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No One Way To Build HR

May 1, 1997
Related Topics: The HR Profession, Featured Article
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When most of us think of the 1920s, we think of flappers and gangsters, tommy guns and bathtub gin. We envision the Beautiful People of F. Scott Fitzgerald flitting about underground speakeasies. What we don't always think of is the incredible change occurring in business at the time, change that opened the door to the function we call human resources today.

Prior to the first World War, the human side of business received very little attention. A combination of the shortage of working men and the increase in industrial operations during the war brought the human element in business to the forefront. In one capacity or another, the human element has remained rooted in business ever since -- and is only growing more important today as we head from the Industrial Age into the Information Age.

What has the road from corporation school to personnel to human resources been like? A look at two very different organizations reveals disparate pathways. For one, HR development was a slow go because the company put off actually creating an HR department until eight years ago. For another, HR popped up early on, and its growing importance to the organization reflects HR's growing status in business. Both companies, however, have one thing in common: HR is now an important player in the business strategy. Whichever company yours looks like, you'll find some valuable lessons in persistence, resilience and HR intelligence.

A family-owned business divvies out HR chores.
Western Exterminator Co. in Irvine, California, is the largest family-owned pest-control company in the West, with more than 800 employees and 30 separate locations serving California, Arizona and Nevada. Last year it celebrated its 75th birthday, a reminder of how far the company has come since Carl Strom founded it in 1921 with only $25 worth of chemicals, a desk and phone in a shared office.

Throughout the following decades, it held on to its belief of family involvement. Recruiting? Easy. When the flourishing company moved to larger quarters in 1929, Strom hired Guy Raymond Lovejoy, his brother-in-law, as a new partner.

By 1952, Western had grown to a business of 88 employees and had changed from a partnership to a privately owned corporation. In the '60s, nine more branch offices were added. By 1972, nearly 350 members of the Western "family," as they call employees, were at work throughout California and Arizona.

Growth and changing times began to signal HR needs the company hadn't experienced before. No longer could Western just hire good people. It needed good people who were good at specific skills; new treatment techniques as well as proliferous regulatory agencies required some specialized professionals.

Still, the company made do without a designated HR person. Retention and succession were never big problems. In fact, when the company moved its headquarters to Irvine in 1973, Roy Ashton, a former sales manager, was named the first general manager, and Arnold Cross, former service manager, moved up to first assistant general manager. Both men started their Western Exterminator careers, in 1956 and 1951, respectively, as service technicians.

However, during the '70s and '80s, as Western continued to double in size about every five years, more HR duties popped up. A training and technical division was added, for instance, which grew to a staff including three degreed entomologists, a registered sanitarian, a California teacher-accredited educational director, and two videographers who develop in-house training videotapes, as well as videos for commercial customers.

It was 1989, when the payroll pushed past the 400-employee mark, that a specific HR department was created. Edith Alson signed on as a personnel assistant. She remembers the variety of hats Western professionals wore to cover for a nonexistent HR. Payroll people handled personnel files and workers' comp issues. The training and technical department conducted pre-employment physicals. The accounts-payable professional also dispensed benefits: The theory being that since benefits were handled by writing a check, and the accounts-payable person mailed checks, thus she could also handle benefits. This was just an example of the lack of HR strategy. But Western was ripe for a new approach. "The [executives] realized the way the world's changing, they needed someone to keep them out of trouble and handle HR so they could concentrate on other things," says Alson. "Payroll can concentrate on payroll, training can concentrate on training."

Alson and her HR supervisor spent most of that first year just straightening things out. The two extracted the HR processes that had been ingrained into many jobs and put them properly under the HR umbrella. "We were just mainly trying to figure out what the HR function should be at this company, and to win respect, to make sure employees understood we were there to help them, not hinder them."

When Alson's boss left after one year, the company proved its commitment to employee development by promoting her to HR manager-even though she had no degree. "[The president] felt that because of the leadership I'd had as [president of a community group], I'd have the leadership here. He said, 'I've seen your work and I've seen you deal with people. I think you'll be very good.'"

But even as recently as eight years ago, HR still was considered a dubious position by many -- it wasn't an easy transition.

From fringe function to full partner in eight years flat.
As Alson slipped into her new position, she realized her actual job tasks were the least of her worries. A lot of employees didn't really want HR there. "Everybody out in the offices thought [HR] was just there to hinder them, so they'd no longer be able to make choices on their own. They felt threatened," explains Alson.

