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Workforce Diversity and Wellness
learning objectives
Examine human resources management interventions related to workforce diversity.
Understand and evaluate the effectiveness of employee wellness interventions.
This chapter presents two additional humanresources management interventions in or-ganizations. Increasing workforce diversity provides an especially challenging environment for human resources management, and an attractive opportunity for line managers looking for a source of innovation. The mix of age, gender, race, sexual orientation, disabilities, and culture and value orientations in the modern workforce is increas- ingly varied. Management’s perspectives, strategic
responses, and implementation approaches can help address pressures posed by this diversity and leverage this resource for organization effec- tiveness. In addition, wellness interventions, such as stress management programs and employee assistance programs (EAPs), are addressing several important social trends, such as the relationship and interaction between professional and personal roles and lives, fitness and health consciousness, and drug and alcohol abuse.
17-1 Workforce Diversity Interventions Several profound trends are shaping the labor markets of modern organizations. Researchers suggest and managers confirm that contemporary workforce characteristics are radically different from what they were just 20 years ago. Employees represent every ethnic background and color; range from highly educated to illiterate; vary in age from 18 to 80; may appear perfectly healthy or may have a terminal illness; may be single parents or part of dual-income, divorced, same-sex, or traditional families; and may be physically or mentally challenged.
Workforce diversity is more than a euphemism for cultural or racial differences. Such a definition is too narrow and focuses attention away from the broad range of issues that a diverse workforce poses. Diversity results from people who bring different resources and perspectives to the workplace and who have distinctive needs, preferences, expectations, and lifestyles.1 Organizations must design human resources systems that
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account for these differences if they are to attract and retain a productive workforce and if they want to turn diversity into a competitive advantage.
17-1a What Are the Goals? Figure 17.1 presents a general framework for managing diversity in organizations.2
First, the model suggests that an organization’s diversity approach is a function of internal and external pressures for and against diversity. Social norms and globalization support the belief that organization performance is enhanced when the workforce’s diversity is embraced as an opportunity. But diversity is often discouraged by those who fear that too many perspectives, beliefs, values, and attitudes dilute concerted action. Second, management’s perspective and priorities with respect to diversity can range from resistance to active learning and from marginal to strategic. For example, organizations can resist diversity by implementing only legally mandated policies such as affirmative action, equal employment opportunity (EEO), or Americans with Dis- abilities Act requirements. On the other hand, a learning and strategic perspective can lead management to view diversity as a source of competitive advantage. For example, a health care organization with a diverse customer base can not only improve percep- tions of service quality by having a more diverse physician base, but it can also embrace diversity by tailoring the range of services to that market and building systems and processes that are flexible. Third, within management’s priorities, the organiza- tion’s strategic responses can range from reactive to proactive. Diversity efforts at Texaco and Denny’s had little momentum until a series of embarrassing race-based
FIGURE 17.1
A General Framework for Managing Diversity
SOURCE: P. Dass, and B. Parker, “Strategies for Managing Human Resource Diversity: From Resis- tance to Learning,” Academy of Management Executive, 13 (1999), p. 69. Permission conveyed via © Clearance Center.
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events forced a response. Fourth, the organization’s implementation style can range from episodic to systemic. A diversity approach will be most effective when the strate- gic responses and implementation style fit with management’s intent and internal and external pressures.
Unfortunately, organizations have tended to address workforce diversity pressures in a piecemeal fashion; only 16% of companies surveyed in 2010 thought their diversity practices were “very effective.”3 As each trend makes itself felt, the organization reacts with appropriate but narrow responses. For example, as the percentage of women in the workforce increased, many organizations simply added maternity leaves to their benefits packages; as the number of physically challenged workers increased and when Congress passed the Americans with Disabilities Act in 1990, organizations changed their physical settings to accommodate wheelchairs. Demographers warn, however, that these trends are not only powerful by themselves but will likely interact with each other to force organizational change. Thus, a growing number of organizations, such as L’Oreal, PepsiCo, Procter & Gamble, American Airlines, and Carrefour, are taking bolder steps. They are not only adopting learning perspectives with respect to diversity, but systemically weaving diversity-friendly values and practices into the cul- tural fabric of the organization.
17-1b Application Stages Many of the organization development (OD) interventions described in this book can be applied to the strategic responses and implementation of workforce diversity, as shown in Table 17.1. It summarizes several of the internal and external pressures facing organi- zations, including age, gender, race, disability, culture and values, and sexual orienta- tion.4 For example, the median age of the workforce is increasing, women make up a larger percentage of the workforce, and globalization is increasing the number of differ- ent cultural values present in the workplace. The table also reports the major trends characterizing those dimensions, organizational implications and workforce needs, and specific OD interventions that can address those implications.
Age To address age diversity, organization development interventions, such as work design, wellness programs (discussed below), career planning and development, and reward systems must be adapted to these different age groups and demographic cohorts.5 For the older employee, work designs can reduce the physical components or increase the knowledge and experience components of a job. The governments in Singapore, Japan, and the European Union have implemented formal programs to encourage organizations to redesign jobs for elderly workers. The adjustments include more flexible arrangements regarding when and where work is performed, automating certain tasks, changing roles to allow for mentoring, and altering pay and benefit options to fit an older workers stage of life. Generation X employees, who are now in the age range from 32 to 52 years, will likely require more accommodations for work and life balance and for mid-career plateauing. The youngest workers, often called Generation Y or millennials, will likely need more challenge and autonomy. Wellness programs can be used to address the physical and mental health of employees from all generations. Career-planning and development programs will have to recognize the dif- ferent career stages of each cohort and offer resources tailored to that stage. Finally, reward system interventions may offer increased health benefits, time off, and other perks for the older worker while using promotion, ownership, and pay to attract and motivate the scarcer, younger workforce.
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Gender Work design, reward systems, and career development are among the more important interventions for addressing issues arising out of the gender trend. For exam- ple, jobs can be modified to accommodate the special demands of working mothers. A number of organizations, such as SAS, Oracle, Booz Allen Hamilton, and Hewlett- Packard, have instituted job sharing, by which two people perform the tasks associated with one job. The firms have done this to allow their female employees to pursue both family and work careers. Reward system interventions, especially fringe benefits, can be tailored to offer special leaves to mothers and fathers, child-care options, flexible working hours, and health and wellness benefits. The Container Store offers a family-friendly shift from 9 A.M. to 2 P.M. so that working mothers can easily drop off and pick up kids from school. Career development interventions help maintain, develop, and retain a compe- tent and diverse workforce. Recent research on career development programs suggests that organizations consider the assumptions embedded in their career development pro- grams to ensure programs are not biased toward masculine experiences and worldviews, especially those related to careers.6
TABLE 17.1
Work Diversity Dimensions and Interventions
Workforce Differences Trends
Implications and Needs Interventions
Age Median age up Distribution of ages
changing
Health care Mobility Security
Wellness program Job design Career planning and
development Reward system
Gender Percentage of women increasing
Dual-income families
Child care Maternity/paternity
leave Single parents
Job design Fringe benefit
rewards
Disability The number of people with disabilities entering the workforce is increasing
Job challenge Job skills Physical space Respect and dignity
Performance management
Job design Career planning and
development
Culture and values
Rising proportion of immigrant and minority-group workers
Shift in rewards
Flexible organizational policies
Autonomy Affirmation
Respect
Career planning and development
Employee involvement
Reward systems
Sexual orientation
Number of single-sex households up
More liberal attitudes toward sexual orientation
Discrimination Equal employment opportunities
Fringe benefits Education and
training
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Unfortunately, many programs over the last several years have tended to focus more on the symptoms, as opposed to sources of gender inequity.7 Recent research suggests that once an organization recognizes the problem, diagnosis through interviews with employees is critical to addressing the sources of gender inequity. The research further suggests that using a strategy of small interventions, “small wins,” or small initiatives that combine behavior and understanding and that target the organization’s specific issues are more effective. For example, one European retail company discovered upon interviewing its employees that a key issue in turnover among female employees was the company’s lack of discipline regarding time. Last-minute scheduling, meeting over- runs, and tardiness wreaked havoc for female employees trying to manage work and home responsibilities. Company leadership began a more disciplined approach to time, resulting in greater efficiency and effectiveness. Resolving such issues requires careful and organization-specific diagnosis and intervention.
Race and Ethnicity Race continues to be an important issue in diversity interventions, especially as organizations globalize and endeavor to increase diversity among top lead- ership and board members. Training can increase the likelihood that effective diversity management programs are responsive to data (not impressions or perceptions), move beyond eliminating obvious racism to eradicating more subtle forms as well, eliminate vague selection and promotion criteria which can let discrimination persist, link diversity management to individual performance appraisals, and develop and enforce appropriate rules.8 For example, 20% of Verizon’s board of directors are African American; an increasing number of organizations are creating chief diversity officer positions reporting into the C-suite or directly to the CEO, and a more than 40 firms, including Yum! Brands, Credit Suisse, and General Mills work with nonprofit firm Minority Leadership Talent to identify, recruit, and retain black and Hispanic candidates. Mentoring programs can ensure that minorities in the advancement stage get the appropriate coach- ing and those successful minority managers and executives get the chance to share their wisdom and experience with others.
Sexual Orientation Diversity in sexual and affectional orientation, including gay, lesbian, bisexual, and transgender (GLBT) individuals and couples, increasingly is affect- ing the way that organizations think about human resources. The primary organizational implication of sexual orientation diversity is discrimination. Members of the GLBT community may be reticent to discuss how organizational policies can be less discrimi- natory because they fear their openness will lead to unfair treatment. People can have strong emotional reactions to sexual orientation. When these feelings interact with the gender, culture, and values trends described in this section, the likelihood of both overt and unconscious discrimination is high, especially around the often misperceived rela- tionship between sexual orientation and AIDS/HIV. The good news is that the Corporate Equality Index—an annual report that grades U.S. companies on their practices related to the GLBT employees—is improving. In 2002, a total of 13 businesses achieved the top ranking of 100%; in its 2010 report, 305 companies made the 100% mark, an increase of 45 companies over 2009.9
Interventions aimed at this dimension of workforce diversity are relatively new in OD and are being developed as organizations encounter sexual orientation issues in the workplace. The most frequent response is education and training. This intervention increases members’ awareness of the facts and decreases the likelihood of overt dis- crimination. In 2012, federal legislation and the Equal Employment Opportunity Council (EEOC) placed sexual orientation into a protected class supporting the many
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cities and states that had already passed such legislation. Human resources practices having to do with EEO and fringe benefits will help to address sexual orientation par- ity issues although most organizations have already modified their EEO statements to address sexual orientation, including 61% of Fortune 500 companies.10 Firms such as Ben & Jerry’s, Boeing, Northop Grumman, Hilton, and Google have communicated strongly to members and outsiders that decisions with respect to hiring, promotion, transfer, and so on cannot (and will not) be made with respect to a person’s sexual orientation. Similarly, organizations are increasingly offering domestic-partner bene- fit plans, and now over 33% of firms polled in a 2012 Society of Human Resource Management survey offer health benefits to same sex domestic partners.11 Compa- nies, such as Shell Oil, Microsoft, and Apple, as well as governments and universities, have extended health care and other benefits to the same-sex partners of their members.
