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How HR Keeps Current in Century-old Companies

October 1, 1994
Related Topics: HR Services and Administration, The HR Profession, Featured Article
One hundred years ago, Rudolf Diesel patented the diesel engine, Wilhelm Röntger discovered the X-ray and the U.S. Congress enacted the first peacetime federal income tax. Politically and technologically, the world today is clearly a different place than it was a century ago. But change hasn't been limited to politics and science. Just as the Millionaire multiplication machine of 1894 has evolved into the personal computer and Bill Clinton has replaced Grover Cleveland as president, corporations that have been around for at least 100 years have changed with the times. As these companies evolve, their HR departments play a vital role in managing this change and ensuring that the companies retain their competitive edge.

For many companies, heritage affects the composition of the work force.
Regardless of a company's age, changes in the social, political and legal environment affect all aspects of business, including human resources. But in century-old companies, the effects from societal change are magnified. Not only have older companies been around to experience more evolution, but also many agree that company age-and the tradition that comes with it-has an effect on the work force and its composition.

At Santa Fe Pacific Corp., which celebrated its 125th birthday last year, company age translates into a family culture. "Our age brings with it a wealth of tradition and loyalty to the company," says Carol Beerbaum, vice president of human resources at the Schaumburg, Illinois-based corporation. Loyalty is displayed through low turnover: The average service for Santa Fe's 15,000-member work force is 20 years, and the average employee age is 45. "It's part of the tradition of the rail company to have a longer average service," says Beerbaum. "When we've been in business 125 years, it isn't surprising that we've had more people who've been here 20 and 30 years. People tend to stay with the company."

In addition to a high individual retention rate, Santa Fe hires generations of family members. "We have employees who had grandfathers, aunts and uncles who worked with the company," Beerbaum says. She adds that she regularly hears stories about employees' grandparents and parents who retired after 35 years with Santa Fe. "I often hear things like, 'I'm one of five in my family who've worked for the railroad,' or 'My grandfather was Santa Fe's first engineer.'"

Mert Hornbuckle sees the same trend at his organization, Deere & Co. "It isn't uncommon for us to have third- and fourth-generation people in the corporation," says Hornbuckle, director of compensation, benefits and employee development at Deere. "Also, a majority of our people started their careers with Deere; a large percentage of our work force is in their late 40s and has 22 to 24 years of experience with the company."

Although Hornbuckle didn't begin his career with Moline, Illinois-based Deere, he's been with the corporation for approximately 20 years himself. And he says that an organization such as Deere, with a long heritage, must work extra hard to communicate change to its employees. "It's clear that a company as old as Deere has a tremendous communications challenge," he says. "Many of the company's values become ingrained. If you start to shift those values, or business conditions demand that you modify them, the communications burden is much more substantial than in a fairly new corporation."

"When Alagasco discarded its old HR policies, the company called it "killing dinosaurs." Dinosaurs were the outdated practices the company had been holding on to."

Beerbaum agrees that sometimes Santa Fe's family tradition has its drawbacks. She admits that when she implements some new policies, people remember how things were done in the past and are reluctant to deviate from the established practice. For the most part, however, she says that the company's link to the past-and the experience Santa Fe has to build on-helps the HR department implement necessary policies and practices. Because the majority of employees have worked together for many years, Beerbaum says that there's an intensified atmosphere of cooperation and cohesiveness. "Our people pride themselves on being able to react quickly to change," she says. "It helps that we're a really unified group and have a lot of experience behind us. We know what works and what doesn't."

Like Santa Fe and Deere, OshKosh B'Gosh, Inc. feels a link to its early years. This is especially true now, as the company nears its 100th birthday. When the company was founded in 1895, Frank Grove of Oshkosh, Wisconsin, aimed to produce high-quality, rugged work coveralls for the area's farmers and railroad workers. His company, Grove Manufacturing, was renamed several times before adopting its current name in 1937.

For more than 70 years, OshKosh was known for its adult workwear. In the 1960s, however, the company experimented with marketing a miniature version of its full-size overalls. This trial was a success, and the company moved in a new direction.

Today, OshKosh still produces some adult workwear, but clothes for kids represent 95% of the company's total sales. "Within a 10-year period, we went from a $20-million regional workwear company to a $315-million kidswear business with a workwear component," says Donald Carlson, vice president of human resources for OshKosh. The business changes affected human resources drastically: "Before the change, the human resources department was basically a maintenance function because that's all that was needed-hiring, maintaining the OSHA logs and that sort of thing," Carlson says. Approximately five years ago, top management studied the company and its future and recognized the need for greater HR involvement in business activity. "As we became a more complex business in a more complex environment, we needed to add capabilities in the HR arena," he adds.

