Strategic HR Lawyer

I recently authored an article on Plant Closings and the WARN Act.  All too often, we think about bare bones compliance and fail to see the need to engage remaining or transitioning employees in the process of closing a facility.  This article, Beyond the Warn Notice:  Getting to the Tipping Point and Beyond, appeared in the July/August issue of Human Resources Advisor Journal (published by Thomson West).

Perhaps some recent employers in the news with significant layoffs could learn a thing or two... Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations , Employment Law , HR Strategy , Policies & Procedures | Permalink

I recently authored an article on Outsourcing Human Resources in a Turnaround published in the August Edition of The Journal of Corporate Renewal, published by the Turnaround Management Association.  All too often HR expenditures are viewed as soft expenses that should be cut as the organization goes through the turnaround process.  In addition, as the senior, highly paid HR staff is cut, responsibilities are often placed ion junior, inexperienced professionals that can do little more than be cheerleaders.  Rather than this traditional approach, organizations would be better served to outsource some of the HR function during a turnaround in order to provide a fresh look and analysis of the operations and efficiency of the HR function.  After all, no company can be successful without focusing on engaging and managing its people.
Posted By Diane Pfadenhauer In Corporate Turnaround | Permalink

Delta Airlines recently obtained approval to terminate its pilots' pension plan as part of its bankruptcy restructuring plan.  This essentially means that the plan will be turned over to the Pension Benefit Guaranty Corporation - a government entity that insures belly-up plans.  The PBGC is funded by insurance proceeds paid for by those who have defined benefit pension plans.  Unfortunately, however, the PBGS is largely underfunded.  The result:  you and I will likely get to fund the pilots' $75,000/year retirement income.

Delta argued that the plan poses an immediate $1 Billion liability that would prevent the company from emerging successfully from bankruptcy.  The pilots' union has agreed to the termination.  I suppose a job is better than a pension?

Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround | Permalink

Often effective communication with employees is touted as advantageous, beneficial,and the stuff that makes the warm and fuzzy types happy.  The 2005/2006 Watson Wyatt Communication ROI Study™ shows that effective communication is a leading indicator of an organization’s financial performance.  Some of the findings:

• Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.
• Shareholder returns for organizations with the most effective communication were over 57 percent higher over the last five years (2000-2004) than were returns for firms with less effective communication.
• The 2005/2006 study found evidence that communication effectiveness is a leading indicator of financial performance.
• Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement versus firms that communicate less effectively.
• Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.
• Two-thirds of the firms with high levels of communication effectiveness are asking their managers to take on a greater share of the communication responsibility, but few are giving them the tools and training to be successful.
• Global firms are not customizing their messages to meet local needs or cultural sensitivities.
• On average, firms within the financial and retail trade sectors rank among the most effective communicators. Health care, basic materials, telecommunications and other service companies rank among the least effective communicators.

I've gotten on the communication bandwagon myself, having written a few articles on the subject in the context of corporate turnaround and mergers/acquisitions.  See the sidebar on the left for some of these.

Thanks to the Human Resources Blog.

Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations , Mergers and Acquisitions , Policies & Procedures | Permalink

Thanks to the The Workers' Comp Insider for providing this analysis of a recent Supreme Court decision concerning unpaid workers' compensation claims in bankruptcy.  In Howard Delivery Service, Inc., et al v. Zurich American Insurance Co., Zurich claimed that since workers' compensation insurance is an employee benefit, that it should be given priority, like other benefits in corporate bankruptcy.  A provision of the Bankruptcy Code assigns priority to unsecured creditors' claims for unpaid benefit plan premiums.  However, the Supreme Court ruled that these premiums do not qualify. As a result, workers' compsation insurance carriers will go to the end of the line in their efforts to collect unpaid premiums.  For more on this case, in addition to the Workers' Comp Insider's analysis, you can view the entire opinion here and another article presenting the insurance industy's view here. Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround | Permalink

Between GM & Delphi, 47,600 employees have elected to take the buyout offered a few months back.  I recently commented on the enormity of this plan here.   According to the New York Times,  almost one third of GM's hourly employees and one half of Delphi's took the offer.  Ultimately GM plans to eliminate over 30,000 employees and the results of this offering will enable it to meet that goal earlier than expected.  Some additional facts:    

About 30,400 G.M. workers, who had at least 26 years on the job, took early retirement packages that include payouts of up to $35,000 and full benefits. The remaining 4,600 will receive either $70,000 or $140,000, depending on their experience, but give up all their benefits except their pensions;

Employees at both G.M. and Delphi who accept the deals have seven days to change their minds. Mr. Wagoner said that window had closed for nearly all of those who said they planned to leave and that he did not expect the final number to change significantly.

