Dedicated to Development

By Jessica Marquez

Feb. 16, 2006

As the new president and CEO of Washington Group International, Steve Hanks recalls 2001 as the year he was buried in financials. He had the monumental task of getting the Boise, Idaho-based engineering, construction and management services company out of bankruptcy and turning it into a profitable business.

    “People didn’t know if we were going to make it or not,” he recalls.

    Then he heard that Wash­ington Group had been awarded two contracts–each worth more than $500 million. He was speechless. He immediately got on a plane to thank the clients in person, but also to ask why they had chosen Washington Group when there had been so many other good bidders whose future was so much more certain.

    “I will never forget what they said to me,” Hanks says. “They told me ‘We didn’t hire Washington Group because of its balance sheet; we selected you because of your people.’ “

    That was the genesis of Washington Group’s top-rated, $50 million-a-year employee development program–no small chunk of change given that the company’s annual after-tax income at that time had never exceeded $46 million.

    In the past two years, the company has spent more than $103 million developing workers. Since 2002, its net income per employee has jumped 60 percent. And for 2005 the company expects, based on third-quarter guidance, to report net income of $55 million to $60 million, exceeding its goal of 10 percent compound annual growth, Hanks says. Ninety-five percent of its customers are repeat clients. The firm has seen job applicants jump from 2,000 a month to 5,000. And in 2005, Washington Group was named one of the top 20 U.S. companies for leaders by Hewitt Associates, joining the ranks of General Electric and Johnson & Johnson.

    Washington Group’s investment in employee development shows how recruiting and retaining top talent are crucial for success in an industry faced with an aging workforce, increased competition for skilled employees and an unprecedented demand for work. Because many of the company’s 25,800 employees–including 2,330 in other countries–work in hazardous conditions, such as handling nuclear waste or working in hostile territories like Iraq, the firm has to do more than the average employer to retain and develop its workforce.

    In the past 28 years, Hanks has seen firsthand what good mentoring can do for an employee. In 1978 he joined Morrison Knudsen, which later was acquired by Washington Group, as a law clerk. Today, the 55-year-old top executive is involved in every day-to-day aspect of employee development, from going over coursework to monitoring attendance and reviewing participants’ feedback, says Larry Myers, senior vice president of human resources. Other CEOs talk about how people are important for the business, but Hanks actually gets it, Myers says.

The Washington way
In 2001, the company was hit hard by several factors, Myers says. The number of engineering school graduates had plummeted 18 percent since 1985 as students opted to study hotter topics like computer science. At the same time, Washington Group was facing an imminent worker shortage, with 25 percent of its workforce becoming eligible for retirement in the next five to 10 years.

    Hanks and Myers realized that employee development had to be a core part of the corporate culture. Until then, Washington Group was an amalgam of about 20 companies, assembled through a string of acquisitions over past decades, each with its own policies and procedures and nothing binding them together, Myers says.

    Their first priority was to create a standard annual performance review for all salaried workers. Until then, the different companies each had their own review process at year’s end, but those discussions were often ineffective and rushed, Myers says. Under the new program, managers review 10 percent of their staff each month from January through October, leaving some time at the end of the year to catch up. Myers and Hanks shifted the focus of the reviews to future goals rather than past performance.

    As part of the process, each year the company’s top seven executives visit all of Washington Group’s business heads, give them reviews and get a list of their top performers and find out what they’re doing to develop those people. Hanks then takes the findings to the board of directors, explaining in detail what each business head is doing to develop talent and rating how well they are doing it.

“You can be in a classroom and see a graph of the factors to consider during a project, but until you are out there dealing with real people, you just don’t fully understand.”
–Noe Hernandez-Saenz

    To make executives accountable, last year Hanks began basing 30 percent of managers’ annual incentive compensation on their talent development efforts. Incentive compensation, which applies to 130 executives and 270 managers, makes up 15 percent to 50 percent of a top employee’s base pay.

Developing the ranks
    A key focus of Washington Group’s employee development program is training in management skills such as controlling costs and time management. Having a pool of employees with these skills can save money and time, says Mark Stone, vice president at We Power, a Milwaukee subsi­diary of Wisconsin Energy and a Washington Group client.