Disability The organizational implications of the disability trend represent both opportunity and adjustment. The productivity of physically and mentally disabled workers often surprises managers. Training is required to increase managers’ aware- ness of this opportunity and to create a climate where accommodation requests can be made without fear.12 Employing disabled workers, however, also means a need for more comprehensive health care, new physical workplace layouts, new attitudes toward working with the disabled, and challenging jobs that use a variety of skills.
OD interventions, including work design, career planning and development, and performance management, can be used to integrate the disabled into the workforce. For example, traditional approaches to job design can simplify work to permit phys- ically handicapped workers to complete an assembly task. Career planning and development programs need to focus on making disabled workers aware of career opportunities. Too often these employees do not know that advancement is possible, and they are left feeling frustrated. Career paths need to be developed for these workers.
Performance management interventions, including goal setting, monitoring, and coaching performance, aligned with the workforce’s characteristics are important. At Blue Cross and Blue Shield of Florida, for example, a supervisor learned sign language to communicate with a deaf employee whose productivity was low but whose quality of work was high. Two other deaf employees were transferred to that supervisor’s depart- ment, and over a two-year period, the performance of the deaf workers improved 1,000% with no loss in quality.
Culture and Values Cultural diversity has broad organizational implications. Dif- ferent cultures represent a variety of languages, values, work ethics, and norms of correct behavior. Not all cultures want the same things from work, and simple, piecemeal changes in specific organizational practices will be inadequate if the work- force is culturally diverse. Management practices will have to be designed with various cultural values in mind and support both career and family orientations. Take language as an example. Operating in multiple countries with multiple lan- guages implies that jobs of all types (processing, customer contact, production, and so on) may need to be adjusted for non-native-speaking customers, but it also repre- sents opportunity. If there are large non-native-speaking markets, the organization has an important resource for reaching those markets. Finally, the organization will be expected to satisfy both extrinsic and monetary needs, as well as intrinsic and personal growth needs.
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Several planned change interventions, including employee involvement, reward systems, and career planning and development, can be used to adapt to cultural diver- sity. Employee involvement practices can be adapted to the needs for participation in decision making. People from certain cultures, such as Scandinavia, are more likely to expect and respond to high-involvement policies; other cultures, such as Latin America, view participation with reservation. Participation in an organization can take many forms, from suggestion systems and attitude surveys to high-involvement work designs and performance management systems. Organizations can maximize worker productivity by basing the amount of power and information workers have on cultural and value orientations.
Reward systems can focus on increasing flexibility. For example, flexible working hours enable employees to meet personal obligations without sacrificing organizational objectives. Many organizations have implemented this innovation, and most report that the positive benefits outweigh the costs. Work locations also can be varied. Many orga- nizations, including Capital One, Oracle, and Gap, Inc., allow workers to spend part of their time telecommuting from home. Other flexible benefits, such as floating holidays, allow people from different cultures to match important religious and family occasions with work schedules.
Child-care and dependent-care assistance also support different lifestyles. For exam- ple, at Stride Rite Corporation (now a part of Collective Brands), the Stride Rite Inter- generational Day Care Center accommodates 55 children between the ages of 15 months and 6 years as well as 24 elders over 60 years old. The center was established after an organizational survey determined that 25% of employees provided some sort of elder care and that an additional 13% anticipated doing so within 5 years.
Finally, career planning and development programs can help workers identify advancement opportunities that are in line with their cultural values. Some cultures value technical skills over hierarchical advancement; others see promotions or titles as a prime indicator of self-worth and accomplishment. By matching programs with people, job satisfaction, productivity, and employee retention can be improved.
17-1c The Results for Diversity Interventions Workforce diversity interventions have been growing rapidly in OD for more than three decades. Despite this growth, most evaluation efforts are survey oriented and somewhat cursory. A 2010 survey by the Society of Human Resource Management found that 68% of firms have diversity practices in place.13 Research suggests that diversity interventions are especially prevalent in large organizations with diversity- friendly senior management and human resources policies,14 and an internal evalua- tion of a diversity training program in a large manufacturing firm showed positive attitudinal changes over a three-month period with respect to emotional reactions, making judgments, behavioral reactions, and organizational impacts.15 Although existing evidence shows that diversity interventions are growing in popularity, there is still ambiguity about the depth of organizational commitment to such practices and the contingencies that moderate the relationship between commitment and performance.16
Recently, however, two more complete evaluations of diversity management pro- grams revealed positive results.17 First, using data collected by the EEOC and survey data from organizations, researchers divided diversity programs into three categories: structures of responsibility, such as affirmative action plans, diversity committees and task forces, and diversity managers; educational programs, such as diversity training
CHAPTER 17 WORKFORCE DIVERSITY AND WELLNESS 503
and diversity feedback for managers; and networking and mentoring programs. The data displayed a clear pattern. Structural programs were associated with significant increases in overall managerial diversity. Education and feedback programs were not followed by increases in managerial diversity. Finally, programs that attempted to increase the net- working among different groups were associated with modest increases in management diversity. Importantly, the presence of structural interventions improved the effect of the other two interventions. In efforts to reduce inequality in the workplace, the researchers suggest that the popularity of individually based diversity interventions should be reviewed carefully. A great deal more research like this is needed to understand these newer interventions and their outcomes.
Second, a study by the Rand Corporation compared a Fortune “Best Places to Work for Minorities” company with a similar company from Fortune’s overall “Best Places to Work For” list. The results suggest that firms recognized as leaders in diversity manage- ment were much more likely than companies known for their superior HR practices to have leadership, structures, initiatives, and evaluation practices reflecting best practices in the diversity literature. These companies favored diversity for a variety of reasons, but primarily because they believed it would improve their business performance; as a result, top officials in these firms demonstrated strong support for diversity in word and deed. Similarly, best diversity companies implemented more diversity-related initiatives and established at least some means of measuring outcomes. Best HR firms pursued fewer kinds of diversity initiatives than best diversity firms (preferring to focus on basic recruiting, retention, and promotion programs) and had fewer means to evaluate company effectiveness with respect to diversity.
Application 17.1 describes the evolution of a workforce diversity intervention at L’Oreal, showing how diversity can be aligned with strategy on a global basis.18
17-2 Employee Stress and Wellness Interventions In the past two decades, organizations have become increasingly aware of the relation- ship between employee wellness and productivity.19 At the high end, the American Insti- tue of Stress (AIS, www.stress.org) estimated that job stress costs U.S. business over $300 billion annually due to increased absenteeism, employee turnover, diminished productiv- ity, medical, legal and insurance expenses, and Workers’ Compensation payments. Stress management and wellness interventions, including employee assistance programs (EAPs), have grown because organizations are interested in retaining a skilled workforce and concerned for the welfare of their employees. Data also suggest that the greater emphasis on workforce health can vary significantly by region. In Asia, the focus is the need to compete for top talent, while in the United States, cost containment continues to be the primary concern. European multinationals are interested in reducing absenteeism and improving employees’ health and safety.20 Companies such as Johnson & Johnson, Weyerhaeuser, Federal Express, Quaker Oats, and Abbott Laboratories are sponsoring a wide range of fitness, wellness, and stress management programs.
17-2a What Are the Goals? Individual well-being or wellness comprises “the various life/nonwork satisfactions enjoyed by individuals, work and job-related satisfactions, and general health.”21
Health is a subcomponent of well-being and includes both mental/psychological and physical/physiological factors. In addition, a person’s work setting, personality
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1 ALIGNING STRATEGY AND DIVERSITY AT L’ORÉAL
L ’Oréal is the world’s largest beauty pro- ducts company. It creates cosmetics, per- fume, and hair and skin care items in more than 130 countries under 23 brands, includ-
ing L’Oréal Paris, Maybelline, Lancôme, Soft- SheenCarson, and Redken. L’Oréal also owns the UK-based natural cosmetics retailer The Body Shop International, which operates about 2,550 stores worldwide. In 2006, L’Oréal had revenues of €15.8 billion and expected future growth to come more from its emerging markets rather than its traditionally large U.S. and European markets. The organization was highly decentralized with countries having full profit-and-loss responsibility. Local results were then rolled up to the group level to pro- vide a picture of overall effectiveness.
L’Oréal’s strategy was conducive to a diversity perspective; the very nature of its business makes diversity vital for success. With diverse customer from around the world, innovation must be based on under- standing and respecting differences. In order to be global, the organization must be global from within, and their experience showed that variety breeds more creativity and innova- tion. As a mirror of the ever-changing world, a diverse workforce is better equipped to deal with change, be in tune with the environment, and a represent a key to L’Oréal being a “great place to work.”
The organization’s current efforts are built on a long history of diversity which began in 1974 with the “Schueller” leave, a maternity policy named after the company’s founder that gives women an additional four weeks leave in addition to the statutory requirements and which can be taken, in full or in part, until the child is two years old. In 2000, L’Oréal adopted an Ethics Charter describing its values and practices as a global company and it imple- mented several other initiatives, such as the adoption of policies concerning diversity prac- tices, the appointment of specific roles (a U.S. vice president of diversity was appointed in 2002), the inception of diversity training, and participation in career fairs.
Momentum for diversity efforts at L’Oréal increased in 2004 with the signing of the Diver- sity Charter, along with 35 other large French organizations, and the appointment of a global diversity director. The charter represented a national effort to promote pluralism and di- versity as strategies for success. It visibly com- mitted the organization to pursue a variety of initiatives, including raising awareness, incor- porating diversity progress metrics in annual reports, and implementing policies that pro- moted diversity throughout the corporation. Diversity within L’Oréal came to be defined as “a mosaic of visible and invisible differences … which influence attitudes, behaviors, values, and ways of working within the professional environment.”
