Sharing Challenging News with Employees GFA Phoenix Meeting, September 2009 Susan Cary-Hanson, PGC Sharing Challenging News with Employees

Background Information What’s the current problem with the Employer/Employee relationship? Lack of trust of management An all time low and why? Examples of abuse and misuse of power: Enron collapse, WorldCom stock scandal Fannie Mae, Freddie Mac required government intervention Lehmann Brothers bankruptcy Merrill Lynch and Bank of America situation Bonuses paid to executives AIG bail-out and payment of additional bonuses

What is bad news? Topics include: Change of business strategy Lay-offs Closing of plant/division Death of an employee Change in benefits Health care, premium contributions Change in compensation or hours Information of a sensitive nature Employee clothing or hygiene problems Employee performance Loss of a customer

What do employees want? Honesty Empathy Immediacy of information Facts As much information as possible Answers to questions

The Delivery Process Deliver news in person Be up-front Individually, small groups, or in large meeting Be up-front Tell as much as is possible Remind employees that “Truth is a moving target in development and execution of the plan” Emphasize “This is the information today as we understand it” If more than one person in the company is sharing the news, prepare written talking points

The Delivery Process Who should deliver the information? Determine who is the best person The person should have a good reputation within the company Ability to be honest, open, sincere, and caring Plan and think through your delivery to avoid problems of misunderstanding, rumor or lawsuit

The Delivery Process At the end of the day, we all run businesses and we make business decisions There will be fallout due to your actions Think through the possible down sides to your business decision What is the message you want to leave with employees? Does your script allow for that (test it with trusted employees) Be prepared for questions

PGC Example – Health Insurance This was a business issue related to the recession and downturn in customer orders I delivered this news after we had already conducted two lay-offs and reduced employee hours and pay Health insurance at PGC was previously a rich benefit; we paid almost 90% of dependent coverage We needed to get our employer contribution in line with other small employers in Minnesota I was concerned about employee acceptance of this, again, negative news

PGC Example – Health Insurance Our 2008 medical loss ratio was high due to surgeries, illnesses, and hospitalizations September 2008 – first mentioned my concern about the 2009 renewal process Informed employees if they have other avenues for obtaining health insurance, this was the time to do this Our independent review of the current market situation, indicated that our health insurance premiums on the open market would increase by at least $5,000/month vs. our current provider

PGC Example We had 4 options to review Review of dependent coverage New health plans from 100% hospitalization and low co-pays to: 500 Deductible with 90% hospitalization 1000 Deductible with 80% hospitalization 1500 HDHP Deductible with 100% hospitalization 3000 HDHP Deductible with 90% hospitalization Review of dependent coverage

Our Strategy Work to reduce our expenses to keep jobs Communicated to employees how they could contribute to this effort by: Working on their health and wellness and by using health care services appropriately Generic drugs vs. Brand name drugs Urgent care or Minute clinics vs. Emergency rooms Continue to produce quality parts Participate in cross-training Offer other cost savings ideas The goal: To keep employee’s premium contribution to the lowest level possible

Offered Alternatives Shared background information on health insurance in United States Gave employees information about how to obtain insurance on their own if they chose not to participate in our plan Met with each employee individually three times over the course of 6 weeks Shared scripted information - The why Discussed options -The available alternatives Asked for questions - Their concerns

Questions Complied Questions included: What is open enrollment and how does it work What does employee benefit eligibility mean When do the new benefits begin Pre-tax dollars for weekly healthcare deductions What are all the benefits offered by PGC What healthcare plans are being offered How can I determine how much I spent on healthcare last year and how can I review by claims How do deductibles work How do I enroll in benefits What is the definition of child Dependent coverage Pre-existing definition Specific plan design questions

The Follow-Up Complied all the questions and had our insurance company provide answers in writing Posted all questions and answers for employee review Group meetings offered by our insurance company to share “state of health insurance” and answer more questions Specific questions answered in private Met individually with all employees to answer questions again – listen to concerns, empathize and share my experience/frustration over the situation

Bad News Process Summary Determine what needs to be discussed Discuss how/the process of sharing information Group meeting Individual meeting Develop talking points Who will share the information Script Follow-up on questions

Bad News Process Summary Be honest, sincere, open Empathize Celebrate the small successes Thank employees for their involvement, suggestions , and concerns Then….Implement and Review as needed