Alson says the key to winning them over was to get them to have confidence in her. Employees needed to understand she was there to make their jobs easier -- that she wasn't the corporate watchdog, ready to snitch to the owners about the slightest glitch. "I told them, 'I have the shoulder to cry on if you just need to let off some steam. That's fine. If it needs to go further I'll let you know, but if it doesn't it doesn't.' They realize that."

Today, Alson, along with two other HR professionals, is in charge of a gamut of HR services-from staffing to legalities, from benefits to performance tracking. She has continued to prove HR's worth by continuing to tie HR strategy to her company. For instance, Alson currently is reviewing the compensation package for certain positions to increase base pay so that employees who occasionally don't hit their commissions aren't stung too badly. As for benefits, they've come a long way since HR hit the scene at Western. Today, Alson uses surveys that simply ask employees what they want. That has led to the company 401(k) plan, a cafeteria plan and the offering of additional life insurance and long-term disability insurance.

With the arrival of increased competition, these extras make a big difference. Satisfied employees mean employees who are willing to go the extra mile -- and that makes for satisfied customers. "We always want to make sure we have the best policy for our people," explains Alson. "I can guarantee that as a pest-control company, we have one of the better benefits packages out there. I've heard that from several employees who used to work at other pest-control companies." It makes for good retention: Western's turnover sits at 8 percent to 9 percent in a high-turnover industry. Most of its managers work their way up from technician position-even the company president started out zapping pests.

As the business continues to boom, so does HR. How does Alson know HR at Western is there to stay? Her phone rings continually with questions that only HR can answer. "I've got managers trained to call me," she laughs. "They know there's an open-door policy in HR, know that they can call us no matter what questions they have -- and that means employees too. We're staffed from 6 a.m. in the morning to 4:30 p.m. in the afternoon, so there's always somebody here to answer questions. And my staff knows they can get a hold of me at any time -- they can reach me at home. I'm not untouchable once I leave here. It doesn't work that way."

If the question posed to HR concerns a legal problem, Alson will head to the inquiring office the next day -- whether it be in Irvine or Arizona. But this scenario is rare, since HR conducts employment-law training with managers three times a year, and more upon request. They're expected to know the ground rules. In addition, Alson tries to make a visit to every office at least once a year, just to stay in touch.

As far as her wish list for the future, Alson is looking into an employee-assistance program. Also appreciated would be a computer system integrated with the rest of the company -- now owned and operated by the second and third generations of Carl Strom's family. Right now, however, she's pleased with her HR department. "We've come a long way. [People throughout] the company appreciate us and know we're a very reliable and viable department. They know they need us."

An organization's HR progress reflects HR's societal progress.
In 1913, the same year as the Federal Department of Labor was given a place in the Cabinet, the National Association of Corporation Training Schools (NACTS) was created. These schools were precursors to the modern HR department-they encouraged consideration of the human element in business. This was particularly crucial in light of a growing socialist movement that harbored anti-employer grudges. (Who could blame them considering the appalling working conditions of the turn of the century?)

Said one keynote speaker at an NACTS meeting: "If the corporation organizes a school within itself to bring out the strong, practical purpose of the institution, and to show the art, ability and skill that are necessary to carry on a great enterprise, it would tend greatly to change the attitude of the employees." That's right, it had dawned on employers that employees' attitudes toward work mattered. Talk of such things as profit-sharing and pensions began cropping up.

Unfortunately, by 1922, companies all around a postwar, economically depressed America were eliminating personnel departments and slashing budgets on all types of benefits, or "employee welfare" as it was called then. To remain solvent, NACTS merged with the National Association of Employment Managers to become the National Personnel Association.

It was in 1922 that an ideological battle raged through the personnel management field. One side argued that the personnel manager should act as the be-all and end-all in anything concerning personnel matters. The opposing side believed not only that personnel authority should remain with line management, but also that personnel matters in general should be addressed by line management, with advice and assistance coming from personnel professionals. The proponents of the latter theory realized that the name National Personnel Association didn't reflect their belief.

Add to this a crucial circumstance: In late 1922, when a high-ranking member of the National Personnel Association addressed a large commerce association, an audience member revealed the prevailing attitude when he remarked archly, "We had a personnel department in our company and threw it out." It was time for a change. It was time to remind executives that human resources were an integral part of running a business, not an amusing sideshow. In 1923, the organization became the American Management Association (AMA). Next year it celebrates its 75th birthday.

Although the name changed, the mission remained largely the same: to promote good business. The employee was ever-present in such strategies. AMA's first elected president, Sam A. Lewisohn, wrote a 1926 book, "New Leadership in Industry," in which he reminds employers of an important point: "What does the worker want? Justice, status and opportunity."

