HR Practices at Toyota

Unless you have been living off the planet Earth, you have probably already read or heard about
several mechanical failures in Toyota automobiles that led the auto maker famous for quality to
recall nearly nine million cars worldwide. In addition, poor handling of the issue in the public eye
has damaged the automaker’s brand reputation and caused sales to decline to their lowest point in
more than a decade.

This think piece wasn’t written to inform you further about the mechanical failures, but rather to
reflect on the following premise:

Toyota’s current predicament is a result of poorly designed practices and weak execution on the
part of the human resource department!

To Find the Root Cause, You Must Look Beyond Gas Pedals

The mechanical issues plaguing eight Toyota models are not the result of human resource
professionals assuming product design roles and producing faulty accelerator pedals and onboard
computers, but anyone who has studied failure analysis knows that the breaking point of a product
or service is seldom the underlying or root cause of the failure. Using the sinking of the Titanic as
an example, the damage caused by the hull colliding with the iceberg ultimately sank the ship, but
the collision was the result of a series of poor decisions to travel too fast given weather conditions.
While hull design flaw contributed to catastrophe, the root cause of the problem was human error.

In any situation where employees fail to perform as expected, investigators must determine if the
human error could have been caused by factors beyond the employee’s control. Such external
factors might include actions by senior management, lack of adequate information or job training,
faulty inputs to the process, or rewards that incent actions not in line with documented goals.

If you believe in accountability, you have to accept that human errors that lead to corporate
catastrophes could be the result of faulty HR processes, most notably those related to acquiring,
developing, motivating, and managing labor. Returning to the Titanic example, had the owners of
the Titanic implemented rewards for safety as well as speed or hired a captain more detail-
oriented, there would have been no crash that dreaded night.

Weak HR Has Been a Major Contributor to Other Notable Failures

Weak people-management practices have been attributed as the primary causes of failure in a
number of notable cases. At Enron and Bear Stearns for example, reward systems that incented
dangerous behaviors easily overpowered the effect of control systems designed to prevent fraud
and ethical breaches. The mass killings at Fort Hood would not have occurred if the Army had
better linkage between performance management and critical incident reporting systems.

Employee Errors Were the Root Cause

BusinessWeek estimates that Toyota is losing $155 million per week as a result of their recent recall
and in the weeks leading up to this article Toyota had lost nearly $30 billion in stock valuation. The
long-term impacts of the root causes that led to Toyota’s current situation could cost the company
hundreds of billions of dollars.

The mechanical failures were known to Toyota leaders long before corrective action was taken, and
many close to the issue are indicating that the company took decisive action to hide the facts and
distort the scope of the problem. The underlying problem of failing to act on this critical
information in a manner consistent with Toyota’s brand is again a rewards issue similar to that at
Enron. When the organization disproportionately rewarded managers for cost-containment versus
sustaining product quality, it created the incentive for everyone involved to ignore the facts and to
deny that a problem existed. Employees who are well-trained and subject to balanced rewards and
performance monitoring systems would not have allowed the situation to grow as it did.

The Eight HR Processes That Contributed to Toyota’s Downfall

If the root cause of the problems Toyota is facing are failure by employees to make good decisions,
confront negative news, and make a convincing business case for immediate action, then the HR
processes that may have influenced those decisions must be examined. The HR processes that
must at least be considered as suspect include rewards processes, training processes, performance
management processes, and the hiring process.

 Rewards and recognition — The purpose of any corporate reward process is to encourage
and incent the right behaviors and to discourage the negative ones. It’s important for the
reward process to incent the gathering of information about problems. It’s equally
important to reward employees who are successful in getting executives to take immediate
action on negative information. Key questions — Were rapid growth (sales have nearly
doubled recently) and “lean” cost-cutting recognized and rewarded so heavily that no one
was willing to put the brakes on growth in order to focus on safety? Were the rewards for
demonstrating error-free results so high that obvious errors were swept under the table?

 Training — The purpose of training is to make sure that employees have the right skills and
capabilities to identify and handle all situations they may encounter. Toyota is famous for its
four-step cycle — plan/do/check/act — but clearly the training among managers now
needs to focus more on the last two. In addition, in an environment where safety is
paramount, everyone should have been trained on the symptoms of “groupthink” and how
to avoid the excess discounting or ignoring of negative external safety information. Key
question — If Toyota’s training was more effective, would the managers involved have been
more successful in convincing executives to act on the negative information received?

 Hiring — The purpose of great hiring is to bring on board top-performing individuals with
the high level of skills and capabilities that are required to handle the most complex
problems. Poorly designed recruiting and assessment elements can result in the hiring of
individuals who sweep problems under the rug and who are not willing to stand up to
management. Key questions — Did Toyota have a poorly designed hiring process that
allowed it to hire individuals who were not experienced in the required constructive
confrontation technique? Were their hires poor learners that did not change as a result of
company training?
 The performance management process — The purpose of a performance management
process is to periodically monitor or appraise performance, in order to identify problem
behaviors before they get out of hand. If the performance measurement system included
performance factors to measure responsiveness to negative information, Toyota wouldn’t
be in turmoil today. Key questions — Was the performance appraisal and performance
monitoring process so poorly designed that they did not identify and report groupthink
type errors? Did Toyota’s famous high level of trust of its employees go too far without
reasonable metrics, checks, and balances? Did HR develop sophisticated metrics that
produced alerts to warn senior managers before minor problems got out of control?

 The corporate culture — The role of a corporate culture is to informally drive employee
behaviors so that it closely adheres to the company’s core values. Because these errors
occurred under difficult driving conditions, it’s hard to blame the production group, which
has a well-known reputation for Six Sigma quality in its construction. The negative reports
came to functions like government, risk analysis, corporate and customer satisfaction. As a
result, it is the culture within the corporate offices that need to be more closely monitored
rather than assuming that the culture was aligned. It appears that the corporate culture
created leaders so concerned with “saving face” and so adverse to negative publicity, that
they for years postponed making the announcement of a massive recall. Key questions —
Did HR’s failure to measure or monitor the corporate culture contribute to its
misalignment? Was the corporate culture (the Toyota Way) so biased toward positive
information that employees learned not to make waves, in spite of their professional
responsibility to be heard on safety issues?

 Leadership development and succession — The purpose of leadership development and

succession planning processes are to ensure that a sufficient number of leaders with the
right skills and decision-making ability are placed into key leadership positions. It is likely
that the leadership development and the promotion process both failed to create and
promote leaders who were capable of confronting problems and making difficult decisions.
Key question — Was the leadership process at Toyota so outdated that it produced the
wrong kind of leaders with outdated competencies, who could not successfully operate in
the rapidly changing automotive industry?

 Retention — The purpose of a retention program is to identify and keep top performers
 and individuals with mission-critical skills. Key question — Did the retention program ignore
people that brought up problems and as a result, did these whistleblowers often leave out
of frustration?

 Risk assessment — Most HR departments don’t even have a risk assessment team whose
purpose is to both identify and calculate risks caused by weak employee processes. Clearly
HR should have worked with corporate risk management at Toyota in order to ensure that
employees were capable of calculating the long-term actual costs of ignoring product
failure information. Key question — Should HR work with risk-assessment experts and build
the capability of identifying and quantifying the revenue impacts of major HR errors,
including a high hiring failure rate, a high turnover rate among top performers, and the cost
of keeping a bad manager or employee?

Final Thoughts

Toyota’s problems are not the result of a single individual making an isolated mistake, but rather
due to a companywide series of mistakes that are all related to each other. So many corporate
functions were involved, including customer service, government relations, vendor management
and PR, that one cannot help but attribute the crash of Toyota to systemic management failure.

Unfortunately, in this case, the famous Japanese saying is true. “The nail that stands out” was not
encouraged to be different, but instead it was “pounded down” to conform.

The key lesson that others should learn from Toyota’s mistakes is that HR needs to periodically test
or audit each of the processes that could allow this type of billion-dollar error to occur.

Note : I invite comments about what other human resource factors may have contributed to
Toyota’s downfall.
Why Are We Losing All Our Good People?

Sambian Partners has prided itself on being a great place to work, but now talented employees are
leaving. What’s going on?

1. By Edward E. Lawler III

♦ INTERACTIVE CASE: Offer your advice on this case and vote on the experts’ advice.

Mary Donillo, the head of human resources at Sambian Partners, motioned Tom Forsythe,
Sambian’s assistant director of commercial design, to a comfortable chair in her office. It was late
on a Thursday afternoon, and the Chicago sky looked like slate. The darkness outside made the
overhead fluorescent lights in her office seem even more glaring than usual.

“Hey, Tom,” she said, adding an extra bit of warmth to her voice. “I was so sorry to hear that you’ve
decided to leave. I know your mind is made up—everyone’s already tried to talk you out of it. But I
do hope you can help us understand why.” She paused and offered a rueful smile. “It’s a huge loss,
but maybe we can learn something from it.”

Tom sat stiffly in his chair, one side of his face partially covered by a few strands of dark hair that
had escaped his ponytail. The lights brought out the bags under his eyes, and his five o’clock
shadow looked more like a seven. With a newborn at home, he probably hadn’t been getting
enough sleep, Mary thought.

“Well, I think you know that I wasn’t out looking,” Tom said. “Their headhunter came to me, and,
what can I say? It’s an offer I couldn’t refuse. I mean, a direct-admit partnership to J&N? It really is
an opportunity that doesn’t come along often.”

Mary couldn’t help blinking at the mention of J&N, Sambian’s much larger competitor. In the past
year, it had seemed to step up its raids on Sambian’s talent pool, luring some very capable people
over to “the dark side,” as Sambian’s CEO, Helen Gasbarian, liked to call it. “I’m glad for you,” Mary
managed to say. “Although I wish it were anywhere else.”

“I know.”

Mary studied Tom’s face for a moment, wondering how to press for more. No unplanned
departure was good news, but this one was really setting off alarm bells. Tom was at the top of his
game; at 35, he’d been with Sambian nearly eight years. The company had been like a family to
him, even after he got married and had children. He’d won a slew of design awards, and he was on
the CEO’s short list of high performers. Mary could see the attraction of a partnership position. But
was that the whole story? At Sambian, Tom enjoyed the same kind of authority he would have at
J&N, if not more. He chose his projects, set his own priorities. Did he know how hard it would be to
earn that kind of autonomy at a new firm, partner or no?

“I’m sure it’s no news to you that you were coming up for promotion,” she ventured. “If not this
year, then maybe the next. Would it have made a difference if the raises had been bigger? For that
matter, would it make a difference now? I mean, there’s no shame in reconsidering—you really are
highly respected here, you know.”

Tom looked at his hands. “It’s nice to hear that, Mary,” he said. “But of course I’ve already
accepted. And anyway, it’s time to move on. I have to challenge myself, keep it fresh.”

“But you’ve always managed to keep it fresher than just about anyone. Are the projects
themselves less challenging these days?” She avoided the obvious question: Have you been
unhappy?

Tom tilted his head and looked directly into Mary’s gray eyes, as if reading her thoughts. “I’ve been
very happy here,” he said. “The people are great. I’m not running away from anything. It’s just that
a fantastic opportunity came along at a good time.”

Mary kept probing, asking all the standard questions, but Tom demurred, merely repeating what
he’d already told her. By the time the interview had ended and she’d seen him to the door, she felt
deflated.

After leaving her office, Tom headed into the back stairwell, pulled out his cell phone, and speed-
dialed his wife.

“Alyson? Hey. Yeah. You’ll be proud of me—I kept my mouth shut. I mean, you’re right about not
burning bridges, but who cares at this point? This place can be as screwed up as it wants. It’s not
my problem anymore.”

An Unhappy Memo

Early the next morning, Mary tapped on Helen Gasbarian’s door. She found Helen staring at her
computer screen, frowning. There was nothing Helen hated more than losing staff to J&N, and it
showed plainly on her face.

“Working on the memo?” Mary asked gently.

Helen nodded. “Not much fun. I was just going to send it to you so you could look it over. How’d
the exit interview go?”

Mary confessed that Tom hadn’t revealed much. “He didn’t want to get specific about why the
grass is greener there or tell me about anything that made him unhappy here.”

When Helen’s father, Peter Gasbarian, had founded Sambian, in 1975, it was supposed to be the
antithesis of a behemoth like J&N. His idea was to build a top-notch architecture and engineering
firm by making appealing offers to young talent. Rather than spend years as anonymous “leverage”
to fat-cat partners, young people at Sambian could start making their mark immediately on
interesting projects. It was no coincidence that he had stopped mulling this idea over and turned it
into reality after his only child announced she was applying to architecture school.

It was also no surprise when Helen took the reins following her father’s death, in 1997. By then an
award-winning architect in her own right, she made it her mission to increase collaboration among
the firm’s cutting-edge designers, engineers, and client account managers. As a result, innovation
had flourished in general—and, in particular, the firm had been in the vanguard of the “green
building” movement. By the time other, larger firms were just starting their green practice groups,
Sambian had already designed dozens of LEED-certified buildings. Riding the growth wave, the
company had opened offices in San Francisco, New York, and London.

Helen looked hard at Mary. She wished she could put the blame for losing Tom on her—or on
someone, anyone—but she couldn’t. “You know, ever since Dad founded this company, we’ve tried
to make it a great place to work,” she said, sighing. “And I think we treat people really well. Where
are we going wrong?”

“I don’t know, honestly,” Mary replied carefully, hearing the bewilderment in Helen’s voice. “But I
want to be careful about not reading too much into this. Obviously, we need to get to the bottom
of it, but it might turn out that it’s not a trend, just a nasty coincidence. People leave jobs for all
kinds of reasons.”

Helen pondered the point. “Well, that’s true enough: Pat Dougherty moved to Ireland ‘for family
reasons.’ Irena Milkovic decided to go solo—I’m still trying to figure that one out. And now Tom, to
a partnership at a big traditional firm.” She shook her head. “But the fact remains that it is a trend.
I want to know what we need to do to keep the rest!”

“I have a few theories, Helen,” Mary said, as soothingly as possible. “But to see whether there’s
anything to them, I’d like to move this year’s employee survey up on the schedule. I think we need
to get some new data in front of us.”

Helen turned back to the computer. “Yes, do the survey,” she said. “Do it as soon as you possibly
can.”
The Word on the Street

Designer Hal Pope and engineer Savannah Dorsey were two floors down in Sambian’s large
kitchen, heating up their lunches in the microwaves. They were both subdued, having read the
memo bearing the news of Tom’s departure.

“Tom sort of checked out when we lost that Marko bid,” Savannah ventured. “He really wanted to
see that design get built. It was gorgeous, with all that light and air. And anyone could see that the
price was right.”

Hal agreed. “The design couldn’t have been better.” He lowered his voice a little. “If only Paul
Bonney had been able to point that out.”

Paul Bonney was the head of architecture sales. Savannah stared at Hal. “You thought so, too,” she
said. “His pitch sounded so, well, uninspired.”

Adrienne Perle, another colleague from engineering, couldn’t help overhearing as she reached
past them for some utensils. “He’s uninspired,” Adrienne said. “And he’s not the only one. It’s really
a pity when you have someone doing incredibly creative work, and the support structure isn’t
there to let it see the light of day. All the salespeople focus on is cutting the deal. If you ask me,
that’s why Tom is leaving. He’s a first-class architect, but if he doesn’t have first-class sales and
marketing behind him, he’s no one. He’s the tree falling in the forest. I’ve tried telling people
upstairs that we’re veering off base. But nobody’s listening.”

Hal shook his head. “I don’t know, guys. Tom had plenty of wins. More work than he could handle.
I just think he looked above him and realized he was going nowhere fast. No one on the executive
team is even close to retiring, and the org chart is top-heavy as it is. Where’s the career path?”

Adrienne pulled a sour face, indicating agreement. “I wonder how much he’ll make as a partner at
J&N? It could be as simple as that. Two kids now. He’ll be worrying about college funds.”

Savannah jumped back into the conversation. “True, but you’d think he’d also be worried about
quality of life. I guess Alyson must have decided not to go back to work. They’ll have him on the
road constantly.”

This Is Not a Drill

A month later, Helen was scanning a staff utilization report when the phone rang. The phone’s
display showed that the call was coming from Bob Wortham, the vice president of engineering.
Through the open door, Helen saw her assistant, Jessie, move to pick it up at her own desk.
“I’ve got it, Jess,” she said, lifting the receiver. “Hi, Bob. What’s up?”