The new global diversity director assem- bled a team that developed an explicit diver- sity strategy. The strategy involved five action levers, including recruitment and integration, training, career management interventions, management and inclusion, and communica- tion. These five levers were expected to drive results along six visible and invisible dimen- sions, including nationality, ethnic and cultural background, social promotion, gender, disabil- ity, and age. The team believed the biggest obstacle to implementation was the cultural differences between the countries and a low-level of awareness of the benefits that a diversity strategy could bring. For example, many of the workforces in the emerging mar- ket countries were quite homogenous relative to the United States and France, their econo- mies were growing fast, and their leadership teams had little experience or understanding of diversity related practices. On the other hand, the diversity efforts in the United States were quite advanced. L’Oréal’s U.S. diversity program was recognized with the 2004 Diver- sity Best Practices’ Global Leadership Award for creating an environment of diversity and inclusion for employees, customers, and sup- pliers. The U.S. experience thus provided some important internal benchmarks for the global team.
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traits, and stress coping skills affect overall well-being. In turn, well-being impacts personal and organizational outcomes, including absenteeism, productivity, and health insurance costs.22
Concern has been growing in organizations about managing the dysfunction caused by stress. According to a national APA survey of Stress in America, 39% said their stress had increased over the past year and even more said that their stress had increased over the past five years (44%).23 The problem is not unique to the United States. In a Towers Watson global survey, 55% of firms responding reported that mental health and stress issues were a priority in all or most of the countries they were operating.24
Of the six major economies making up 50% of the world’s gross domestic product, the United Kingdom has the highest level of worker stress (35%), while China and India have the lowest (17%).25
For example, with respect to the recruiting strategy, the U.S. vice president of diversity had introduced the concept of “fishing in different ponds” to suggest that where the organization looked for diverse talent was as important as whom they were looking for. The organization iden- tified seven different ponds and as a result, more than 60% of the general managers were women compared to a L’Oréal international average of about 33%. In addition, minority representation had increased from 13.9% in 2001 to 16% in 2004. Eventually, this led to the principle of sourc- ing diversification to be able to access a broader range of profiles.
In addition, the international organization began computerizing the application process in 2004. Through its website, they deleted request for certain kinds of information that might contribute to recruit- ing biases. Since its inception, the organization has deleted home addresses, a type of information that French studies believed was among the most dis- criminatory, as well as information related to gender, age, and nationality.
In terms of the training strategy, the U.S. vice president collaborated with the global training orga- nization to make diversity and inclusion part of the core curriculum for all major leadership develop- ment training programs. One of the global diversity team’s initial activities was a two-day diversity seminar that involved over 8,000 managers in 32 countries in Europe. The seminar explained the diversity strategy and created opportunities
for managers to establish goals and action plans to make diversity practices a reality in their coun- tries. In line with the global team’s concerns, the managers’ reactions were mixed, depending on their organizational role and the country they repre- sented. Many wondered if this was a “flavor of the month” issue, believed they were already manag- ing with diversity in mind, or had more important business issues to address. However, many of the managers also realized the potential of diversity and became aware of some personal biases. These managers were used to leverage the diver- sity effort as it rolled out globally.
The U.S. program also led with way in terms of implementing the strategy of management and inclusion. Diversity objectives were included as part of a manager’s responsibilities in annual performance reviews. That practice was eventually expanded, and today diversity objectives are included on a worldwide basis.
To measure the progress of the programs, L’Oréal benchmarks the company against leading Fortune 500 companies that are recognized as “Best in Class” for women and people of color. A quarterly “State of Diversity Report” measures results and monitors progress in key areas; it is shared with senior leaders and human resources teams. In 2006, L’Oréal was recognized with the World Diversity Leadership Council’s Diversity Innovation Award, and in 2007 Ethisphere maga- zine ranked the organization as one of the “world’s most ethical companies.”
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A study by O’Toole and Lawler concluded that the price most U.S. workers and managers have paid to get more interesting and enriched jobs is an increased amount of stress.26 Stress has been linked to hypertension, heart attacks, diabetes, asthma, chronic pain, allergies, headache, backache, various skin disorders, cancer, immune system weakness, and decreases in the number of white blood cells and changes in their function. It can also lead to alcoholism and drug abuse, two pro- blems that are reaching epidemic proportions in organizations and society. For orga- nizations, these personal effects can result in costly health benefits, absenteeism, turnover, and low performance. One study reported that one in three workers said they have thought about quitting because of stress; one in two workers said job stress reduced their productivity; and one in five workers said they took sick leave in the month preceding the survey because of stress.27 Another study estimates that each employee who suffers from a stress-related illness loses an average of 16 days of work per year.28
17-2b Applications Stages Stress and wellness interventions involve (1) diagnosing stress and being aware of its causes and (2) alleviating and coping with stress to improve wellness.
Diagnosing Stress and Becoming Aware of Its Causes Stress refers to the reac- tion of people to their environments. It involves both physiological and psychological responses to environmental conditions, causing people to change or adjust their beha- viors. Stress is generally viewed in terms of the fit of people’s needs, abilities, and expectations with environmental demands, changes, and opportunities.29 A good person–environment fit results in positive reactions to stress; a poor fit leads to the negative consequences already described. Stress is generally positive when it occurs at moderate levels and contributes to effective motivation, innovation, and learning. For example, a promotion is a stressful event that is experienced positively by most employees. On the other hand, stress can be dysfunctional when it is excessively high (or low) or persists over a long period of time. It can overpower a person’s coping abil- ities and cause physical and emotional exhaustion. For example, a boss who is exces- sively demanding and unsupportive can cause subordinates undue tension, anxiety, and dissatisfaction. Those factors, in turn, can lead to withdrawal behaviors, such as absen- teeism and turnover; to ailments, such as headaches and high blood pressure; and to lowered performance. Situations in which there is a poor fit between employees and the organization produce negative stress consequences.
A tremendous amount of research has been conducted on the causes and conse- quences of work stress. Figure 17.2 identifies specific occupational stressors, potential dysfunctional consequences, and interventions to address stress. People’s individual dif- ferences determine the extent to which the stressors are perceived negatively. For exam- ple, people with strong social support experience the stressors as less stressful than those who do not have such support. This greater perceived stress can lead to such negative consequences as anxiety, poor decision making, increased blood pressure, and low productivity.
The stress model shows that almost any dimension of the organization, includ- ing the physical environment, structure, roles, or relationships, can cause negative stress. This suggests that much of the material covered so far in this book provides knowledge about work-related stressors, and implies that virtually all of the OD interventions included in the book can play a role in stress management. Team
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building, employee involvement, reward systems, and career planning and develop- ment all can help alleviate stressful working conditions. Thus, to some degree stress management has been under discussion throughout this book. Here, the focus is on those occupational stressors and stress management techniques that are unique to the stress field and that have received the most systematic attention from stress researchers.
Workplace Stressors. Figure 17.2 identifies several organizational sources of stress, including the physical environment, individual situations, group pressures, and organiza- tional conditions. Extensive research has been done on three key individual sources of stress: the individual items related to work overload, role conflict, and role ambiguity.
Research relating workload to stress outcomes reveals that both too much and too little work can have negative consequences. Apparently, when the amount of work is
FIGURE 17.2
Stress Management: Diagnosis and Intervention
SOURCE: Adapted from J. Gibson, J. Ivancevich, and J. Donnelly Jr., Organizations: Behaviors, Structure, Processes, 8th ed. (Plano, Texas: Business Publications, 1994): 266. Reproduced with permission of The McGraw-Hill Companies.
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in balance with people’s abilities and knowledge, stress has a positive impact on per- formance and satisfaction, but when workload either exceeds employees’ abilities (overload) or fails to challenge them (underload), people experience stress negatively. This negative experience can lead to lowered self-esteem and job dissatisfaction, ner- vous symptoms, increased absenteeism, and reduced participation in organizational activities.30
People’s roles at work also can be a source of stress. A role can be defined as the sum total of expectations that the individual and significant others have about how the person should perform a specific job. Problems arise when there is role ambiguity and the person does not clearly understand what others expect of him or her, or when there is role conflict and the employee receives contradictory expectations that cannot be satisfied at the same time.31 Extensive studies of role ambiguity and conflict suggest that both conditions are prevalent in organizations, especially among managerial jobs where clarity often is lacking and job demands often are contradictory.32 For example, managerial job descriptions typically are so general that it is difficult to know precisely what is expected on the job. Similarly, managers spend most of their time interacting with people from other departments, and opportunities for conflicting demands abound in these lateral relationships. Role ambiguity and conflict can cause severe stress, resulting in increased tension, dissatisfaction, and withdrawal, and reduced com- mitment and trust in others.
Individual Differences. Figure 17.2 identifies two classes of individual differences that can affect how people respond to workplace stressors: cognitive/affective characteristics and biological/demographic characteristics. Much research has been devoted to the cognitive/affective category, especially the Type A behavior pattern, which is characterized by impatience, competitiveness, and hostility. Type A personalities (in contrast to Type B’s) invest long hours working under tight deadlines, and put themselves under extreme time pressure by trying to do more and more work in less and less time. Type A people are especially prone to stress. For example, a longitudinal study of 3,500 men found that Type A’s had twice as much heart disease, five times as many second heart attacks, and twice as many fatal heart attacks as did Type B’s.33
Stress management is directed at preventing negative stress outcomes either by changing the organizational conditions causing the stress or by enhancing employees’ abilities to cope with them. This preventive approach starts from a diagnosis of the cur- rent situation, including employees’ self-awareness of their own stress and its sources. This diagnosis provides the information needed to develop an appropriate stress man- agement program. There are two methods for diagnosing stress.
Charting stressors involves identifying organizational and personal stressors operat- ing in a particular situation. Guided by a conceptual model like that shown in Figure 17.2, data can be collected through questionnaires and interviews about environ- mental and personal stressors. For example, researchers at the University of Michigan’s Institute for Social Research have developed standardized instruments for measuring most of the stressors shown in Figure 17.2. Similarly, there are specific instruments for measuring the individual differences, such as hardiness, social support, and Type A or B behavior pattern. In addition to perceptions of stressors, it is necessary to measure stress consequences, such as subjective moods, performance, job satisfaction, absenteeism, blood pressure, and cholesterol level. Various instruments and checklists have been developed for obtaining people’s perceptions of negative consequences, and these can be supplemented with hard measures taken from company records, medical reports, and physical examinations.
CHAPTER 17 WORKFORCE DIVERSITY AND WELLNESS 509
Once measures of the stressors and consequences are obtained, the two sets of data must be related to reveal which stressors contribute most to negative stress in the situ- ation under study. For example, an analysis might show that qualitative overload and role ambiguity are highly related to employee fatigue, absenteeism, and poor perfor- mance, especially for Type A employees. This kind of information points to specific organizational conditions that must be improved to reduce stress. Moreover, it identi- fies the kinds of employees who may need special counseling and training in stress management.