The program will cost G.M. about $3.8 billion but save it $8 billion a year. G.M. lost $10.6 billion last year.

Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround , Retirement | Permalink

General Motors recently announced its plan to shed 30,000 workers. To achieve this goal, company is offering incentives to encourage employees to leave. Workers eligible to retire who leave now will get $35,000. Those who leave and sever all ties (i.e. forego retirement benefits) will get $140,000 if they have more than 10 years of service, $70,000 if less than 10 years of service. Doing the math, it seems staggering that a company could view spending BILLIONS of dollars as a way to save money over the long haul. This just goes to show the sheer size of GM, which lost over $10 billion last year alone. For more on this, go here.

This, by the way, is an effective use of an early retirement incentive program. For more on ERIP's, see my article on this subject here. It's a strategy that can be useful for organizations far smaller than GM.

Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround , Retirement | Permalink

The Workplace Prof Blog brings to our attention the growing concern regarding employees' 401(k) funds when a company falters.  According to the post, some of the problems relate to the notion that someone from the company must approve the release of the plan funds.  When a company goes under, often these people are difficult to find.  They further note that the Department of Labor is considering regulations to address this issue. A word to the wise is that when employees leave their money in a former employer's 401(k) plan, they should be keeping tabs on the company and where the money is.  It's easy to forget about it. Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround , Retirement | Permalink

Ford Motor Company's recent announcement that it will cut 30,000 jobs and close 14 factories follows recent trends in the auto industry to scale back to become more competitive in the global economy.   According to this article, when combined with the cutbacks proposed by other automakers, overall one third of the industry's employees will be cut (wow!). My concern about this turnaround is that it's the same management that's leading the charge.  William Clay Ford, Jr., Henry's great-grandson, Ford Motor's current CEO is leading the way.  Seems to me that they might be better served with an objective eye from the outside rather than counting on the same blood to transform the company. 

On another note, the WSJ print edition (sorry, no link) had an interesting article regarding Ford's new buyout plan which includes free college tuition ($15,000), half salary (about $27,000) and health benefits for employees at its Edison, NJ truck plant who were recently laid off.  Not a bad deal and certainly commendable to want to retrain employees for other careers rather than having them stay on the company dole as required under the collective bargaining agreement or unemployment.

Posted By Diane Pfadenhauer In Corporate Turnaround | Permalink

Delphi has taken a few punches since filing for bankruptcy.  Its seemingly excessive bonus plans for key employees angered union members and became fodder for media criticism.  Seems that Delphi CEO Robert "Steve" Miller, who has known for being bluntly outspoken about the financial issues facing Delphi, is trying to demonstrate a little compassion for employees.   This article in USA Today describes his recent statements . Specifically,

"Workers have built their lives around their high wages, and Delphi is working with its biggest customer and former parent, General Motors, to find a reasonable way to bring Delphi's labor costs in line while maintaining workers' standard of living....Behind all this financial drama are the lives and livelihoods of thousands of Delphi workers. They played by the rules and cannot be blamed for taking a high-paying job. ... They are at risk of being severely impacted and disappointed. I don't blame them for being angry."

Moral of the story - sometimes honey works better than vinegar.  A bit of compassion can go a long way in trying to get employees and other stakeholders on board with what is seemingly a daunting initiative.

Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations , HR Strategy | Permalink

I'm back from my trip to the Gulf area this past week with the Turnaround Management Association.  As I previously mentioned, we did a series of workshops in Baton Rouge and New Orleans for businesses in the area.  Dan Dooley, CTP of Morris-Anderson (Chicago) was our fearless leader, Anu Singh, CTP of Huron Consulting Group (Chicago) spearheaded the process of combining all of our presentations into a great program.   Also presenting were Pat O'Keefe of O'Keefe and Associates out of Detroit, Vince Liuzza from the local TMA Chapter, and yours truly.  The amazing staff of TMA headquarters in Chicago and the leadership of the local TMA chapter coordinated the activities ensuring a worthwhile event for everyone who participated.

We led the participants through the basics of the turnaround process, how to deal with bankers, lenders, the pros and cons of filing for bankruptcy protection and employee retention and other issues.   