“I might need your help on something. I’m afraid we’re at risk of losing Adrienne. It’s just a rumor
so far, but I want to jump on the situation.”

Helen grimaced. “Adrienne? You’re right—we don’t want to lose her. Why don’t you come up
now?”

Hanging up, Helen called out to Jessie. “Can you see if Mary is free? If she can make time right
now, that would be great.”

She stood up, walked over to the window, and pressed her forehead against the cool glass. On the
plaza below, a few late lunchers clustered around a vendor’s stainless-steel cart. She closed her
eyes. Another loss for Bob, she thought. Was he part of the problem? She shook her head, refusing
to pursue that line of thought. The best way to decrease attrition surely couldn’t be to fire loyal
employees.

In the hallway outside Helen’s office, Bob ran into Mary. As he relayed the rumor about Adrienne,
Mary felt the blood start to drain from her face.

“It’ll be a real problem if we lose Adrienne,” Bob said. “She’s in the thick of a huge project, and the
client loves her.” He gave Mary a hard look as they passed Jessie’s desk. “What’s going on here,
anyway? It’s like our talent is being sucked out by vampires.”

Hearing them enter, Helen turned away from the window. “OK, Bob,” she said. “What exactly is this
rumor?”

“People are picking up a vibe that she might follow Tom to J&N,” Bob began, pulling the door shut.
“The two of them were kind of on a wavelength. It wouldn’t surprise me if he wanted to find a
home for her there.”

Helen shot a look at Mary. “No noncompete?” Presumably, Tom had signed the standard contract
preventing him from taking talent or clients with him to the competition.

“Oh, sure,” Mary replied. “Tough to enforce, though,” she added, immediately wishing she hadn’t.

“Oh, I’ll find a way,” Helen spat. “Even if I can’t win, I can make life tough for him.”
Mary and Bob exchanged glances. Helen turned to Bob, on the offensive now. “So you’re telling me
we shouldn’t be surprised, but I’m also getting the sense that you haven’t done anything in
anticipation of this.” She couldn’t resist adding a swipe at Mary. “And why are you waiting around
for the satisfaction survey results before taking any action?”

Mary opened her mouth as if to object, but Helen waved her hand impatiently. “OK, look,” she
said. “I’ll talk to her. Let me see what I can do.” She walked to the door and opened it.

“Jess, call Adrienne Perle and ask if she’s available. I want to see her as soon as possible.”

Oh, Won’t You Stay?

Ten minutes later, Adrienne appeared in Helen’s doorway. Her heavy-framed designer glasses
made it a little difficult to read the expression on her face, but her body language signaled anxiety.
It wasn’t every day she was summoned to the CEO’s office.

A few moments of small talk prolonged the awkwardness, but Helen got to the point as quickly as
possible. “Adrienne, I’ve heard an alarming rumor—that you might be considering a job elsewhere.
I certainly hope this isn’t true.”

Adrienne looked down at the coffee table and then around the room as if to see who might have
spilled the beans. “Rumors spread fast around here,” she said finally.

“I want you to tell me the truth—in total confidence, no repercussions,” Helen said pleadingly. She
paused for effect. “Is Tom Forsythe talking to you?”

Adrienne’s eyes widened slightly, and her answer seemed, to Helen, a little too quick. “Tom has
nothing to do with this,” she said. “I mean, it’s true that I talk to him. We’ve known each other for
a long time—since I got here, five years ago. He’s probably the closest thing I’ve had to a mentor.
And I guess I do feel a little lost now that he’s gone.”

“Well, my job is to make sure that you don’t feel lost. We really value you around here, and I want
you to be happy. I don’t want you to even think about leaving.” She paused. “Is it possible that Bob
could play more of that mentoring role?”

With an uncomfortable shrug, Adrienne began formulating a careful response. “Well, it’s not so
much, um...” Her voice trailed away.

Helen let her off the hook. “Well, let’s figure out how we can fill that void.” It was clear that
Adrienne wasn’t being totally forthcoming but impossible to know how much she was withholding.
Of course, she would know better than to say that Tom was recruiting her, even if he was. Recalling
Bob’s note of desperation earlier, Helen made a decision. “In fact, maybe you would let me play a
little of that role myself. I’m promoting you.”

Which Is Worse?

“Helen, you can’t do that! Adrienne’s only a level-six employee—she’ll drown in that position.”

Helen had known that the suddenness of her executive decision would not sit well with Mary, but
the intensity of Mary’s reaction surprised her. She had, after all, succeeded in keeping Adrienne on
board. “Desperate times call for desperate measures,” Helen offered in her own defense.

“But that’s just it,” Mary cried. “It will look like an act of desperation to anyone who heard the
rumor. And worse than that, it isn’t fair. If that job is available, there are other people who should
get a crack at it. It’s not right that they should effectively be penalized because they were the loyal
ones. What kind of signal does that send?”

“I’ll tell you what signal I think it sends. It tells people that we aren’t so constrained by HR
procedures that we can’t make exceptions for fast-rising talent. That’s a positive message. And as
for Adrienne, don’t worry about her. Everyone loves her. She’ll step up to the plate.”

Mary shook her head. “It’s not a question of popularity or attitude. She’s missing some of the
competencies...”

“Well, aren’t we all!” Helen interrupted. “Sometimes I think we focus too much on the things that
aren’t quite perfect. If Adrienne were on the outside and sent us her résumé, we’d say she was
perfect for this job. Tell me that’s not true.”

The Voice of the People

A few weeks after the tense encounters over Adrienne, Mary tapped again at Helen’s door.

“Survey results time,” Mary called out in a singsong voice, glad that she and Helen were back on a
happy footing. She sat down across the desk from Helen and handed over a copy of a chart-
saturated report. “I’ll give you the big picture first. Overall, people at Sambian are quite satisfied
with just about every aspect of their employment experience.”

Helen groaned.

“I know, I know,” Mary continued, “but once you get into the details, there are some nuances.” She
offered a few examples of departments whose results diverged from the averages. And, as always,
the open-ended questions had yielded food for thought. Commenting anonymously on their
survey forms, a few employees had complained of too much deadwood in the project manager
ranks. One staffer referred to “certain prima donnas” who cared more about winning awards than
staying on budget. The administrative staff was, for the most part, neutral. Some resented the
evening and weekend hours they spent when, as one phrased it, “someone higher up the chain
procrastinated.” The perks were good. The perks were bad. The perks were skewed to the younger
employees. The younger employees didn’t feel valued enough.

Helen listened for 20 minutes, saying little but shaking her head frequently. Then, when Mary was
in the middle of reading a comment about the snack and beverage choices in the kitchen, she
interrupted.

“Oh, that one was mine,” she joked.

Mary played along. “I thought so. And don’t worry, I’m on the case.” But she knew the boss had
heard enough for the moment. Closing the report cover, she leaned back in her chair. “I know it’s
hard to separate the signal from the noise here, but at least it gives me some more ideas about
what to probe for when I’m talking to people one-on-one.”

“And that might be enough,” Helen said, “if only they would give us straight answers.”

HBR Case Commentary

How can Sambian discover what’s really driving people out the door?

Four commentators offer expert advice

Anna Pringle is the head of international people and organization capability for Microsoft. She is
based in Dublin.

Helen gasbarian has had a wake-up call. To keep precious talent on board, she must grab the helm.
This is especially urgent because Mary Donillo is not giving Helen the help she needs.

Indeed, if I were Helen, I’d be taking a hard, cold look at Mary. In her exit interview with Tom
Forsythe, Mary asks poor questions, offers only stock responses, and gives up too soon. Mary is
not doing her most important job, which is to be the custodian of talent at Sambian. She should
have known Tom was at risk. If she had established an early-warning system, Tom might not have
quit. If his departure was not preventable, she should have been looking out for the people around
him, such as Adrienne Perle. When Tom left, Mary should have thoroughly rerecruited Adrienne. At
the very least, Helen should tell Mary to pull up her socks and start providing the kind of
information and advice needed to keep Sambian’s talent intact.

Even if Mary were more effective, Helen should be out there listening to people. She cannot
delegate that task to anyone inside or outside the firm. In organizations like Sambian, where
creativity, innovation, and intellectual capital equal competitive advantage, the most effective
leaders devote at least 40% of their time to people—coaching and mentoring other leaders,
rerecruiting the top talent. To this end, Helen and Mary—or Mary’s replacement—should consider
conducting “listening tours.” These would involve visiting every department, gathering direct
feedback from supervisors and staff, and taking the organization’s pulse. Helen should hold small,
open discussions with key employees in the form of breakfast or coffee meetings. These should be
at least a weekly feature on her calendar.

At Microsoft, one effective listening tool is the HR vice president’s weekly blog. In it, she writes
about topics that employees have raised, often during her listening tours, and then she asks for
opinions, which people can offer anonymously. Recently, the blog revealed that many employees
had a strong interest in international careers but were frustrated because it was so difficult to find
out about opportunities. As a result, we’re now posting listings of international jobs.

Sambian should also establish an open-door policy so that employees know that they can talk to
someone above their supervisors if they have a complaint. Helen must personally guarantee that it
is safe to do this and that feedback will be taken seriously. Making this policy work requires robust
and clear HR processes.

Additionally, Helen should assure employees that she knows what’s important to them and that
Sambian’s value proposition for employees is clear and differentiated from the competition’s. At
Microsoft, we try to tailor our proposition to individuals’ needs. Parents like Tom, who have young
children at home, don’t have the same needs as younger, single employees. They may value
flexible hours above, say, access to a fitness club. Sambian should also try to engage people
intellectually, emotionally, and even through their physical environment, so that they can enjoy
doing their best work there.

Finally, it’s important for Sambian to make leaders accountable for attracting and retaining key
talent. This starts at the top. Helen should make it clear that she personally holds herself and her
direct reports to a high standard in this regard and will, over time, remove those who are not
effective. Sambian’s performance management systems should be revamped to focus managers on
both business results and people management goals. By doing these things, Sambian will be able
to keep employees from drifting.

F. Leigh Branham is the CEO of Keeping the People, a human resources consultancy in Overland
Park, Kansas. He is the author of The 7 Hidden Reasons Employees Leave: How to Recognize the
Subtle Signs and Act Before It’s Too Late (Amacom, 2005).

Sadly, I’ve seen Helen’s panicked reaction too often when good people start to leave a company.
After the second or third resignation, the CEO acts impulsively, just as Helen did with Adrienne
Perle. She wants to stop the bleeding so desperately that she’s trying to do so before she even
knows why it’s happening. Mary, the cooler head, is absolutely right to try to put the brakes on
Adrienne’s on-the-spot promotion. Helen needs to take a deep breath, pull back, and move directly
to expose the causes of the exodus, going far beyond deciphering the clues in the firm’s superficial,
apparently self-conducted, survey.
In my analysis of 20,000 employee surveys conducted by the Saratoga Institute, a human-capital-
management firm in Silicon Valley, I discovered that in all sorts of companies and industries, there
are several “triggering events” that can impel employees to flee. Sometimes, soon after being
hired, an employee realizes that there is a misalignment between her expectations and the actual
work or the workplace, or she finds that the job doesn’t fit her. Other times, a boss offers
insufficient coaching or feedback. Workers may feel that their career opportunities are limited or
that they are not valued, listened to, or well paid. Employees may experience an imbalance
between work and life, or a loss of trust and confidence in senior leaders. Most employees are
reluctant to talk openly with management about any of these so-called push factors.

In Sambian’s case, several of these below-the-radar issues are in play, as the conversation among
Hal Pope, Adrienne, and Savannah Dorsey reveals. Tom feels devalued by Paul Bonney, the head of
architecture sales, and so is lured away from Sambian by the promise of a partnership and a fresh
challenge. Hal grumbles about a misalignment between the designers and the salespeople. The
disconnect between the firm’s long-standing focus on innovative design and its concern with deal
cutting can lead to disillusionment for proud professionals like Tom.

To get to the root of what is happening, Helen needs to provide a forum where employees can
speak openly about their discontent without fear of repercussions. For example, she might
consider calling employees together into a GE-style “workout session,” where employees break
into groups to discuss their concerns and appoint representatives to make recommendations to
the larger group.

One design firm I worked with suffered from a staffing flight similar to the one at Sambian. During
a workout session, the CEO—an engineer who was an introvert by nature—made himself
vulnerable by taking the stage and listening to every employee who had an idea. He took action
based on what he had heard—including raising pay to market levels and reassigning less effective
sales staff. This kind of action went a long way toward gaining the respect of his workforce. Within
five months, the firm had won a key contract and the bleeding had stopped.

Helen also needs to get some help for Mary, who is not providing the honest information Helen
desperately needs to guide the firm. Hiring a third party to assist with surveys and exit interviews
would help, because employees will tell a trusted outsider things they may not feel safe telling an
insider like Mary. This is clearly the case with Tom. In the absence of an environment in which
employees can speak freely about what bugs them, even a once-great company like Sambian may
become little more than a revolving door.

Jim Cornelius is the chairman and CEO of Bristol-Myers Squibb in New York City.

Helen may have inherited her architectural talents—as well as the firm—from her father, but she
doesn’t seem to have his managerial genes. As a CEO, Helen’s number one job is to attract and
retain great talent, but she’s just not doing that.

I can certainly understand the difficulty of the problem, having been in a talent-draining situation
myself. In 2006, Bristol-Myers Squibb, where I was then an independent member of the board,
spun into turmoil when the CEO and general counsel were summarily fired following a botched
patent fight. Having spent my previous life as a senior executive at both Guidant and Eli Lilly, I
understood the business well enough and accepted the board’s request to step in as interim CEO
of BMS.

Dealing with workforce turmoil was one of the toughest challenges I’d ever faced. Following the
firings, employees were in shock. Our stock price fell, and there were rumors that we were going
to be acquired. Given the drop in employee morale and our proximity to other large
pharmaceutical firms in the New York area, competitors found it pretty easy to lure people out the
door. It looked as if there might be a large exodus. Worst of all, nobody really knew me; I had to
build trust from ground zero. My job, not unlike Helen’s, was to reestablish stability—and fast.

If my experience can serve as a guide, I would suggest to Helen that she do several things right
away. First, she should simplify the management structure so that she can gain a direct
understanding of the issues facing each area of the firm. Second, she should make sure that
Sambian’s mission is crystal clear and that everyone in the firm understands it. Third, she should
ensure that people are being compensated correctly.

It’s also critical for Helen to spend much more time with the key talent. At our firm, the future of
the business rests with people in R&D. Having worked with R&D employees in my previous
positions, I understood their language, and that proved helpful at BMS when I met with R&D
staffers in the wake of the firings to discuss science and technology issues. With our chief scientific
officer, I still attend R&D meetings and discuss the importance of the R&D function to the future of
the company. In addition, our scientists know that I sit on the board’s science and technology
committee and that they have the board’s full support. At Sambian, Helen can use the language of
architecture to connect with her most talented employees and assure them that she understands
their concerns and desires.

At the same time, I would encourage Helen, with her leadership team, to hold a lot of face-to-face
meetings with senior managers from all departments, including, as often as possible, the folks
from San Francisco, New York, and London. Phone calls, e-mail, and teleconferences won’t cut it;
she needs to read the senior managers’ body language and facial expressions. In these meetings,
she and the team must define what success means for Sambian and how they will achieve it.

Finally, Helen should start writing bimonthly e-mails—“memos from the CEO”—in which she
actively solicits anonymous feedback, suggestions, ideas, and complaints from everyone in the
company. At BMS, my memos generate hundreds of responses—a sure sign of employee
engagement. I read them all and respond to as many as possible.

As a result of doing all these things at BMS, we cut turnover to a level below the historical average
and have attracted some industry stars, all within 15 months. If Helen does likewise, she may be
able to turn Sambian around.

Jean Martin is the executive director of the Corporate Leadership Council, a global membership of
chief human resources officers and a division of the Corporate Executive Board, headquartered in
Washington, DC.

Sambian’s story is not unusual. People begin leaving, and the blame game starts (“Is it the
manager? Is it HR?”). Senior managers react by increasing compensation, making promotions, and
introducing new projects and even new managers. But these are short-term fixes. They might
postpone a departure, but they are really no more than Band-Aids.