Health profiling is aimed at identifying stress symptoms so that corrective action can be taken. Many firms contract with local health care facilities to provide the ser- vice. It starts with a questionnaire asking people for their medical history; personal habits; current health; and vital signs, such as blood pressure and cholesterol levels. It also may include a physical examination if some of the information is not readily avail- able. Information from the questionnaire and physical examination is then analyzed, usually by a computer that calculates the individual’s health profile. This profile com- pares the individual’s characteristics with those of an average person of the same gen- der, age, and race. The profile identifies the person’s future health prospect, typically by placing him or her in a health-risk category with a known probability of fatal dis- ease, such as cardiovascular risk. The health profile also indicates how the health risks can be reduced by making personal and environmental changes such as dieting, exercising, or traveling.
Alleviating and Coping with Stress to Improve Wellness After diagnosing the presence and causes of stress, the next step in stress management is to do something about it. OD interventions for reducing negative stress tend to fall into two groups: those aimed at changing the organizational conditions causing stress and those directed at helping people to cope better with stress. Because stress results from the interaction between people and the environment, both strategies are needed for effective stress man- agement. Five such interventions are described below.
Role Clarification. This involves helping employees better understand the demands of their work roles. A manager’s role is embedded in a network of relationships with other managers, each of whom has specific expectations about how the manager should perform the role. Role clarification is a systematic process for revealing others’ expecta- tions and arriving at a consensus about the activities constituting a particular role. There are several role clarification methods that follow a similar strategy.34 First, the people relevant to defining a particular role are identified (e.g., members of a manage- rial team, a boss and subordinate, and members of other departments relating to the role holder) and brought together at a meeting, usually in a location away from the organization.
Second, the role holder discusses his or her perceived job duties and responsibilities and the other participants are encouraged to comment on and to agree or disagree with the role holder’s perceptions. An OD practitioner may act as a process consultant to facilitate interaction and reduce defensiveness. Third, when everyone has reached con- sensus on defining the role, the role holder is responsible for writing a description of the activities that are seen now as constituting the role. A copy of the role description is distributed to all participants to ensure that they fully understand and agree with the role definition. Fourth, the participants periodically check to see whether the role is being performed as intended and make modifications if necessary.
510 PART 5 HUMAN RESOURCE INTERVENTIONS
Supportive Relationships. Building supportive relationships is aimed at helping employees cope with stress rather than at changing the stressors themselves. It involves establishing trusting and genuinely positive relationships among employees, including bosses, subordinates, and peers. Supportive relations have been a hallmark of organization development and are a major part of such interventions as team building, intergroup relations, employee involvement, work design, goal setting, and career planning and development. Considerable research shows that supportive rela- tionships can buffer people from stress.35 When people feel that relevant others really care about what happens to them and are willing to help, they can cope with stressful conditions.
Work Leaves. In the United States, employees work more hours and take less time off than in most other developed countries. For example, Americans worked an average of 1,878 hours per year while workers in the United Kingdom averaged 1,711, France aver- aged 1,532, and German workers averaged 1,467. Only Korean employees worked more than Americans. Similarly, other countries offer longer and more flexible work leave arrangements, with vacation minimums often subject to government mandate. The United States and Japan average ten days annual vacation, and the United Kingdom, France, and Germany average 22, 25, and 24 days, respectively.36 While some differences can be explained by cultural values or government policies, the potential to affect well- ness through work leaves should not be ignored.
As organizations struggle to minimize the effects of work stress, paid and unpaid work leaves are receiving increasing attention. Paid leaves include vacation, holidays, personal days, as well as maternity and paternity leaves. The comparative statistics sug- gest that globalization may increase pressure on vacation allowances. As with vacation time, the United States lags behind other countries in regards to maternity and paternity leave. Although the Family Medical Leave Act (FMLA) guarantees parents 12 weeks unpaid leave (and more people are taking advantage of FMLA unpaid leave), many employees cannot afford to take it, and firms at the top of Fortune’s “Best Companies to Work For” list have responded with paid maternity and paternity leave.37 Another key work leave intervention is paid sabbaticals, typically received after a specified tenure of service. For example, Perkins Coie, a Seattle law firm with approximately 1,400 employees, offers eight-week paid sabbaticals. In another survey, 19% of companies, including Deloitte and Touche, Microsoft and Intel, offered sabbaticals, but only 5% with pay.38 Sabbaticals are a way of avoiding burnout and renewing employee creativity and commitment.
Unpaid leaves, or leaves of absence, also offer employees a chance to renew and to bring new experiences to the organization, while guaranteeing a job for them upon their return. For example, personal growth leaves or social service leaves may allow an employee to explore an individual interest or cause. Such a leave is an exchange, offering the employee a chance for time off, renewal, and pursuit of a given interest, while retain- ing a valued employee for the organization.
Health Facilities. A growing number of organizations are providing facilities for helping employees cope with stress. Elaborate exercise facilities are maintained by such firms as Qualcomm, Xerox, Weyerhaeuser, Google, and PepsiCo, and a majority of the Fortune 500 operate corporate cardiovascular fitness programs. Employees at Aetna can earn a financial incentive for their involvement in weight management and fitness programs. Before starting such programs, employees must take an exercise tolerance test and have the approval of
CHAPTER 17 WORKFORCE DIVERSITY AND WELLNESS 511
either a private or a company doctor. Each participant is then assigned a safe level of heart response to the various parts of the fitness program.
In addition to exercise facilities, some companies, such as McDonald’s and Equitable Life Assurance Society, provide biofeedback facilities in which managers take relaxation breaks using biofeedback devices to monitor respiration and heart rate. Feedback of such data helps managers lower their respiration and heart rates. Some companies provide time for employees to meditate, and other firms have stay-well programs that encourage healthy diets and lifestyles.
Employee Assistance Programs. This final stress and wellness intervention is an organizational intervention and a method for helping individuals directly. EAPs help identify, refer, and treat workers whose personal problems affect their perfor- mance.39 While some large companies still provide an in-house EAP, most outsource their EAPs. Initially started in the 1940s to combat alcoholism, these programs have expanded to deal with emotional, family, marital, and financial problems, and, more recently, drug abuse. For example, 2008 data from the federal Substance Abuse and Mental Health Services Administration, suggest that 10.2% of full-time employed adults and 11% of part-time working adults are substance-dependent. Of these, about 85% are dependent on alcohol alone or on alcohol and drugs; 15% abuse drugs only.40
Alcohol and drug use costs U.S. business an estimated $102 billion per year in lost productivity, accidents, and turnover.41 Britain’s Royal College of Psychiatrists sug- gested that up to 30% of employees in British companies would experience mental health problems and that 115 million workdays were lost each year as a result of depression.42 Other factors, too, have contributed to increased problems: altered family structures, the growth of single-parent households, the increase in divorce, greater mobility, and changing modes of child rearing are all fairly recent phenomena that have added to the stress experienced by employees. These trends indicate that an increasing number of employees need assistance with personal problems, and the research suggests that EAP use increases during downsizing and restructuring.43
When other stress management interventions are not effective or when employ- ees have particular types of wellness and or health issues, EAPs provide a means of responding to employee wellness problems including extreme or chronic stress, drug and alcohol abuse, problems with child and elder care, grief, and financial pro- blems.44 Central to the philosophy underlying EAPs is the belief that although the organization has no right to interfere in the private lives of its employees, it does have a right to impose certain standards of work performance and to establish sanc- tions when these are not met. Anyone whose work performance is impaired because of a personal problem is eligible for admission into an EAP. Successful EAPs have been implemented at Kimpton Hotels and Restaurants, Telemundo Network, Alcoa, Sprint-Nextel, Wells Fargo Bank, and Johnson & Johnson. Numerous websites, including that of the Employee Assistance Professionals Association, share or pro- vide at minimal cost detailed guidelines on establishing an EAP. These steps include developing an appropriate EAP policy, deciding to insource or outsource the pro- gram, communicating the program to organization members, and providing training on EAP use. Recent changes in health care privacy as a result of the Health Insur- ance Portability and Privacy Act (HIPAA) impact EAPs, related health insurance benefits, data requirements, and how such data and information can be used and shared.45
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17-2c The Results of Stress Management and Wellness Interventions The variety of stress management and wellness interventions makes it difficult to provide overall conclusions, but the numerous studies about stress and any particular intervention do add up to a positive recommendation. For example, the research on role clarification supports this intervention. One study found that it reduced stress and role ambiguity and increased job satisfaction.46 Another study reported that it improved interpersonal relationships among group members and contributed to improved production and quality.47 Like many of the other studies in this area, the findings should be interpreted carefully because of weak research designs and per- ceptual measures.
The research on supportive relationships suggests that organizations must become more aware of their value in helping employees cope with stress. They may need to build supportive, cohesive work groups in situations that are particularly stressful, such as introducing new products, solving emergency problems, and han- dling customer complaints. For example, firms such as Procter & Gamble and the Hartford Financial Services Group have recognized that internal OD consultants bear a lot of the stress of organization change, and so they encouraged internal OD practitioners to form support teams to help each other cope with the demands of the role. Equally important, organizations need to direct more attention to ensuring that managers provide the support and encouragement necessary to help subordinates cope with stress. For example, Pepperdine University’s executive programs often include a module on helping subordinates cope with stress, and firms are training managers to be more sensitive to stress and more supportive and helpful to subordinates.
Preliminary evidence suggests that fitness programs can reduce absenteeism and coronary risk factors, such as high blood pressure, body weight, percentage of body fat, and cholesterol levels.48 A review of the research, however, suggests that fitness programs primarily result in better mental health and resistance to stress and that such organizational improvements as reduced absenteeism and turnover and improved performance are more uncertain.49
The amount of research on EAP-related issues is quite large, as a look through dedicated journals, such as the Journal for Workplace Behavioral Health or Employee Assistance Quarterly, will attest. Two studies reviewed the multinational EAP evalua- tion research for 39 studies between 1990 and 1999 and 42 studies between 2000 and 2009.50 The research explored several aspects of EAP implementation including assessments of program success. For example, one study reported on a four-year, quasi-experimental design of Fairview Health Services’ EAP and reported average per-employee savings of $230 in lost work days, $340 in medical costs, and $188 in workers compensation claims for a combined cost savings of $758 per employee accessing the EAP. Application 17.2 provides additional data regarding the benefit of EAP-related programs.51 Johnson and Johnson’s “Live for Life” program, among one of the most regarded in the world, has been studied extensively and demonstrates the long-term value of this approach. The author concludes: “To state it as simply as possible, EAPs are effective. They save organizations money. EAPs also increase the well-being of the majority of employees who actively participate in counseling offered through the auspices of the programs and as a result enhance the wellness of our communities.”