One of the steps OshKosh took to make the change was hiring Carlson: He joined the company four years ago. Since that time, human resources has taken many steps forward. Today, instead of pushing paper, the HR professionals play an essential role in ensuring the success of the company. "We're businesspeople who have some particular HR skills," says Carlson of the current department. "We're focused on helping the organization achieve its business objectives."

Carlson says that the transformation has been gradual, but the long-term results are obvious. "When you're involved in the process on a day-to-day basis, it's difficult to measure," he says. "If you want to really see the change, you have to step back and look at it long term. It's similar to going up a mountain and putting a stick in a glacier. If you go back up a year later, you can see that the glacier has moved."

Despite the slow rate of change, OshKosh's history and sense of tradition can sometimes make it difficult. Carlson says that when HR began implementing such policies as teamwork and total quality, the department met some resistance. "Our habits were ingrained, and our culture was taken for granted," he says. "We were dealing with an ingrown set of principles that had to be changed. All of us had grown up together and hadn't thought much about how things were done in other apparel industries, much less what was going on in other types of industries such as automotives or electronics." Despite this frustration, Carlson sees the company's history as its most valuable asset. "We have a consumer franchise that's based strongly on our history," he says. "Our people are very proud of that."

Some companies must break from the past to move into the future.
At such companies as Santa Fe, human resources departments find small ways to affect change. To combat its occasional reluctance to move into the future, Santa Fe's HR department strives for a mixture of employees-some long term, some new to the company. "That mixture has helped on both ends," Beerbaum says. "The new people bring in fresh ideas, and the established employees help with training and keeping traditions intact."

At other companies, greater measures are necessary. Such was the case at the Chicago-based Tribune Co. Since the corporation's beginnings with Joseph Medill's Chicago Tribune in 1847, forwardthinking and a sense of adventure have been part of the company framework. In fact, the abolitionist Tribune played an important role in promoting Abraham Lincoln for president in 1860.

The sense of adventure that has prevailed throughout the company's history led the Tribune to made some drastic modifications to its business identity. In response to societal change, the company has moved away from its position in traditional media and has reidentified itself as an information and entertainment company. Today, the Tribune has 29 business units ranging from the cornerstone Chicago Tribune to the television talk show Geraldo and an interactive service, Chicago Online. "We see ourselves as a growth company," explains Sheryl Favia, manager of benefits and compensation at the Tribune. "We want to take content that's created within the company and deliver it to our customers in whatever medium they'd like to receive it."

The Tribune's business response to technological and societal change led to a break from the past in HR. Instead of retaining its traditional role as a department focusing on labor relations, human resources did a turnaround. Two years ago, the Tribune formed a human resources service center at the corporate headquarters in Chicago to provide centralized HR functions to the business units nationwide. Although each unit has its own human resources staff onsite, the service center provides corporatewide counsel and helps to facilitate change. "We provide the business units with management development and training, labor-relations advice and counsel, and assistance with employment and EEO," says Luis Lewin, director of human resources administration at the Tribune. Also, Lewin says that the service center manages a corporatewide job-posting program for managerial positions, so that anyone in the company who has the proper qualifications can apply for openings.

In addition to providing these extra services, the HR service center acts to standardize the company's benefits and compensation programs. "In an environment in which most companies have started to outsource a lot of their benefits administration, we've made a conscious decision to insource," Favia says. "We feel that our employees can get the best service from fellow Tribune employees who are familiar with the culture in which they work and can relate to the company's values and long-term strategy." Not only does the standardized process simplify administration and reduce cost through increased volume, it also reduces legal liability. "We feel that we're better able to give consistent treatment to employees and avoid the potential pitfalls of each business unit interpreting policies its own way," Favia adds.

Overall, Lewin says that the service center makes human resources better able to help the company move into the future. "For human resources to be successful, we need to stay flexible and progressive and look into upcoming growth," he says. "It all comes down to managing change." Bob Carr, a spokes-person for the organization, agrees: "It's wonderful to have a 147-year heritage of serving a variety of customers and taking a leadership role in providing credible information, but Wall Street looks at us as a growth company. They don't see us as a traditional operation."