Helen must understand that people don’t just leave managers; they leave organizations. Sambian
needs a cure for the organizational ills that are making employees unhappy. In a four-year analysis
of more than 100,000 employees around the world, the Corporate Leadership Council found that
although workers join companies for rational motives (better compensation, benefits, and career
opportunities), they stay and work hard for emotional ones.

The most important contributor to employees’ emotional commitment is a sense of connection to

the firm’s mission. Tom’s situation reveals the danger of Sambian’s failure to make this connection.
When his pet project loses a bid, he’s disappointed because he feels a misalignment between the
direction the firm is taking and his own aspirations. His boss probably failed to spot his growing
unhappiness for two reasons: The first is that Tom never said anything about it. Indeed, CLC data
show that, on average, only 25% of departing employees express dissatisfaction before quitting.
This means that by the time unhappy workers tell their managers what’s going on, it’s often too
late to win them back. The second reason that Tom’s unhappiness went unnoticed may be that his
performance was so strong. In a CLC survey, however, nearly a third of high performers reported
that what they want for their careers is not what their company wants for them.

To better pick up on the warning signs of an emotional disconnect, Sambian needs first to
communicate a clearer mission and the contribution individual employees will make to it. Helen
must also update the company’s mission; words like “creative” and “green” may no longer set the
firm apart in the minds of talented employees like Tom. To get disenchanted staffers back on
board, Helen could hold monthly employee-run “mission review sessions,” in which workers
discuss Sambian’s mission and its relevance to their work.

Employees also stick around when they have everything they need—from tools and resources to
top-down managerial support—to succeed in their jobs. Without a clear understanding that the
firm is aligned behind them, even the most talented workers can feel that their work is futile.

Finally, employees—especially young ones—are more likely to stay at a company whose culture
and values they enjoy. Mary should conduct regular “culture audits” to measure employees’
connection to the company’s work environment. These anonymous audits consist of a brief set of
questions aimed at discovering cultural disconnects: “What are the unwritten assumptions about
the way work gets done here?” “Do you believe hard work will be rewarded?” “Do you feel that
other employees are committed to your success and the organization’s success?” By comparing the
answers to such questions with employee demographic data, Sambian may see trends. For
instance, employees with five or more years of tenure may feel disconnected from the firm’s
culture. Such studies, followed by proper managerial attention, can reduce attrition rates by as
much as 87%.

In the end, by making sure that Sambian actively supports a mission and culture to which
employees feel committed, Helen can see to it that her high performers—and her company—
survive and thrive.

Case Study 2

Recruitment & Selection- A Tesco case Study

Tesco is the biggest private sector employer in the UK. The company has more than 360,000
employees worldwide. In the UK, Tesco stores range from small local Tesco Express sites to large
Tesco Extras and superstores. Around 86% of all sales are from the UK.

Tesco also operates in 12 countries outside the UK, including China, Japan and Turkey. The
company has recently opened stores in the United States. This international expansion is part of
Tesco”s strategy to diversify and grow the business.
In its non-UK operations Tesco builds on the strengths it has developed as market leader in the UK
supermarket sector. However, it also caters for local needs. In Thailand, for example, customers are
used to shopping in 'wet markets' where the produce is not packaged. Tesco uses this approach in
its Bangkok store rather than offering pre-packaged goods as it would in UK stores.
Tesco needs people across a wide range of both store-based and non-store jobs:
 In stores, it needs checkout staff, stock handlers, supervisors as well as many specialists,
such as pharmacists and bakers.
 Its distribution depots require people skilled in stock management and logistics.
 Head office provides the infrastructure to run Tesco efficiently. Roles here include human
resources, legal services, property management, marketing, accounting and information
technology.

Tesco aims to ensure all roles work together to drive its business objectives. It needs to ensure it
has the right number of people in the right jobs at the right time. To do this, it has a structured
process for recruitment and selection to attract applicants for both managerial and operational
roles.

Workforce planning
Workforce planning is the process of analysing an organisation's likely future needs for people in
terms of numbers, skills and locations. It allows the organisation to plan how those needs can be
met through recruitment and training. It is vital for a company like Tesco to plan ahead. Because
the company is growing, Tesco needs to recruit on a regular basis for both the food and non-food
parts of the business.
Positions become available because:
 jobs are created as the company opens new stores in the UK and expands internationally
 vacancies arise as employees leave the company when they retire or resign or get
promotion to other positions within Tesco
  new types of jobs can be created as the company changes its processes and technology
Tesco uses a workforce planning table to establish the likely demand for new staff. This considers
both managerial and non-managerial positions.
In 2008/09, for example, Tesco calculates that to support its business growth there will be a
demand for around 4,000 new managers.

The planning process

This planning process runs each year from the last week in February. There are quarterly reviews in
May, August and November, so Tesco can adjust staffing levels and recruit where necessary. This
allows Tesco sufficient time and flexibility to meet its demands for staff and allows the company to
meet its strategic objectives, for example, to open new stores and maintain customer service
standards.
Tesco seeks to fill many vacancies from within the company. It recognises the importance of
motivating its staff to progress their careers with the company. Tesco practises what it calls 'talent
planning'. This encourages people to work their way through and up the organisation.
Through an annual appraisal scheme, individuals can apply for 'bigger' jobs. Employees identify
roles in which they would like to develop their careers with Tesco. Their manager sets out the
technical skills, competencies and behaviours necessary for these roles, what training this will
require and how long it will take the person to be ready to do the job. This helps Tesco to achieve
its business objectives and employees to achieve their personal and career objectives.

Job descriptions and person specifications

An important element in workforce planning is to have clear job descriptions and person
specifications. A job description sets out:
 the title of the job
 to whom the job holder is responsible
 for whom the job holder is responsible
 a simple description of roles and responsibilities
A person specification sets out the skills, characteristics and attributes that a person needs to do a
particular job.

Together, job descriptions and person specifications provide the basis for job advertisements. They
help job applicants and post-holders to know what is expected of them. At Tesco these documents
are combined. As they are sent to anyone applying for jobs, they should:
 contain enough information to attract suitable people
 act as a checking device to make sure that applicants with the right skills are chosen for
interview
 set the targets and standards for job performance.
Job descriptions and person specifications show how a job-holder fits into the Tesco business. They
help Tesco to recruit the right people. They also provide a benchmark for each job in terms of
responsibilities and skills. These help managers to assess if staff are carrying out jobs to the
appropriate standards.
Skills and behaviours
Tesco's purpose is to serve its customers. Tesco's organisational structure has the customer at the
top. Tesco needs people with the right skills at each level of this structure. There are six work levels
within the organisation. This gives a clear structure for managing and controlling the organisation.
Each level requires particular skills and behaviours.

 Work level 1 - frontline jobs working directly with customers. Various in-store tasks, such as
filling shelves with stock. Requires the ability to work accurately and with enthusiasm and
to interact well with others.

 Work level 2 - leading a team of employees who deal directly with customers. Requires the
ability to manage resources, to set targets, to manage and motivate others.

 Work level 3 - running an operating unit. Requires management skills, including planning,
target setting and reporting.

 Work level 4 - supporting operating units and recommending strategic change. Requires
good knowledge of the business, the skills to analyse information and to make decisions,
and the ability to lead others.

 Work level 5 - responsible for the performance of Tesco as a whole. Requires the ability to
lead and direct others, and to make major decisions.

 Work level 6 - creating the purpose, values and goals for Tesco plc. Responsibility for
Tesco”s performance. Requires a good overview of retailing, and the ability to build a vision
for the future and lead the whole organisation.

Tesco has a seven-part framework that describes the key skills and behaviours for each job at every
level in the company. This helps employees understand whether they have the right knowledge,
skills or resources to carry out their roles.

Attracting and recruiting

Recruitment involves attracting the right standard of applicants to apply for vacancies. Tesco
advertises jobs in different ways. The process varies depending on the job available.

Internal recruitment
Tesco first looks at its internal Talent Plan to fill a vacancy. This is a process that lists current
employees looking for a move, either at the same level or on promotion. If there are no suitable
people in this Talent Plan or developing on the internal management development programme,
Options, Tesco advertises the post internally on its intranet for two weeks.
External recruitment
For external recruitment, Tesco advertises vacancies via the Tesco website www.tesco-careers.com
or through vacancy boards in stores. Applications are made online for managerial positions. The
chosen applicants have an interview followed by attendance at an assessment centre for the final
stage of the selection process.
People interested in store-based jobs with Tesco can approach stores with their CV or register
though Jobcentre Plus. The store prepares a waiting list of people applying in this way and calls
them in as jobs become available.
For harder-to-fill or more specialist jobs, such as bakers and pharmacists, Tesco advertises
externally :
 through its website and offline media
 through television and radio
 by placing advertisements on Google or in magazines such as The Appointment Journal.

Tesco will seek the most cost-effective way of attracting the right applicants. It is expensive to
advertise on television and radio, and in some magazines, but sometimes this is necessary to
ensure the right type of people get to learn about the vacancies.
Tesco makes it easy for applicants to find out about available jobs and has a simple application
process. By accessing the Testco wesite an applicant can find out about local jobs, management
posts and head office positions. The website has an online application form for people to submit
directly.

Selection
Selection involves choosing the most suitable people from those that apply for a vacancy, whilst
keeping to employment laws and regulations. Screening candidates is a very important part of the
selection process. This ensures that those selected for interview have the best fit with the job
requirements.

Screening
In the first stages of screening, Tesco selectors will look carefully at each applicant's curriculum
vitae (CV). The CV summarises the candidate's education and job history to date. A well-written
and positive CV helps Tesco to assess whether an applicant matches the person specification for
the job.
The company also provides a 'job type match' tool on its careers web page. People interested in
working for Tesco can see where they might fit in before applying.
The process Tesco uses to select external management candidates has several stages.

Assessment centres
A candidate who passes screening attends an assessment centre. The assessment centres take
place in store and are run by managers. They help to provide consistency in the selection process.
Applicants are given various exercises, including team-working activities or problem-solving
exercises. These involve examples of problems they might have to deal with at work.
Candidates approved by the internal assessment centres then have an interview. Line managers for
the job on offer take part in the interview to make sure that the candidate fits the job
requirements.

Conclusion
Workforce planning is vital if a business is to meet its future demands for staff. It allows a business
time to train existing staff to take on new responsibilities and to recruit new staff to fill vacancies or
to meet skill shortages.
Tesco is a major international company with many job opportunities, including management,
graduate, school leaver and apprentice posts. Tesco needs to have people with the right skills and
behaviours to support its growth and development.
Tesco has clear organisational structures, detailed job descriptions and person specifications. It
provides user-friendly ways of applying for jobs and a consistent approach to recruitment and
selection. This means it can manage its changing demand for staff.

Questions:
Q-1 : Define the terms recruitment and selection. How do these processes enable an
organisation like Tesco to get the right people to fill its posts?

Q-2 : Describe how job descriptions and person specifications are helpful in the selection
process? What other purposes might a job description be used for?

Q-3 : Analyse Tesco’s methods of attracting and recruiting candidates. Outline what you
consider to be the main strengths and weaknesses of one of these methods.

Q-4 : Evaluate the benefits for Tesco of using both interviews and assessment centres in the
selection process.

Article Study:
Eight Recruiting and Hiring Mistakes
Hiring decisions that result in "bad" hires sap your organization's time, training resources, and
psychic energy. These are the top hiring mistakes to avoid during your recruiting and hiring
process. Do these eight activities with care; your recruiting, interviewing and hiring practices will
result in better hires. Better hires will help you develop a strong, healthy, productive, competitive
organization.
Here are eight recruiting and hiring mistakes to avoid.

Do Not Pre-screen Candidates

A half hour phone call can save hours of your organization's time. Pre-screening applicants is a
must for recruiting and hiring the best employees. You can discover whether the candidate has the
knowledge and experience you need. You can screen for applicants who expect a salary that is out
of your league. You can gain a sense about the person's congruity with your culture. Always pre-
screen applicants.

Fail to Prepare the Candidate

If your applicant fails to ask about your company and the specifics of the job for which he or she
has applied, help the applicant out. Prepare your applicants better for the interview, so
interviewers spend their time on the important issues: determining the candidate's skills and fit
within your culture. Prepare the candidate by describing the company, the details of the position,
the background and titles of the interviewers, and whatever will eliminate time wasting while the
candidate interviews within your company.

Fail to Prepare the Interviewers

You wouldn't choose a college for your child or launch a project without a plan. Why, then, do
organizations put so little planning into interviewing candidates for positions? Interviewers need to
meet in advance and create a plan. Who is respponsible for which types of questions? What aspect
of the candidate's credentials is each person assessing? Who is assessing culture fit. Plan to
succeed in employee selection in advance.

Rely on the Interview to Evaluate a Candidate

The interview is a lot of talk. And most frequently, because applicants are not prepped in advance,
a lot of interview time is spent giving the candidate information about your organization. Even
more time is invested in different interviewers asking the candidate the same questions over and
over.
During an interview, candidates tell you what they think you want to hear because they want to
successfully obtain a job offer. Organizations are smart when they develop several methods for
evaluating candidates in addition to the interview.
In The Most Common Hiring Mistakes - and How to Prevent Them, Peter Gilbert states, "In a
University of Michigan study titled 'The Validity and Utility of Alternative Predictors of Job
Performance,' John and Rhonda Hunter analysed how well job interviews accurately predict
success on the job. The surprising finding: The typical interview increases your chances of choosing
the best candidate by less than 2 percent. In other words, flipping a coin to choose between two
candidates would be only 2 percent less reliable than basing your decision on an interview."
This number is not encouraging when you are attempting to recruit and hire a hire a superior
workforce.

Here are four more mistakes you need to avoid as you work with your candidates from application
through interview.

Do Nothing But Talk During an Interview

Every interview needs to have components other than questions, answers and discussion. Walk the
candidate through the company. Ask about his or her experience with situations you point out
during the walk. In a manufacturing company, ask how the candidate would improve a process.
Watch the candidate perform a task such as separating parts or components to get a feel for their
"hands-on" ability. Have a documentation or writing candidate write a description of the steps in
one of your work processes. See how quickly a person learns a particular task. Ask how the
candidate would approach improving the quality of a given accounting process.
As long as you use tests and tasks that are directly related to the position for which the individual
is interviewing, you will earn reams of relevent information to use in your selection process.

Evaluate "Personality," Not Job Skills and Experience

Sure, it would be nice for you to like everyone at work. But, this is much less important than
recruiting the strongest, smartest, best candidates you can find. People tend to hire people who
are similar to themselves. They are the most comfortable with those candidates, of course.
This will kill your organization over time. You need diverse people with diverse personalities to deal
with diverse employees and customers. Think about the customer that drives you crazy. Isn't it
likely that a new employee with a similar personality would have the same problem? Likewise,
hiring a candidate because you enjoyed and liked him or her, as the main qualification, ignores
your need for particular skills and experience. Don't do it.{/p]

Fail to Differentiate, Via Testing and Discussion, the Critical Job Skills

How do you differentiate one candidate from another? Everyone has a "wish list" for all of the
qualities, skills, personality factors, experience and interests you want to see in your selected
employee. You must decide on, and perhaps, test, the skills you most desire in your candidate.
What are the three - four most critical factors for contribution and success given the job, the skills
of the other employees and the needs of your customers? Once you have identified these, you
cannot "settle" on a candidate that does not bring these to your workplace. Or you will fail.

Develop a Small Candidate Pool

Take the time to build a candidate pool with several candidates who meet the needs of your
organization. If you don't have to make a choice among several qualified candidates, your pool is
too small. Don't "settle" for someone if you don't have the right person with the skills and
experience you need. It's better to reopen your search.
These mistakes are often fatal to a candidate's ultimate success within your organization. If you do
these activities successfully, you increase the probability of a happy, successful employee
contributing what you need from him or her to your organization.
Case Study: ( Session 7, 8 & 9)

New Performance Appraisal System at Xerox

In the mid-1980s Xerox corporation was faced with a problem—its performance appraisal system
was not working. Rather than motivating the employees, its system was leaving them discouraged
and disgruntled. Xerox recognized this problem and developed a new system to eliminate it.

