Workforce.com

Unifying American Standard

When Larry Costello joined American Standard, the company's three businesses were operating independently and inconsistently. His challenge: to build a new unified company-wide HR department from the ground up.

May 2, 2003
Build a human resources department from the ground up: that was LarryCostello’s challenge when he joined American Standard as senior vice presidentof human resources in June 2000.

    A daunting task under any circumstances, this case presented specialchallenges. For one thing, American Standard was no budding start-up. Thecompany, which was formed in 1929, had nearly 60,000 employees, manufacturingplants in 29 countries, annual revenues of more than $7.5 billion, multiplebrands, and three businesses--air-conditioning, bath and kitchen products, andvehicle control systems.

    Each of the three businesses ran virtually independently and operatedautonomously, with disparate human resources policies and procedures andcompensation structures. That situation fostered perceptions of favoritism,unhealthy competition, and narrow-minded insularity. "A decentralizedstructure bottles up talent, resources, knowledge, and experience," Costellosays. "American Standard as a company didn't get the benefit of new thinking,new approaches, or cost efficiencies. It was nearly impossible to move talentfrom the most profitable business units to other units because of thecompensation inequity and the perceived lack of potential for professionalgrowth."

    To create consistent practices throughout the company, Costello expanded thehuman resources department at its headquarters, in Piscataway, New Jersey. Thefirst step in unification was to install a new PeopleSoft HRMS, whichconsolidated the businesses' multiple payroll and other legacy systems(including some paper-based systems) into a single database. Costello alsolaunched a Web-based human resources planning process, which enables the companyto make staffing decisions based on the performance and skill sets of itssalaried managers.

Allegiance to the company
    To ensure that policies and programs are implemented and enforcedconsistently throughout the company, the human resources department now includes"centers of excellence"--each led by its own vice president--coveringsuch functions as compensation, benefits, talent development, recruiting, andsafety/security.

    A new pay-for-performance plan, for example, formalizes and standardizesemployee appraisals. "That means employees can expect a certain level ofcompensation relative to their position--no matter which business they workfor," Costello says. "Previously, there were any number ofcompensation and bonus arrangements, which created confusion and promotedallegiance to individual businesses rather than the company."

    Costello's biggest hurdle has been convincing employees that the changes arein their best interest. Those who worked for the biggest and most profitablebusiness--air-conditioning--were especially skeptical. "We had to get ourpeople to appreciate that we could accomplish more together as one company thanas individual businesses," he says. "You have to anticipate resistance tosomething that’s new, particularly when the perception is that nothing wasbroken. If you’re making money, why change? That's our biggest challenge goingforward--convincing our people that the business could be even better."

Frequent communication
    To gain employee support, American Standard's chairman and CEO, Fred Poses,sends monthly letters to all workers and holds frequent "town meetings" andconference calls with managers. Leaders within each business have been trainedto communicate the message through slide and PowerPoint presentations. A newinteractive intranet keeps employees abreast of company-wide programs andpolicies, and a broad-based training program is being launched. Costello is alsoworking on ways to make it easier for individuals to transfer or be promotedfrom business to business.

    "When I came aboard, I saw a business that was solid and ripe forgrowth," Costello says. "It had good-quality people, but they wereuntapped and didn't have the opportunity to develop. Now our employees know thatAmerican Standard has a genuine interest in their careers, and they can growacross the company."

Workforce Online, May 2003 -- Register Now!