relationships And since he joined Zappos as CEO in 2000, creative when dealing with customers. Rather – communication is key the entrepreneur has taken the company from than using a script, each consumer is treated as $1.6 million in annual turnover to over $1 billion. an individual case, and will be encouraged to Build a positive team and family All by focusing on great customer experience. order multiple pairs of shoes to ensure they find spirit – go beyond the typical ‘coWhile any firm is reliant on its staff, in order the right pair as well as take advantage of the free worker’ relationship to produce a superb customer experience a comshipping in both directions. And if Zappos runs out pany becomes even more dependent on its emof a particular style, call reps will actively point out Do more with less – constantly raise ployees. So how does Hsieh ensure that his new competitors who have the style in stock.There are the bar hires are the right cultural fit for Zappos? He only many stories about customer service reps going hires people who are passionate about what beyond the normal boundaries of the job. For exBe passionate and determined – Zappos is passionate about – namely, great serample, a recently widowed woman called to see if have a positive but realistic attitude vice. Anyone who comes into the company, be it it would be possible to return some shoes that Be humble – treat others how you an accountant, lawyer or call center rep, is put had been ordered for her husband, who died a wish to be treated yourself through two sets of interviews. The first set is short time after receiving them. The rep accepted through the hiring manager and his or her team, the shoes and sent the customer some flowers. to make sure that the individual fits within the In fact, a large part of Zappos’ appeal is the team, has the correct technical ability and the relevant experience. hassle-free returns policy, free shipping both ways and the fact that 90 perThen the HR department does a separate set of interviews, purely for cent of orders arrive the following business day. In order to accommodate the culture fit, which consists of some wacky interview questions (including, high volume return rate it was imperative that warehouse and customer ser‘on a scale of 1 to 10, how weird are you?’ And, ‘what’s your theme song?’) vice operations be highly efficient. “Our return rate can be anywhere from 20

ZAPPOS 10 CORE COMMANDMENTS

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to 40 percent depending on the brand, so we had to ensure that we would expect this level of return, and also encourage it,” says Hsieh. Having a warehouse with around four million pairs of shoes is just part of the business for Hsieh, but while there are costs associated with that and extra steps around making sure they haven’t been worn and so on, it is all part of the service. “While there is more labor involved, it’s what makes people keep coming back to us – because it’s so easy to return items.”

Tough decisions In a tight economy companies across all verticals have to make tough decisions. And in October 2008, when Hsieh himself announced a number of layoffs, he was widely praised for the way in which he handled them. “The economy definitely affected our original growth plans,” explains Hsieh. “All our hiring and expense structure was based on us hitting the $1.1 billion mark in 2008, but we ended up doing a little over $1 billion.” Hsieh decided that Zappos should start 2009 in as healthy a position as possible, and so he knew that when the figures were going to fall short, he would have to lay off about eight percent of employees. “It was a tough decision but at the same time we wanted to be proactive about the situation and not wait until we had no choice.” Every laid off employee was given at least two months severance, and if they had been with the company for three or more years, received one month per year that they had worked. On top of that, Hsieh offered to reimburse them for up to six months of COBRA payments so that they were taken care of on the medical side as well. “It was definitely a tough thing to do but we were very open and honest in terms of the business reasons for doing it,” says Hsieh. “We sent an email to all employees explaining why we had to do it and why it was the best choice for the company given the economy. And then we posted that same letter on our blogs and announced it through Twitter. It wasn’t something unique to the layoffs but rather part of our culture – being open, honest and transparent.” However, this wasn’t the first time that Hsieh had to make layoffs. He also did so during the first couple of years of the company, and while it involved fewer people, percentage-wise it was actually a much greater portion of the company. “Looking back it was a blessing in disguise that we had to lay people off in the early days, as it forced us to focus on the customer experience. In fact, if we hadn’t gone through that we wouldn’t be who we are today. So we do see it as an opportunity for us to make our culture stronger and more tightly knit, as well as make the company more efficient.”

tomers become promoters, recommending the brand to others. ‘We’ve grown from basically no sales in 1999 to a little over $1 billion in gross merchandise sales in 2009. The number one driver of that is repeat customers and word of mouth – promoters have become an extremely important thing for us.” In fact, these promoters have meant that the company has spent less on paid advertising than it otherwise would have, and in turn that money has been spent on the customer experience. So, for example, the free shipping both ways, 365-day return policy and 24-hour call center are all huge expenses for the company, but viewing these as marketing outgoings makes it much easier to see the benefits. “Any costs that we’ve put into investing in the customer experience end up driving that repeat customer behavior and word of mouth, so it is very much an indirect marketing cost,” explains Hsieh. He goes on to explain that he is very much aware of the importance of letting your employees hear the applause of the consumers. “A lot of it for us is instant,” says Hsieh. “The customer will be on the phone and when you wow

“We are of the philosophy that you can do a lot more if you get the culture right, and then most of the other stuff will take care of itself”

Feedback In order to manage touch points and the behavior of his employees Hsieh uses net promoter score, but on the whole he prefers to inspire them rather than try to manage them. “We are of the philosophy that you can do a lot more if you get the culture right, and then most of the other stuff will take care of itself in terms of great customer service,” he explains. “We’re extreme in trying to inspire people through the larger vision and living the core values.” With 75 percent of sales from repeat customers, Hsieh is keen to highlight that good customer experience not only generates repeat sales but those cus-

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them you can hear the feedback instantly from the customer themselves.” A weekly newsletter also goes out to the whole company that highlights when someone emails or calls to tell the company about a great experience. “At Zappos we really believe in the importance of forming a personal and emotional connection with as many customers as possible.That’s why we put our 1-800 number on the top of every page of our website, because we actually want to talk to our customers,” explains Hsieh.

