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HR Positions U.S. Long Distance for Further Growth

June 1, 1994
Related Topics: Growth, Featured Article
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Parris H. Holmes Jr. doesn't hate memos. He simply prefers human contact. And if face-to-face communication isn't possible, he recommends using a phone. "Show me an office that sends memos all the time, and I'll show you a company that's not going to succeed," says Holmes, CEO and president of San Antonio, Texas-based U.S. Long Distance, a telecommunications and information services company.

Holmes values communication because he believes his employees are USLD's greatest asset. Harnessing their skills and input in a growth mode requires USLD's HR staff to play a key role. In order to manage the company's growth, HR has placed special emphasis on training and management development, providing excellent benefits and managing change through interactive communication projects. USLD, Holmes says, developed these three prongs of success with remarkable speed and creativity. In less than 10 years, the company has grown from three employees to 1,000. Last September, Fortune magazine ranked USLD number seven on its list of the "100 Fastest-Growing Public Companies in America"—one of only two telecommunications companies to be included.

Following the deregulation of AT&T in 1984, more than 1,000 direct-dial long-distance and operator services emerged. Today, there are fewer than 500 direct-dial long-distance companies, and the number of operator service providers is less than 200, according to USLD's annual report. Now, U.S. Long Distance is among 25 second-tier tele-communication companies that generate between $50 to $300 million annually in long-distance telephone revenues. With-in the last six years, USLD's revenues have increased from $32,000 to $134 million, according to Holmes. Unlike first-tier organizations such as AT&T, Sprint or MCI, USLD has gained its success by targeting small- to medium-sized businesses that want customized services.

What began as a small, operator-services business has since grown into a company with three distinct niches: direct-dial long-distance services in the Southwest and Pacific Northwest; operator services for the hospitality and private pay-phone industries that connect phone calls in 43 states; and a billing clearinghouse for operator service providers and 140 long-distance telephone companies. Known by economic forecasters as gazelles, companies like USLD are among the few and far between. Of approximately 9 million U.S. companies, only 3% have grown as rapidly as USLD, according to David Birch, president of Cambridge, Massachusetts-based Cognetics, an economics research and consulting firm. "Anybody that does that is unusual," he says.

As smaller companies like USLD experience rapid growth, internal communication becomes one of the greatest challenges. In a smaller company, it's much easier to operate informally. With 1,000-plus employees, it's even more difficult to maintain the corporate culture because additional policies and procedures are essential. "You have to reduce into writing what was once a verbal tradition," says James Spoor, national president of the Bethesda, Maryland-based Council of Growing Companies. That's why Holmes believes HR must play a leading role in the company's strategic planning. Human resources understands the organization's mission, its internal resources, strengths and weaknesses. Most importantly, they know the employees. "When a company is growing as fast as we are, HR managers are the silent partners of growth. If there are people problems, then they're like an alarm system going off all the time," says Holmes.

Managing a growing number of employees, however, can be extremely difficult. By 1990, USLD had hired 140 employees. At that point, Holmes realized that the firm couldn't continue to grow successfully without establishing a human resources department. That's when he hired David Horne as vice president of human resources. Horne's mandate was to establish policies and procedures, liaise between management and employees and ensure the company's compliance with employment laws. Today, Horne, a former HR manager in the restaurant industry, oversees eight staff in human resources. He is one of 13 executive officers, including the CEO and company president, who meet every six weeks for strategic planning. Included on Horne's staff are three directors who are responsible for training and management development, benefits and employment law. In addition, an employment manager oversees recruitment, and three administrative assistants provide staff support.

One of Horne's staff members is Brenda Cunningham, who initially was hired in 1990 as an administrative assistant. Today she is a director in human resources and focuses on employment law. Cunningham says the company's rapid growth never really seemed to come all at once. It was continuous, she recalls. Human resources professionals, therefore, must not just react to growth. They must be told where the growth is going to happen. Where is there going to be the most immediate need? And what internal resources are necessary to support a new position? If resources are unavailable internally, how can the company use advertisements or executive recruiters? Replacements, she says, are easy. It's the new positions that take more planning.

Within the last three years, all areas of USLD have expanded. Most new employees have been hired at entry-level positions as customer-service representatives and operators. But the qualities that USLD looks for in a managerial candidate are flexibility, belief in an open-door philosophy of communication, ability to empower the employees, manage change and adapt to the fast pace of the telecommunications industry. In searching for the right candidate, HR has primarily relied on in-depth interviews and reference checks. But next year, USLD also plans to institute personality and management-style tests. "We look for someone who is dynamic and not easily stressed out," she says. Because USLD employees are the most preferred candidates for managerial positions, HR provides employees access to an internal job line.

