The Headcount Solution - How to Cut Compensation Costs and Keep Your Best People

N. Fredric Crandall, Ph.D.
Marc j. Wallace, Jr., Ph.D.

with

Barbara b. Buchholz
Margaret crane

McGraw-Hill

Library of Congress Cataloging-in-Publication Data

Crandall, N. Fredric.

The headcount solution : how to cut compensation costs and keep your

best people / N. Fredric Crandall and Marc J. Wallace, Jr. ; with

Barbara B. Buchholz and Margaret Crane.

p.cm.

Includes bibliographical references and index.
ISBN 0-07-140299-3 (hardcover : alk. paper)
1. Employee retention. 2. Personnel management. 3. Cost control. I.
Wallace, Marc J., 1944- II. Buchholz, Barbara Ballinger. III. Crane,
Margaret. IV. Title.
HF5549.5.R58 C72 2002
658.15'53--dc21

2002152685

Copyright 2003 by The Center for Workforce Effectiveness. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher.

1 2 3 4 5 6 7 8 9 0 DOC/DOC 0 9 8 7 6 5 4 3 2

ISBN 0-07-140299-3

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

—From a declaration of principles jointly adopted by a committee of the American Bar Association and a committee of publishers

McGraw-Hill books are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. For more information, please write to the Director of Special Sales, Professional Publishing, McGraw-Hill, Two Penn Plaza, New York, NY 10121-2298. Or contact your local bookstore.

To Julie Freeman Crandal
l and
Nancy Smith Wallace
for the love and encouragement
they have provided us for over 35 years.

Acknowledgments

We dedicate The Headcount Soultion to the hundreds of clients and professional colleagues who have supported us and whom we have served over the past 25 years. Our clients have truly been the source of our inspiration and our colleagues have provided us with invaluable guidance. The list is huge, but special thanks go to Nancy Reardon, formerly with Borden, Inc., and now with Comcast; Karen Shuttenberg, of Borden, Inc.; Steve Fazio of Nissan Motor Corporation; Jean Alden of Rich Sea Pak; Dwain Beydler of the Memphis Regional Chamber; John Riordan, formerly of SONY Electronics; Tom Collinger of Northwestern University; John Bremen of Watson Wyatt; Maggie Coil; Rob Wolcott of Northwestern University; Bill Hass of Teamwork Technologies; Howard Risher; and Marc Auster.

Kelly Hyman has worked closely with us in the development of ideas and analyses that led to The Headcount Solution. In addition, she has assisted in the research, provided a needed reality test when our ideas got too far out, and provided good counsel all along the way. Paul Schindler, of Schindler Technology, is a partner who has developed the technology allowing us to translate our tools into powerful software. Paul Cherner, with Altheimer & Gray, has been a legal beacon for us to follow in understanding the legal ramifications and implications that one must take into account when making human capital decisions. He has provided advice, counsel, and tools that have been incorporated into the book. We also appreciate the contributions of John DiFrances, John Morrison, Gary Fallert, and Lisa Spathis.

We are grateful to the fine staff of WorldatWork, the professional association dedicated to knowledge leadership in compensation, benefits, and total rewards, for partnering with us in the research that went into this book. Anne Ruddy, Executive Director, has provided strong support and resources all along the way. Lane Michelle Abrahamsen directed the survey discussed in Chapter 2. Additional support was provided by Don Griffith and Ryan Johnson.

Our friends at McGraw-Hill deserve special note. Bill Faris, a longstanding professional associate, introduced us to McGraw-Hill. Richard Narramore, our editior, helped immensely in the original development of themes and chapters, as well as shepherding the manuscript to production.

Finally, we thank Iris Nason and Tracy Scimeca for assisting us in the preparation of the manscript. Their day-to-day support (and a fair amount of criticism) is greatly appreciated.

About the Authors

Fred Crandall, Ph.D., is a founding partner of the Center for Workforce Effectiveness in Northbrook, Illinois, where he serves as a management consultant specializing in compensation and organization issues. He has extensive consulting experience in strategic management, compensation planning, incentive plans, and human resource/organization effectiveness.

Fred is a frequent speaker to domestic and global forums. He is a past president of the Society for Human Resources Management Foundation and an instructor and former course developer for WorldatWork. He is on the editorial review board of Compensation and Benefits Review and coauthored the award-winning book entitled Work and Rewards in the Virtual Workplace: A New Deal for Organizations and Employees.

Fred has a Ph.D. from the University of Minnesota, a master’s degree from the Anderson School of Management at the University of California, Los Angeles, and a bachelor’s degree from the University of California, Berkeley. He served as associate professor at the Cox School of Business, Southern Methodist University, Dallas, Texas.

Marc J. Wallace, Jr., Ph.D., is a founding partner of the Center for Workforce Effectiveness in Northbrook, Illinois, where he serves as a management consultant specializing in work force effectiveness, human resource strategy, and compensation. Marc is an internationally recognized expert on rewards and human resource strategy, legal compliance, and compensation. His research findings have been published in over 60 articles and papers in periodicals such as the Journal of Applied Psychology, Industrial Relations, Compensation and Benefits Review, Decision Sciences, The Journal of Vocational Behavior, and many others. In 1995 WorldatWork honored Dr. Wallace with the Keystone Contributor Award, recognizing a lifetime contribution to the fields of compensation and human resources.

He has coauthored nine books on management and human resources, including Organizational Behavior and Performance (4th ed.), Administering Human Resources, Compensation Theory and Practice (2nd ed.), and Research Based Decisions, bestselling textbooks that have been used by over 1 million students. He also coauthored Work and Rewards in the Virtual Workplace: A New Deal for Organizations and Employees.

Prior to founding the Center for Workforce Effectiveness in 1992, he was professor and Ashland Oil fellow in the Department of Management, College of Business and Economics, University of Kentucky. He holds a bachelor’s degree from Cornell University and a master’s degree and Ph.D. in industrial relations from the University of Minnesota.

Barbara Ballinger Buchholz is a freelance writer who has written primarily about business, real estate, and design for publications such as the Chicago Tribune, Crain’s Chicago Business, St. Louis Post-Dispatch, The New York Times, and House Beautiful. She has coauthored a dozen books, including Porches, The Family Business Answer Book: Arthur Andersen Tackles 101 of Your Toughest Questions, and Successful Home Building & Remodeling. She lives in St. Louis, Missouri.

Margaret Crane, a St. Louis, Missouri, journalist, has coauthored several books on business, including The Family Business Answer Book: Arthur Andersen Tackles 101 of Your Toughest Questions. Her articles on business have appeared in Crain’s Chicago Business, The New York Times, Money, Family Business Magazine, Your Company Magazine, Inc., Success Magazine, and the St. Louis Post-Dispatch newspaper.