Future focus Having previously described Zappos as a service company that just happens to sell shoes, it is unsurprising perhaps that Hsieh is planning to get into other industries this year. “We’re already making a big push in new ranges of clothing in 2009 – we already sell clothing, as well as electronics and housewares, but really 10 years from now Zappos doesn’t even have to be an online business. “We just want to be about the very best at customer service. We’ve had customers email us and ask if we would start an airline – so a Zappos airline would just be about the very best customer service. One brand that we look toward for inspiration is Virgin – it does airlines, music and a whole other bunch of businesses, but their overarching brand is about being cool. We want to become an overarching brand around the very best customer service and customer experience.” With the core competence – namely that great customer service – entirely transferable and already in place, it seems that Zappos has the edge over its competitors and is already well on the way to building a lasting advantage through customer and corporate culture, providing first-class customer experience to the masses.

Magnovo Training Group offers public training sessions in the following major U.S. Cities

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INDUSTRY INSIGHT

The next generation A new business simulation, re-engineered as an instrument of assessment rather than training, provides a quality control tool for HR managers, as Craig Watters explains

alance sheets, income statements, cash flow statements and financial ratios are like a doctor’s report following a physical exam – they are a comprehensive description of overall health. They are so fundamental, however, that it can be difficult for business people to admit when there’s a gap in their knowledge about what the figures really mean and how they can be used to make better decisions. Comp-XM is a new business simulation designed to identify gaps in understanding. Rather than a training tool to build business acumen – as simulations have done for decades – it’s an assessment tool to identify strengths and weaknesses. By reengineering the business simulation so it can be used as an assessment tool, we have, in a sense, developed a quality control tool for HR managers. For HR managers tasked with hiring, reassigning and promoting people, knowing those strengths and weaknesses is crucial. If you can identify a problem, you can focus your training efforts whether they target an individual or a whole population. American historian Daniel Boorstin said, “The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.” In 20 years of teaching business to corporations around the world, I have found the illusion of knowledge is a hurdle many have to vault. Even admitting it exists can be a challenge. Most established managers can talk a good game even if their understanding is faulty. I am not suggesting people are dishonest; simply that it is easy to believe your industry-specific knowledge is all that matters and all you need for good decisionmaking. The environment is constantly changing, however, and if some of the fundamentals are missing, decision-making will suffer. Comp-XM was launched in 2003 as a quality control instrument for business

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Craig Watters is CEO of Capsim Management Simulations, Inc. and its senior business coach. Using Capsim simulations he teaches strategy and finance to executives from General Electric, Samsung, Goldman Sachs, Allstate, Sony Music Entertainment, Caterpillar, Johnson Controls, Alcoa and many more. Walters’ PhD is in Industrial Engineering from Northwestern University and his MBA is from Kellogg Graduate School of Management.

schools. It was a direct response to the increasing pressure from stakeholders to demonstrate ‘assurance of learning’ in business schools. Comp-XM evaluates the competence of graduating MBA’s as they address a comprehensive problem – how to manage a business over a period of simulated years. In other words, it measures them on their ability to do just what an employer wants them to do. Do they understand the implications of their asset turnover, for example? Do they see the impact on productivity of positive training and recruitment policies? Do they comprehend the liabilities of excess inventory? Comp-XM’s ability to spot problems at a granular level and determine competence across a range of business management areas is now available to HR departments for two key purposes. First, Comp-XM can be used to sample a cohort of the workforce to identify defects in overall business acumen. As a population, do our managers understand basic business principles and if not, what’s missing?

Second, it can be used to assess an individual’s learning needs before hiring, re-assignment or promotion. Before Jane becomes a VP, does she need coaching on marketing? Before John heads up the business team, does he need to understand ratio analysis? The process is simple. First, participants do a training program based on either Capstone or Foundation business simulators. Next, individuals or the whole class undertake Comp-XM, which takes from five to seven hours to complete. At the end of each round of the exam, participants answer questions from the ‘board’ of their company. The questions are specific, based on each individual’s decisions. The results can be standardized against a whole population, or fed into a matrix and presented as an in-depth report on an individual. Just as business simulations help managers learn to make better use of company resources, Comp-XM can help you make better use of the skills and talent in the company’s human resources. n

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E-LEARNING

The

art of e-learning

Tim Buff explains why this teaching method has become so important to business today and how developing a real strategy is the only way to provide real ROI 2. Decide how to develop your e-learning content In the past the only real option in developing e-learning content has been to subcontract to specialist e-learning developers. However, with prices per hour of e-learning ranging from $14,000 to $35,000 or more, and long development cycles of typically three months or more, it’s easy to see why e-learning adoption has been patchy. Now, with the latest enterprise rapid e-learning development platforms, e-learning can be created and updated quickly, without having to outsource to external specialists. This is an approach that can deliver a very high ROI, with payback in just a few months. The key is to make sure you select a system that requires minimal author training that can be used to develop high quality and engaging e-learning, quickly and easily.