Old Performance Appraisal System

The original system used by Xerox encompassed seven main principles:
The appraisal occurred once a year.
It required employees to documenet their accomplishments.
The manager would assess these accomplishments in writing and assign numerical ratings.
The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory) to 5
(exceptional).
The ratings were on a forced distribution, controlled at the 3 level or below.
Merit increases were tied to the summary rating level.
Merit increase information and performance appraisals occurred in one session.
This system resulted in inequitable ratings and was cited by employees as a major source of
dissatisfaction. In fact, in 1983, the Reprographic Business Group (RBG), Xerox’s main copier
division, reported that 95 percent of its employees received either a 3 or 4 on their appraisal.
Merit raises for people in these two groups only varied by 1 to 2 percent. Essentially, across-the-
board raises were being given to all employees, regardless of performance.

New Performance Appraisal System

Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a new
system from scratch.The task force itself was made up of senior human resources executives;
however, members of the task force also consulted with councils of employees and a council of
middle managers.Together they created a new system, which differed form the old one in many
key respects:
 The absence of a numerical rating system.
 The presence of a half-year feedback session.
 The provision for development planning.
 Prohibition in the appraisal guidelines of the use of subjective assessments of performance.
The new system has three stages, as opposed to the one-step process of the old system. These
stages are spread out over the course of the year. The first stage occurs at the beginning of the
year when the manager meets with each employee. Together, they work out a written agreement
on the employee’s goals, objectives, plans, and tasks for the year. Standards of satisfactory
performance are explicitly spelled out in measurable, attainable, and specific terms.
The second stage is a mid-year, mandatory feedback and discussion session between the manager
and the employee. Progress toward objectives and performance strengths and weaknesses are
discussed, as well as possible means for improving performance in the latter half of the year. Both
the manager and the employee sign an “objectives sheet” indicating that the meeting took place.

The third stage in the appraisal process is the formal performance review, which takes place at
year’s end. Both the manager and the employee prepare a written document, stating how well the
employee met the preset performance targets. They then meet and discuss the performance of
the employee, resolving any discrepancies between the perceptions of the manager and the
employee. This meeting emphasizes feedback and improvement. Efforts are made to stress the
positive aspects of the employee’s performance as well as the negative. This stage also includes a
developmental planning session in which training, education, or development experiences that can
help the employee are discussed. The merit increase discussion takes place in a separate meeting
from the performance appraisal, usually a month or two later. The discussion usually centers on
the specific reasons for the merit raise amount, such as performance, relationship with peers, and
position in salary range. This allows the employee to better see the reasons behind the salary
increase amount, as opposed to the summary rank, which tells the employee very little.
A follow-up survey was conducted the year after the implementation of the new appraisal system.
Results were as follows:
1. 81 percent better understood work group objectives
1. 84 percent considered the new appraisal fair
2. 72 percent said they understood how their merit raise was determined
3. 70 percent met their personal and work objectives
4. 77 percent considered the system a step in the right direction
In conclusion, it can be clearly seen that the new system is a vast imporvement over the previous
one. Despite the fact that some of the philosophies, such as the use of self-appraisals, run counter
to conventional management practices, the results speak for themselves.

Questions:
1. What type of performance appraisal is central to new system at Xerox? Which, if any, of the
criteria for a successful appraisal does this new system have?
2. Given the empahasis on employee development, what implications does this have for hiring
and promotions?
3. How do you think, management feels about the new performance appraisal system? Why?
4. Are there any potential negative aspects of the new performance appraisal system?

Article Study:

Importance of Performance Management Process & Best Practices To Optimize Monitoring

Performance Work Reviews/Feedback and Goal Management

In today's workplace, performance improvement and the role of performance management is an

increasingly popular topic. Why the intense focus on performance management now? Business
pressures are ever-increasing and organizations are now required to become even more effective
and efficient, execute better on business strategy, and do more with less in order to remain
competitive.
While human resources professionals clearly understand the importance of optimal performance
management, they often face significant internal obstacles. When someone mentions performance
management or reviews at your organization, what is the typical response? Do employees and
managers alike cringe? Do they avoid performance management related tasks? Do visions of
tracking down incomplete appraisal forms come to mind? This can be changed.

Forward thinking companies are taking steps to successfully address this negative view of
performance management. They are implementing innovative solutions that ensure processes
deliver real results and improve performance. The purpose of this guide is to provide concrete
guidelines and practical steps that can be used to improve the performance management
processes at your organization. In addition, a new class of automated performance managment
solution has emerged to specifically address small- and medium-sized businesses. We conclude
this guide with a few tips for selecting an automated performance management system to
implement best practices across your company.
The Performance Review—Only Part of an Ongoing Process
Frequently when performance management is mentioned, people think of the employee
performance appraisal or review. Performance management, however, involves so much more.
Properly constructed appraisals should represent a summary of an ongoing, year-round dialogue.
Focusing only on an annual appraisal form leads to misunderstanding and under appreciation of
the benefits of performance management.
An effective performance management process enables managers to evaluate and measure
individual performance and optimize productivity by:
 Aligning individual employee's day-to-day actions with strategic business objectives
 Providing visibility and clarifying accountability related to performance expectations
 Documenting individual performance to support compensation and career planning
decisions
 Establishing focus for skill development and learning activity choices
 Creating documentation for legal purposes, to support decisions and reduce disputes
“Many Human Capital Index research reports say that superior human capital practices not only
are correlated with financial returns, but also are a leading indicator of increased share holder
value"

Many of the practices that support performance also positively impact job satisfaction, employee
retention and loyalty. Recommended practices include:
 Delivering regular relevant job feedback
 Setting and communicating clear performance expectations
 Linking performance to compensation clearly
 Identifying organizational career paths for employees
 Evaluating performance and delivering incentives in a fair and consistent manner
 Providing appropriate learning and development opportunities
 Recognizing and rewarding top performers
Consequences of a Poorly Structured Process
What is the impact of a poorly structured performance management process? If individual goals
are not aligned with business strategy, then time and resources are wasted. Low employee
engagement levels may mean that individuals are not performing at their best. Inconsistent
evaluation criteria and rewards can lead to mistrust, lower productivity and higher attrition. If top
performers see no differentiation in performance ratings, opportunities and compensation from
underperformers, morale can suffer. Lack of documentation, visibility, and accountability can
negatively affect stakeholders who are demanding more and more transparency. If accurate
performance information is unavailable or difficult to access, training and development decisions
along with project assignment decisions may not be made in the company's or the individual's best
interests. An annual process will not adequately alert managers to problems in a timely manner.
Last, but not least, a lack of proper documentation related to performance may result in legal
issues.

Management "buy-in" is equally important to the performance management process. If

management does not understand the importance and value of the process, it can lead to
consistently late or incomplete appraisals, mistrust, avoidance of performance discussions, and a
lack of honest performance-related discussions. Often managers may feel unprepared to deliver
quality feedback and oversee effective performance discussions.
A Closer Look at the Importance of Performance Management
The primary reason to make sure performance management processes are functioning properly is
to tighten the link between strategic business objectives and day-to-day actions. Effective goal
setting (including timelines), combined with a method to track progress and identify obstacles,
contributes to success and bottom line results. Regularly tracking progress against performance
goals and objectives also provides the opportunity to recognize and reward employees for
performance and exceptional effort, contributing to job satisfaction and productivity. Employees
want to feel successful, to do well at their job and feel they are making a valuable contribution. In
order to ensure this happens, employees need a clear understanding of individual goals and how
they fit into the larger organization. New technology-based solutions offered can provide goal
visibility across entire organizations, offer extensive reporting options and can reduce paperwork
by as much as 90%.

Clear visibility, regular individual analysis, and company-wide employee appraisal help identify
corporate competencies and skill gaps. With this valuable data in hand, companies can identify
training and development plans.

When effectively implemented, performance management best practices result in a wide range of
benefits for employees, managers and companies.

Organization-wide Supervisors / Managers Employees

Savings Time Savings Clarification of Expectations
Accuracy Reduced Conflicts Improved Self-assessment
Accountability Visible Accountability Improved Performance
Productivity Efficiency Career Paths
Retention Consistency Job Satisfaction
Communication Performance
Performance

10 Ways To Optimize The Performance Review Process

1. Set Goals Effectively
Goals are the basis of an effective process. There are two key elements to consider when
developing goals. First, are goals written clearly and objectively? Second, are they directly
contributing to the achievement of business strategy?

Clearly communicating strategic business objectives is the first step to creating alignment.
Providing visibility to goals set by departments across the organization furthers alignment. Typically
the process begins with departmental managers setting goals for their departments, based upon
organization-wide goals, which support the general business strategy. Making departmental goals
accessible to all managers ensures there is no overlap, reduces conflict, and allows members of
different departments to see where they support each other and ensure they are not working at
cross purposes. Each manager in turn shares the overall goals with his/her department and meets
with employees to identify individual performance goals and plans.

When setting goal, key job expectations and responsibilities should act as the main guide and
reference. Goals should be set that not only address what is expected, but also how it will be
achieved. For example, the "what" covers quality or quantity expected, deadlines to be met, cost
to deliver, etc. The "how" refers to the behavior demonstrated to achieve outcomes, for example,
focus on customer service. In addition, some organizations choose to include competencies within
performance expectations, to reinforce the link to business strategy, vision and mission.

An accepted framework to use to help write effective goals is the "SMART" goal:

S - Specific
M - Measurable
A - Achievable/Attainable
R - Results oriented/Realistic/Relevant
T - Time bound

The inclusion of the above criteria results in a goal that is understandable and easily visualized and
evaluated. Making a goal specific, measurable, and time bound contributes to the ability to make
progress on the goal and track that progress. Some managers choose to further define goals with a
start and finish date with milestones in between. As we have mentioned, goals must be achievable
and realistic. An unachievable goal is just that. An employee knows when he/she does not stand a
chance of reaching it, and their effort to achieve the goal will be affected. In addition, goals must
reflect conditions that are under the employee's control and the R's (results oriented, realistic and
relevant) should definitely consider these conditions. Sometimes the focus on the outcome of the
goals can overshadow the necessary steps to achieve them. Action plans to support each goal can
include documentation of the steps necessary to achieve a goal. By keeping goals relevant, a
manager reinforces the importance of linking to strategic objectives and communicating why the
goal is important. Some organizations have suggested the use of SMARTA, or SMARTR with the
additional A standing for aligned and the R standing for reward.

A focus on objective, behavioral-based, and observable outcomes that are job-related helps ensure
fairness of the process and reduces discrepancy. Although sometimes difficult to hear, objective
feedback supported with regular documentation is difficult to dispute. This is also where an
understanding of the organization's overall objectives and goals and how individual efforts
contribute becomes essential. If for example, an individual understands that their actions support
an area of the business then it is easier to understand the impact when deadlines are not met.
Using the SMART framework provides clarity up front to employees who will be evaluated against
these goals.

2. Begin with Performance Planning

Using established goals as a basis, performance planning sets the stage for the year by
communicating objectives, and setting an actionable plan to guide the employee to successfully
achieve goals.

Performance planning, as with all other steps, is a collaborative process between the manager and
employee, although there will always be some elements that are non-negotiable. Begin with the
job description and identify major job expectations; expectations then can be clarified for each
major area.

Under each key contribution area, it is important to identify long-term and short-term goals, along
with an action plan around how they will be achieved. Goals can be weighted to identify priorities.
Discuss specific details related to how progress against goals will be evaluated. Next steps include
determining any obstacles that would stand in the way of these goals being achieved. If an
obstacle is knowledge, skills or behavior–a plan should be developed to overcome, i.e.; training,
mentoring, etc.

Using the performance planning document as a reference document, the employee and manager
then should regularly monitor progress against goals, problem solve road blocks, re-assess goals,
change goals as business direction changes, and re-evaluate training and resource needs. This is
where the conversation is critical and often where the follow through sometimes falls down.
Performance planning and ongoing performance feedback are critical because they facilitate
continuous improvement and aid open communication.
3. Ensure an Ongoing Process
As the following diagram illustrates, goal setting, performance planning, performance monitoring,
feedback and coaching is ongoing and supports the creation of the performance appraisal, which
in turn supports processes related to rewards, learning and development. Performance
monitoring, feedback and coaching creates a separate feedback loop within the larger loop which
should take place more often, allowing for necessary adjustments to performance planning as
conditions dictate.

4. Improve Productivity Through Better Goal Management

Regular goal tracking allows for the opportunity to provide feedback as needed, make adjustments
to performance plans, tackle obstacles and prepare contingencies for missed deadlines. Without a
mechanism to regularly track progress against goals, the ongoing, cyclical nature of the process
falls apart.

Goal progress discussions, along with all performance feedback, should be delivered with respect
and should be objective and supportive. Specific examples provide clarity and help the employee
focus on future improvements. It is crucial that the manager listens to the employee's perspective
and incorporates the employee's observations into future plans– the employee often experiences
roadblocks the manager may not see.
5. Gather Information From a Number of Sources
Gathering performance information from a variety of sources increases objectivity and ensures all
factors impacting performance are considered. This information should include objective data like
sales reports, call records or deadline reports. Other valuable information includes: feedback from
others, results of personal observation, documentation of ongoing dialogue, records of any
external or environmental factors impacting performance. Many reviews also include an employee
self-evaluation. Other documents that help define performance objectives include: past
performance appraisals, current departmental and organizational objectives and documented
standards related to career goals.

In order to gather feedback from other employees, organizations will often use a 360° feedback
process. Along with the completion of a self-assessment, selected peers, subordinates, and
manager(s) are asked to contribute feedback around pre-identified areas. The feedback is based
upon specifically identified skills or competencies and the final results are compared against the
employee's self-assessment. This type of feedback increases self-awareness and in some cases is
used to support the performance evaluation process.

Objectivity is essential when evaluating performance and it begins with clarity about job
expectations and evaluation methods. Certain checks and balances can be built in to ensure
objectivity. Managers commonly make mistakes when they conduct evaluations and the first step
to minimizing those errors is to acknowledge they exist. Consistent processes organization-wide
contribute to fairness and objectivity. Access to information allows others to check the validity of
the process. Obviously, not all employees need access to other employees' performance appraisal
results, but processes like calibration meetings will help ensure consistency. In the calibration
process, managers with employees in similar positions meet and discuss the appraisals before they
are finalized and shared with the employees. A calibration meeting helps establish the reasons
individuals are awarded various performance rankings, educates managers about the process
across the organization and promotes consistency. It also provides validation for manager's
decisions, if appropriate.

Reporting is very valuable to assess the fairness/consistency of the process–for example, to

compare ratings in one division to the next or for one manager to the next.
6. Document, Document, Document
Note taking must be consistent and include all significant occurrences, positive or negative.
Documentation is important to support performance decisions, and notes should be written with
the intent to share. In addition to documenting the details of an occurrence, any subsequent
follow up should be detailed.

The performance log is a record that the manager keeps for each employee and is a record of
performance "events." The maintenance of a performance log serves a number of purposes. The
manager can record successes or performance that requires improvement. When it comes time to
complete the appraisal, the manager has a historical record of events and will not have to rely on
recent memory. In addition, this documentation can be used to support performance decisions or
ratings. But it also can be used as a reminder for the manager–if the log has no recordings for a
period of time, perhaps it is time to check in. If an employee does exceptionally well, or meets
deadlines consistently, the log can be used as a reminder to provide recognition for a job well
done. In addition, if a manager notices an area of deficiency, the log can serve as a reminder and a
record of circumstances. The performance log can also act as a reminder for coaching i.e.: record
of upcoming tasks, manager can make note to discuss with the employee to ensure he/she is
prepared for the individual for a task ahead, and then follow up discussion can promote learning
and continuous improvement.

This log should be created using the same principles of performance management and should be
objective, based on observable, job-related behaviors, including successes, achievements and, if
applicable, any documentation related to disciplinary actions taken.
7. Adequately Prepare and Train Your Managers
Managing the performance of another individual is not an easy task and requires many skills.
Training may be required to ensure managers feel adequately prepared to effectively complete all
the tasks related to performance management. This is especially the case for newly promoted
supervisors. Managers need to understand human behavior, how to motivate, how to develop,
provide coaching and deal with conflict. To a great extent, managers must be observers and able to
assess a situation, provide motivation and identify problems that interfere with performance. In
addition, managers must understand that individuals at different levels of comfort, ability and
experience with their jobs will require different levels of input, support and supervision. A
manager who feels adequately prepared to provide and receive feedback, deliver a performance
evaluation and conduct a performance evaluation meeting will be a major contributor to a
successfully functioning process.
8. The Review
The employee performance appraisalor review should be a summary of all that has been
discussed. Based upon job expectations and key areas of contribution, and previously discussed
goals and evaluation methods, the appraisal should be a written confirmation of what has already
been discussed with the employee.