Despite our frenetic schedule, we managed to go on a tour of devastated areas early Thursday morning.  The devastation was unbelievable.  I think its true that the media has all but forgotten as the news we see in no way portrays the reality of the situation down there.  Some amazing things we learned and saw while there:

• Around 200,000 homes were destroyed
• HALF of the area is still without power
• The homes of MOST of the people I spoke with were completely destroyed
• The population of Orleans parish is now at about 70,000 (down from about 400,000)
• The lack of employees is incredible - Many restaurants and other stores are operating with only one shift and limited hours.  Burger King is paying $10/hour and offering $500 monthly bonuses.
• The largest park in the area is now a garbage dump as a staging area for the 40 YEARS of garbage created by the disaster.
• And the list goes on....

Suffice to say, almost 4 months after Katrina hit it looks as though it happened yesterday!  Thankfully, TMA will continue its work to help businesses in the area.  For those interested in continuing TMA activities in this area you can visit the TMAssist Blog here.

Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations , Miscellaneous , Weblogs | Permalink

I'm off to New Orleans with the folks from the Turnaround Management Association, so posting will be light this week.  We have a heck of a schedule, everyone has been working 'round the clock to put this all together and we're all looking forward to doing good.  I'll post as I can with any updates.

Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations , Miscellaneous | Permalink

The Turnaround Management Association issued this press release discussing TMAssist, a new public service program I previously mentioned that includes free seminars/workshops, educational materials and an online resource center for businesses affected by the recent hurricanes.  We'll be in Louisiana on December 14th and 15th.  The press release provides more information about the workshops we'll be conducting and where interested business owners can register online.  Please pass this information along those you may know in the area who are in need!

Posted By Diane Pfadenhauer In Corporate Turnaround , Miscellaneous , Resources | Permalink

In mid-December, I will be traveling with a group of professionals from the Turnaround Management Association to the Gulf Coast.  TMA has launched a major initiative called TMAssist to work with companies in the region affect by the recent hurricanes.  For those of you who are not familiar with TMA, it is a professional association focusing on corporate renewal and organizations restructuring.  Typical membership is comprised of turnaround specialists, attorneys, bankers and other advisors to companies going through these issues.  I was recently elected to the board of directors of the Long Island Chapter.

Once down there, we anticipate doing a series of workshops over two days in Baton Rouge and New Orleans.  Obviously, I'll be focused on the people issues.  It is anticipated that several hundred will be in attendance at these workshops.  Needless to say, I am excited at the prospect a providing guidance and assisting those in need.  I'll keep you posted as things develop.

Posted By Diane Pfadenhauer In Corporate Turnaround , Miscellaneous , Resources | Permalink

Last March I posted this "Lessons from Baseball" post which provides interesting insight on group dynamics and why some teams excel and others don't.  As the season winds down and playoffs are underway, today's WSJ has a timely article describing some additional lessons to be learned ( available here, registration required) from baseball discussing "The Culture of Winning."  The article notes that the Atlanta Braves have won 14 straight division titles.  The team's General Manager, John Schuerholz, attributes this streak to his views on how to transform a losing culture.  He suggests the following:

• Gather everyone, communicate the plan and preach it daily
• Constantly remind them it works
• Don't be afraid to get rid of the people who don't buy in
• Make the lowest-level employees feel as important to success as the top-level executives
• Show trust in everyone to do their jobs well

Seems to me all of these tips can be taken back to the corporate world and implemented in our workplaces.  When organizations are going through major strategic transitions, everyone needs to be communicated with, feel valued and empowered to do their jobs in order for the transition to be successful.  Let's hope the Yanks do that as well for the rest of the playoffs......

Posted By Diane Pfadenhauer In Corporate Turnaround , Mergers and Acquisitions , Miscellaneous | Permalink

An article in today's Christian Science Monitor discusses the fact that American Airlines recently posted a profit for the first time in 5 years, despite ever-increasing fuel prices which are adversely affecting airline profits.  The article attributes the airlines success to ruthlessly seeking ways to cut costs.  While this sounds great and many airlines are doing the same thing, their success is further attributed to engaging employees in the effort to reduce costs.  For example,

• Rather than close maintenance facilities and outsource aircraft maintenance like other airlines, American is expanding it's facility in Tulsa and engaging employees in a goal to save $500 million at the facility.
• American's pilots were the ones who suggested that the planes could taxi with one engine, instead of two, saving fuel costs.
• And the list goes on.