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a p
p lica
tio n
1 7
2 JOHNSON & JOHNSON’S HEALTH AND
WELLNESS PROGRAM
J ohnson & Johnson (J&J) is the most diver- sified health care corporation in the world. It grosses more than $65 billion a year and employs approximately 117,900 people
at 190 companies in 51 countries. The J&J companies are decentralized and directly responsible for their own operations. Corporate management is committed to this structure because of the many proven advantages to the businesses and people involved, such as the development of general managers, faster product development, and a closer connection with the customer. Its philosophy is embodied in a document called “Our Credo,” a section of which makes a commitment to the welfare of its employees.
J&J has a long history of commitment to health, wellness, and stress management pro- grams. For example, based on a successful pilot project in its Ethicon division during the 1970s, J&J top management decided to imple- ment EAPs throughout the rest of the com- pany. The J&J EAPs were in-house treatment programs that offered employees and family members confidential, professional assistance for problems related to alcohol and drug abuse, as well as marital, family, emotional, and men- tal health difficulties. The major goal was to help clients assume responsibility for their own behavior and, if it was destructive to themselves or others, to modify it. Employees could enter an EAP by self-referral or by counseling from their supervisor. The program emphasized the necessity of maintaining com- plete confidentiality when counseling the employee or family member to protect both the client’s dignity and job.
The EAPs were implemented between 1980 and 1985 in three phases. The first phase consisted of contacting the managers and directors of personnel for each of the decentralized divisions and assessing their divisions’ EAP needs. An educational process was initiated to inform managers and
directors about the EAP. This EAP training then was conducted in each of the personnel departments of the divisions. The second phase included a formal presentation to the management board of each division. It included information about the EAP and about an alco- hol and drug component for executives. In the third phase, cost estimates were developed for EAP use and for employment of an EAP administrator to implement the program in each division. In addition, the corporate direc- tor of assistance programs established a qual- ity assurance program to review all EAP activities biennially.
Eventually, more than 90% of all domestic employees had direct access to an EAP, and the remaining employees had telephone access. There were EAPs at all major J&J loca- tions throughout the United States, Puerto Rico, and Canada. Programs also operated in Brazil and England. A study of J&J’s EAP in the New Jersey area showed that clients with drug abuse, emotional, or mental health problems who availed themselves of EAP ser- vices were treated at substantial savings to the company.
The EAPs were ultimately integrated with J&J’s original wellness program known as Live for Life. This program was initiated by the chairman of the board in 1979, when he committed to provide all employees and their families with the opportunity to become the healthiest employees of any corporation in the world. The program brought together experts in health care education, behavior change, and disease management to create a program to improve the health and productivity of workers. The Live for Life program offered classes in nutrition, weight reduction, and smoking cessation. In addition, small gymnasi- ums with workout equipment, aerobics rooms, and swimming pools were made available. In the late 1980s and 1990s the combined programs became known as Live for Life
514 PART 5 HUMAN RESOURCE INTERVENTIONS
Assistance programs. Health, safety, benefits, wellness, and EAPs worked together to promote employee well-being in the workplace.
The current Johnson & Johnson Health and Wellness Program is an outgrowth of those early programs. It has undergone several transforma- tions in the past three decades to respond to shifting business requirements and changing employee health needs. The Johnson & Johnson Health and Wellness Program includes disability management, occupational health, employee assistance, work–life programs, and wellness and fitness programs. The program is often stud- ied by other corporations because of its integrated service deliveries.
In 1995, Johnson & Johnson’s health and fit- ness group took a simple step that catapulted par- ticipation in the company’s wellness program from 26% to 90%. Patricia Flynn, vice president of John- son & Johnson’s health care system, described how J&J offered every employee a $500 health- benefits credit in exchange for completing an annual health-risk assessment before enrolling in the plan. Although the company had offered the assessment optionally for years as part of its well- ness program, it was not until the incentive was attached that employees flocked to it. “People think they are fit and might not want to bother with an assessment,” Flynn says. “This incentive got them to do it.”
In the past, organization members were given incentives for participating in various wellness pro- grams, but the company’s focus has shifted all of its incentive dollars toward risk assessment. “We are confident that once employees know what their risks are, then we can make a positive impact on their health,” says Jennifer Bruno, director of business planning. Early studies conducted at the company showed that even those employees who took the assessment but had no follow-up support through wellness programs showed improve- ments in their health.
But for Johnson & Johnson, the assessment is just the beginning. The aggregate data helps the health care group choose the right wellness
programs for the exact needs of the population, Bruno says. The program developers aren’t gues- sing at employees’ health interests or expecting them to know what programs they will benefit from, she says. They use the hard data to guide their wellness program choices. “We are making better use of our health care dollars, thanks to the assessment information.”
For example, the initial assessment showed that the employees had three areas of risk: high cholesterol, high blood pressure, and inactivity. The company now regularly offers exercise and counseling programs to help employees reduce cholesterol and blood pressure and manage weight. Bruno says there are also subtle additions to the workplace environment that contribute to a healthy culture, such as nutritious choices in the cafeteria, scales in all of the bathrooms, and a non- smoking environment.
Johnson & Johnson’s Live for Life program is one of the most emulated and evaluated pro- grams of its kind. The most recent evaluation, which compared J&J’s program against 16 other programs over time, found that their average annual growth in medical costs were 3.7% lower. That is, after accounting for inflation, J&J’s average medical and drug costs increased 1% per year between 2002 and 2008 compared to the average increase of 4.8% in 16 other companies with EAPs. That translates to an average annual savings of $565 per employee, and a return on investment estimate of between $1.88 and $3.92 for every dollar spent. Further tests suggested that J&J employees were significantly less likely to be at risk for high blood pressure, high cholesterol, poor nutrition, obesity, physical inactivity, and tobacco use. The researchers conclude that the benefits from health promotion programs, espe- cially those as comprehensive as J&Js, may be long lasting. Johnson & Johnson’s Health and Wellness program demonstrates a long-term commitment to its strategy, its industry, and its people. The execution and coordination of the dif- ferent wellness components has paid off hand- somely for many stakeholders.
CHAPTER 17 WORKFORCE DIVERSITY AND WELLNESS 515
SUMMARY
This chapter presented two important human resources interventions: workforce diversity interven- tions and employee stress and wellness interventions. Like coaching, career planning and development, and leadership development presented in Chapter 18, these change programs generally are carried out by human resources specialists but have become an important part of OD’s practice.
Workforce diversity interventions are designed to adapt human resources practices to an increasingly diverse workforce. Age, gender, race, sexual orienta- tion, disability, and culture and values trends point to a more complex set of human resources demands. Within such a context, OD interventions (e.g., job design, perfor- mance management, and employee involvement prac- tices) have to be adapted to a diverse set of personal preferences, needs, and lifestyles.
Employee stress and wellness interventions, such as work leaves and EAPs, recognize the important link between worker health and organizational productivity.
A model for understanding work-related stress includes occupational stressors; individual differ- ences, which affect how people respond to the stres- sors; stress outcomes; and interventions to increase wellness or decrease stress. The two main steps in stress management are diagnosing stress and its causes, and alleviating stressors and helping people to cope with stress. Two methods for diagnosing stress are charting stressors and health profiling. Techniques for alleviating stressful conditions include role clarification and supportive relationships. Means for helping workers cope with stress are developing supportive relationships and participation in activi- ties at health and fitness facilities. Finally, EAPs iden- tify, refer, and treat employees and their families for such problems as marital difficulties, drug and alcohol abuse, emotional disturbances, and financial crises. EAPs preserve the dignity of the individual but also recognize the organization’s right to expect certain work behaviors.
NOTES
1. F. Miller and J. Katz, The Inclusion Breakthrough (San Francisco: Berrett-Koehler, 2002); R. Thomas, Build- ing on the Promise of Diversity (New York: AMACOM Books, 2005); M. Bell, Diversity in Organizations, 2nd ed. (Mason, OH: South-Western College Publishing, 2011).
2. P. Dass and B. Parker, “Strategies for Managing Human Resource Diversity: From Resistance to Learning,” Acad- emy of Management Executive 13 (1999): 68–80.
3. Society for Human Resource Management, “Workplace Diversity Practices Poll” (Alexandria, VA: SHRM, 2010), accessed from http://www.shrm.org/Research /SurveyFindings/Articles/Pages/WorkplaceDiversityPractices .aspx on August 12, 2012.
4. This section has benefited greatly from the advice and assistance of Pat Pope, president of Pope and Associates, Cincinnati, OH. Much of the data and many examples cited in support of each trend can be found in the fol- lowing references and websites: M. Galen, “Equal Opportunity Diversity: Beyond the Numbers Game,” BusinessWeek, August 14, 1995, 60–61; K. Hammon and A. Palmer, “The Daddy Trap,” BusinessWeek, September 21, 1998, 56–64; H. Kahan and D. Mulryan, “Out of the Closet,” American Demographics (May 1995):
40–47; http://stats.bls.gov; http://nces.ed.gov; http://census .gov; http://cdc.gov.
5. “How to Prepare for the Coming Older Workforce,” IOMA’s Safety Director’s Report 1, no. 3 (April 2001). See also World Health Organization information on aging of the workforce.
6. E. Cook, M. Heppner, and K. O’Brien, “Career Develop- ment of Women of Color and White Women: Assump- tions, Conceptualizations, and Interventions from an Ecological Perspective,” Career Development Quarterly 50 (2002): 291–305.
7. D. Meyerson and J. Fletcher, “A Modest Manifesto for Breaking the Glass Ceiling,” Harvard Business Review (January-February 2000): 127–35.
8. A. Brief, R. Buttram, R. Reizenstein, D. Pugh, J. Callahan, R. McCline, and J. Vaslow, “Beyond Good Intentions: The Next Steps Toward Racial Equality in the American Work- place,” Academy of Management Executive 11 (1997): 59–72.
9. H. Ernst, “Promoting Diversity and Equality,” Fortune, June 14, 2010, 142.
10. “More Employers Cover Domestic Partners,” Employee Benefit News 17, no. 8 (June 15, 2003): 30.
