HARRT at UCLA

HARRT Quarterly

Human Resources Round Table for Senior Executives

Summer 1997

The Fundamental Strategic Challenges for Human Resources Management HARRT Round Table, June 4, 1997 Allen Scott Professor of Policy Studies and Geography at UCLA Associate Dean, UCLA School of Public Policy and Social Research Karen Stephenson Assistant Professor of Management UCLA Anderson Graduate School of Management Anil Verma Visiting Professor of Human Resource Management UCLA Anderson Graduate School of Management There is nothing more difficult to plan, more doubtful ofsuccess, nor more dangerous to manage than the creation of a new system. -Nicolo Machiavelli By Claudia Kavanagh

The world of work is changing in fundamental ways. Pressing issues that were of great concern in the past, although still in evidence, are not as urgent. New issues have emerged and it is necessary to identify the trends that will shape the management of human resources over the next decade. Shifts from hierarchy to network, economic globalization, entrepreneurship, new technology, and regional economic development need to be explored. Human resources is redefining itself as the ability to work interdependently and cooperatively, to encourage participation in decision making, and to develop respectful, trusting relationships. At HARRT's Human Resources Round Table on Wednesday, June 4, 1997, at UCLA, nationally prominent experts, Professors Allen Scott, Karen Stephenson, and Anil Verma discussed the underlying economic and organizational changes that will shape how and where economic activity will occur. What, they asked, will the conseuences be for the management of people, and for -1IARRTaswell? Traditionally, human resource departments man-

age routine functions such as benefits and compliance, but increasingly these are being farmed out. The new human resource function, according to Professor ofHR Management, Anil Verma, will become a much larger component and will shift its focus to change management, leadership development, growth and learning, and the work environment. Human resources executives and managers can enhance both financial returns and values by creating the type of work environment in which people survive naturally. They can develop an ongoing training approach of participation and restructure operations around continuous learning. The fundamental purpose of most transformational efforts is to engage the whole person at all levels ofthe organization, and to develop workers ' latent talents so that the corporation's business performance is raised. The aim is to redesign the culture to recognize the value of human capital. In order to keep the interest and enthusiasm of their people, organizations will have to allow them more control over their destiny. EmSee Challenges. page 2

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Corporate Policies Toward Employee Substance Abuse: A Bottom-Line Analysis by Mark A. R. Kleiman Professor of Policy Studies, UCLA School of Public Policy and Social Research

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Substance abuse by employees imposes costs on employers. This gives companies a strong business reason to want non-substance-abusing workers. From a strictly corporate perspective, alcohol and nicotine constitute the bulk of the problem. because their use and abuse is so prevalent. At the same time, illicit drug abuse, while much rarer and thus much less of a workplace problem, is an issue of national concern. A variety of officials and private organizations have called on employers to use workplace drug policies to lend symbolic and substantive support to the quest for a "drug-free America." There is no comparable push to reduce the abuse of licit substances within corporate workforces. The result is a tension between a manager's role as steward of organizational health and shareholder value, and the natural and praiseworthy desire to contribute to larger public and social purposes. It is not my purpose here to suggest how that tension ought to be resolved, rather, I want to try to explicate the problem of corporate drug policy from a strictly business perspective, so that managers can make decisions on the basis of information rather than of advocacy from those who would wish the tension out of existence. Forms of Damage A checklist of potential drug-related damage to business can help organize the problem:

• Absenteeism: not coming to work due to intoxication, or increased sick days due to drug-related health problems. • Theft and embezzlement to support expensive drug habits. • Drug dealing in the workplace. • Reputational damage to companies or industries as a result of employee drug use, (e.g., professional athletics). • Harm to employees from their own drug use, of concern to employers on paternalistic grounds. These various dimensions of corporate concern are affected differentially by the various possible patterns of drug use. Drug-dealing, theft, and reputational damage relate entirely or almost entirely to illicit drugs. Industrial safety relates to all intoxicants, including illicit drugs and alcohol, but not to tobacco (except as a fire hazard). Absenteeism, health care utilization, and harm to employees will be reasons for concern about the use, or at least the heavy use of all drugs, including nicotine. Since alcohol has by far the largest number of users, and nicotine by far the largest number of frequent, high-volume, chemically-dependent users, any problem category which includes them will tend to be dominated by them. For example, in most companies more than three-quarters of referrals to employee assistance programs are for alcohol rather than for controlled substances. Tobacco is likely to dominate the health-related categories, except for the utilization of substance abuse treatment services. Components of Corporate Drug Strategies: Their Costs and Benefits Costs can be reduced in three ways: first, by altering the composition ofthe workforce by screening out employees with potentially problematic drug use patterns; second, by deterring drug use, or at least de-

• Industrial safety: workplace accidents associated with intoxication. • Productivity and quality of work: slow or poor work related either to intoxication on the job or the chronic effects of drug use (e.g., alcoholic tremors). • Health care utilization: for substance abuse treatment or general medical care for drug-induced diseases. • Industrial health: indoor air pollution from cigarette smoking, or interactions between workplace hazards (e.g., asbestos), and employee habits (e.g., smoking).