3. Decide how to deliver your e-learning content

he current economic crisis has prompted much debate around how the HR function can contribute to the effectiveness of an organization in a time of challenge and change. There is increased pressure to cut costs, increase value for money and enhance flexibility, whilst at the same time it’s vital to continue to drive for more effective and relevant staff development. So how can businesses, with a recognized need for training staff, begin developing their own e-learning strategy? Firstly, remember that an e-learning strategy is part of an overall staff development strategy; you need to ensure overall strategic aims are in place before you embark on using e-learning. These aims need to identify the audience; understand the skills that employees need to develop; the subject matters that are covered by the training requirements; who the subject matter experts are within the organization; what the ‘quick win’ areas are; where (in geographical terms) the learners are based; which requirements can be effectively addressed through e-learning, and which will require a traditional classroom-based or mixed approach; and how ROI and cost benefits will be measured. HR functions need to be flexible to changing business requirements and must support them proactively. Using modern e-learning as a key part of an overall training strategy is becoming much more important in increasing reach and reducing costs.

Developing an e-learning strategy 1. Decide on your curricula Which content will be delivered as e-learning, and which will be issued as classroom-based training? If you need help, then talk to someone who has the relevant experience; e-learning providers can supply a full range of support services to help clients get the most from e-learning as part of an overall strategy.

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You can deliver e-learning content in a number of ways. Most e-learning development platforms can be delivered through CD-ROM or a website, but the advantages of a learning management system (LMS) should also be considered. Additionally, you might benefit from the ability of comprehensive platforms that are on offer, to deliver e-learning through a Microsoft SharePoint site or even a mobile phone or PDA.

4. Monitor results and modify the strategy going forward In tough economic times, it is important to ensure you get the best return on any investment. For e-learning, this means tracking learner progress and ensuring the effectiveness of the training. A key contributor to monitoring e-learning is a SCORM compliant learning management system that can automatically track and report learner progress and individual results. The real benefit of using the latest technologies within your e-learning strategy is not only the cost reduction that is offered, it is also the speed, relevance and effectiveness that the latest e-learning platforms can enable. Content development and updated timescales are reduced from months to weeks, or even days, and consequently many more courses can be developed for a wider range of uses. This enables a much better use of staff time, and most crucially, training can be better targeted for increased effectiveness. n

Tim Buff is one of the founder members of CM Group and a major shareholder in the company. He is a strategic thinker and an astute entrepreneur with solid managerial skills, wide experience and a strong business mind. Buff is a graduate of the University of West of England where he studied Accounting and Finance. On leaving university he joined international accounting firm PriceWaterhouse Coopers, where he qualified as a chartered accountant. He is currently responsible for the development of CM Group, its staff and its position in the market.

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EXECUTIVE INTERVIEW

Going through the mill? Jason Baron and Missy Alexander explain how to avoid ‘diploma mills’ and make the most out of online learning What is a ‘diploma mill’ and how can I determine if a school is credible? Missy Alexander. Diploma mills provide academic credentials for little or no academic work with many degrees awarded for ‘life experience.’ These businesses are not accredited by any nationally recognized certifying agency (although not all unaccredited schools are diploma mills) and often claim certifications by bogus entities. Josh Baron. The key step to avoiding diploma mills is to ensure a school is accredited. The US Department of Education provides a listing of 6900 postsecondary educational institutions and programs that have been approved by regional accrediting bodies and/or state agencies. Specialized accreditations for programs like business, psychology, or nursing might also apply. Check school websites for these additional certifications.

Josh Baron is Director of Academic Technology and e-learning at Marist College and is a member of the Sakai Foundation Board of Directors.

Is the role of the professor different in online classes? MA. While the style of teaching in an online course is different from what students typically experience in the traditional classroom, the role of professor is no less important in terms of guiding students through the curriculum, creating meaningful learning opportunities for individuals and small groups, and evaluating the learning process and student outcomes. Teaching in an online environment is very exciting because the people who enroll in online programs tend to be motivated learners ready to engage the material. It’s easy to get to know online students because they can’t hide in the back of the room: everyone must participate. Unlike the instant responses necessary in a traditional classroom, the time delay between questions and answers encourages a productive dialogue.

What is the difference between online college courses and web-based training? JB. Web-based training, often used for corporate training, is generally delivered in a self-paced mode without an instructor. As a result, students often work in isolation. In general, this model works well when a set of facts needs to be learned and when the students are externally motivated (such as where certification is required) to complete the work. The model is less than ideal for learning a larger body of knowledge or developing high-order thinking skills (such as problem solving). MA. With high-quality online courses the learning outcomes go beyond a standard checklist of facts or skills. Online learning provides students with the mechanism to explore topics at a greater depth, in part because they tend to be led by an instructor who helps facilitate the learning process.

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Missy Alexander is Director of the online Masters Program in Communication at Marist College. Her Ph.D., from New York University, focused on Media Ecology, a subject that explores how new media communication transforms social institutions.

These courses also encourage more student-to-student interaction through things like online discussions. This allows students to gain insight into a diverse set of options and learn from one another. How can I figure out if an online program or course is a good fit? MA. Start with the basics. Consider your professional goals and try to find the best path to meeting them. Then start looking into the programs available. Don’t just look at the names of the degrees: look at the specific courses offered. Then check out the faculty expertise and whether their interests mesh with yours. Beyond curriculum, check out the support services available to online students. Will an online writing center be available? Can you access the library from home? How often is the help desk available? Are you eligible to attend on campus events? JB. For those folks who are hesitant about online learning, the eLearners advisor tool helps students determine if the online learning environment is best for them – both in terms of their familiarity with computer technology and their learning and personal interaction styles. n

As part of their white paper, Marist College has provided an easy to use questionnaire that students or benefits administrators can use when evaluating programs. See www.hrmreport.com for details.

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COMMENT

PICTURE PERFECT LEARNING Can the concepts of e-learning go beyond just training your workforce?