The form should include key job responsibilities, current project work, relevant competencies,
goals and achievements. Previously completed performance appraisals should be used as
reference documents. It should also contain an area to allow employees to record their comment
and input. All comments included on the appraisal form need to be job-related and based upon
observable behaviors.

For the appraisal meeting, it is imperative to prepare ahead of time. Schedule an appropriate place
and time with no interruptions. Ensure the employee has the information necessary to allow them
to prepare adequately. Begin the discussion with job requirements and strengths/
accomplishments. The focus, as pointed out previously, should be forward looking. The way the
manager approaches this meeting conveys a message related to its importance and should be
approached with the appropriate level of seriousness and an open mind. The manager must be
prepared in regard to what he/she wants to discuss, but just as importantly must be prepared to
listen.

Many suggest that it is important to first define the purpose of the meeting and provide an
agenda. A factual discussion with a focus on job-related behaviors will keep the discussion
objective. At the end of the meeting, key points should be summarized. It is important to note that
the employee will be asked to sign the appraisal, whether or not there is agreement.
9. Link Performance Management With Rewards and Recognition
More and more, organizations are linking performance to compensation. This link, however,
cannot effectively be established without the existence of sound performance management
processes that are seen as fair and equitable.
Clear documentation of progress against performance expectations also allows proper recognition
for a job well done. This can be provided a number of ways, i.e.: formal recognition events,
informal public recognition or privately delivered feedback.

It is important also to note the benefits of a consistent process across the organization. A
consistent process creates a sense of fairness and significantly increases job satisfaction. This is
even more critical if Compensation is linked to performance. Employees need to know that if an
individual in one department is identified as a top performer and compensated accordingly, then
an employee performing at the same level in another department will receive similar rewards.
10. Evaluate and Encourage Full Participation and Success
There is widespread recognition that an annual meeting to evaluate progress does not have the
same benefits as ongoing dialogue and feedback. Feedback that is delivered when it is most
relevant enhances learning and provides the opportunity to make necessary accommodations in
order to meet objectives. Some organizations are moving towards conducting performance
reviews twice a year, while a small portion is trying to conduct them more frequently. Regardless of
frequency, the attitude towards ongoing feedback is crucial. If there is organizational recognition
and support for the need to build constructive feedback into the fabric of day-to-day interactions
combined with increased visibility into goals, then the environment will encourage development
and drive goal-directed performance improvement.

Design the process right. The performance management process must add value, otherwise
problems with resistance and non-participation will surface. In addition, the process itself must be
efficient and as simple as possible, while still providing the necessary value. Automated reminders
and scheduling tools can help keep the process on track.

Another element to consider that contributes to success is upper level management support. This
support needs to take not only the form of verbal support, but also through participation in the
same performance management process for evaluations. In addition, consider the current culture
of your organization when it comes to performance appraisals and performance management. Is
the "atmosphere" supportive of an effective process? Is there a culture of open honest
communication or are employees fearful when they make a mistake? Employees must be able to
honestly discuss performance and consider how to make improvements in order to move forward.

Another thing to consider is the provision of a mechanism to evaluate the process itself, whether it
consists of an annual survey, focus groups, manager feedback, reporting, or a combination of these
and other methods.
The Next Step: Automating Best Practices With Technology
More and more organizations are relying on innovative technology solutions to implement
performance management best practices and automate painful manual processes. A move to web-
based, on-demand technology is making these systems affordable, regardless of the size of an
organization, with quick implementation schedules, no IT support requirements and automatic
upgrades.

An automated system can ensure that the performance management process is built around
world-class best practices, easy to complete, efficient and consistent across an organization.
Necessary visibility into organizational and departmental goals is simplified, as is access to
necessary data to support accountability, consistent standards, (by viewing manager average
ratings) and identification of top performers. In addition, technology enables companies, managers
and employees to address many of the issues discussed. When selecting an automated
performance management solution make sure to do your research. Some solutions offer nothing
more than an electronic appraisal form while others offer complete best-of-breed goal
management solutions. The best solutions offer:
 instant form routing and paperless processes
 goal tracking and cascading functionality for complete visibility and alignment
 automated goal management and performance review reminders
 legal scan wizards to ensure appropriate/legal use of language
 writing assistants to help managers prepare appraisal forms
 support tools providing coaching support to managers when they need it most
 dashboards to deliver company-wide, aggregated or individual reporting
It is especially important that technology provides us access to performance data and the ability to
evaluate progress against goals, compare average manager ratings, easily access performance
levels of individuals and use this data to support decision making. Aggregating and analyzing data
in traditional paper-based forms is often too time-consuming and costly.
Summary: Key Points
The road to effective performance management is not always an easy one, but progressing
towards a long-term vision by making manageable changes, step-by-step, will bring about
significant results. The points below act as a reminder of some of the key elements of a successful
process.

 Communicate and understand purpose and value of process

 Set goals effectively
 Begin with performance planning
 Ensure an ongoing process
 Gather information from a number of sources
 Document, document, document
 Adequately prepare and train managers
 Deliver objective reviews that summarize an ongoing process
 Link performance management with other talent management processes
 Evaluate the process and make it easy, efficient and effective to ensure participation
 Consider the benefits of automation to save money and resources and optimize the
performance management process.

Case Study:
T & D as a Strategy for Growth- A Siemens Case Study
Siemens is a leading technology business and one of the largest electrical and electronics
engineering companies in the world. In the UK, it employs over 20,000 people and is in the top
three electrical and electronics companies in the world.
It has been a pioneer in innovation since 1843 when Siemens installed the first street light in
Godalming, Surrey. In 2006, Siemens UK invested over £74.4 million on research and development.
The company designs and manufactures products and services for both industrial customers and
consumers. It operates in three main sectors:
In industry, Siemens develops systems for transport, for example, London”s traffic
monitoring for its congestion charge scheme. It is also the second largest provider of trains
for major UK rail companies like FirstGroup. Siemens also provides lighting and electrical
systems for major construction projects.
In energy, Siemens' work is wide-ranging. It makes systems for transmitting and distributing
power for power companies including building power stations and wind farms. It also
provides energy metering services, for example, water meters for businesses and
consumers.
In healthcare, it specialises in equipment to help medical diagnosis, such as MRI scanners
and imaging technology. It also provides equipment for testing blood in laboratories.
Siemens' technology appears in every aspect of everyday life, for example:
 the electronic 'eye' (Hawk Eye) helps umpires in tennis and cricket matches
 9 out of 10 cars contain Siemens products
 20,000 domestic products like toasters are used in homes every day
 systems such as Pelican crossings keep people safe. Car parking systems help guide traffic
quickly to free spaces, keeping traffic moving and reducing pollution on the roads
To keep its world-leading position and grow in a competitive environment, Siemens aims to deliver
quality products and services. To do this, it needs people with first class levels of skill, knowledge
and capability in engineering, IT and business.
The size and varied nature of its business means that Siemens requires many different types of
people to fill a wide range of roles across the company. These include skilled factory workers, trade
apprenticeships, designers and managers.

This case study explores how Siemens manages its ongoing need for skills through training and
development.
Identifying training needs
For a business to be competitive, it is important that it has the right number of people with the
right skills in the right jobs. Workforce planning enables Siemens to audit its current staff numbers
and the skills it has in place as well as identify where it has skills gaps needed to meet its business
objectives.
For instance, Siemens is relocating its main plant in Lincoln to a bigger site outside the main city.
This will require new skills for the work to be done there. A plan has been constructed to analyse
which skills the company has and what training will be needed for staff to use the new technology
in the new location.
Siemens needs new skills for many reasons:
1. to maintain competitive advantage, in ensuring Siemens has people with the right skills to
develop new technologies and innovations
2. to ensure Siemens has a pipeline of talent and minimal knowledge gaps, for example, due
to retirement
3. to fill a gap following the promotion of existing employees

Siemens is a business focused on innovation. This means it needs to anticipate and respond to
rapid changes in the external business environment. For example, climate change and the growing
emphasis on its carbon footprint has massively increased Siemens focus on wind turbines and
renewable energy sources to address this.
Siemens needs to attract employees with the appropriate skills, either by recruiting people into the
organisation or by training existing employees to develop more skills.
A recent example of opportunities is the forthcoming 2012 Olympic Games in London. Siemens
helped advise the Olympic bid and has great opportunities in providing security, healthcare
provisions, media and communications technology for the Games. If it wins the bid for these
provisions it will need to ensure it has the right people to deliver results.

Training
Training involves teaching new skills or extending the skills employees already have. There are two
forms of training.
As well as induction training, where new employees learn the basic information they need to begin
working, Siemens has three main development programmes designed for 'Entry Level Talent', i.e.
those beginning their career with Siemens after education.

Apprenticeships
Siemens offers a variety of technical apprenticeships, aimed at school leavers who want to 'earn as
they learn'. Apprentices can join a variety of engineering/IT apprenticeships across a variety of
locations in the UK, although the majority start their working life from their home town working at
their local Siemens site.
Apprenticeship training is a combination of off-thejob college training and on-the-job work
experience. Apprentices work to achieve their HND qualifications in their related field. Entry
requirements vary depending on the programme, but fundamentally applicants require good
communication skills and the ability to work in a team.
Siemens believes apprenticeships provide a clear route in developing staff for the future growth of
the organisation.

Development
The costs of recruiting staff are high. It is far more cost effective to keep good staff. Siemens need
well-trained employees with good key skills and capabilities, especially communication and team
working skills.
This gives Siemens a competitive advantage as employees will be more flexible, adaptable to
change and be more creative and innovative. They do their jobs better and are able to develop into
other roles in the future.
Siemens implemented the Siemens Graduate Development Programme in 2005, as a means of
developing graduates with the essential skills set they need in their everyday role and to equip
them for a long-term career at Siemens.
Every graduate that joins Siemens, regardless of role or location joins the 2 year programme. This
consists of 9 modules including team working, customer focus, project management,
communication skills, and business writing. The training is hosted at a number of Siemens sites, so
graduates get exposure to different parts of Siemens, learn about the business, and network
amongst the graduate population.
By improving the development opportunities, employees feel the company values them.
The motivation theories of Herzberg and Maslow show that staff work better when valued. This
delivers long-term commitment and ensures benefits to the company.

Siemens Commercial Academy

The Siemens Commercial Academy was launched in 2005 to further enhance the pipeline of
financial and commercial capability within Siemens. The programme lasts four years and is
regarded as an alternative to going directly to university.
Aimed at students who have a keen interest in Business and Finance, the programme enables
students to rotate around various finance and commercial placements including Accounting, HR,
Procurement and Corporate areas.
The trainees who join the programme split their time between studying towards an HND in
Business with Finance and working at Siemens. Students study towards the degree at the
European College of Business Management, as well as take part in personel development training
such as communication and presentation skills. IT courses and German language training are also
available.

Siemens Graduate Programmes

Siemens recruits graduates into three core areas of the business:
1. Engineering including electrical/electronic, mechanical/mechatronic systems, broadcast,
process and manufacturing
2. IT covering research, development, design and consultancy
3. Business including finance, HR, sales, project and operational management
All Siemens graduate recruits are treated as individuals. They enter the business with relevant
skills, knowledge and experience and the potential to do many different roles. Each graduate has a
discussion with his or her line manager when they start, to decide on their individual training and
development plan.
Where appropriate Siemens supports graduates to gain further qualifications. These include
gaining chartered engineer status through institutions such as IET or IMechE. The typical graduate
profile is varied.
Craig Finlayson graduated from the University of Paisley with a degree in Information Technology.
He worked on the BBC account in London within the project finance team. He now works in Sales
Support and Portfolio on various projects.
Anna Carder, HR Graduate, joined Siemens in 2006 from Aston University with a BSc in Managerial
and Administrative Studies. Anna is currently in her third and final placement in the Recruitment &
Sourcing team of Global Shared Services. She has previously worked in two other placements in
Corporate Personnel where she worked as part of the Talent Management team followed by an HR
operational placement within Siemens Traffic Controls in Poole. Siemens is currently supporting
Anna in her studies for her CIPD qualification through distance learning.

Evaluation of training and development

Well-trained employees provide a number of benefits that contribute to a business' competitive
advantage.
To measure the effectiveness of its training and development, Siemens uses an appraisal system,
known as a Performance Management process. Employees and their line managers agree
objectives at the beginning of a placement and progress is then monitored formally and informally
throughout the placement. This helps to focus everyone on the developing needs of the business.
Annually, the results form the basis of a staff dialogue where the employee's manager reviews the
progress towards the objectives that have been set. Feedback is discussed with the employee and
any development needs are captured in order to decide appropriate training. Together, new
objectives for the following year ahead are set. In some instances, appraisals are linked to pay
reviews. In these cases, pay rises depend on employees meeting or exceeding their objectives.
There are several benefits for Siemens in using appraisal. It can:
1. ensure that all training is being used well and for the best interests of the company
2. keep all staff up-to-date in a fast changing business
3. make sure that staff are well motivated
4. get feedback from staff on changes
5. make sure staff are involved in changes.
Conclusion
Training and development helps the growth of a business.
Siemens has a clear focus on having a well-motivated and trained workforce. The company needs
to have motivated and confident staff who have up-to-date skills in order to remain competitive. In
addition, well-trained staff are an asset to the business and help to retain customers.
Well-trained staff who remain with the business mean that customers enjoy continuity. This
contributes to customer loyalty and leads to repeat business.
Staff who feel valued stay longer in a company. This means that Siemens” costs of recruitment can
be reduced, resulting in cost savings across the organisation.

Questions:
1. Identify four benefits to Siemens of its in-depth training and development of workers.

2. Explain how an appraisal system can help to motivate employees?

3. Using your understanding of the work of Herzberg, which motivators can you see in
action at Siemens?

4. Analyse how Siemens uses training and development to ensure growth in its business?
Article Study:

Training & Development at Dell

Michael Dell, the CEO of Dell Computer Corporation, in a recent annual report, summarized where
the CEO stands on the role that learning plays in his company. He said it was people who produced
results in any business, laying emphasis on how building a talented workforce remained Dell’s
greatest priority as well as its greatest challenge. This challenge contained two primary issues. The
first being training, developing and retaining their existing employees so they continue capitalizing
on the career opportunities Dell’s growth provides them. The second being to actually successfully
recruit employees at all levels to support Dell.
The CEO said the company progressed pertaining to both issues in the previous fiscal year, adding
Dell would continue to keep it a critical area of focus. Dell filled more than half of its executive-
level positions with promotions from within the organization, hiring the remaining externally. Dell
also modified its core training and development programs to improve employee effectiveness as
well as, for the second successive year, compensation programs.
Michael Dell said hyper-growth companies that lack long-established practices have better chances
of adapting with the ever-changing environment, while laying emphasis on the fact that enough
structure had to be in place to ensure that growth would not go out of control. He said hyper
growth needs to be dealt with in a particular manner regarding learning and leadership
development.