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terring drug use at the work site or proximate to work time, through threats of adverse employment action; and third, by reducing drug use and its consequences through persuasion, or through providing encouragement and services to those willing to alter their own habits. Each component of a corporate drug strategy can be analyzed in terms of its likely contribution to each of these three intermediate goals. Pre-employment chemical screening is the bestknown approach to altering the composition of the workforce. Amid all the fuss about privacy, civil liberties, and chemical accuracy, too little attention has been paid to what ought to be the central question: the power of such testing to improve the quality of the workforce, and its cost- effectiveness compared to competing expenditures in recruitment, evaluation, and selection. The correlation between having drug metabolites present in one's system on any given day and being an undesirable employee because of one 's drug use ~imperfect. Some problem users will test "clean" because their drug (alcohol, LSD) is not tested for; others through design or by accident, have not recently taken the drugs of which they are in fact habitual, heavy users. Some applicants whose drug use would create no problem for their employers will nonetheless test "dirty" and be excluded. If the applicant pool is deep enough, the costs of such exclusion will be negligible; but if good people are hard to find, discarding some of them will be expensive. A sensible discussion of testing policies ought to pay attention to the mathematics of testing and the economics of selection and exclusion as applied to the facts about employee drug use and the circumstances of the company. At present, the enormous structure of pre-employment testing rests on a research base no firmer than one somewhat equivoca,1paper reporting on a study of postal clerks. There appears to be no published study on the effects of pre-employment drug testing on recruitment, or on the characteristics of employees who do not apply or who are screened out, nor is there data ;)ut the effects of such screening on employee atti~es or behavior. In the absence of research, there is no obvious answer to such questions as what drugs to test for, what

cutoff quantities to use, and how much, if any, warning to give about when a sample will be required. The right answer surely varies from company to company according to the nature of its business and the characteristics of its workforce. Chemical screening, in the form of on-the-job testing , is one way to deter drug use within the workforce. Several other approaches to identification and deterrence may be either complements to chemical monitoring or substitutes for it: training and empowering front-line supervisors; periodic or random "impairment" or "fitness-to-work" tests (paper-and-pencil, neurological, or task-simulation) as contrasted with chemical drug testing; and no-smoking rules on company premises and no-alcohol policies in company dinmg areas. As to incentives and offers of services to help employees recover from substance abuse, the most familiar version is the Employee Assistance Program (EAP). It delivers a mix of coercion, counseling, and therapy to employees whose problem drug use is detected by chemical testing, by supervisory action, or by self-report. Whether more holistic approaches can outperform a narrow focus on substance abuse in promoting health and workplace performance remains a largely unexplored question. Many employers pay for outside drug treatment, either as part of the EAP or through their health insurance. What to offer and how much coercion to use are much-debated topics, with some research now emerging to show that paying for external treatment can be a net money-saver for the employer. The financial incentives that drive managed-care providers will not lead them to provide optimal levels of substance abuse detection, intervention, and treatment from the employer's viewpoint, both because they are interested in healthcare costs (where the employer has a much wider range of interests) and because the workers change health plans more often than they change jobs, giving the health insurer a shorter time-horizon over which to amortize the costs of prevention. This situation calls for more management attention than most benefits departments currently provide.

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Website

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Networks

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Thomas Plate, Los Angeles Times columnist. Global Window provides practical information for those just entering the Japanese market. Topics such as "Conducting Business," "Understanding Your Counterpart," "Economy," and "The Consumer" cover social and business relationships with Japanese colleagues. Here managers will learn "keiretsu," "shokaisha," and "keiretsu meish," and they \\"ill experience the way the Japanese business community interacts with its own institutions. Keeping up with cutting-edge issues in Japan, managers can discover better ways of adapting their business strategies to seize the competitive high ground . • Explore Global Window at: http://www. anderson. ucla. edulresearchljapan

they do. By appraising an employee 's "network index" and adding that to your existing hierarchical work appraisal and measurement system, you can now complete the equations and capture the lion's share of the work efforts of your employees. Finally, network analysis can be used to scout or scope for the next innovation. Most innovation is accidentally discovered and then accidentally lost in firms. Why? Because firm behavior is usually based upon past successful behavior and can unwittingly ignore or kill innovation. Network analysis allows you to scan the innovation networks, see the natural synergies between several innovations, keep what you want and put on hold those new ideas to be developed later. Network analysis within the next five years may become the favored tool of most business. Network management may become the new paradigm .•

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New Developments at USCS International

Measuring and Monitoring

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The drug control strategy a corporation pursues ought to be related both to the patterns of drug-taking within its workforce, or within the labor pool from which it draws, and to the fonns of drug-related damage which weigh especially heavily on its resources and goals. Whatever that strategy is, it ought to be monitored to gauge its effectiveness and to alert management to changes in conditions that may call for changes in approach. Surveys, focus groups, and drug-testing results (especially infonnation about readings that fall just below the arbitrary quantitative cut-offs used by testing laboratories) can all be useful here. So can several kinds of data derived from operations: reports on workplace accidents, aggregate data about EAP activity, and infonnation generated by health-care providers and insurers. Since ignoring a real problem and treating a nonexistent one can be equally expensive, getting a finn grasp on a workplace 's situation ought to be a routine preliminary to designing policies. Too often, it is not, and companies wind up with programs that fit their managers ' prejudices rather than their realities .•

USCS International, according to vice president, human resources and administration, Randy Gorrell, has experienced many changes and growth within its organization since its initial public offering in 1996. They are currently implementing a new automated employment management system (Restrac) using scanning/database technology for resume tracking, which should save uses approximately $467,000 annually. uses has been operating in a manual environment, processing up to 500 resumes per week, while attempting to fill an ongoing open requisition load of 140 positions. With this new automated system they will not only streamline resume processing, but will ministration organization where the facilities organization is housed. In addition, a new Management Essentials training course has been developed to provide managers with better guidelines and training on the overarching Human Resources Policies and Procedures of uses. This course is structured to provide managers with more skill practice, updates on policy changes, and facilitation on proper procedures for handling employment activities . •

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