LEONARD NOLAN

have always considered myself a pretty ‘hands-on’ kind of guy, and the idea of physically being in one place and experiencing something first-hand is exactly what has driven me through life, both personally and professionally. Take photography, for instance. One summer vacation, about 11 years ago, I ended up coming home with reams of film (this was before the joys of digital photography). Through these photographs I uncovered a passion for taking pictures. I began shooting local landscapes and monuments, along with portraits of friends and family. In time I pushed on, messing about with compositions, the use of lighting and shade, exposure and digital media. It was then that I took a local evening course in photography. While my main aim had been to get a handle on the techniques that professional photographers use to capture that elu-

sive ‘perfect picture’ – concepts like contre-jour, long exposure and lith-printing – I discovered that getting into class, sharing my latest prints with classmates, seeing their photographs and our discussions was actually the most rewarding thing. Learning in this way was incredibly rewarding for me, and the classes’ relationships transcended student stereotypes and instead became friendships. It was a special 12 weeks, and something I believed would remain unmatched as I continued to take pictures for my own collection. Until very recently I had had no real desire to get back into the classroom setting, but then I came across a company offering online photography courses – something that interested me both as an amateur photographer and an internet enthusiast. Over the last 10 years, we have seen elearning emerge from being a radical idea to something that is widely regarded as mainstream. This is because the way that people use the internet has begun to change. While these changes are sweeping across all industries and are not particularly unique to the area of education, we do know that the mod-

ern internet user does want to learn. They absorb information quickly, in the format of images and video, as well as through text. They expect instant responses and feedback; they prefer on-demand access to media and they expect to be in constant communication with their friends and colleagues (who may be either next door, or around the world). However, my experiences of ‘traditional’ photography classes, which I saw as being so intrinsically linked to face-to-face communication, meant I struggled to see any functionality for photography through an online setting. I decided to give it a go, and test my theories. Research showed how the company I chose to sign-up with offered courses to suit all competencies and tastes – I chose an eight-week, level three course entitled, ‘Eight Steps To More Dramatic Photography’, though there are also courses graded at levels one to four, and some that only last four weeks. Each course follows a similar path, offering informative lessons, inspiring assignments designed to get students out shooting, professional feedback on photographs, including critiques, and an online forum providing message boards, follow-ups, interactive Q&As and answers to FAQ’s. The course allowed me to interact with other photographers from across the globe – one of my ‘classmates’ lived in Sydney, another in London – and it encouraged me to take better pictures. It felt good to be ‘learning’ this skill again – developing it further. In many ways, it was like traveling around the world to study with the best in the business – only without the jet lag or price tag. It got me thinking that if the way we were are learning is set to change. There is not only greater autonomy, but also a greater emphasis on ‘active learning’, with creation, communication and participation all playing key roles, perhaps now is the time to look beyond the workplace and ask, what else can we achieve through e-learning?

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INDUSTRY INSIGHT

Wake up Albert Einstein once said, ‘Insanity is doing the same things over and over again and expecting different results’. Frances Martinez Myers explains why yesterday’s relocation strategies don’t work in a depressed real estate market

t is madness the way companies are using old relocation models to move employees in a volatile real estate market. The depressed housing market has changed the game, yet a trend suggests that employers are willing to suffer losses associated with outdated strategies rather than innovate with market-relevant policies. A weak economy, declining home values, a saturated market and the continued threat of foreclosures have changed the rules of relocation. The average time to sell a home now exceeds 200 days in many areas, but despite this, many companies are still trying to make yesterday’s strategies work. The resistance to change is most obvious in the RFP (request for proposal) process used to vet relocation partners. Organizations spend up to six months shopping for a partner. Two things are remarkable about this practice in this environment: First, employers clearly expect the same services and pricing that were used in a boom market. Second, companies are asking routine questions instead of those relevant to a volatile market. During the housing boom, major relocation players invented fixed fee pricing to help companies manage costs. Homes sold quickly, guaranteeing the employer a fixed

expense and the relocation company, a fair profit. The fixed fee was based on the client’s volume and typically averaged 11 percent of the Guaranteed Buyout. This model worked because it was based on the assumption of a quick sale. When the market shifted, however, many relocation companies suffered huge losses because properties began taking up to five times longer to sell. They banked on the fact that the market would improve. Some relocation companies had to financially restructure and reduce staff. Others have since backed away from these price structures to avoid the same disaster.    The expectation of fixed relocation costs continues to drive the RFP process, which is preposterous. Property values will not bounce back anytime soon. In most instances, guaranteed buyouts are no longer a benefit to the employee (if established value is less than the original purchase price). These transactions are also losses for employers if they try to keep employees whole against the loss. Most companies cannot afford to shoulder these expenses and continuing to do so may be viewed as fiscally negligent. Employers must look at their business as a whole and revamp their relocation strategy for the current environment. Are your relocation benefits feasible for your employees’ needs and your company’s budget? Are your expectations of suppliers realistic? Are there alternatives to a home sale package? What about property management options? These are important checkpoints you should weigh before an RFP is ever initiated.  Equally important, you must turn RFPs into a meaningful vetting process that helps you identify ser-

vice providers that have the expertise to manoeuvre property sales in a distressed market. Look at issues that are relevant to your business now.     Ask potential partners this: What percentage of your relocation team has a real estate license?  What experience has your team had with other bad markets?  How do you establish fair market value?  How can you help us reduce our costs?  What are your average days on market? What kind of experience do you have handling short sale scenarios?    It’s time to get realistic about the market and your relocation program. Flat fee relocation programs are a thing of the past. Guarantee Buyouts and BVO programs may need to be tabled for now. Using an updated vetting process will bring your needs into focus. With a buyer’s employment market working in your favor, the timing has never been better to modernize your strategy. n

Frances Martinez Myers is SVP for Employee Transfer Corporation and its affiliate, ETCREO Management. She has 33 years of industry experience both domestically and internationally. In 2005, Hispanic Business named her one of the top 100 most influential Hispanics in the US and in 2006, Realtor Magazine named her one of real estate’s 25 most influential thought leaders.