516 PART 5 HUMAN RESOURCE INTERVENTIONS
11. Society for Human Resource Management, “2012 Employee Benefits: The Employee Benefits Landscape in a Recovering Economy” (Alexandria, VA: SHRM, 2012), accessed from http://www.shrm.org/Research /SurveyFindings/Articles/Pages/2012EmployeeBenefits ResearchReport.aspx on August 14, 2012.
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13. Society for Human Resource Management, “Workplace Diversity Practices Poll” (Alexandria, VA: SHRM, 2010), accessed from http://www.shrm.org/Research /Sur- veyFindings/Articles/Pages/WorkplaceDiversityPractices .aspx on August 12, 2012.
14. S. Rynes and B. Rosen, “A Field Survey of Factors Affect- ing the Adoption and Perceived Success of Diversity Training,” Personnel Psychology 48 (1995): 247–70; K. Labich, “Making Diversity Pay,” Fortune, September 9, 1996, 177–80.
15. K. De Meuse, T. Hostager, and K. O’Neill, “A Longitudi- nal Evaluation of Senior Managers’ Perceptions and Atti- tudes of a Workplace Diversity Training Program,” Human Resource Planning 30 (2007): 38–47.
16. M. Kwak, “The Paradox of Effects of Diversity,” Sloan Management Review 44 (Spring 2003): 7–8; M. Hamdani and M. Buckly, “Diversity Goals: Reframing the Debate and Enabling a Fair Evaluation,” Business Horizons 54 (2011): 33–40.
17. A. Kalev, F. Dobbin, and E. Kelly, “Best Practices or Best Guesses? Assessing the Efficacy of Corporate Affirma- tive Action and Diversity Policies,” American Sociologi- cal Review 71 (2006): 589–617; J. Marquis, N. Lim, L. Scott, M. Harrell, and J. Kavanagh, “Managing Diver- sity in Corporate America” (Santa Monica, CA: RAND Corporation, 2008), accessed from http://www.rand.org /pubs/occasional_papers/OP206 on August 13, 2012.
18. This application was adapted from the following sources: “L’Oréal Dedicated to Diversity,” Global Cosmetic Indus- try 173 (February 2005): 80; K. Mark, “L’Oréal S.A.: Roll- ing Out the Global Diversity Strategy” (London, Ontario, Canada: Richard Ivey School of Business, 2010), #910C26; http://www.loreal.com.
19. L. Berry, A. Mirabito, and W. Baun, “What’s the Hard Return on Employee Wellness Programs?” Harvard Business Review (December 2010): 104–12; “Cadbury’s Runs Smoothly Under Pressure; Wellness Program Keeps IT Project on Track,” Human Resource Manage- ment International Digest 15 (2007): 14; C. Haltom, “Health Risk Management: Well-Being for the Employee and the Bottom Line,” Benefits Quarterly 21 (2005): 7–10; M. O’Rourke and L. Sullivan, “Corporate
Wellness: A Healthy Return on Employee Investment,” Risk Management 50 (2003): 34–36.
20. Towers Watson, “Multinational Workforce Health: Building a Sustainable Global Strategy” (New York: Towers Watson, 2012), accessed from http://www.towerswatson .com/en-ZA/Insights/IC-Types/Survey-Research-Results /2011/05/Multinational-Workforce-Health-Building-a- Sustainable-Global-Strategy-1 on June 3, 2013.
21. K. Danna and R. Griffin, “Health and Well-Being in the Workplace: A Review and Synthesis of the Literature,” Journal of Management 25 (1999): 357–84.
22. These data were accessed from http://www.successunlimited .co.uk/costs.htm on January 14, 2000. The results have since been moved to http://www.bullyonline.org /workbully/costs .htm, accessed October 1, 2003.
23. American Psychological Association, “Stress in America” (Washington, DC, 2012), report accessed from http:// www.apa.org/news/press/releases/stress/index.aspx on August 13, 2012.
24. Towers Watson, “Multinational Workforce Health: Building a Sustainable Global Strategy.”
25. S. D’Mello, “Stress: The Global Economic Downturn Has Taken Its Toll on Employees. What’s the Impact for Organizations?” Kenexa High Performance Institute, 2011, accessed from http://khpi.com/documents/KHPI- WorkTrends-Report-Stress on August 13, 2012.
26. J. O’Toole and E. Lawler, The New American Workplace (New York: Palgrave Macmillan, 2007).
27. T. O’Boyle, “Fear and Stress in the Office Take Toll,” Wall Street Journal, November 6, 1990, B1, B3; A. Riecher, “Job Stress: What It Can Do to You,” Bryan-College Station Eagle, August 15, 1993, D1.
28. D. Allen, “Less Stress, Less Litigation,” Personnel (January 1990): 32–35; D. Hollis and J. Goodson, “Stress: The Legal and Organizational Implications,” Employee Responsibilities and Rights Journal 2 (1989): 255–62.
29. T. Cummings and C. Cooper, “A Cybernetic Framework for Studying Occupational Stress,” Human Relations 32 (1979): 395–418.
30. J. French and R. Caplan, “Organization Stress and Indi- vidual Strain,” in The Failure of Success, ed. A. Morrow (New York: AMACOM, 1972).
31. C. Cooper and R. Payne, Stress at Work (New York: John Wiley & Sons, 1978).
32. C. Cooper and J. Marshall, “Occupational Sources of Stress: A Review of the Literature Relating to Coronary Heart Disease and Mental Ill Health,” Journal of Occupa- tional Psychology 49 (1976): 11–28; Cooper and Payne, Stress at Work.
33. R. Rosenman and M. Friedman, “The Central Nervous System and Coronary Heart Disease,” Hospital Practice 6 (1971): 87–97.
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34. E. Huse and C. Barebo, “Beyond the T-Group: Increasing Organizational Effectiveness,” California Management Review 23 (1980): 104–17; I. Dayal and J. Thomas, “Operation KPE: Developing a New Organization,” Jour- nal of Applied Behavioral Science 4 (1968): 473–506.
35. J. House, Work Stress and Social Support (Reading, MA: Addison-Wesley, 1982).
36. M. Peak, “I Think I’ll Go to Work in France,” Manage- ment Review 84 (1995): 7; U.S. Department of Labor, “Annual Hours Worked per Employed Person 1990 and 2001,” Chart 19.
37. R. Levering and M. Moskowitz, “100 Best Companies to Work For,” Fortune, January 20, 2003, 127–52.
38. T. Gunter, “The Pause That Refreshes,” BusinessWeek, November 19, 2001, 138.
39. G. Bohlander and S. Snell, Managing Human Resources (Cincinnati, OH: South-Western College Publishing, 2004).
40. R. Grossman, “What to Do About Substance Abuse?” HR Magazine 55 (2010): 32–38.
41. S. Savitz, “Mental Health Plans Help Employees, Reduce Costs,” Best’s Review 96, no. 3 (1995): 60–62.
42. C. Hodges, “Growing Problem of Stress at Work Alarms Business,” People Management 1 (1995): 14–15.
43. W. Lissy and M. Morgenstern, “Employees Turn to EAPs During Downsizing,” Compensation and Benefits Review 27, no. 3 (1995): 16.
44. K. Blassingame, “Providers Offer Bereaved Employees Counseling Options,” BenefitNews.com, September 1, 2003, 51.
45. K. Bakich and K. Pestaina, “HIPAA Mean Changes for Human Resources,” Employee Relations Law Journal 28 (2002): 29–54; K. Bakich and K. Pestaina, “HIPAA Mean Changes for Human Resources—Part II: Addres- sing the Most Challenging HR Issues,” Employee Rela- tions Law Journal 28 (2003): 47–64.
46. Huse and Barebo, “Beyond the T-Group.” 47. Dayal and Thomas, “Operation KPE.” 48. J. Zuckerman, “Keeping Managers in Good Health,”
International Management 34 (January 1979): 40. 49. L. Falkenberg, “Employee Fitness Programs: Their Impact
on the Employee and the Organization,” Academy of Management Review 12 (1987): 511–22.
50. R. Csiernik, “A Review of EAP Evaluation in the 1990s,” Employee Assistance Quarterly 19 (2004): 21–37; R. Csiernik, “The Glass Is Filling: An Examination of Employee Assistance Program Evaluations in the First Decade of the New Millennium,” Journal of Workplace Behavioral Health 26 (2011): 334–55.
51. Adapted from T. Desmond, “An Internal Broadbrush Program: J & J’s Live for Life Assistance Program,” in The EAP Solution, ed. J. Spicer (Center City, MN: Hazel- den, 1987), 148–56; L. Paetsch, “Wellness Program Saves Johnson and Johnson $8.5 Million in Health Care Costs,” Employee Benefit Plan Review 56 (2002): 31–32; S. Gale, “Selling Health to High-Risk Workers,” Workforce 81 (2002): 74–76; R. Henke, R. Goetzel, J. McHugh, and F. Isaac, “Recent Experience in Health Promotion at Johnson & Johnson: Lower Health Spending, Strong Return on Investment,” Health Affairs 30 (2011): 490–99; the company’s website http://www.jnj.com.
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Scenario #1
“Pat, I just can’t do it. I know you want me to go to New York tonight, but I can’t make a trip like this at the last minute.”
“Chris, you are the best attorney we have for these negotiations—we need you.”
“I appreciate the compliment, but I can’t arrange the care for my mother and my daugh- ter on four hours notice. I told you during my performance appraisal about the demands I am under—in terms of carrying my own workload and part of Sidney’s [a coworker] during this parental leave time. In addition, like I said, I have two elderly parents, one needing daily care, my toddler daughter, and I am moving next week. I know you want me to progress and I appreciate it, but you know I work hard—I work overtime every week—but I can’t do what you want this time. I’m sorry. I’ll talk to you later.”
Pat hangs up the phone and thinks, “Okay, I know I am asking a lot, but how do I resolve these issues? It’s frustrating that Sidney is out on 12 weeks leave—geez!!!—and it’s only going to get worse. Chris is my best person … why isn’t Chris more committed? And doesn’t Sidney know that 12 weeks off creates hard- ships for everyone else? How can I get them to do more?”
Chris walks to the parking lot thinking, “Boy, I thought I made a good move in coming here. But Pat is worse than the partners I used to work for. What am I going to do? Oh well, at least the job market for attorneys is good.”
Scenario #2
“Francis, I appreciate your help these last few weeks. I never could have exceeded all my goals or facilitated my team exceeding its goal if you hadn’t connected me with Kyle’s Elder Care Referral Service. I feel like I would have had to take at least five to seven days off to gather the same information that Kyle had
immediately available. And then I would have spent another week or two—not two days— getting my dad settled. I don’t know why he decided to retire to Ireland, but he is delighted with the arrangements, and is doing well.”