So far, promoting from within has been successful. Within the last year, 23 employees have been promoted into management in the operator- and customer-services departments. Twenty of the positions were filled internally, and 18 of them were filled by minorities. "When you hire from within, you're dealing with a known quantity. It's great for employee morale and employee relations," Cunningham says. However, if a search has to be conducted externally, U.S. Long Distance uses both executive recruiters and newspaper advertisements. Local organizations that are downsizing also are notified about USLD's job line.

Formalized training prepares employees for the future.
At the center of USLD's training and management development program is director Randy Brown. Using material from Zenger-Miller, Inc., a San Jose, California-based international training and consulting firm, Brown has designed and offers a series of courses that are taught quarterly to administrative and technical employees, sales representatives, individual professionals, first-line supervisors, middle management and senior management. Individuals are usually recommended by their supervisors to take the courses. But they also can volunteer. The individual courses are divided into two broad categories: "Critical Skills and Knowledge" or "Related Skills and Knowledge." For example, in one critical-skills course designed for senior management, executives can learn how to utilize feedback from their bosses and peers.

Sales representatives, on the other hand, are offered courses such as "Company and Industry Fundamentals," "Product Knowledge," "Selling Skills," "Administrative Procedures," "Sales Planning" and "Market Knowledge." In terms of learning, it's a continuous process, says Brown. The challenge, however, is to keep the talent base developing as quickly as the company's growth. "Regardless of your level, critical and related skills are needed for your success," he says.

Before U.S. Long Distance actually formalized training in February, employees learned skills without the benefit of the classes now run by Brown. The emphasis used to be on job skills, not education for future responsibilities. Most training consisted of on-the-job coaching from one's supervisor. Now that telecommunications is becoming more sophisticated and interconnected, USLD managers and employees must have a combination of technical and leadership skills.

So far, very few of those promoted into management jobs have had college degrees. And USLD rarely hires college graduates with no work experience, especially for management positions. "College can only teach you so much. You need real-world experience. Good managers are not born. They're created," says Cunningham. The managers who began as employees and received further in-house training have been the most successful, she adds. But some newly-promoted managers may still require the backup of other supervisors. For example, some new managers find it difficult to supervise their long-time friends and peers. When put into a supervisory role for the first time, some new managers aren't able to be firm. Through leadership training, these managers learn to develop skills such as establishing performance expectations, taking corrective action, coaching for optimal performance, getting their ideas across, handling emotional behavior and recognizing positive results. Simultaneously, the next-level supervisor is asked to support the manager, especially if employees try to undermine the manager's decisions.

An attractive benefits package attracts the best employees.
As a fast-growing company, USLD has had to achieve flexibility in its benefits package as new positions were created, duties were shifted and employees' needs evolved. But changes haven't compromised the quality of employees' benefits. "We want our employees to have exactly what they need," says Melisa Caston, HR director of benefits. Although USLD's work force tends to be younger, particularly in operator and customer services, the most popular benefit is the company's 401(k) retirement plan. Caston says that the company began offering the package two years ago with the belief that planning well in advance of retirement is essential for financial security. Generally, all employees of the company who are 21 years of age and who have completed one year of employment and have worked at least 1,000 hours are eligible for participation.

When employees participate in the defined contribution plan, their contribution is deducted before their income is reported to the government for tax purposes. Also, the money an employee contributes as well as the interest earned belong to the employee, even if the employee leaves the company. To make the benefit even more attractive, USLD also contributes an additional 33 cents for each dollar deferred, up to a maximum of 6% of an employee's salary. The contributions also are subject to a liberal graded vesting schedule that provides the employee with 25% of the matching dollars should the employee leave the company after two years of employment, and up to 100% of the matching dollars should the employee leave the company after five years.

Horne adds that the plan also provides maximum control and flexibility because the employees can decide how much to contribute and how their money should be invested. For example, there are five investment options available, which vary in risk and rate of return. Four of the options are provided by Kemper Mutual Funds and include a growth fund, total return fund, government securities fund and money- market fund. The fifth investment option is to purchase USLD stock.

In terms of other benefits, USLD also offers employer-paid health insurance for employees and a Section 125 cafeteria plan, in which employees can defer money pretax to pay for expenses such as vision or child care. For example, an employee who wears contact lenses may have to spend $250 a year on vision care. Knowing that, the employee can request to have that amount deducted from his or her paycheck before taxes. For every $100, the employee saves $23 in taxes, says Cunningham. "Where it adds up is when an employee is spending $500 a month for child care. You can funnel that premium through the cafeteria fund."