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RELOCATION

All roads lead to home Migration trends are changing. The US population is moving south and west, and, experts say, HR professionals need to use that data when making talent-sourcing decisions. HRM’s Katie Pollack investigates

ata released at the end of last year have revealed that southern and western regions are proving to be the most popular destinations for potential workers who are upping sticks and moving out of highly taxed states in favor of those with a typically more manageable economic lifestyle. The data, based on migration reports from two of the US’s largest moving companies – Allied Van Lines and United Van Lines – have revealed similar, if slightly different, views of the current trends in population migration. Both companies highlighted eastern states like New Jersey, New York and Maine as having a ‘high outbound’ status (when 55 percent or more moves are out of a state); both also highlighted southern and western states, such as Alabama, Nevada and Oregon, as having a ‘high inbound’ status (when 55 percent or more moves are going into a state). But Allied, for example, which conducted its 41st annual Magnet States report last year, ranked Texas as the top relocation destination for the fourth consecutive year, followed by North Carolina and Virginia, which was slightly different when compared to United’s results (see figure). And now, it is suggested that this data could be useful for HR executives who are looking to establish new facilities or who are looking into expansion plans despite the bite of the economy. For example, an area with a heavy prevalence of retired baby boomers could be a prime target for call centers because many of those boomers, who had expected to live on their retirement savings, are now looking to supplement their incomes with part-time jobs as a consequence of the recession. The current economic crisis has made everything more localized and subsequently those states with a more favorable environment can benefit both employers and jobseekers looking to relocate. The issues related to expansion and talent acquisition are mostly dependent on how healthy an employer was to begin with. Some

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ARRIVALS AND DEPARTURES

OUTBOUND

INBOUND

55 percent or more of moves coming out of a state

55 percent or more of moves going into a state

Michigan North Dakota Rhode Island New York

New Jersey Pennsylvania Illinois

Nevada Alabama South Dakota Oregon

North Carolina Wyoming South Carolina

Source: United Van Lines Annual Migration Study 2008; www.unitedvanlines.com

states that didn't expand too much in the past, such as Alabama, which also has a low cost of living and low taxes, may be good places for employers to now look to locate new facilities, if they find themselves in a mood for expansion. Texas also remains a popular choice for relocation. This because it offers a solid employment base, low taxes and some of the nation's most affordable housing, and in these extreme economic times, those qualities can look particularly

attractive to families and businesses seeking a place where they can maximize their dollars. Put simply, employers who are still hiring need to look at maximizing local strengths, and need to be looking to move or locate offices in places that are more cost effective. Using migration data like these findings allows employers to make smart decisions, which have become something of a necessity given how current markets are shaping up. n

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WORKING LIFE

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Even in our turbulent times, some companies are still enjoying fascinating growth spurts. Unsurprisingly, while a huge number of this year's fast-growers have come from the energy sector, thereâ&#x20AC;&#x2122;s barely a Wall Street firm in sight. Here, we take a look at some of those companies who are proving they have real staying power

NutriSystem

Intuitive Surgical

Apple

Revenue growth (3 yr annual rate): 110 percent

Revenue growth: 62 percent

Revenue growth: 33 percent

The companyâ&#x20AC;&#x2122;s da Vinci System enables surgeons to perform complex procedures, such as openheart surgery, through 1-2cm incisions. Since launching the system in 2000, Intuitive Surgical has sustained growth in excess of 25 percent annually and today over 1000 da Vinci Systems are installed in hospitals across the globe.

From its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. Last year, amidst solid laptop sales and iPhone hysteria, Fortune named the company the most admired in the US and Apple stock soared.

The online diet company, whose mission is to provide weight loss programs based on quality foods and nutritionally balanced meals, offers individualized counselling so each customer can reach their goal weight. With a hit advertising campaign featuring ex-Miami Dolphins star Dan Marino, it has seen its menâ&#x20AC;&#x2122;s business skyrocket.

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Life in the fast lane

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Arena Resources

Netflix

GameStop

Revenue growth: 117 percent

Revenue growth: 32 percent

Revenue growth: 62 percent

Founded in 2000, the oil-and-gas firm has always sought to acquire select properties right in their backyard, providing immediate cash flow and development opportunities for future years. To date, the company has made acquisitions representing an estimated 55.4 million BOE’s (barrel of oil equivalents) and the company now operates across four states, including Texas.

Netflix subscribers can get DVDs delivered to their homes and can instantly watch streamed movies and TV episodes, all in unlimited amounts. With subscribers now able to choose from over 100,000 DVD titles and a growing library of more than 12,000 choices that can be watched instantly, the accessibility of Netflix has seen the company reach new heights of success.

The world’s largest video game and entertainment software retailer, GameStop operates 5899 retail stores throughout the US, Canada and Europe. However, it has been mass sales of Nintendo’s Wii and Sony’s Playstation 3 consoles that have really boosted sales, along with a healthy market in secondhand video games

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THE OPTIMIST

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Little rays of sunshine in a world gone cloudy

Looking for hires The recession may have claimed some 4.4 million jobs but new government data shows that more than two million openings now exist across a range of industries. While many roles available are for highly trained or specialized professionals, sectors now on the hunt for fresh talent include pharmaceuticals, engineering and healthcare. Believe it or not, there are even some banks that are hiring too.