Compare this to cost reducing strategies of some of the other major carriers:

• While United Airlines is scrapping its pensions, the unions consider a strike.
• Delta airlines, with similar financial difficulties, joined the fray of several international carriers by spending a ton of money on new uniforms.  The Marketing to Women Blog points out the obvious:  how great employees will look in their uniforms while they contemplate whether there will be a pension plan when they retire....

It appears that American is making strides by transforming its culture under new leadership, engaging and empowering employees, and beginning to turn the company around.

Posted By Diane Pfadenhauer In Corporate Turnaround | Permalink

Everyone knows by now that the Krispy Kreme board terminated 6 of its top executives (see USA Today article here).  Everyone probably also knows that several months ago the company brought in a turnaround expert to do exactly that for the company.  What isn't being discussed, and quite frankly hardly ever gets discussed in the news is the following:

What is the corporation is doing to ensure that the employees and other stakeholders remain engaged? 

This has always been a soap box issue of mine and has been the subject of some recent articles I have written on the subject.  There is often a tremendous void between the ivory tower and the rank and file employees (the ones, in this case, that take those steaming hot donuts out of the fryer one by one).  It would be interesting to see them discuss openly how they are addressing the people issues associated with the turnaround.  Let's not forget that they went public a few years ago and that prior to that, they were a privately held company for decades.   I suspect there is a lot of history there.  There are also many other significant change issues going on for the organization.  What are they up to?

Posted By Diane Pfadenhauer In Corporate Turnaround , Employee Relations | Permalink

A recent article published at Knowledge @ Wharton (registration required) discusses an interesting concept.  The article discusses a study commissioned by Booz Allen concerning the concept of "enduring value."  The study identifies some enduring institutions such as GE, Sony, the US Constitution, the Salvation Army, Dartmouth College and the Rockefeller Foundation, that "share the ability to innovate and adapt, leadership that balances stability and change, and a commitment to excellence."  Ralph Shrader, Booz Allen's CEO stated:

"I would like to challenge the contemporary thinking that something or someone has to be new to be good.  We make a grave mistake when we look at the future with our backs to the past.  The past is what brought us to where we are.... Some of the reasons for the corporate leadership problems we have seen over the last several years [have to do with] overemphasis on things that change and not enough on things that endure..."

The article states what is now almost obvious: that companies such as Enron, et. al. were more focused on the short-term than on long-term viability and shareholder financial well being.  As many of us go into companies in a turnaround situation, we often evaluate performance from the perspective that what was done in the past must be bad or wrong.  Perhaps if we take a step back and look instead at what elements of the firm are consistently "right" over the long haul, we can balance those with the changes we are recommending.  Sometimes people become so enamored with activity for the sake of action, rather than truly understanding what in the past brought value compared with what really needs to be changed.

Continue Reading Posted By Diane Pfadenhauer In Corporate Turnaround , HR Strategy , Trends | Permalink

How many times have plan administrators been faced with the prospect of dealing with seemingly lost plan participants when terminating a plan?  The US Department of Labor recently issued guidance for fiduciaries of terminated defined contribution plans who cannot find all plan participants to make final distributions.  If a fiduciary is unable to locate a plan participant, the administrator may distribute the account according to the guidelines set forth in the DOL's bulletin.  The bulletin sets forth several steps that a fiduciary can take to locate plan participants.  Reasonable expenses associated with these search efforts may be charged to the participant accounts.  These include:

1. using certified mail,
2. checking records of related employer plans,
3. contacting a designated beneficiary and asking that beneficiary to forward information to the participant,
4. using a government letter-forwarding service, or,
5. using internet search tools or credit reporting agencies.

For further information, this bulletin is available here.

Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround , Policies & Procedures | Permalink

The Wall Street Journal recently reported that USAirways was seeking to reject certain labor contracts.  As  many know, the airline is in bankruptcy.  It further wishes to reduce health and retirement benefits.  You can view the article here.  The unions have already taken a 21% pay cut and this rejection of the contracts would most likely result in further reductions in pay and benefits.  While these cuts are presumably designed to enable the carrier to tansition from a traditional carrier to a low cost airline, the impact on employees is obviously dramatic.  One can only hope that the airline is considering not only the strategic business implications of these changes on the bottom line, but also the strategic people implications of these changes.  How loyal or demoralized will these employees be?  Conversely, without these reductions can the airline survive?  Only the future will tell.  In the mean time, the employees continue to take significant blows as the airline transforms its business strategy.

Posted By Diane Pfadenhauer In Compensation & Benefits , Corporate Turnaround , HR Strategy , Labor Relations | Permalink