In the first shaky years of AMA, each function -- sales, finance, and so on -- handled its own personnel issues. But by the end of 1929, the need for HR was glaring. How could an organization promoting the human-relations function choose to ignore the need within its own walls? It didn't. That year, AMA welcomed its own personnel department. This department -- like HR in general -- proved through the decades that it was no sham.

In World War II, for instance, AMA served as one of the prime channels of communication for the government. It lent a hand in the procurement, training and manpower agencies. The vice president of AMA's personnel division, Lawrence A. Appley, served as executive director, then deputy chairman of the War Manpower Commission and discussed staffing problems with employers. Appley achieved what many HR professionals only aspire to -- he ascended to his organization's presidency in 1948. Personnel matters had gained relevancy in business.

HR at AMA today-continued growth, with a nod to past truths.
In 1981, Priscilla C. Goss became vice president of personnel for AMA, based in New York City. In 1984, she changed the wording. Today, Goss is vice president of HR, with responsibilities for approximately 1,000 employees domestically and 150 internationally. Why the title change? As employees are expected to "work smarter" for their companies, so is HR. "It indicates that we're providing more value to the organization," she says. "People are expecting HR folks to do more than just the soft stuff. Take recruiting. Now we're asked to do more than screen for skills. Now we also screen for values, for loyal people who will be able to create and implement strategy... or compensation. It's no longer just [determining] base pay-you need incentive plans and bonus plans to keep people motivated."

Has HR been up to the challenge? Is it doing more for companies today than it was 25, 35 or 75 years ago? Goss uses the example of an old AMA personnel policy handbook she ran across. Dated from the 1950s, it was packed with soft stuff: definitions of acronyms, maps of building locations, photos of key managers and so on. "There was no mention of benefits [options], so I have to guess it was just the one-size-fits-all package of those days," she says. "The man worked and the wife took care of the kids, and there wasn't much need for flexibility."

That's not the case anymore for the nonprofit AMA, which had $272 million in sales last year. The company, under Goss's guidance, now offers a savings and investment plan with a company match, which is a tax-deferred program similar to for-profit companies' 401(k)s. AMA also has changed its pension plan so fewer dollars go into a defined-benefit plan and more go into the employer-matched plan, which pays 50 cents on the dollar. Employees can defer up to 6 percent of their salaries. "When I came here the benefits plan's only choice was you took it or you left it," says Goss. "Now there are many more options than before."

The options aren't just financial either: Employees have a variety of flexible-work arrangements to choose from, including telecommuting, job sharing, temporary work, part-time work and so on. "None of those really existed before," she says.

Doing more for the employee pushes the employee to do more for the organization, and AMA has indeed developed into an employee-driven organization. Three of its five values statements, created in the past few years, focus on its workforce:

  • We value people who want to do the best possible job they can because they value the work and not just the financial rewards, thereby leaving AMA better than they found it.
  • Both viability and renewal are driven by innovation. Therefore, we encourage people to take intelligent risks that contribute to AMA's goals and objectives.
  • AMA is committed to an environment that enables people to take charge of their own jobs and take advantage of opportunities to excel that are consistent with AMA's goals. In return, we trust every employee to achieve the results they have agreed to produce.

HR is there to support any way it can. But key to Goss's HR philosophy is the belief her predecessors held almost 75 years ago, as the National Personnel Association underwent its name change: The responsibility for personnel work rests with management. "It has shifted in that we're pushing back on the managers. Over the years, the [trend] had shifted to the personnel people taking on a lot of that responsibility. Now it's back to where we were in 1923. [Our job] isn't so much getting in there and being the person to resolve the problem, but being the coach and facilitator and guide for the manager, who in turn handles the problems. It's a major shift after all these years."

Goss believes it's not only a major shift, but an invaluable one, because it allows HR professionals to remove themselves as administrators and plunge into the business aspect of their jobs, in which they can add the most value. It allows Goss to do things like employee surveys to see what employees value and want in benefits. It also allows her to assist with AMA's globalization effort. She can take more time to hire culturally sensitive employees. She can exert more effort into translating the AMA performance management system to ensure its proper use worldwide. Or she can conduct recruitment training for the manager in Argentina who's going to be staffing up this year.

Overall, Goss is optimistic about the future of HR at her company-and HR in general. "Management is realizing the value that a good HR department can bring to the company." After 75 years of ups and downs, it looks like the HR function is finally getting the respect and recognition it deserves.

Workforce, January 1997, Vol. 76, No. 1, pp. 43 - 48.

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