The Edsel of Communication

Remember the Edsel the 1957 mid-sized car that Ford introduced with great fanfare, only to be pulled two years and $200 million in the red later? Ford only thought it knew what customers wanted, without verification from customers themselves. The Edsel has come to epitomize how not to market a product.

Look, too, at IBM’s experience from converting to a cash-balance pension plan. In early May 1999, IBM announced that it was considering a cash-balance pension plan for its 141,000 U.S. employees, effective July 1, 1999.

IBM used e-mail and internal Web sites to announce the proposal. The communication highlighted how the new plan would provide incentives for younger employees who tend to have numerous employers during a career.

Many long-term IBM employees became outraged when they discovered their pensions would be reduced by 30 percent to 50 percent when compared to what they expected to receive under the traditional pension plan.

In response, IBM workers established a Web site as a way to communicate amongst themselves, and plan next steps. Because of the “employee revolt,” IBM eventually modified its position. According to an IBM spokesperson: “The change was driven entirely by employees who barraged the company with e-mails and other correspondence, and used the Internet to stoke their collective anger. We heard from enough of them to make the changes.” (Wall Street Journal, 9/20/99).

The fallout from IBM’s decision to switch to a cash-balance pension plan caused the IRS to suspend approving cash-balance plans; led the Equal Employment Opportunity Commission to investigate whether cash-balance plans run afoul of federal discrimination laws; and added fuel for a serious union drive among IBM’s’ employees.

Guess which department at Big Blue was marked as the scapegoat? Look at what one article said:

“The mathematically disadvantaged half-wits in HR can’t hold up a conversation on the topic of calculating anything. They are more like used-car salesmen trying to sell a car with a sawdust-filled transmission (my apology to any used-car salesmen as you probably have more integrity than HR).” (Wall Street Journal 6/14/99)

Why isn’t HR listening?
How could this disaster happen? Isn’t HR the leader of “listening to employees”? Before you answer, think about this: You’re planning to revise your employee handbook. Who would you ask to review the new draft before going to press? In asking this question to HR and benefit managers, answers have included HR director, company lawyer, benefit consultant, senior executives, and HR staff.

Aren’t employees missing from this group? The purpose of an employee handbook is to help employees understand policies. Therefore, it makes a lot of sense to review drafts of an employee handbook with employees before implementation. Yet it’s amazing how many companies don’t do it.

To try to find out why HR executives don’t routinely ask employees for their opinions regarding handbooks or benefit changes, I began asking questions to HR managers who attend courses that I teach. I asked what kinds of risks there were in asking employees for their opinions before implementing a new employee handbook or benefit change. The responses were grouped into six identified risks, then ranked by greatest to least amount of risk:

1. Employees not liking some policies.
2. Employees taking too much time, thus causing a delay in implementation.
3. Employees not understanding policies.
4. Employees becoming argumentative.
5. Employees offering better ideas.
6. Employees showing-up management.

No one is blaming HR for taking these risks into consideration asking employees for their reaction is not benign. You can expect resistance. Based on follow-up discussions, HR managers expressed considerable pressure to “get the handbook out” by the deadline.

One manager stated: “In theory it sounds nice to involve employees. However, you don’t know my company’s culture. We must meet deadlines.”

Another manager commented on the difficulty of having to redraft a policy. It can take a lot of time. Other managers were worried about having to respond to angry employees. It was a lot easier and safer just to send out a memo. Besides, who wants to be the messenger?

Great concern also was raised about employees wanting to change a policy or asking a lot of questions. With all these worries, it’s no wonder why HR may be reluctant to share changes with employees.

Ask. There are more benefits than risks.
In contrast, here’s an example of healthy communication between a service and its customers whether they’re internal or external. Microsoft Corp. and Ford Motor Co. created a strategic alliance to develop an online build-to-order system. The system will enable customers to customize their cars and order them on the Internet.

This new business approach is 180 degrees from the traditional approach of auto companies that build cars based on consumer surveys. The problem is consumer surveys aren’t perfect. Consequently, salespeople end up selling cars with some features that customers don’t really want. Or dealers are stuck with hard to sell cars due to unpopular packages or models.

By bringing the Internet into the factory, Ford expects to reduce costs and respond quicker to consumer needs than the current manufacturing and distribution arrangement.

Also, Dell Computer Co. has made a fortune by selling just what the customer wants. You call Dell and tell them what you want in a system. The computer is then configured based on the order. What Dell really did was change the method of communication between itself and its customers.

Now Ford is attempting to do something radical in the car industry. Ford views the new relationship with customers as a way to enhance customer loyalty, sales, and profits. Ford, like Dell, sees advantages in having customers be well-informed and active players in the selection of desired products.

In light of these examples, perhaps HR needs to rethink how to go about doing business. It’s not by accident that HR executives who are more in touch with employees become more successful.

As a mentor told me, the more controversial the change, the greater the need to invest time to involve employees in face-to-face communication before the change. Sometimes changes are initially perceived as take-a-ways or negatives. But the interaction from HR should help employees understand why the change is happening, the positive and negative effects on employees, and how employees can benefit from the change.

The reality is companies need to keep pace with changes and be able to respond to new competition. Change doesn’t have to be feared. Change is inevitable. The key is how change is managed and communicated.

Perhaps some good can come from IBM’s experience. Hopefully, HR executives will see the merit to actively involving employees. The most important thing is for HR managers to ask employees for their opinions before implementing a change, and be willing to respond, even if it means modifying what was initially presented or delaying implementation.

You’ll see that “customizing” policy or benefit changes with the help of employee feedback much the same way that Dell or Ford does with their customers will be worth your while in the long run.