The Tribune isn't the only established company making a huge effort to revamp business and human resources. The same is true of Alagasco, a natural-gas distributor based in Birmingham, Alabama. Ten years ago, the company had what top management now calls a "utility mindset," which could be traced back to its roots as Montgomery Gaslite Co. in 1852. Dave Self, vice president of HR and administration at Alagasco, describes the previous corporate attitude as paternalistic, yet autocratic, in nature. "The company always knew what was best for employees," he says. "It was a function of the age of the company and the nature of our business."

Even though this mindset was part of the company's history, it wasn't something that management wanted to continue. "We had some new leadership in the company that recognized the fact that not only was our industry in the midst of change but the pace of that change was going to significantly increase in the years to come," Self says. "If we were going to be successful in the future, it called for a radical transformation in our philosophy and in the ways we treated our people."

Under the leadership of its new president, Mike Warren, Alagasco discarded its old HR policies in 1984. The company called it "killing dinosaurs." As Self explains, "Heroes in our company were those who found the dinosaur and killed it." And how does he define a dinosaur? "A dinosaur is the ancient way things were done around here," Self says.

The transformation started at the top. Warren made himself available to the company's employees, visiting all of their worksites and talking to them in small groups. He explained that he was determined to get rid of the utility mindset and change the company's overriding philosophies. "We knew that we had to depend on empowering the employees who were closer to the customers," Self says.

Employee feedback helps to keep HR up to date.
Many established companies, including Alagasco, rely on employee feedback to help them remain competitive. At Alagasco, one initiative is an employee-suggestion program. When Warren joined the company, he was determined to remain accessible to employees at all levels. He knew, however, that he would have limited time and wouldn't be onsite at the employees' worksites as often as he'd like. His solution was the "Hey, Mike" program, which he began in 1985. As an alternative to the traditional employee suggestion box, the company printed 5" x 7" cards and distributed them to all worksites. Each card had an introductory line that read, "Hey, Mike, have you ever thought about...." Still today, Warren and the company encourage all employees to respond. "Whenever employees have an idea, a suggestion or a complaint, they write out their comments and send the card to him," Self says. The comments can be anonymous; however, if they are signed, Warren guarantees a personal response. "He either writes, calls or stops by the worksite the next time he's in the area," Self says.

Warren does more than simply read the cards-he considers each suggestion seriously. In fact, the program has resulted in changes that include company-car upgrades for lower-level management, no-smoking sections in company breakrooms and a variety of new training programs for employees. This consideration of employees' feedback may be why interest in the program continues. In the first month of the "Hey, Mike" program, Warren received more than 100 responses from employees of all levels. Nine years later, he still gets approximately five suggestion cards per month. "Employees can see that we care about their expectations and needs," Self says.

Alagasco also relies heavily on employee input to remain current in other aspects of business. For example, the company has conducted several quality-of-life focus groups to identify work/ family issues that need attention. As a result, the human resources department is looking into such initiatives as instituting alternative work schedules, redefining its sick and family-care leave policies and adopting alternative dispute-resolution programs.

Just two months ago, the company also created a diversity council to address diversity-specific issues. The council is made up of employees who represent the diversity of the company and are from all levels of the organization. Although the council has only 14 members, more than 50 employees volunteered to participate.

Self says that the council will meet in a working-lunch format approximately once every two months. Warren and Self both will attend every meeting, the first of which was held in July. "It's more than a training program," Self says. "We're bringing diversity into the culture of the company. We're using the council to help evaluate where we are as an organization with respect to diversity, and how we can improve day-to-day worklife."

All of Alagasco's progressive initiatives help to further eliminate the antiquated utility mindset. And despite drastic change, Alagasco's employees are accepting. Under the new practices, their input is more highly respected, and they're empowered to make a greater difference in the organization.

Santa Fe Pacific has similar efforts. To obtain the most honest and useful feedback from its employees, the company conducts frequent employee surveys. The surveys, which were started approximately two years ago, are designed to help HR determine employees' concerns: what's important to them, what areas can be improved and how Santa Fe can be more successful as a business. Following the first survey, the human resources department identified several areas that needed some attention, and these areas became priorities for change.

"As older companies look to the future, they will require even greater self-reliance and competency from their employees at all levels."