I ♥ my job The national unemployment rate is currently at 7.6 percent, a 17-year high. As a result, it’s easy to forget that this means more than 90 percent of Americans are currently in employment. At JobVent.com, a site where members can vent about (and sing the praises of) their employers or former employers, positive reviews are still coming in on a daily basis. In fact, according to their data, the ratio of positive to negative hasn’t changed, even in this recession. There are happy people out there who love their jobs.

North Carolina’s red-letter day In Charlotte, North Carolina, an unidentiﬁed individual has taken it upon themselves to stimulate the local economy. The unconventional method entails putting $10 bills into people’s mailboxes, with a letter asking them to spend the money both locally and wisely. The move has garnered a lot of attention, with some wondering whether it is part of a similar scheme carried out by a local real estate company, which recently gave each of its employees $100 to spend in any way they wanted, so long as it encouraged local business.

The female touch President Obama has said that female Americans should have “no limits on their dreams” and has set up the White House Council on Women and Girls. The Council is headed by Valerie Jarrett, “one of my closest advisors and most senior members of my administration”, according to the President. The Cabinet-level body is tasked with ensuring that all of the federal government considers how policies will impact on women. Obama went on to praise Secretary of State Hillary Clinton and House Speaker Nancy Pelosi for their achievements.

The worst is over? For the last 18 months, the global economy has been pretty bad, and although most agree we are still in a decline, some experts believe the worst is over. Evidence can be seen in several factors, including the price rise in commodities and certain surveys that show the consumer mood is brightening. What’s more, the Federal Reserve Board has been using unorthodox ways to stimulate the economy. The tactics seem to be working, as the markets have also beneﬁted from some improvement in the stock prices of banks.

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Spotlight

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Well on its way In a follow-up to a feature in issue nine of HRM, we visit states across the US to discover what they are doing to boost their wellness credentials

New York Oregon Last year’s Healthy Worksites Initiative supports Oregon’s Health Promotion and Chronic Disease Prevention (HPCDP) framework through a strategic focus on the worksite setting. Strategies include policy interventions and worksite campaigns to reduce chronic disease risk factors and promote self-management of health issues.

The New York State Department of Health (NYSDOH) notes that with many working adults spending 2000 or more hours a year at work, worksite wellness programs play a vital role in making workplaces healthier. Online pages, based on the NYSDOH Healthy Heart Program’s 10 years of funding worksite wellness programs, include detailed information on exactly how companies can plan, implement and evaluate a worksite wellness program.

Florida Colorado Colorado has a reputation for being a state of very active and athletic people. According to several studies, Coloradans have the lowest rates of obesity of any state in the US. The Colorado Physical Activity and Nutrition Program’s Active Community Environments (ACE) Task Force members support planning for and modifying existing environments in ways that make it easy for people to integrate physical activity into their daily routines.

The Florida Hospital Healthcare System (FHHS) provides employers with a team of health coaches offering an assortment of monthly challenges during the entire FHHS Wellness Cycle as well as an intensive eight-week ‘Boot Camp’ program offered twice a year across every campus. Monthly challenges are supported by a state of the art Wellsource program called GetFit Adventures, which offers walking adventures including: Walking the Oregon Coast, Touring Italy, Discovering Florida or Walking in the Footsteps of Jesus.

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THE LOWDOWN

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Gossip column Heard it through the grapevine? You’re not the only one. HRM’s Matt Buttell takes a look at the dangers of letting rumors and office politics get out of control

anging with a limited group of people isn’t just something for high schoolers it seems. Evidence shows that cliques are very prominent in the workplace too. A new study of office workers across North America has revealed that 85 percent of respondents see cliques appearing in their offices, which can then become threatening to a work environment should clique members put their personal friendships before office ethics and values. While some experts say that having close friendships with colleagues can be a positive influence, others say that they breed gossip and

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exclusivity; all respondents agreed that there is a fine line between a group of friends and a clique. One thing is certain: no one can emphatically say that they are immune to gossip. From office water coolers to chatting by a colleague’s desk, from family get-togethers to cocktail parties, we all find a certain pleasure in talking about other people. Put simply: gossip is seductive. There is no end to people engaged in official and non-official gossip or rumor, but sometimes, an unintentional or casual remark can make the gossip wheel turn: the wheel gathers momentum when the listener gives credence to it, it lubricates the wheel when it is repeated to others, and, in extreme

cases, can develop enough impetus to tear the workplace apart. Perhaps most worryingly is the fact that the stresses of the current economic climate are leading many HR professionals to report that more and more employees are eavesdropping and gossiping. In a recent poll of 494 HR professionals conducted by the Society for Human Resource Management (SHRM), 23 percent of respondents said they have had to deal with an increased number of eavesdropping incidents in the last 12 months. Examples of these include employees lingering outside conference rooms or near closed-doors, trying to catch wind of possible layoffs or terminations. Also in the survey, more than half (54 per-