“That’s okay, Blair, I’m happy to help. Thank you for the excellent job you’ve been doing. I really appreciate it. Let’s talk about next month’s key goals.”
Blair had been the project lead during the implementation of a new quality process in the laboratory, and despite an above-average workload the last month, had successfully met the project’s objectives. Francis thought, “It was touch and go when Blair’s dad sud- denly wanted to retire to Ireland, and wanted to move immediately. Thank heaven I remem- bered reading about Kyle and the Elder Care Referral Service.”
Blair left Francis’ office with a smile, think- ing, “Francis is great to work for ... I can’t even consider any of the calls I’m getting from other hospitals or headhunters. It’s just great to work for someone who understands that work is just one part of life.”
Scenario #3
Robin, department head for pediatrics at HealthCo’s second largest hospital, had asked to meet with Mercer, the director of pediatrics for HealthCo.
“Mercer, thanks for your time. As you know I’m 56 this year, and I want to talk to you about my retirement. I have many interests beyond my medical practice, and also want more time with my family and community. What I would like to do is begin working part- time after this first year. What I’m thinking is that I would work 30 hours a week for two years, still holding clinic hours two days week. Then the next three to five years I would like to transition to full-time retirement. What I would like is to work 20 or so hours per week for those years, working with medical school students and on research projects.”
“Well, Robin, as you know, we don’t have any formal retirement policy except to fully
*This case was prepared by Professor Karen Whelan-Berry of Utah Valley State College for classroom discussion. It is published with permission of the author.
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retire. I’m going to have to talk to HR about this. You have extensive experience and expertise, and I don’t want to lose that. I’m just not sure what HR or the Physicians’ Council will say.”
“I understand. My first choice is to remain with HealthCo, but I know there are organizations that would be interested in my working part-time. When can you get back to me?”
“Give me a couple of weeks, Robin.” “Okay.” Mercer began to think about Robin’s request,
already hearing HR raise issues like benefits, ongo- ing participation in retirement funding, and prece- dents being set. But Mercer didn’t want to lose Robin’s expertise. And Robin’s idea of working with the medical students might let HealthCo cre- ate a unique internship and residency experience, which would let HealthCo attract the top students.
BACKGROUND
The people in these three scenarios work for HealthCo, a fully integrated, nonprofit health care organization with nine major medical centers and 36 affiliated clinics, rehabilitation units, therapy facilities, hospice and geriatric units, and other highly specialized centers. Located in the eastern United States, HealthCo has about 6,700 employ- ees. Like other health care companies, it employs a disproportionate number of women, especially in nursing and patient care, allied health services, and support staff. The backgrounds of Pat, Francis, and Mercer, all managers at HealthCo, are provided below.
Pat is the chief counsel of HealthCo’s internal legal department. Pat has worked for HealthCo for five years, after 15 years in a major law firm in Washington, D.C. It has been a difficult transition from the “do-anything, 24/7” pace of the firm to the “slower, less professional” pace of HealthCo. Pat is married and has three kids. Pat’s spouse is also an attorney. Pat’s staff is primarily full-time and works “nine to five.” The department is very busy, often with a workload that significantly exceeds the day-to-day capacity of the staff.
Francis serves as the director of laboratory ser- vices for the largest hospital. The laboratory is staffed around the clock and can be called on to perform routine and emergency procedures at any time. The new quality process that Blair helped
to implement was critical to the lab supporting the hospital’s status as the primary emergency and critical-care facility in the region. Francis, who had started in a research lab prior to joining HealthCo, felt the pressure of staffing a 24/7 lab. Having never married, Francis could not imagine juggling marriage and children in addition to the demands of having two parents and five siblings and their fami- lies living nearby. Francis tried to help the lab’s employees with family or life demands, but did so on a personal basis, and not because the hospi- tal had many such benefits available.
Mercer is a nationally known pediatrician with 15 years experience, and was recently hired to head HealthCo’s pediatrics organization. Mercer’s expertise and management capabilities were stretched in a positive way by the demands of such a large and comprehensive pediatric practice. Thriving on that challenge, Mercer had been very successful since taking over the organization. Mar- rying after medical school to another physician, Mercer felt grateful for being able to work the hours required to fully learn and understand this new position. Mercer knew a number of people on the pediatric staff, including a number of the pediatricians. Many of them felt Mercer worked way too much, and moreover, worried Mercer expected the same of them. Mercer knew that younger physicians weren’t as keen on the 24/7 doctor lifestyle that Mercer’s father had lived.
RECENT EVENTS
A couple of weeks after Pat’s conversation with Chris, Francis’ with Blair, and Mercer’s with Robin, a senior staff meeting was called to discuss current issues and the coming year’s strategic initiatives. The CEO, Dr. Palmer, recently had become focused on employee retention, after Human Resources reported that HealthCo’s turn- over was 1.5 times the industry average. While HealthCo was competitive about salary, benefits seemed to be an area needing improvement. Fur- ther, the recent issue of Fortune, which identified the “Best Companies to Work For,” raised Dr. Pal- mer’s awareness of the growing importance of work–life programs and policies.
Dr. Palmer realized that HealthCo did not pro- vide many of the benefits offered by these “best companies.” In fact, very few health care
520 PART 5 HUMAN RESOURCE INTERVENTIONS
companies made the list. Palmer conceded that the 24/7 nature of health care organizations proba- bly complicated the provision of work–life benefits. However, Palmer also saw a potential competitive advantage in being a leader in providing such ben- efits, especially when combined with the competi- tive salary and merit structure HealthCo offered. Dr. Palmer remembered that a survey had been done of HealthCo female employees by an outside
research team, and that one area of the survey was work–life issues. A review of the data revealed a number of benefits seen as important to the female employees of HealthCo (see Table 1). The research also had suggested that the immediate supervisor played a vital role in the employee’s ability to successfully balance work and life, and the employee’s satisfaction with her work–life balance. An immediate supervisor’s
TABLE 1
Rank-Order Importance of Work–Life Benefits for Female Employees at HealthCo
Benefit Rank Currently Offered by Healthco
Maternity/Paternity and Family Leave Includes paid maternity and paternity leave,
extended paid leave for family issues, and unpaid leave for family issues with the ability to return to work.
1 HealthCo pays six weeks maternity and paternity leave, after the employees has been with the company for one year. Employees can take another six weeks unpaid. No extended leave.
Sabbatical/Extended Leave Paid extended leave after working for a
specified time with the company. 2 Not offered by HealthCo.
Fitness Includes on-site fitness facilities, and/or paid
health club memberships. 3 Not offered by HealthCo.
Flextime Includes part-time work schedules, flextime,
and telecommuting. 4 Flextime, with two-hour flex offered in
some departments.
Work–Life Task Force Employee committee that oversees
work–life issues. 5 Currently overseen by HR.
Concierge Services Includes services such as on-site takeout,
dry cleaning, auto service, and other simi- lar services.
6 Not offered except at corporate headquarters.
Child Care Includes on-site child care, vacation pro-
grams, and before and after school care. 7 Sick-child care offered at some of the
medical centers.
Referral Services Includes child care, elder care, and other
referral services. 8 Not offered by HealthCo.
Paid Health Insurance Premiums * HealthCo pays the employee’s premium.
*Payment of health insurance premium not rank-ordered, but included in survey information.
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direct support of work–life balance was signifi- cantly linked to other important outcomes, such as job satisfaction, organizational commitment, and intent to leave the organization.
Dr. Palmer raised the question of offering work–life benefits at the senior staff meeting. Dr. Palmer noted that while funding was not unlimited, of course, HealthCo’s recent financial performance would permit budget allocations to such benefits, and might also be offset by reduced turnover costs or improved productivity.
Pat immediately stated, “I can barely get my staff together now with all the work we have going on. And, I certainly can’t hold their hands. They would never be coddled this way in a law firm. People work the hours needed, no questions asked.” Francis said, “I can see the difference such benefits would make, but how do I make this work in a 24/7 department? While Legal might see it as difficult, I see it as impossible, especially any movement away from traditional shifts.” A nursing director commented thought- fully, “Some hospitals are considering shorter, split shifts, and longer shifts to create flexibility— there might be something to that.” A number of departments immediately argued such scheduling was a leader’s nightmare, and that the company’s existing two hours of flextime in a number of departments created serious issues. The V.P. of finance for the hospital spoke up, “I don’t see why people with children should be treated differently—it’s their choice to have children. I have a life, too, and you don’t see me asking for
special arrangements. I have employees asking me to work from home—how do I appraise their per- formance if they primarily work at home?” Mercer thought about Robin’s request, wondering if other baby-boomer employees would soon be making similar requests.
Dr. Palmer listened to what was quickly becoming a heated discussion, noting the varied and complicated reactions of the different direc- tors, vice presidents, and other top leaders of the organization. Dr. Palmer commented, “We say in our recruiting materials that our employees are HealthCo, that it is individual care in all areas of the company—from nursing to accounting—that makes us different. How can we expect our employees to give individual care if we, as an orga- nization, don’t care about them and their lives?”
“I’d like a team of four to six volunteers to put together a plan for becoming a top company in terms of work–life benefits. Please identify the key issues in serving all employees with such a set of benefits, and any related issues.”
Questions
1. How would you conduct a diagnosis of the situation at HealthCo?
2. Based on the information provided in the scenarios and the case, what is your own diagnosis of the situation?
3. What do you see as the key issues in HealthCo becoming a top company in terms of work–life benefits?
522 PART 5 HUMAN RESOURCE INTERVENTIONS
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SYSTEM AT DISK DRIVES, INC.*
D isk Drives, Inc. (DDI) is a specialty electron- ics firm that designs, markets, and distri- butes disk drives for the computer industry. DDI began in 1980 by manufactur-
ing and marketing large-format disk drives for minicomputer firms, such as Digital Equipment Corporate (DEC) and Data General, as well as for complex, large-scale word-processing sys- tems offered by Xerox and Wang. DDI’s first products were quite successful and the com- pany grew to revenues of $119 million by 1985. A strategic decision to integrate different tech- nologies inside the disk drive for a different type of customer resulted in a newer and smal- ler product line with lower costs and lower prices. Unfortunately, DDI was late to market and its products did not have the performance features these customers wanted or needed. Thus, despite the new customers and higher product volumes, sales and profits plummeted as its original products faded and its new products faltered.