One area that was of specific concern was compensation and benefits. "Santa Fe had been through so much restructuring-we'd sold off businesses, we've downsized, we've made so many changes during the past five years-that people felt compensation hadn't been looked at and wasn't as equitable as it should've been," says Beerbaum. Santa Fe responded to the employees' concern by updating the compensation package. "All of our programs now are driven by Santa Fe's success," she says. "In compensation, we tied our incentive programs to Santa Fe's business objectives."

The result is a very different package than in the past. One difference is that all salaried employees at Santa Fe are on an incentive plan that's tied to net revenue from operations. Beerbaum says that before the program, many Santa Fe employees didn't think that they needed to understand these financial aspects of business. Now, the net revenue affects them personally, and they are more closely tied to the finances of the company. "Our people now understand what expenses go into the net revenue and how new customer orders help to drive the figure," Beerbaum says. In addition, all salaried employees at Santa Fe now have share options. "Our people really follow the share prices of Santa Fe now; they know what drives that price," says Beerbaum.

Santa Fe's HR department also has looked at the employees' other areas of concern, which included career opportunities and communications. Through what is called career listings, Santa Fe's HR department publicizes all job openings on its electronic-mail system. "We list every single opening, to whom it reports, where the location is and what the job requirements are," Beerbaum says. "We list every position, even if it's a part of our union agreement or it's something we're recruiting for externally." As part of career listings, the HR department also publicizes the number of promotions annually.

Although Santa Fe developed this system to enhance employees' possibilities for advancement and improve communications about career opportunities, it serves another purpose as well. As the company has changed through the years, job requirements have been altered drastically. "Before, we would look for a switchman who would do nothing but manual labor," Beerbaum explains. "Now, our switchmen require some background in math and electronics because everything is computerized." The career listings offer HR an opportunity to distribute information regarding changes in job responsibilities. "We aren't needing people who will do the jobs as they were done five or 10 years ago," she says. "We need a higher level of education and a higher level of initiative and leadership for all of our positions."

Most older companies agree that they must listen to employees to effectively manage change. Even the Tribune, when creating the HR service center, formed a panel of HR people from the business units to help establish the new set-up. "Before the changes took place, the company formed a steering committee of leaders from business units nationwide," says Lewin, who was working at the Sun-Sentinel in Ft. Lauderdale, Florida, at the time and was selected to serve on the committee. "We talked through the changes with some of the management here. They needed input from those in the field." As the Tribune's HR service center continues to evolve, feedback from those in the business units remains essential to success. "Cooperation is the only thing that makes this system work," he says. "Before we initiate anything in the service center, we get a lot of input from people in the field. We need their expertise."

Age-old companies move into the future.
Just like all other corporations, century-old companies must anticipate change. Today, that includes preparing for rapidly advancing technology and the Information Superhighway. But because these particular businesses have a wealth of experience and years of history behind them, their movements differ slightly from their younger counterparts. At the Tribune, the company is moving full steam ahead by connecting their two foci-broadcasting and publishing-and expanding into new media such as online services and ChicagoLand Television News, a 24-hour cable news channel that utilizes the company's newspaper staffers. Through the HR service center, the corporation is prepared to service new business units as they're created. During the past two years, the center has proven itself effective. But Favia says that its success is due, in part, to the experience the company had to build on. "It was established by combining the best practices from throughout the company," she says. "It was an extension of what already had been done."

At OshKosh, adapting to new markets is already part of the company's history. Just as the corporation changed its focus from workwear to kids' clothing in the late 1960s, future change will be necessary for the company to remain competitive. Experience may make this transition easier. "We must realize that the world that treated us so well in the '80s-when we had a niche to ourselves-has changed," says Carlson. "We have to anticipate what the world of eight or 10 years from now will look like and what the customers are going to demand of us." This affects HR: "To remain process focused, this organization will require even greater self-reliance and competency from people at all levels," he adds.

And at Deere & Co., the corporation continues to diversify into new businesses including health care, insurance and credit. But as the markets change, the company's tradition and history remain constant. Hornbuckle says that the connection between past and future is clear. The company began with one product-a plow to cut through the hard turf in Kansas-and three simple ideas: a desire to produce a quality product, a belief in customer service and the idea that employees are assets to the company. "John Deere built this company around some basic principles," says Hornbuckle. "Today, if you were to sit down with our CEO and say, 'What's your vision?' he'd come right back to quality, a customer focus and making sure our employees understand that they're value-adders."

Personnel Journal, October 1994, Vol.73, No. 10, pp. 86-94.

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