    In 2002, We Power contracted Washington Group to build two natural gas plants. The companies set target prices for each plant. If the construction of the plant was less than the target, the companies shared the savings. If it was more, they shared the costs. The model requires a high level of teamwork to make sure that things get done on time and under budget.

    During construction of the first plant, Stone saw instances where people were not working as a team. Rather than keep the scaffolding up for weeks to let each subcontractor do its job, for example, each team would take the scaffolding down after one task and the next group would have to reconstruct it.

    “We realized that if we repeated the same type of situation on the second plant that we were both going to lose money,” Stone says.

    In response, Washington Group reorganized its team, bringing in employees who showed expertise in team-building and weeding out workers who did not. By having a pool of employees trained in project management and team-building skills that could jump into the project, Washington Group stands out from its competitors, Stone says. As a result, he estimates that We Power will see cost savings of at least $10 million on the construction of the second plant.

    Getting more than technical training also builds loyalty among employees, says Noe Hernandez-Saenz, a Washington Group project manager based in Mexico City. In his last year at Universidad Autonoma de Coahuila in Saltillo, located in northeast Mex­ico, Hernandez-Saenz worked part time for Morrison Knudsen on a construction project. After graduation, his project manager recommended him for a yearlong training program in which he worked on the construction of six auto plants and was able to see each stage of the project.

    “You can be in a classroom and see a graph of the factors to consider during a project, but until you are out there dealing with real people, you just don’t fully understand,” Hernandez-Saenz says.

Creating leaders
    Several times a year, 20 to 30 managers like Hernandez-Saenz are invited to the company’s Leaders Forum, a weeklong series of meetings at Washington Group’s Boise headquarters. Executives present real-life business scenarios that the company is facing and ask attendees to break into teams and come up with solutions.

    Last year, participants were presented with a proposal to acquire a business in Romania. Attendees had to present their ideas to the executive review committee, just as they would in real life. Hernandez-Saenz says the experience gave him an understanding of how things work at the top of the company, and helped him to see all the variables involved in making a high-level decision, such as the political ramifications. At one point, the committee asked his team if they had reached out to the unions and government about their proposal. It was a question that hadn’t even occurred to them.

    So far, 350 employees have attended the Leaders Forum, which is held several times a year.

    During the next step, Washington Group offers the Leadership Excellence in Performance program, a yearlong initiative for managers who are chosen to work with executive mentors from different business units. With the help of their mentors, participants design an action plan for themselves.

    Hernandez-Saenz wants to develop his financial knowledge and presentation skills. He is working with his mentor to create a financial plan for another business unit and present it to a group of financial executives. At 30, Hernandez-Saenz admits the task is daunting. Still, he says he can’t believe the opportunity. “If you had told me four years ago that this is what I would be doing, I would have laughed in your face.”

    Chief executive Hanks hopes all of his employees will experience that sense of awe at Washington Group. His biggest challenge is keeping leaders focused on the individual development of employees. That’s why he and Myers have not implemented employee-development metrics. “We don’t want people getting too caught up in statistics,” he says.

    That’s a risky approach, particularly given how much money the company is spending, says Glen Miller, a consultant with Performance Essentials in Har­leys­ville, Pennsylvania, who worked with Wash­ington Group in the late ’90s on employee development. Miller thinks the company should do more to track whether employees are using the skills they are being taught.

    Paul Chinowsky, a professor of civil engineering at the University of Colorado in Boulder, raises another concern: He wonders whether the company can maintain this level of commitment, noting that employee development typically is the first thing to get the ax at the slightest market downturn.

    Hanks says that’s not going to happen, and he’s not the least bit concerned about budget cuts. “We are a constant learning organization,” he says.

    Nor is Hanks worried that he’ll develop such highly skilled employees, they will be poached by the competition. “As my friend Gary Michaels [former CEO of Albertson’s] once said, ‘The bigger fear is that if we don’t train our employees, they will stay.’ ”

Workforce Management, February 13, 2006, p. 1, 24-30Subscribe Now!

Schedule, engage, and pay your staff in one system with