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cent) reported an increase in gossip and rumors regarding downsizings and layoffs, and about the same percentage said they had had cause to address those rumors between October 2007 and October 2008, which was when the study was conducted. Now experts, including Steve Williams, director of research for SHRM, are saying that organizations need to ramp up communications with their employees, providing HR with an opportunity to really show its leadership skills. The theory is that the more transparent you are, the less likely gossip will be. “When there is lack of communication between management and employees, and when management believes in withholding information, particularly at a time of crisis, it creates a vacuum,” notes Madan Mohan Tripathy, a General Manager of Human Resources at Rallis India Limited, before noting that employees then feel frustrated out of imaginary fears and develop their own assumptions. “They start saying all sorts of things behind each-others’ backs and rumor and gossip develop and spiral out of control,” he adds. Conversely though is the argument that says that greater communication will only breed the opposite reaction. Imagine that everybody in a struggling company is fully aware of how bad things really are and you could easily see a shift from unease to outright panic. Gossip can lead to fear, it’s true, but it’s a slightly nebulous fear, a monster under the bed. If a CEO comes out and says he’s going to cut the workforce by 50 percent in the next six months, the monster is already right there threatening everybody, and chaos could well ensue. Workplace gossip is often most prominent in organizations where the culture doesn’t address job-related issues, thereby creating a sense of frustration for employees. In turn, employees see co-workers as obstacles rather than helpers, and this creates an atmosphere ripe for gossip. It also tends to flourish where workers lack information or have too much time on their hands, or in unionized workforces where management and labor are typically at odds with one another. Ultimately, the higher the level of tension, the swifter and more damaging the gossip can be. Boredom and demor-

Cliquing into place A recent poll of office workers across the US found that only 50 percent would report bad, illegal or unethical behavior if it was committed by a friend. Here we look at some suggestions of how to prevent the office from becoming as segregated as a high school cafeteria: • Make a genuine effort to be friendly to everyone at work. • Don’t complain if you feel left out of a clique. Instead, lead by example. • I f you’re in the position to do so, give public recognition to specific employees as this shows each person’s value to those in other cliques. • I f you see a clique that seems to get things done and is made up of people who like their jobs, join them and try to integrate them with the rest of the office And if you insist on sticking with your loyal group, experts say the trick is to avoid pettiness and leaving others out. If you find yourself placing more importance on keeping your clique members happy, you may get labeled as unfriendly, unapproachable or as a non-team player.

alization are often key to the development of workplace gossip and when employees do not feel engaged with their work, or when they do not have specific knowledge of what is going on, they turn to speculation, which in turn gives rise to gossip. Generally it is when there is open communication between management and employees, and between employees themselves, that is based on trust, gossip is harmless and fulfills merely a function to form perfunctory relationships.

“Put simply: gossip is seductive” Whatever the theory, following an increase of workplace gossip as a natural corollary of the present environment, organizations are starting to implement standards and rules related to employee conduct and gossip. With the state of current markets essentially turning every

office across the country into something of a pressure cooker, gossip is taking on a new capacity as a way of letting workers release some pent-up frustration and steam. And just like a pressure-cooker, if there is no way of relieving that pressure, regulation to stop gossip may only cause more damage than good. Some experts have even gone on to say that a conscious effort to try and control gossip will only drive it underground, where it will manifest again – only this time with a darker edge and more malice. Essentially, organizations thinking that they can eradicate gossip altogether are typically putting themselves in a no-win situation.    The answer is for management to be open enough so that employees understand the situation they are in, therefore easing the gravitational pull of gossiping about the crunch, job losses and potential layoffs. On the other hand, employers need to accept that gossip is part of daily office life and realize that it is naïve to think that it could ever be wiped-out completely. Yes, HR professionals should do everything they can to ensure false or exaggerated rumors are truly sunk, but they also need to learn that the occasional day-to-day banter between office colleagues isn’t going to rock the boat too much. n

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IN REVIEW

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Hot off the press HRM takes a quick look at some of this quarter’s business books

Lead by Example

50 Ways Great Leaders Inspire Results, By John Baldoni In Lead by Example, Baldoni reveals how you can get people to believe in you and work together. An internationally recognized leadership guru, Baldoni believes that a great leader does what is right for his team; in other words, supporting, developing and defending it in the good times and bad. HRM says: This book is ﬁlled with examples of visionary leaders who have overcome their shortcomings and achieved greatness. The writing is accessible and will show how to build trust and drive results. For more on Baldoni, see our exclusive interview on page 112.

Reward Systems

Does Yours Measure Up? By Steve Kerr After working with countless executives over the years, Kerr has developed a simple but effective three-step process to help executives realign their reward systems. By following his advice, Kerr helps executives understand how poor execution isn’t always about good people gone bad, but incentive systems gone bad and how to change that. HRM says: Kerr has led legendary leadership development centers at Crotonville for General Electric and at Pine Street for Goldman Sachs, and here he highlights how organizations can dramatically improve performance and create a more motivated workforce by simply following three easy steps.

What Would Google Do?

By Jeff Jarvis

In What Would Google Do? Jarvis explores the principles, ideas, philosophies and worldview underpinning Google’s success. By reverse-engineering Google, Jarvis discerns its core practices, strategies, and attitudes to lay out a blueprint for what corporations, governments and individuals can do to build on their success. HRM says: A bold and vital look at the most important challenges facing organizations today, this book will change the way businesses ask questions, solve problems and chart a course for the future.

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COMMENT Present tense

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Marie Shields asks whether workplace stress is necessarily a bad thing

ike most people in the modern world, I have a lot on the go: a full-time job, a small child, creative interests, friends to keep up with, household chores to be done. I sometimes get that panicky feeling: the worry that I’ve taken on too much and that I won’t be able to cope. I’m suffering from too much stress. Or am I? If you believe the constant stories in the media, we’re in a war with stress, and we’re losing. The American Institute of Stress calls stress our number one health problem. According to the American Psychological Association, two-thirds of us say we are likely to seek help for stress. sixty-one percent of employed people feel their workloads are heavy enough to raise stress levels, and 54 percent are concerned about resulting health problems.