Dell Learning was established to meet Dell`s needs pertaining to human resources. Although
training had always been an integral part of Dell, in 1995, it realized the need for greater emphasis
on ensuring the employees were sufficiently skilled to keep up with the firm`s hyper growth. Dell
Learning, following the expansion in 1995, was also assigned a series of objectives:
Bringing learning in line with Dell`s key business
Making learning directly and openly available
Creating a clarity around competencies required to maintain Dell’s hyper growth
Providing consistency through a global curriculum
Naturally, as a response to hyper growth, Dell had to structure three fourths of its training program
to target new employees, products and basic job skills. A centralized corporate team was
established for training development and administration. Training managers were appointed to:
Develop business based educational plans
Hold business leaders responsible for execution of plan
Ensure that sufficient resources exist to execute the plan
Report on the plan’s impact
In addition to providing strategic direction, the corporate team includes fulfillment teams that
serve Dell’s different businesses on demand. One team produces learning tools for training sales
and technical audiences on Dell’s products and services. Another, ‘Education Services’, manages
classrooms, registration, scheduling, tracking, and other logistics. A third group consists of highly
experienced instructional designers who oversee development projects requested by the
businesses. Essentially, the training organization operates as a federation. There are three parts:
Corporate Training, Regional (HR) Training, and Regional (Non-HR) Training, held together by the
senior management team and a series of Dell Learning councils.
The corporate group comprises six major elements: 1) Corporate and Regional Operations – global
education planning, financial management and reporting, and process and infrastructure. 2) Dell
Learning Services – instructional design services and consulting. 3) Dell Learning Technology
Services – enables rapid distribution of new learning technologies. 4) Education Services – handles
event management, vendor management, registration, facilities, and a wide range of
administrative services. 5) The New Product Training Group – provides core training materials for
sales and technological support. 6) The Program Management Office – develops strategies and
aligns them with global curricula to support strategic initiatives. The specific areas of focus shift
from year to year based on business needs. The Corporate Group reports to Human Resources, a
few groups, do however, report to marketing or customer service organizations even though they
still take part in management meetings, operations reviews, and global strategy sessions.
This organizational structure is, in part, a response to Dell’s hyper growth status. The company’s
training charter was revised around the time Dell University was reassessed and thereby renamed
Dell Learning to include:
 Education should be business-issue based
 Education should be as cost-effective and time-effective as possible
 Business managers should be in charge of managing their own training investments
 Education must be flexible and able to scale
 All training should be competency based
 All learning should be just enough, just-in-time
 Learners should be in control
 Learning solutions have limited shelf life and should be treated accordingly
 Learning occurs everywhere, so our obligation is to leverage it across the organization
 The education function must create access to the intellectual capital of Dell
The establishment of such a charter as well as the nature of the computer business have forced
Dell to take an aggressive take towards technology-enabled learning. In order to put learners in
control, it was essential that learning solutions be available to them all the time, as well as them
being able to control what they learn and when. Low-tech solutions made that possible, however,
classroom learning never could. Technology has made learning omnipresent and a natural part of
work.
The Dell Learning Technology Services Group was added to the corporate team in 1999 – to focus
exclusively on utilizing technology and other non-traditional training methods. Curriculum road-
maps and self-assessments have been based on the skills and knowledge required for job success.
The road-maps show logical sequences of learning; the assessments, determine the gaps between
employees current abilities and required abilities, enabling them to customize their development.
Road-maps include management and executive education, sales, marketing, finance, technical
certifications, and IT.
Most of Dell’s competitor’s have corporate universities, however, the biggest difference between
them and Dell is that Dell has put the learners in charge. Most companies believe it’s too
dangerous to let employees determine what training they require, however, Dell Learning
Technology Services Manager Darin Hartley said: “These are people who raise children, maintain
households, manage budgets, and solve incredibly complex problems every day. We ought to be
able trust them to manage their own learning.”
Dell Learning also partners with several universities, community colleges, and high schools for
certain learning needs as they are available online and can be specifically focused as well as
offering educational assistance (advanced degrees) to employees. The chief financial officer, Tom
Meredith, leads Dell’s alliance team with the University of Texas, he said there were two kinds of
knowledge critical to success. The first being your associates’ knowledge and the other being the
knowledge that is required immediately, wasn’t required in the past and most likely won’t be
required in the future either. He said the first type of knowledge was provided through degree
program, adding that Dell Learning provided the second type to its employees.
Dell links where employees can find them easily during the normal course of their work. The
ultimate goal is ‘stealth learning’ – -making learning so involved with work that people can’t
pinpoint when learning happens. Dell’s HR created an Internet-based, online pay-planning tool.
Managers use it to record and submit their plans for merit pay increases for the next fiscal year.
The tool comprises formulas and reminders based on company guidelines, this is considered by
them as part of their job, however, stealth learning is taking place as they learn to manage their
pay budgets and relationships between pay decisions and other aspects of compensation and
performance management.
As opposed to the traditional approach where training budgets are determined by the trainers or
authorized managers, at Dell, individual lists are provided to Dell Learning by the managers, who
have compiled a series of trainings required by them and the costs that they will incur, allowing
flexibility and the ability to scale learning according to the business’ needs. That ‘pay as you use’
philosophy has been driven by the vice-chairman’s office, he said: “I’ve been in companies where
people are constantly complaining about corporate allocations. They ask what the training people
do with such large sums of money, the complaint, however, disappears when you take away the
allocation. But the training department better be doing what our managers want or it’ll go out of
business.”
Adopting such a technique has shifted talk about training costs in board meetings to how Dell’s
investment in learning has paid off – cost avoidance, increased sales, increased employee
productivity, and better customer service. Seeing as how several employees say they joined Dell
was development, it apparently helps recruiting too.
In 1998, Dell Learning launched a Web-based global measurement system that provides online
access to training statistics and reporting at global, business, segment, and departmental levels.
For example:
1.Training Snapshot Report – this documents all training activity, including classes taken,
total tuition and enrollment, and total hours by region, business, and segment.

2.Training by Type – this report sorts training activity by category, such as management,
executive, customer service, sales, new product, technical, new hire, business initiatives,
professional development, and compliance.

3.CBT/On-line Training Report – this documents all computer-based training and online
training completed for the fiscal year.

4.Customer Satisfaction Report – this is a summary of all training evaluations by course.

Dell Learning’s performance measurement strategy includes a performance measurement
scorecard showing Dell Learning’s alignment with business goals. An enterprise-wide assessment
software system and infrastructure were designed and implemented for delivery of Web-based
tests, surveys, and other assessments.
Despite the internet being heavily prevalent in not only organizations but our society as a whole,
Michael Dell understands the importance of personal interactions. From the early days of the
company, he insisted on holding semi-annual executive conferences, saying that most
communication was done through technology, adding that it became easier if a personal
relationship had been established. The CEO closed a presentation in a recent conference while
emphasizing the need to hire and develop new talent for the company to remain in line with its
organizational vision.
When the chairman’s office initiated QUEST (Quality Underlies Every Single Task), the CEO, as well
as other senior executives, personally ensured quality tools were provided to every employee and
managed the program’s evolution from its initial focus on internal quality to its current external
approach to create the best possible customer experience. The CEO also encourages senior
executives to involve themselves wherever possible to ensure that timely and adequate training is
provided to Dell employees.
Another example of CEO involvement in governance is how the education function’s work is
measured at Dell. Its training organization has its operations review with the chairman’s office.
Those quarterly sessions go over the total company investment in learning, areas of focus,
deployment of resources, and results. The chairman’s office also looks at training department
productivity in terms of Dell’s investment in comparison to its competitors.
Dell’s CEO is also involved in setting strategic direction for training by personally setting specific
targets. Two vice-chairmen directed a study to determine the core competencies required for
leadership success. The study was utilized to determine what competencies the company should
be looking for in potential employees. Those competencies have been integrated into Dell’s
staffing, promotion, and performance review processes. More significantly, they form the basis for
development activities across the company. The chairman’s office, together with the executive
committee, conducts quarterly meetings on the development of company’s top talent.
The data gathered from leaders across Dell identified two distinct sets of competencies:
1. Hiring Criteria – they include functional and technical skills, business acumen, integrity
and trust, command skills, and intellectual horsepower. Depending on the job requirements, a
best-in-class candidate should have demonstrated strengths in most of those areas. In other
words, in order to be minimally successful, employees will need to do their jobs well,
understand the Dell Business Model, be ethical and honest, be willing to speak up and
defend their points of view, and think smart.

2. The Dell Leadership Profile (DLP) – consists of common traits and skills shared by some of
Dell’s most successful leaders: customer focus, priority setting, problem solving, dealing
with ambiguities, drive for results, organizational agility, building effective teams,
developing direct reports, and learning on the fly.

Despite these two sets of competencies serving as guidelines for recruitment, they aren’t intended
to represent all the competencies required to be a successful leader at Dell. The remaining
competencies and performance standards vary according to the specific job requirements.
The DLP and Hiring Criteria are in an interview guide, available to all groups, worldwide. The DLP
competencies are also used in several projects worldwide such as organizational HR planning and
executive staffing and development. The profiles are also integrated into Dell Learning’s curriculum
and performance management processes. Learning has been singled out as crucial to success for
Dell leaders at any level across the organization. Integrating the competencies into so many
aspects of how Dell does business has made a huge difference, however, the key to such success in
integrating the competencies was due to Michael Dell and top executives using the same language
and approach. Such hands-on involvement by a CEO has a strong symbolic and practical impact on
how learning happens within an organization.
Michael Dell is always talking about what he learns from at least three important sources:
employees, outsiders, and especially customers. His experience, in the form of stories, end up in
his speeches and presentations to his leadership team. He’s constantly searching for new ideas
from the internet, books, etc, and providing them to his employees.
In his book: ‘Direct from Dell’, Michael describes another deliberate, systemic learning process:
‘In a direct business like ours, you have, by definition, a relationship with customers. But beyond
the mechanisms we have for sales and support, we have set up a number of forums to ensure the
free flow of information with the customer on a constant basis. Our Platinum Councils, for
example, are regional meetings (in Asia-Pacific, Japan, the United States, and Europe) of our largest
customers. In these meetings, our senior technologists share their views on where the technology
is heading and lay out roadmaps of product plans over the next two years. There are also breakout
sessions and working groups in which our engineering teams focus on specific product areas and
talk about how to solve problems that may not necessarily have anything to do with the
commercial relationship with Dell. For example, is leasing better than buying? Or, how do you
manage the transition to Windows NT? Or, how do you manage a field force of notebook
computers?’
When Michael Dell talks about what he’s learning, he doesn’t just quote authors and analysts.
Most of what he shares, he’s learned from employees. At Dell, an open email policy means that
everyone in the company has direct access to the CEO, which helps support his learning. There
have also been periodic lunch meetings with randomly selected groups of employees. Michael also
walks the halls, drops in on employees to ask what they’re doing, hearing, and thinking. It’s not
only a good management technique, but also a good learning strategy.
The CEO promotes learning by acting as a chief marketing officer for learning. He has set a
standard in the company by making it clear that learning is not only expected, but inspected as
well. For example, when Dell mandated that all managers take instruction on ethics, values, and
the legal aspects of management, Michael sent personal emails to his team to let them know that
he expected 100 percent participation, and what the CEO wants, the CEO generally gets, so,
needless to say, 100 percent employees were present.
Michael Dell said: ‘Everyone has to be open to learning all of the time, starting with me, and
everyone must support and encourage their teams to make sure they have the knowledge and
skills to succeed.’
It can clearly be determined by the above-mentioned facts that Dell not only lays key emphasis on
programs such as training and development of its employees, but has figured out innovative and
extremely effective and efficient ways to deal with its training needs given its hyper growth status.
It also shows that all levels of managerial executives are involved in the learning process through a
series of channels and councils, this motivates employees as their seniors are actively involved in
the employees’ knowledge.
Article Study:

Nestle: Training and Development

Introduction
Nestlé is today the world’s leading food company, with a 135-year history and operations in
virtually every country in the world. Nestlé’s principal assets are not office buildings, factories, or
even brands. Rather, it is the fact that they are a global organization comprised of many
nationalities, religions, and ethnic backgrounds all working together in one single unifying
corporate culture.
Culture at Nestlé and Human Resources Policy
Nestlé culture unifies people on all continents. The most important parts of Nestlé’s business
strategy and culture are the development of human capacity in each country where they operate.
Learning is an integral part of Nestlé’s culture. This is firmly stated in The Nestlé Human Resources
Policy, a totally new policy that encompasses the guidelines that constitute a sound basis for
efficient and effective human resource management. People development is the driving force of
the policy, which includes clear principles on non-discrimination, the right of collective bargaining
as well as the strict prohibition of any form of harassment. The policy deals with recruitment,
remuneration and training and development and emphasizes individual responsibility, strong
leadership and a commitment to life-long learning as required characteristics for Nestlé managers.

Training Programs at Nestlé

The willingness to learn is therefore an essential condition to be employed by Nestlé. First and
foremost, training is done on-the-job. Guiding and coaching is part of the responsibility of each
manager and is crucial to make each one progress in his/her position. Formal training programs are
generally purpose-oriented and designed to improve relevant skills and competencies. Therefore
they are proposed in the framework of individual development programs and not as a reward.
Literacy Training
Most of Nestlé’s people development programs assume a good basic education on the part of
employees. However, in a number of countries, we have decided to offer employees the
opportunity to upgrade their essential literacy skills. A number of Nestlé companies have therefore
set up special programs for those who, for one reason or another, missed a large part of their
elementary schooling.
These programs are especially important as they introduce increasingly sophisticated production
techniques into each country where they operate. As the level of technology in Nestlé factories has
steadily risen, the need for training has increased at all levels. Much of this is on-the-job training to
develop the specific skills to operate more advanced equipment. But it’s not only new technical
abilities that are required. It’s sometimes new working practices. For example, more flexibility and
more independence among work teams are sometimes needed if equipment is to operate at
maximum efficiency. “Sometimes we have debates in class and we are afraid to stand up. But our
facilitators tell us to stand up because one day we might be in the parliament!” (Maria Modiba,
Production line worker, Babelegi factory, Nestlé South Africa).
Nestlé Apprenticeship Program
Apprenticeship programs have been an essential part of Nestlé training where the young trainees
spent three days a week at work and two at school. Positive results observed but some of these
soon ran into a problem. At the end of training, many students were hired away by other
companies which provided no training of their own. “My two elder brothers worked here before
me. Like them, for me the Nestlé Apprenticeship Program in Nigeria will not be the end of my
training but it will provide me with the right base for further advancement. We should have more
apprentices here as we are trained so well!” (John Edobor Eghoghon, Apprentice Mechanic, Agbara
Factory, Nestlé Nigeria) “It’s not only a matter of learning bakery; we also learn about
microbiology, finance, budgeting, costs, sales, how to treat the customer, and so on. That is the
reason I think that this is really something that is going to give meaning to my life. It will be very
useful for everything.” (Jair Andrés Santa, Apprentice Baker, La Rosa Factory Dosquebradas, Nestlé
Columbia).
Local Training
Two-thirds of all Nestlé employees work in factories, most of which organize continuous training to
meet their specific needs. In addition, a number of Nestlé operating companies run their own
residential training centers. The result is that local training is the largest component of Nestlé’s
people development activities worldwide and a substantial majority of the company’s 240000
employees receive training every year. Ensuring appropriate and continuous training is an official
part of every manager’s responsibilities and, in many cases; the manager is personally involved in
the teaching. For this reason, part of the training structure in every company is focused on
developing managers’ own coaching skills. Additional courses are held outside the factory when
required, generally in connection with the operation of new technology.
The variety of programs is very extensive. They start with continuation training for ex-apprentices
who have the potential to become supervisors or section leaders, and continue through several
levels of technical, electrical and maintenance engineering as well as IT management. The degree
to which factories develop “home-grown” specialists varies considerably, reflecting the availability
of trained people on the job market in each country. On-the-job training is also a key element of
career development in commercial and administrative positions. Here too, most courses are
delivered in-house by Nestlé trainers but, as the level rises, collaboration with external institutes
increases. “As part of the Young Managers’ Training Program I was sent to a different part of the
country and began by selling small portions of our Maggi bouillon cubes to the street stalls, the
‘sari sari’ stores, in my country. Even though most of my main key accounts are now supermarkets,
this early exposure were an invaluable learning experience and will help me all my life.” (Diane
Jennifer Zabala, Key Account Specialist, Sales, Nestle Philippines). “Through its education and
training program, Nestlé manifests its belief that people are the most important asset. In my case, I
was fortunate to participate in Nestlé’s Young Managers Program at the start of my Nestlé career,
in 1967. This foundation has sustained me all these years up to my present position of CEO of one
of the top 12 Nestlé companies in the world.” (Juan Santos, CEO, Nestlé Philippines)
Virtually every national Nestlé company organizes management-training courses for new
employees with High school or university qualifications. But their approaches vary considerably. In
Japan, for example, they consist of a series of short courses typically lasting three days each.
Subjects include human assessment skills, leadership and strategy as well as courses for new
supervisors and new key staff. In Mexico, Nestlé set up a national training center in 1965. In
addition to those following regular training programs, some 100 people follow programs for young
managers there every year. These are based on a series of modules that allows tailored courses to
be offered to each participant. Nestlé Pakistan runs 12-month programs for management trainees
in sales and marketing, finance and human resources, as well as in milk collection and agricultural
services. These involve periods of fieldwork, not only to develop a broad range of skills but also to
introduce new employees to company organization and systems. The scope of local training is
expanding. The growing familiarity with information technology has enabled “distance learning” to
become a valuable resource, and many Nestlé companies have appointed corporate training
assistants in this area. It has the great advantage of allowing students to select courses that meet
their individual needs and do the work at their own pace, at convenient times. In Singapore, to
quote just one example, staff is given financial help to take evening courses in job-related subjects.
Fees and expenses are reimbursed for successfully following courses leading to a trade certificate,
a high school diploma, university entrance qualifications, and a bachelor’s degree.
International Training
Nestlé’s success in growing local companies in each country has been highly influenced by the
functioning of its international Training Centre, located near our company’s corporate
headquarters in Switzerland. For over 30 years, the Rive-Reine International Training Centre has
brought together managers from around the world to learn from senior Nestlé managers and from
each other.Country managers decide who attends which course, although there is central
screening for qualifications, and classes are carefully composed to include people with a range of
geographic and functional backgrounds. Typically a class contains 15–20 nationalities. The Centre
delivers some 70 courses, attended by about 1700 managers each year from over 80 countries. All
course leaders are Nestlé managers with many years of experience in a range of countries. Only
25% of the teaching is done by outside professionals, as the primary faculty is the Nestlé senior
management. The programs can be broadly divided into two groups:
Management courses: these account for about 66% of all courses at Rive-Reine. The participants
have typically been with the company for four to five years. The intention is to develop a real
appreciation of Nestlé values and business approaches. These courses focus on internal activities.
Executive courses: these classes often contain people who have attended a management course
five to ten years earlier. The focus is on developing the ability to represent Nestlé externally and to
work with outsiders. It emphasizes industry analysis, often asking: “What would you do if you were
a competitor?”