Some of the additional benefits offered USLD employees are health club memberships, wholesale department- store memberships, discounts on residential long-distance phone calls, two weeks' vacation a year (three for those employed five years) and 10 sick days a year that are allowed to carry over the following year, if unused. "It's not a use-it or lose-it benefit," she says.

Because the work force at USLD includes 35% Hispanics, 12% blacks and 1% Asian Americans, the company also provides two floating holidays in addition to the 8 1/2 paid holidays. The floating holidays can be used for Cinco de Mayo, Martin Luther King Jr.'s birthday or Lunar New Year, she says.

Based on feedback from USLD employees, Caston says the company is considering adding other flexible benefits in the future. "Our department receives more phone calls than any other department. We have a very active employee population. They're not shy about saying what they think," she says.

Within the next two years, USLD also will establish a formal salary administration program because the various positions are becoming more standardized. When determining an em ployee's or manager's salary, HR utilizes market data, salary surveys and compares salaries of comparable worth within the company. For example, if USLD creates a new management position, HR will look at management positions that have similar responsibilities. They also look at comparable managers' education and experience to place the candidate in the appropriate salary bracket. "There is a process now, but as we stabilize, we'll have to standardize," says Cunningham. Salary reviews are conducted annually and raises are based on merit, which allow a 2% to 9% range increase for exempt employees and a 2% to 6% range increase for non-exempt employees.

Overall, USLD's benefits package has been designed to attract and maintain the best selection of employees. Being able to offer a good benefits package has allowed U.S. Long Distance to remain competitive. "We're always looking for ways to enhance our package. It's an ongoing effort to get the best product for the lowest cost. And if we have to change providers, we will," Cunningham says.

Communication is key in order to manage change and instill the corporate culture.
At USLD, the company's values begin at the top. Founder and CEO Holmes believes that employees will perform beyond the call of duty if a company creates a culture of mutual respect, empowerment, creativity and an open-door policy toward communication. "Everyone should be able to voice their opinion and be given the authority to do their job. Employees need to be part of the decision-making process," he says. Especially in fast-growing companies, employees can begin to feel alienated as informal channels of communication are replaced by too many bureaucratic layers, meetings and memos.

Maintaining the same enthusiasm and excitement of a smaller organization is daunting, but not impossible, according to Cunningham. At U.S. Long Distance, employees are offered a variety of ways in which to remain informed, motivated, creative and active.

One of the most successful vehicles for improving company morale has been the employee suggestion program, which was initiated in 1992. Within two years, HR had received a total of 420 suggestions from USLD employees and implemented 54 of them, says Horne. "The response was fantastic. We received ideas that no one had thought about before." Once the suggestions were received, Horne, Cunningham and five other senior managers reviewed the suggestions by posing a three-pronged question: Is it original, feasible and does the company want to implement it?

If the answer to the question was yes, then the suggestions were implemented. If a suggestion was considered one of three top finalists, the author received a monetary award. When reviewing the finalists, the committee considered the suggestions in terms of their potential to save the company money, increase sales, improve customer service, enhance employee or community relations and improve productivity. The top three winners were given $500, $250 and $100, respectively, and one paid day off.

Last quarter, out of 58 suggestions received, the suggestion committee decided to implement seven. One customer-service file clerk was awarded $250 and one paid day off because of her suggestion that the company purchase a folding/inserting machine to use for their sustain letters. (Sustain letters refer to USLD correspondence that up-holds a customer's disputed charge.) Customer service sends out more than 1,000 sustain letters every day, each one requiring someone to fold the letter and insert it in the envelope. The suggestion increased the company's efficiency and productivity and improved customer service. Although the suggestion was initially for that department, USLD may apply the idea to other departments.

Another employee received $100 and one paid day off for suggesting a way to enhance USLD's community relations. She suggested that the company sponsor an employee talent contest, with the proceeds benefiting a local charity such as a children's hospital. The suggestion increased the company's visibility in the community in addition to helping a worthwhile cause.

Because of USLD's multiracial clientele, another employee suggested that the company's hold recordings for customers include the information in Spanish as well as English.

Cunningham says that the suggestion program not only improves customer service and productivity, but raises employees' self-esteem. "The best thing is the way in which the prizes are given," she says. On the day of the award, she, Horne and a department manager surprise the employee at his or her work station. Fellow employees are called together to celebrate the award and recognize the winner in front of peers. "When others see that recognition, they see that the suggestion program really works," Cunningham says.