“The stress response itself can be a lifesaver in truly dangerous situations” And last month in the UK, Samaritans – the emotional support charity – held a national ‘stress down day’ to encourage people with workplace or financially related stress to ask for help. All this attention begs the question: are we making stress out to be more important than it is? Are we placing too much stress on stress? In her new book The Truth About Stress, researcher and columnist Angela Patmore refutes the notion that stress is a debilitating condition worth throwing

millions of dollars at. According to Patmore, we need to stop processing our lives through a ‘stress filter’ and have the courage to face up to life’s challenges. The stress response itself – fast heartbeat, dry mouth, ‘butterfly’ feelings in the stomach – is the body’s way of responding to an unexpected situation. It can be a lifesaver in truly dangerous situations – if you should meet a bear while hiking, for example, or find yourself confronted with an irate boss. It’s an important coping mechanism. How we apply the concept of stress has become more all-encompassing in the past few decades. Fifty or sixty years ago, people worked hard, got tired and frustrated and angry, had heart attacks and breakdowns, and yet few would have called themselves stressed. Now a whole industry has been built up around helping people to cope with their stress. Companies offering counselling, massage, relaxation techniques and stress-busting workshops have proliferated. How much of this in our heads? Look again at those APA statistics: stress levels were measured by asking people about

how stressed they felt. This is far from an objective measure – relying on people’s perceptions of their own state of mind. If someone asked you if you were stressed at work, what would you say? No, fine thanks, it’s very relaxing? Every job has its built-in stressors – in a way, that’s what work is. Our employers are not going to pay us to sit around and chill out. Even the AIS website points out that stress is not always a synonym for distress. Good things, like winning a race or getting married, can also raise your stress levels. Think about the stressful situations you find yourself in, and how your own state of mind contributes to them. Do you really need to get that laundry done tonight? Will the world fall apart if your presentation is a few hours late? Perhaps you could see your mother next weekend instead of this one? Next time I get that panicky feeling, maybe I need to take my own advice, keep things in perspective and try not to take life too seriously. And learn to love my stress. n

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FINAL WORD

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Benefit shopping By Steven T. Cates, President and CEO, Texas Life Insurance Co.

an afterthought among the various health/dental/critical illness/ long-term care/legal/pet insurance options. Before deciding the longstanding flavor of permanent life insurance doesn’t sit well on the modern benefits palate, however, consider these statistics, provided by research giant LIMRA International: • More than half of US households have only the group term life insurance an employer provides; • More than 75 percent of all death benefits paid are from individually owned policies; • More than 90 percent of term life, either individually or group owned, expires without paying a death benefit.

avigating the myriad employee benefits decisions human resources professionals face each year is somewhat akin to shopping in one of those by-the-pound candy stores in large malls. Colorful, eye-popping bins mesmerize the shopper, brimming with all sorts of unlabeled sweet stuff, every bit of it looking enticing and vaguely familiar, yet at the same time just a bit mysterious. Not sure exactly how each confection is going to taste but tempted by intoxicating smells and appealing looks, the shopper fills his or her bag carefully, knowing that each added piece will increase the cost at checkout. Today’s employee benefits world is similar. Choices are abundant and come wrapped in such familiar sounding names as ‘health insurance’ and ‘disability income’. Yet once the wrapper is removed, what’s underneath reveals complexity and a bit of mystery. It might actually be flavored ‘HSA’ or ‘HRA’ or ‘HDHP’, or perhaps a combination of all three. And, although a wrapper might look like ‘disability’, what’s inside might be PTO banks or STD or LTD or ‘buy-up’. Like the candy shopper, the HR professional must select carefully, balancing the need and desire to take care of employees with concern for staying within budget. As the cost of health coverage has continued its dramatic increase, voluntary benefits have become more prominent. It is tucked within this realm that one finds an old standby often overlooked in the quest for newer, sexier products. Voluntary permanent life insurance remains an important cornerstone of a modern, viable benefits program because it helps solve the basic human need for security. Yet many times it is either not included in an annual benefits offering or is relegated to

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These numbers paint a disturbing picture. Many Americans depend on their employers to provide the peace of mind that comes from knowing their families will have a cash benefit when the employee dies. But because the majority of them are covered solely by term insurance, that sense of security can be false. Group term life insurance, both basic employer-paid and optional, is also a vital component of any employee benefits plan. It allows the employee to have significant amounts of death benefit coverage for an affordable premium, especially during the employee’s peak earning years. However, one fact is constant with term life insurance: as the policy-owner ages, benefits decrease and premiums increase. It is this basic truth that accounts for the fact that term life insurance rarely pays a death benefit. Simply put, term life insurance typically expires before the insured dies. The solution to this problem is as obvious as the colors in the candy store. Voluntary permanent life insurance, offered alongside basic and optional term, affords the employee the opportunity to address his/her post-retirement life insurance needs. Because it is portable, permanent life insurance allows the employee to keep his/her policy, at the same premium, even when he/she retires or changes jobs. The statistics appear to indicate that employees don’t understand they need both term and permanent insurance to cover a lifetime’s needs; they need someone to explain the basics of life insurance to them. This is best accomplished during a face-toface meeting with an enrollment counsellor when the employee is making his/her benefits choices. When shopping in the candy store that is 21st century benefits, employees need both the opportunity to cover their lifetime of insurance needs and the help in understanding how to do that. 

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