Conclusion
Nestlé’s overarching principle is that each employee should have the opportunity to develop to the
maximum of his or her potential. Nestlé do this because they believe it pays off in the long run in
their business results, and that sustainable long-term relationships with highly competent people
and with the communities where they operate enhance their ability to make consistent profits. It is
important to give people the opportunities for life-long learning as at Nestle that all employees are
called upon to upgrade their skills in a fast-changing world. By offering opportunities to develop,
they not only enrich themselves as a company, they also make themselves individually more
autonomous, confident, and, in turn, more employable and open to new positions within the
company. Enhancing this virtuous circle is the ultimate goal of their training efforts at many
different levels through the thousands of training programs they run each year.
Case study

PRATHAMESH STEEL (PVT.) LTD.

Prathamesh Steel (Pvt.) Ltd. founded 15 years before by Mr. A.M. Bapat was
havingbooming time. At that time, Mr. Bapat, worked both in the office and in the
factory andk n e w h i s m e n a n d t h e y k n e w h i m . P r o d u c t i o n s t a n d a r d w e r e
a l w a y s m a i n t a i n e d a n d labour turnover was practically non-existing. As the business
mushroomed, the number of employees has progressively increased. Thus, Mr. Bapat's
greetings and conversationwith his workers became less frequent. In fact, he had so many things to
do, that he couldn o l o n g e r s u p e r v i s e t h e f a c t o r y. T h u s , h e h i r e d a n o t h e r m a n ,
M r. G o d s e a s a p l a n t supervisor. As this time though the number of workers
increased to about 500, labour t u r n o v e r a n d a b s e n t e e i s m i n c r e a s e d a l o n g w i t h
t h e l a b o u r c a s e s . T h e o n l y t h i n g t h a t decreased was productivity. In order to meet the
situations, Mr. Bapat granted substantialincrease in wages which were already high and
made some arrangements for incremente a r n i n g s b a s e d o n m e r i t r a t i n g o n
s e n i o r i t y. Ye t l a b o u r t u r n o v e r a n d a b s e n t e e i s m c o n t i n u e a t a h i g h r a t e . O n
i n v e s t i g a t i o n , i t w a s f o u n d t h a t t h e n e w p l a n t s u p e r v i s o r lacked the patience and
understanding which is necessary for dealing with the employees.When something was found
wrong, he was scolding the employees but no attempt was made to find the case of faulty
work. Meanwhile, labour unrest developed. The ,Worker began to complain about working on
Saturdays and not having either time or facilities change from work clothes to original
dresses after work, about toilet facilities etc. Someof the claims were' not found sufficiently
justified or easy to meet. Mr. Bapat offered toworkers as compensation, a new rise in wages
with more liberty in allowing vacationtime all of which the company could well afford.

Questions:
1. Were the steps taken by Mr. Bapat right?
2. What do you think he should have done in order to improve the situation

Article:

BATA INDIA'S IR PROBLEMS

INTRODUCTION

For right or wrong reasons, Bata India Limited (Bata) always made the headlines in the financial
dailies and business magazines during the late 1990s. The company was headed by the 60 year old
managing director William Keith Weston (Weston). He was popularly known as a 'turnaround
specialist' and had successfully turned around many sick companies within the Bata Shoe
Organization (BSO) group.

By the end of financial year 1999, Bata managed to report rising profits for four consecutive years
after incurring its first ever loss of Rs 420 million in 1995. However, by the third quarter ended
September 30, 2000, Weston was a worried man. Bata was once again on the downward path. The
company's nine months net profits of Rs 105.5 million in 2000 was substantially lower than the Rs
209.8 million recorded in 1999. Its staff costs of Rs 1.29 million (23% of net sales) was also higher
as compared to Rs 1.18 million incurred in the previous year. In September 2000, Bata was heading
towards a major labour dispute as Bata Mazdoor Union (BMU) had requested West Bengal
government to intervene in what it considered to be a major downsizing exercise.

BACKGROUND NOTE
With net revenues of Rs 7.27 billion and net profit of Rs 304.6 million for the financial year ending
December 31, 1999, Bata was India's largest manufacturer and marketer of footwear products. As
on February 08, 2001, the company had a market valuation of Rs 3.7 billion. For years, Bata's
reasonably priced, sturdy footwear had made it one of India's best known brands. Bata sold over
60 million pairs per annum in India and also exported its products in overseas markets including
the US, the UK, Europe and Middle East countries. The company was an important operation for its
Toronto, Canada based parent, the BSO group run by Thomas Bata, which owned 51% equity stake.

The company provided employment to over 15,000 people in its manufacturing and sales
operations throughout India. Headquartered in Calcutta, the company manufactured over 33
million pairs per year in its five plants located in Batanagar (West Bengal), Faridabad (Haryana),
Bangalore (Karnataka), Patna (Bihar) and Hosur (Tamil Nadu). The company had a distribution
network of over 1,500 retail stores and 27 wholesale depots. It outsourced over 23 million pairs
per year from various small-scale manufacturers.

Throughout its history, Bata was plagued by perennial labor problems with frequent strikes and
lockouts at its manufacturing facilities. The company incurred huge employee expenses (22% of
net sales in 1999). Competitors like Liberty Shoes were far more cost-effective with salaries of its
5,000 strong workforce comprising just 5% of its turnover.

When the company was in the red in 1995 for the first time, BSO restructured the entire board and
sent in a team headed by Weston. Soon after he stepped in several changes were made in the
management. Indians who held key positions in top management, were replaced with expatriate
Weston taking over as managing director. Mike Middleton was appointed as deputy managing
director and R. Senonner headed the marketing division. They made several key changes, including
a complete overhaul of the company's operations and key departments. Within two months of
Weston taking over, Bata decided to sell its headquarter building in Calcutta for Rs 195 million, in a
bid to stem losses. The company shifted wholesale, planning & distribution, and the commercial
department to Batanagar, despite opposition from the trade unions. Robin Majumdar, president,
co-ordination committee, Bata Trade Union, criticized the move, saying: "Profits may return, but
honor is difficult to regain."

The management team implemented a massive revamping exercise in which more than 250
managers and their juniors were asked to quit. Bata decided to stop further recruitment, and
allowed only the redundant staff to fill the gaps created by superannuation and retirements. The
management offered its staff an employment policy that was linked to sales-growth performance.

ASSAULT CASE

More than half of Bata's production came from the Batanagar factory in West Bengal, a state
notorious for its militant trade unions, who derived their strength from the dominant political
parties, especially the left parties. Notwithstanding the giant conglomerate's grip on the shoe
market in India, Bata's equally large reputation for corruption within, created the perception that
Weston would have a difficult time. When the new management team weeded out irregularities
and turned the company around within a couple of years, tackling the politicized trade unions
proved to be the hardest of all tasks.

On July 21, 1998, Weston was severely assaulted by four workers at the company's factory at
Batanagar, while he was attending a business meet. The incident occurred after a member of BMU,
Arup Dutta, met Weston to discuss the issue of the suspended employees. Dutta reportedly got
into a verbal duel with Weston, upon which the other workers began to shout slogans. When
Weston tried to leave the room the workers turned violent and assaulted him. This was the second
attack on an officer after Weston took charge of the company, the first one being the assault on
the chief welfare officer in 1996.

Soon after the incident, the management dismissed the three employees who were involved in the
violence. The employees involved accepted their dismissal letters but subsequently provoked other
workers to go in for a strike to protest the management's move. Workers at Batanagar went on a
strike for two days following the incident. Commenting on the strike, Majumdar said: "The issue of
Bata was much wider than that of the dismissal of three employees on grounds of indiscipline.
Stoppage of recruitment and continuous farming out of jobs had been causing widespread
resentment among employees for a long time."

Following the incident, BSO decided to reconsider its investment plans at Batanagar. Senior vice-
president and member of the executive committee, MJZ Mowla, said[1]: "We had chalked out a
significant investment programme at Batanagar this year which was more than what was invested
last year. However, that will all be postponed."

The incident had opened a can of worms, said the company insiders. The three men who were
charge-sheeted, were members of the 41-member committee of BMU, which had strong political
connections with the ruling Communist Party of India (Marxist). The trio it was alleged, had in the
past a good rapport with the senior managers, who were no longer with the organization. These
managers had reportedly farmed out a large chunk of the contract operations to this trio.

Company insiders said the recent violence was more a political issue rather than an industrial
relations problem, since the workers had had very little to do with it. Seeing the seriousness of the
issue and the party's involvement, the union, the state government tried to solve the problem by
setting up a tripartite meeting among company officials, the labor directorate and the union
representatives. The workers feared a closedown as the inquiry proceeded.

INDUSTRIAL RELATIONS

For Bata, labor had always posed major problems. Strikes seemed to be a perennial problem.
Much before the assault case, Bata's chronically restive factory at Batanagar had always plagued by
labor strife. In 1992, the factory was closed for four and a half months. In 1995, Bata entered into a
3-year bipartite agreement with the workers, represented by the then 10,000 strong BMU, which
also had the West Bengal government as a signatory.

On July 21, 1998, Weston was severely assaulted by four workers at the company's factory at
Batanagar, while he was attending a business meet. The incident occurred after a member of BMU,
Arup Dutta, met Weston to discuss the issue of the suspended employees. Dutta reportedly got
into a verbal duel with Weston, upon which the other workers began to shout slogans. When
Weston tried to leave the room the workers turned violent and assaulted him. This was the second
attack on an officer after Weston took charge of the company, the first one being the assault on
the chief welfare officer in 1996.
In February 1999, a lockout was declared in Bata's Faridabad Unit. Middleton commented that the
closure of the unit would not have much impact on the company's revenues as it was catering to
lower-end products such as canvas and Hawaii chappals. The lock out lasted for eight months. In
October 1999, the unit resumed production when Bata signed a three-year wage agreement.

On March 8, 2000, a lockout was declared at Bata's Peenya factory in Bangalore, following a strike
by its employee union. The new leadership of the union had refused to abide by the wage
agreement, which was to expire in August 2001. Following the failure of its negotiations with the
union, the management decided to go for a lock out. Bata management was of the view that
though it would have to bear the cost of maintaining an idle plant (Rs. 3 million), the effect of the
closures on sales and production would be minimal as the footwear manufactured in the factory
could be shifted to the company's other factories and associate manufacturers. The factory had
300 workers on its rolls and manufactured canvas and PVC footwear.

In July 2000, Bata lifted the lockout at the Peenya factory. However, some of the workers opposed
the company's move to get an undertaking from the factory employees to resume work. The
employees demanded revocation of suspension against 20 of their fellow employees. They also
demanded that conditions such as maintaining normal production schedule, conforming to
standing orders and the settlement in force should not be insisted upon.

In September 2000, Bata was again headed for a labour dispute when the BMU asked the West
Bengal government to intervene in what it perceived to be a downsizing exercise being undertaken
by the management. BMU justified this move by alleging that the management has increased
outsourcing of products and also due to perceived declining importance of the Batanagar unit. The
union said that Bata has started outsourcing the Power range of fully manufactured shoes from
China, compared to the earlier outsourcing of only assembly and sewing line job. The company's
production of Hawai chappals at the Batanagar unit too had come down by 58% from the weekly
capacity of 0.144 million pairs. These steps had resulted in lower income for the workers forcing
them to approach the government for saving their interests.
Case Study:

SAIL'S VOLUNTARY RETIREMENT SCHEME

INTRODUCTION

At a meeting of the board of directors in June 1999, the CEOs of Steel Authority of India's (SAIL)
four plants - V. Gujral (Bhilai), S. B. Singh (Durgapur), B.K. Singh (Bokaro), and A.K. Singh (Rourkela)
made their usual presentations on their performance projections. One after the other, they got up
to describe how these units were going to post huge losses, once again, in the first quarter [1] of
1999-2000. After incurring a huge loss of Rs 15.74 billion in the financial year 1998-99 (the first in
the last 12 years), the morale in the company was extremely low. The joke at SAIL's headquarters
in Delhi was that the company's fortunes would change only if a VRS was offered to its CEOs - not
just the workers.

BACKGROUND NOTE
SAIL was the world's 10th largest and India's largest steel manufacturer with a 33% share
in the domestic market. In the financial year 1999-2000, the company generated
revenues of Rs. 162.5 billion and incurred a net loss of Rs 17.2 billion. Yet, as on February
23, 2001, SAIL had a market valuation of just Rs. 340.8 billion, a meager amount
considering the fact that the company owned four integrated and two special steel
plants.
SAIL was formed in 1973 as a holding company of the government owned steel and
associated input companies. In 1978, the subsidiary companies including Durgapur
Mishra Ispat Ltd, Bokaro Steels Ltd, Hindustan Steel Works Ltd, Salem Steel Ltd., SAIL
International Ltd were all dissolved and merged with SAIL. In 1979, the Government
transferred to it the ownership of Indian Iron and Steel Company Ltd. (IISCO) which
became a wholly owned subsidiary of SAIL.

SAIL operated four integrated steel plants, located at Durgapur (WB), Bhilai (MP), Rourkela (Orissa)
and Bokaro (Bihar). The company also operated two alloy/special steel plants located at Durgapur
(WB) and Salem (Tamil Nadu). The Durgapur and Bhilai plants were pre-dominantly1ong products [2]
plants, whereas the Rourkela and Bokaro plants had facilities for manufacturing flat products [3] .

THE JOLT

In February 2000, the SAIL management received a financial and business-restructuring plan
proposed by McKinsey & Co, a leading global management-consulting firm, and approved by the
government of India (held 85.82% equity stake).

The McKinsey report suggested that SAIL be reorganized into two strategic business units (SBUs) - a
flat products company and a long products company. The SAIL management board too was to be
restructured, so that it should consisted of two SBU chiefs and directors of finance, HRD,
commercial and technical. To increase share value, McKinsey suggested a phased divestment
schedule. The plan envisaged putting the flat products company on the block first, as intense
competition was expected in this area, and the long products company at a later date.
Financial restructuring envisaged waiver of Steel Development Fund [4](SDF) loans worth Rs 50.73
billion and Rs 3.8 billion lent to IISCO. The government also agreed to provide guarantee for raising
loans of Rs 15 billion with a 50% interest subsidy for the amount raised. This amount had to be
utilized for reducing manpower through the voluntary retirement scheme. Another guarantee was
given for further raising of Rs 15 billion, for repaying past loans.