But some practices at USLD don't generate the same festive atmosphere as the suggestion program. Nevertheless, they are necessary. In the course of expanding, a company may have to institutionalize a grievance procedure. Problems are bound to occur in the relationship between employees and between employees and their supervisors. When a company is smaller, differences are often settled informally. Both parties usually reach a verbal understanding. When a company becomes larger, policies and procedures become even more complicated, and the employee filing a complaint may have to be accountable to more than one supervisor. To help ensure fair and equitable treatment for its employees, USLD adopted a complaint procedure in 1991, which employees were encouraged to utilize without fear of retaliation.

If a serious complaint is filed against another employee or supervisor and is found to be substantiated, the charged employee may be subject to disciplinary action, up to and including discharge. Conversely, if the charging employee provides misleading or fraudulent information to the company's management when filing a complaint, the employee may be subject to disciplinary action, up to and including discharge. The procedure basically allows the employee to file a verbal complaint and then a written one if a satisfactory solution is not achieved. The written complaint can be forwarded to the next-level supervisors and human resources department and, if necessary, can be taken all the way up to the company president. According to Cunningham, the procedure has helped the company's effort to ensure a consistency in employee relations.

Another necessary procedure developed at USLD is the exit interview. Although USLD prides itself on supporting and retaining most of its managers and employees, HR personnel also conducts an exit interview with any manager or employee who leaves the company. The process, Cunningham says, began this year. It helps HR understand how the employee or manager could have been more successful or satisfied in their job. "We want to keep good employees, but occasionally we've lost some. We also want to learn from those fired. Why did they leave? What strengths do we have to recruit the most qualified individuals?" she explains. If an employee quits, the interview is conducted before departure. In the case of a firing, the former employee receives a phone call within one week after termination. The interview is based on a questionnaire that includes these open-ended questions:

  • What are the main reasons you are leaving USLD?
  • If accepting another position, what does the new job offer you that our job with our company did not?
  • What did you enjoy the most about your work?
  • What did you dislike the most about your work?
  • Was your workload usually: heavy, appropriate or light?
  • If you could make one recommendation to USLD management to improve the company, what would it be?

In addition, the employee also is requested to rate the following on a scale of one to five—one representing "poor" and five representing "excellent":

  • Compensation and benefits package
  • Policies and procedures
  • Training
  • Performance-evaluation process
  • Salary-review process
  • Opportunity for advancement
  • Working environment.

The exiting employee also is given the opportunity to rate his or her supervisor's management skills in the areas of listening and communicating, following policies and procedures, treatment of employees, providing feedback and recognition and resolving disputes. Most employees know about the process, and even those who've been fired are usually cooperative because they appreciate some type of closure, according to Cunningham.

Volunteer program and other projects get employees involved.
Last year, USLD established the U.S. Long Distance Lifeline to assist flood victims in the Midwest through the American Red Cross. The company held press conferences hosted by the company's executive vice president in San Antonio, Houston and Dallas announcing the program, which raised thousands of dollars. Other community-relations projects have included staffing phones for Texas Public Radio's fund-raising drive and becoming a title sponsor of a golf tournament that benefited the American Cancer Society.

To promote even greater company spirit and visibility, USLD's marketing department opened a company store last year so employees could purchase items bearing the USLD logo. According to Jon Rochetti, vice president of marketing, employees have been ordering T-shirts, golf shirts, pens, beach towels and many other items since the opening. In addition to the suggestion and volunteer programs, USLD's HR department also provides quarterly newsletters called "USLD On The Line," E-mail for employees and regular departmental meetings for employees to evaluate their work. Lastly, whenever the company issues a press release, all employees receive a copy so they're kept informed of the latest news items provided to the media, says Cunningham.

USLD's strategy for the future is to strengthen its core businesses.
With economic forecasters predicting growth in the telecommunications industry, USLD will continue to expand. Holmes says the company will focus on the expansion of it core businesses and grow externally through acquisitions in the $60 billion-a-year direct-dial industry. Operator services and billing clearinghouse and information services will continue to contribute significant portions of the company's revenues, but the direct-dial industry will become the company's foundation in the future. That means more operators, customer-service and sales representatives and, definitely, more managers. With USLD's strong training and management development program in place, an attractive benefits package and a commitment to interactive communication, the company will continue to attract qualified employees. For Horne and his HR staff, the challenge will be to tap that energy and provide USLD employees with the same kind of opportunities that promoted Cunningham from an administrative assistant to a director in HR. "When you're a growing company, you can't afford a specialist for everything. It's been good for me that I've been an HR generalist. The majority of what I've learned, I've learned here," says Cunningham.

Personnel Journal, June 1994, Vol.73, No. 6, pp. 78-91.

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