One of DDI’s subsidiaries, however, was designing and selling different and even smal- ler disk drives to personal computer original equipment manufacturers (OEMs). Following a different business model, they had out- sourced their manufacturing capacity to a Japanese plant. The subsidiary—over the 1985–1989 time frame—saved DDI from failure. By 1988, DDI announced it would stop develop- ing and manufacturing all of its larger disk drives and focus on the smaller ones for PCs. It also phased out its domestic manufacturing opera- tions and began sourcing its drives exclusively from the Japanese plant. Whereas two-thirds of DDI’s 1988 revenues had come from large drives manufactured domestically, by the end of 1989, 100% of its revenues were from the
small drives manufactured in Japan. The ques- tion facing DDI management was how to main- tain the momentum. It required a careful look at the existing organization and determining its fitness for the future.
The head of HR at DDI, who was quite knowledgeable in organization change and development, convinced the executive team to go through a systematic process of diagnos- ing the organization’s current operating model and redesigning the company to handle the projected growth and the increased complexity it was facing.
THE CURRENT DDI ORGANIZATION
At the macro level, competition in the disk drive market was characterized by fast-paced technology change and product evolution as well as a number of equally sized competitors. First, customers—the OEM manufacturers of PCs, such as IBM, Dell, Toshiba, and HP— were not only designing newer, faster, and more sophisticated computers, they were demanding and expecting newer, faster, and more sophisticated disk drives. Although man- agement was confident in the firm’s technical ability to offer the best price/performance products in the industry, they realized that the period during which a new DDI drive could retain a performance edge before being leapfrogged by a competitor was getting shorter and shorter. Second, when an OEM announced a new computer model, all of the disk drive manufacturers competed aggres- sively to get the business. The disk drive firms had a limited amount of time—usually less than a few months—to make their bid, and it was often based on yet untried techno- logical capabilities. Moreover, the sales pro- cess had a “gold rush” or “winner take all” feel. If a disk drive manufacturer could win a contract with an OEM manufacturer, it usually meant that a whole line of disk drives, including follow-on models, would be part of the deal. As a result, quality, speed of customer response, and cost were increasingly important
*This case was derived and adapted from materials found in C. Christensen, “Quantum Corporation—Business and Product Teams,” Harvard Business School Case 9-692-023 (Boston: Harvard Business School, 1992); S. Mohrman, “Computer Components,” Center for Effective Organizations (Los Angeles: University of Southern California, 2012).
SELECTED CASES 523
dimensions to be managed. Quality was necessary to win the confidence of the OEMs and increase the chances of winning follow-on business, speed of response was necessary given the narrow time- frame, and cost vigilance was necessary to pro- duce a profit.
In this environment, the company was clear about the processes for adding value (Figure 1). The key work processes included:
1. Working with appropriate technical support, it was important to bid and win on new accounts. A Request for Proposal (RFP) provided by the OEM detailed the technical specifications for the disk drive in its new computer model.
2. The disk drive was then designed to fit the technical specifications and to meet quality and cost targets.
3. The resulting design was then prepared for transfer to the manufacturing facility.
4. The drive was manufactured in Japan. 5. The drive was then released to the OEM to be
incorporated into the computer, and support issues were handled.
DDI was growing fast and new models were being continually released that embodied technology advances, new capabilities, and enhanced designs. The life cycle for a disk drive (once a contract was signed with the OEM) was about six to eight months for development, first-run production, and field distribution and service. Even including a sec- ond release (follow-on) product, the entire life cycle for the model was generally about 12 to 16 months. The company was handling about five to six disk drive designs at any particular time and that number was expected to increase significantly.
As described above, DDI had signed a long- term, exclusive contract to outsource manufactur- ing to a Japanese company that promised, in turn, to continually retool and upgrade its manufacturing capabilities as DDI grew. To manage this process, DDI had experienced manufacturing engineers, quality assurance, process optimization, and distri- bution staff to plan the movement of the disks into the contracted factory and to manage its introduc- tion into the field.
In line with this functional structure and work process, the organization was governed by the executive committee, composed of the CEO and trusted colleagues who had “grown up” together in the industry. Each took responsibility for certain functional tasks (Figure 2). Each hired people to carry out the functions they managed as the com- pany achieved success and grew rapidly.
The executive team was also responsible for the planning, coordination, and integration of the activities of marketing and sales, technical devel- opment, and managing operations and field distri- bution and support. That is, decision making, goal setting, and strategic direction were centralized to this group. Similarly, the organization’s perfor- mance management system was centralized and traditional. Managers and functional employees were given overall company targets for revenue and each function was expected to translate those goals into specific objectives for their group. Functional supervisors gave annual perfor- mance appraisals that provided the basis for merit pay increases. In addition, all DDI employees were eligible for a profit sharing bonus that had been running at about 5% of salary. Executives were eli- gible for stock options as well.
FIGURE 1
The DDI Value Chain
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ENGAGING IN A REDESIGN OF DDI
Although happy with the recent success of the company, the executive team realized that it could not continue to grow and be successful as it was currently designed. It was not effectively coordinat- ing the complexity that came with rapid growth, and it was having trouble keeping up with demand. It had experienced several delays and quality inci- dents, including one major field warranty problem due to a disk drive failure. The executive team was highly involved in ongoing operational issues, and the CEO was concerned that they did not have time to attend to the strategic decisions required in the rapidly developing computer indus- try. He also believed that the executive team had become a bottleneck and was slowing product deci- sion making. The CEO recalled being in an execu- tive committee meeting and asking about why a particular product had not yet shipped to the cus- tomer. After collecting a variety of data and informa- tion about component inventories, capacity planning, forecasts, and other details, he realized that management—in particular, the executive committee—was part of the problem. “We were trying to manage details we weren’t knowledgeable about. We had a bandwidth problem—the executive staff just didn’t have enough time or brain capacity to keep making all the key decisions.”
The executive team decided that they needed to assume a more strategic role in the organization and decentralize cross-functional integration and operational decision making about new product development, manufacturing, and field support. Although they wanted insight into product develop- ment progress and milestone achievement, they also understood that to decentralize this integration and decision making, they needed to be clear about the roles, responsibilities, and accountabil- ities for success. They believed such a change would create and build a cadre of future leaders for the organization.
Based on the diagnostic data and the executive team’s requirements, the head of HR led the team through a systematic redesign of the organization.
Commitment to Strategic Direction
The executive team first recommitted itself to the basic strategy of rapidly advancing the technology through aggressively bidding on and delivering disk drives to computers that required increasing oper- ating speed, flawless quality, and continual new functionalities.
Structure Modification
The executive team believed that the existing func- tional structure provided important advantages.
FIGURE 2
DDI’s Functional Organization
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There was a clear focus on technical excellence and clear technical career paths. However, to achieve the cross-functional integration and speed objec- tives and to begin building leadership skills, they decided to implement cross-functional product teams as a lateral structure to coordinate the devel- opment of each disk drive. Functions would remain the core units of the company, but the management of each disk drive model would be carried out by a team, established as soon as a contract was signed, to manage the product over its life cycle (see the dotted horizontal lines in Figure 3).
The members of each product team would be functional managers at the director or senior manager level—moving the operational cross- functional coordination and management lower in the organization and freeing up the executive team to concentrate on more strategic issues.
The teams were to consist of seven members, one from each function (although there was no member from the sales organization). They were to be collectively responsible for the general man- agement of their product and not just represent
their functional point of view. In general, the engi- neering team member was to be the leader during the initial phases of the program, but as the product approached commercial launch, the marketing member would assume more leadership responsi- bilities. The engineering team member would also lead a dedicated group of engineers assigned to develop the drive and to work through any product design problems encountered during manufactur- ing and in the field (see the solid vertical lines in Figure 3). The engineering member was the only person with a functional group dedicated to the product; all other functions would allocate personnel to a product team based on the project’s stage of development and need. Each team member would continue to have management responsibilities within their function. In other words, working on a team was considered an “overload” responsibility in addition to their regular functional responsibilities.
Management Processes
The executive team was careful to delineate which issues were the responsibility of the product teams,
FIGURE 3
The Proposed Product Team Structure
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the functional organizations, and the executive staff. The product team would be empowered to make all decisions relating to developing and bringing a specific product into the field—and it would be incented to bring the product to market on time, within cost, and with high levels of qual- ity and customer satisfaction. Teams were responsible for the revenues and gross margins generated by the product and for the inventories required to support the revenues. The product teams were responsible for achieving faster and faster development cycle times. Each product team was given clearly defined milestones that were derived from the contract, including cost, quality, and profitability targets.
Functional groups, on the other hand, were charged with managing ongoing functional activi- ties and expenses, providing effective career paths and skill-building programs, executing the plans, and staffing the programs initiated by the product teams. For example, the engineering organization was responsible for maintaining DDIs overall technical edge, dedicating a group of engineers to a specific product, and defining professional development. In addition, each func- tion was divided into discipline groups that car- ried out specialty tasks. For example, the quality function had a group that specialized in design quality, prototype testing, and manufacturing quality specifications and monitoring (the latter working closely with the contract manufacturing facility). The responsibilities of the product teams and the functional organizations are summarized in Table 1.
Finally, the executive team controlled milestone reviews for each product, including prototype design completion, design completion/release to manufacturing, release to customer, and the three- week release to field.
Performance Management
The executive team next considered the question of performance management and incentives.
Questions
1. Does DDI need a new performance system to account for the structural and management process changes they are contemplating? Why or why not?
2. Assuming a modification to the performance management system is necessary, describe the features of a system you would recommend. What changes need to be made in the goal setting, feedback/appraisal, and reward sys- tems at DDI? Be specific about the features of the system(s) you believe need to be changed and the characteristics of the system itself. That is, do not describe the process for designing the system (see Question 3) but focus on the characteristics of the reward system that are required to fit or align with the strategy, structure, and management processes.
3. Describe the change management process you would use to design and implement the new system. What roles and responsibilities should the executive team take on? How fast should the system be implemented?
TABLE 1
Product Team and Functional Organization Responsibilities
Product Team Mission: To work in a coordinated way to address market needs
Functional Organization Mission: To ensure high quality technical support services
• Define, develop, and introduce new products • Manage cycle time, cost, and quality
objectives • Manage the inventories required to support
revenues • Manage product revenues and gross margins
• Provide career path and skill development • Support team projects and provide specialized
services • Allocate engineering and manufacturing
personnel to product team projects • Execute plans and staffing programs initiated
by product teams
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- PART 5 HUMAN RESOURCE INTERVENTIONS
- 17 Workforce Diversity and Wellness