Business restructuring proposals included divestment of the following non-core assets:

 Power plants at Rourkela, Durgapur & Bokaro, oxygen plant-2 of the Bhilai steel plant and
the fertilizer plant at Rourkela.
 Salem Steel Plant (SSP), Salem.
 Alloy Steel Plant (ASP), Durgapur.
 Visvesvaraya Iron and Steel Plant (VISL), Bhadravati.
 Conversion of IISCO into a joint venture with SAIL having only minority shareholding.

THE DILEMMA

The major worry for SAIL's CEO Arvind Pande was the company's 160,000-strong workforce.
Manpower costs alone accounted for 16.69% of the company's gross sales in 1999-2000. This was
the largest percentage, as compared with other steel producers such as Essar Steel (1.47%) and Ispat
Industries (1.34%). An analysis of manpower costs as a percentage of the turnover for various units
of SAIL showed that its raw materials division (RMD), central marketing organisation (CMO),
Research & Development Centre at Ranchi and the SAIL corporate office in Delhi were the weak
spots.

There was considerable excess manpower in the non-plant departments. Around 30% of SAIL's
manpower, including executives, were in the non-plant departments, merely adding to the
superfluous paperwork.

Hindustan Steel, SAIL's predecessor, was modelled on government secretariats, with thousands of
"babus" and messengers adding to the glory of feudal-oriented departmental heads. SAIL had yet to
make any visible effort to reduce surplus manpower.

A senior official at SAIL remarked: "If you walk into any SAIL office anywhere, you will
find people chatting, reading novels, knitting and so on. Thousands of them just do not
have any work. This area has not even been considered as a focus area for the present
VRS, possibly because all orders emanate from and through such superfluous offices and
no one wants to think of himself as surplus." With a manpower of around 60,000 in
these offices and non-plant departments like schools, township activities etc, SAIL could
well bring down to less than 10,000.
Reduction of white-collar manpower required a change in the systems of office work and
record keeping, and a very high degree of computerization. Officers across the
organization employed dozens of stenographers and assistants. Signing on note sheets
was a status symbol for SAIL officers.

Another official commented: "Systems have to be result oriented, rather than person oriented and
responsibilities must match rewards and recognition. There is a need to change the mindset of the
management, before specific plans can be drawn out for reduction of office staff."
From the beginning, SAIL had to contend with political intervention and pressure. Many officials
held that SAIL had to overcome these objectives: “Many employees do not have sufficient orders
or work on hand to justify their continuance, and yet political pressures keep them going. It is time
that the top management takes a tough stand on such matters. One does not have to call in
McKinsey to decide that many SAIL stockyards and branch offices are redundant.”

THE VOLUNTARY RETIREMENT SCHEME

As a part of the restructuring plan, McKinsey had advised Pande that SAIL needed to cut the
160,000-strong labor force to 100,000 by the end of 2003, through a voluntary retirement scheme.
Pande was banking on natural attrition to reduce the number by 45,000 within two years, but
GOI's decision to increase the retirement age to 60 further delayed the reduction. Subsequently,
SAIL had requested GOI to bail it out with a one-time assistance of Rs 15 billion and another
subsidized loan of the same size for a VRS, to achieve the McKinsey targets.

In a bid to 'rationalize' its huge workforce, SAIL launched a VRS in mid 1998, for employees who
had put in a minimum service of 20 years or were 50 years in age or above. The scheme provided
an income that was equal to 100 per cent of the prevailing basic pay and DA to the eligible
employees. About 5,975 employees opted for the scheme. Of them, 5,317 were executives and
658 non-executives. Most of those who opted were above 55 years.

On March 31, 1999, SAIL introduced a 'sabbatical leave' scheme, under which employees could
take a break from the company for two years for studies/employment elsewhere, with the option
of rejoining the company (if they wanted to) at the end of the period. The sabbatical allowed the
younger members of the SAIL staff to leave without pay for "self-renewal, enhancement of
expertise/knowledge and experimentation," which broadly translated into higher studies or even
new employment.

On June 01, 1999, SAIL launched another VRS for its employees. Employees who had completed a
minimum of 15 years of service or were 40 years or above could opt for the scheme. The new VRS,
which was opened to all regular, permanent employees of the company, would be operational till
31st January 2000. Its target groups included:

1. Those who were habitual absentees, regularly ill and those who had become surplus
because of the closure of plants and mines;

2. 2. Poor performers.

Under the new package, employees who opted for the scheme, depending on their age, would get
a monthly income as a percentage of their prevailing basic salary and dearness allowance (DA) for
the remaining years of their services, till superannuation. Employees above 55 years of age would
be given 105 per cent of the basic pay and dearness allowance (DA) every month. Those
employees who were between the age of 52 and 55 years would receive 95 per cent of the basic
pay and DA while those below 52 years would get 85 per cent of the basic pay and DA. The new
scheme, like the old one was a deferred payment scheme, with extra carrots like a 5% increase in
monthly benefits for each of the three age groups.

By September 1999, over 4,000 employees opted for the new scheme. About 1,700 employees
opted for VRS in the Durgapur steel plant while in the Bhilai, Bokaro and Rourkela steel plants. The
number varied between 400 and 700.

In September 2000, SAIL announced yet another round of VRS, in a bid to remove 10,000
employees by the end of March 2001. The company planned to approach financial institutions for
a credit of Rs 5 billion. Pande said: "We are awaiting the government nod for the VRS scheme,
drawn on the pattern of the standard VRS by department of public enterprises. We expect to get
the clearance by the end of the month."

On February 08, 2001, SAIL ended its four year recruitment freeze by announcing its plans to fill up
more than 250 posts at its various plant sites in both technical and non-technical categories.
According to a senior SAIL official: "This recruitment is being done to ease the vacancies created
due to natural attrition and those that arose after the previous VRS."

THE PERSUASION
In mid 1998, in a bid to convince its employees to accept VRS, SAIL highlighted six 'plus'
points of VRS, in its internal communique, Varta. They were as follows:

5. During the next 4-5 years, SAIL has to reduce its workforce by 60,000 for its own
survival. Employees with chronic ailments, and habitual absentees, who add to
low productivity, have to go first - maybe, with the help of administrative actions.

6. The employees may have to be transferred to any other part of the country in the
larger interest of the company.

7. For those who started their career as healthy young men 25-30 years ago, the
VRS will take care of their financial worries to a great extent, and they can
discharge their domestic duties more comfortably.

8. VRS can be used for special purposes like paying huge sum of money for getting
one's son admitted to a professional course.

9. VRS will give many individuals the money and time on pursuing personal dreams.

10. It can be a good opportunity to do social service.

On December 27, 1999, SAIL initiated a company-wide information dissemination program to

educate the staff on restructuring. The company drafted an internal communication document
entitled "Turnaround and Transformation" and a special team of 66 internal resource persons (IRP)
had been assigned the task of preparing a detailed plan to take this document to a larger number
of people within the company. The 66-member team was constituted in September 1999 and was
stationed in Ranchi to undergo a detailed briefing-cum-training course. A generalized module was
presented to the IRP team during the course, which then summarised the root causes of SAIL's
crisis and the strategies to overcome it.

According to an official involved with the program: "Initiatives like the power plant hive-off or the
Salem Steel joint venture will hinge on employee concurrence, particularly at the shop floor
level,CASE STUDY

The 66-member IRP team conducted half-day workshops across plants and other units based
on three specific modules:
A video film conveying a message from the chairman of the company.

A generalized module of the recommendations of the turnaround plan focusing on restoring

the financial foundation, reinforcing marketing initiatives and regaining cost leadership.

A module covering plant-specific or unit-specific issues and strategies for action.

The exercise was expected to cover at least 16,000 SAIL employees by the end of March 2000.
A senior official at SAIL said: "The idea is that the employees covered in this phase would take
the communication process forward to their peer group and fellow colleagues."

The staff education exercise was stressed upon, particularly in view of the power plant hive-off
fiasco, which could not take off as scheduled due to stiff resistance from central trade unions.
The problem, at the time, was that the SAIL top brass had failed to convince the employees
that jobs would not be at risk because of the hive-off.
THE REACTION

The trade unions were on a warpath against the recommendations of McKinsey. Posters put
up by the Centre of Indian Trade Unions (CITU) at SAIL's central marketing office said that the
McKinsey report was meant, not for the revival or survival of SAIL, but for its burial. A senior
TU leader said: "SAIL TUs so far have been extremely tolerant and exercised utmost restraint.
Even in the face of scanty communication by the management of SAIL, they have not lost
patience in these trying times."

The TU leaders felt that SAIL would try to bolster support for the financial restructuring
proposal based on the recommendations of McKinsey. But being a government-owned
company, SAIL cannot take decisions on such recommendations as the privatization of SAIL
or breaking it up into two product-based companies. Even in relatively small matters the like
hiving off of power plants to a subsidiary company, with SAIL being the major partner, the
government had not cleared SAIL's proposal, even after months of gestation. Therefore, it
was futile to think that SAIL would secure the permission of the government to sell off Salem
Steel Plant (SSP) in Tamil Nadu or close down Alloy Steels Plant (ASP) at Durgapur in West
Bengal.

At SSP, all the TUs had joined hands to form a 'Save Salem Steel Committee' and observed a
day's token strike on June 24, 1999, demanding investment in SSP by SAIL, rather than by a
private partner.

Though TUs had no objection to voluntary retirements, they were not very happy about the
situation. They were worried that employment opportunities were shrinking in the steel
industry and that reduction of manpower would mean increasing the number of contractors
and their workforce. After the Rourkela Steel Plant in Orissa absorbed contractors' workers
on Supreme Court orders, fresh contractors had been appointed to fill up the vacancies.

SAIL'S VOLUNTARY RETIREMENT SCHEME

SAIL TU leaders were emphatic that the McKinsey recommendations were not the last word on
SAIL. They felt that foreign consultancy firms were unable to appreciate the role played by major
public sector units like SAIL or Indian Oil in the growth of the Indian economy.

They alleged that since large public sector units had shown they could withstand the onslaught of
the multinationals, efforts were being made to weaken them, break them into pieces and
eventually privatize
them.
On February 17, 2000, workers at SSP went on a strike against the government's decision to
restructure SAIL. The strike was called by eight unions affiliated to CITU, INTUC, ADMK and PMK.
CITU secretary Tapan Sen said: "The unions are going to serve the ultimatum to the government
for indefinite action in the days to come if this retrograde decision is not reversed. Demonstrations
were held against the government's decision in all steel plants and workers of Durgapur would
hold a daylong dharna. Steel workers all over the country, irrespective of affiliations have reacted
sharply to the disastrous and deceptive decision of the government on the so-called restructuring
of SAIL."
QUESTIONS FOR DISCUSSION

1. McKinsey's recommendation is that SAIL cut its workforce to 100,000 by the end of 2003. SAIL
has launched various VR schemes to meet this target. Though every time the company is comes
out with improved schemes there are still not many takers. What according to you could be the
reasons?

2. The staff education exercise on VRS at SAIL seems to be more of a reaction to the power plant
hive-off fiasco than a proactive measure. What other steps can SAIL take to educate employees
about VRS? Explain.

3. According to McKinsey proposals, offering VRS to employees was the part of the restructuring
plan. Do you think VRS is sufficient without restructuring or vice-versa? Comment.

4. In February 2001, SAIL ended its four-year recruitment freeze by announcing its plans to fill up
more than 250 posts. Do you think this is the right move especially when a VRS is being offered to
its employees? Explain.
Case Study:

Managing Diversity

To address diversity issues, consider these questions: what policies, practices, and ways of thinking
and within our organizational culture have differential impact on different groups? What
organizational changes should be made to meet the needs of a diverse workforce as well as to
maximize the potential of all workers, so that San Francisco can be well positioned for the
demands of the 21st century?
Most people believe in the golden rule: treat others as you want to be treated. The implicit
assumption is that how you want to be treated is how others want to be treated. But when you
look at this proverb through a diversity perspective, you begin to ask the question: what does
respect look like; does it look the same for everyone? Does it mean saying hello in the morning, or
leaving someone alone, or making eye contact when you speak?
It depends on the individual. We may share similar values, such as respect or need for recognition,
but how we show those values through behavior may be different for different groups or
individuals. How do we know what different groups or individuals need? Perhaps instead of using
the golden rule, we could use the platinum rule which states: "treat others as they want to be
treated." Moving our frame of reference from what may be our default view ("our way is the best
way") to a diversity-sensitive perspective ("let's take the best of a variety of ways") will help us to
manage more effectively in a diverse work environment.

Your Role
You have a key role in transforming the organizational culture so that it more closely reflects the
values of our diverse workforce. Some of the skills needed are:
 an understanding and acceptance of managing diversity concepts
 recognition that diversity is threaded through every aspect of management
 self-awareness, in terms of understanding your own culture, identity, biases, prejudices,
and stereotypes
 willingness to challenge and change institutional practices that present barriers to different
groups
It's natural to want a cookbook approach to diversity issues so that one knows exactly what to do.
Unfortunately, given the many dimensions of diversity, there is no easy recipe to follow. Advice and
strategies given for one situation may not work given the same situation in another context.
Managing diversity means acknowledging people's differences and recognizing these differences as
valuable; it enhances good management practices by preventing discrimination and promoting
inclusiveness. Good management alone will not necessarily help you work effectively with a
diverse workforce. It is often difficult to see what part diversity plays in a specific area of
management.
The Office of Affirmative Action, Equal Opportunity and Diversity is experienced in providing help
with training and advice on the variety of situations that occur, tailored to your specific
environment.
To illustrate, the following two examples show how diversity is an integral part of management.
The first example focuses on the area of selection, the second example looks at communication:

Issues
 How do you make the job sound appealing to different types of workers?
 How can recruitment be effectively targeted to diverse groups?
 How do you overcome bias in the interviewing process, questions, and your response?

Strategies
 Specify the need for skills to work effectively in a diverse environment in the job, for
example: "demonstrated ability to work effectively in a diverse work environment."
 Make sure that good faith efforts are made to recruit a diverse applicant pool.
 Focus on the job requirements in the interview, and assess experience but also consider
transferable skills and demonstrated competencies, such as analytical, organizational,
communication, coordination. Prior experience has not necessarily mean effectiveness or
success on the job.
 Use a panel interview format. Ensure that the committee is diverse, unit affiliation, job
classification, length of service, variety of life experiences, etc. to represent different
perspectives and to eliminate bias from the selection process. Run questions and process
by them to ensure there is no unintentional bias.
 Ensure that appropriate accommodations are made for disabled applicants.
 Know your own biases. What stereotypes do you have of people from different groups and
how well they may perform on the job? What communication styles do you prefer?
Sometimes what we consider to be appropriate or desirable qualities in a candidate may
reflect more about our personal preferences than about the skills needed to perform the
job.

Fair vs. Same Treatment

Many people think that "fairness" means "treating everyone the same." How well does treating
everyone the same work for a diverse staff? For example, when employees have limited English
language skills or reading proficiency, even though that limit might not affect their ability to do
their jobs, transmitting important information through complicated memos might not be an
effective way of communicating with them. While distributing such memos to all staff is "treating
everyone the same," this approach may not communicate essential information to everyone. A
staff member who missed out on essential information might feel that the communication process
was "unfair." A process that takes account of the diverse levels of English language and reading
proficiency among the staff might include taking extra time to be sure that information in an
important memorandum is understood. Such efforts on the part of supervisors and managers
should be supported and rewarded as good management practices for working with a diverse staff.

Managing Diversity is Different from Affirmative Action

Managing diversity focuses on maximizing the ability of all employees to contribute to

organizational goals. Affirmative action focuses on specific groups because of historical
discrimination, such as people of color and women. Affirmative action emphasizes legal necessity
and social responsibility; managing diversity emphasizes business necessity. In short, while
managing diversity is also concerned with underrepresentation of women and people of color in
the workforce, it is much more inclusive and acknowledges that diversity must work for everyone.

Consequences of Ignoring Diversity

Ignoring diversity issues costs time, money, and efficiency. Some of the consequences can include
unhealthy tensions; loss of productivity because of increased conflict; inability to attract and retain
talented people of all kinds; complaints and legal actions; and inability to retain valuable
employees, resulting in lost investments in recruitment and training.