Table of Contents *

OPENING STATEMENT OF HON. PETE HOEKSTRA, CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE, US HOUSE OF REPRESENTATIVES *

STATEMENT OF ELIZABETH A. TILNEY, SENIOR VICE PRESIDENT, ADVERTISING, COMMUNICATIONS AND ORGANIZATIONAL DEVELOPMENT, ENRON CORPORATION *

STATEMENT OF MARY ANNE WALK, VICE PRESIDENT, LABOR RELATIONS AND HUMAN RESOURCES, AT&T *

STATEMENT OF LOUIS BENJAMIN HOUSTON, JR., PRESIDENT AND CHIEF OPERATING OFFICER, T. D. INDUSTRIES *

STATEMENT OF CONCHITA ROBINSON, VICE PRESIDENT, US SALES CENTERS, IBM *

STATEMENT OF JOHN NIELSEN, MANAGER, HUMAN RESOURCES, I/N TEK I/N KOTE *

STATEMENT OF PAUL RAUSCH, PRESIDENT OF LOCAL 9231, UNITED STEELWORKERS OF AMERICA, I/N TEK I/N KOTE *

STATEMENT OF DAVID SLOAN, GENERAL MANAGER, COTTON DIVISION, DELTA WOODSIDE *

Appendix A – Written Statement of Hon. Pete Hoekstra *

Appendix B – Written Statement of Ms. Elizabeth Tilney *

Appendix C – Summary Testimony for Enron Corporation *

Appendix D – Written Statement of Ms. Mary Anne Walk *

Appendix E – Written Statement of Mr. Ben Houston *

Appendix F – Additional Comments by Mr. Ben Houston *

Appendix G – Written Statement of Ms. Conchita Robinson *

Appendix H – Joint Mission and Values Statement of the United Steel Workers Union and Management at I/N TEK I/N KOTE *

Appendix I – Joint Written Statement/Testimony Summary Mr. John A. Nielsen and Mr. Paul W. Rausch *

Wednesday, May 20, 1998

U.S. House of Representatives

Committee on Education and the Workforce,

Subcommittee on Oversight and Investigations

American Worker at a Crossroads Project

Washington, D.C.

The subcommittee met, pursuant to call, at 10 a.m., in Room 2175, Rayburn House Office Building, Hon. Peter Hoekstra [chairman of the subcommittee] presiding.

Present: Representatives Hoekstra, Ballenger, and Mink.

Staff Present: Jan Faiks, Project Director

Paul Boertlein, Communications Director

Arturo Silva, Communications Assistant

William Matchneer, Chief Counsel

Steve Settle, Counsel/Investigator

Stevan Johnson, Professional Staff Member

Kim Reed, Counsel and Professional Staff Member.

 

 

Chairman Hoekstra. Good morning. The subcommittee will come to order.

The subcommittee today is meeting to hear testimony for the American Worker at a Crossroads Project. Today’s hearing is entitled Innovative Workplaces of the Future. Any oral statement at the hearing is limited to the Chairman and the Ranking Member, and any additional members that would like to have statements inserted into the record may do so without objection.

Witnesses should also be advised that any additional information or testimony that they would like to have entered into the hearing’s permanent record may be done in the next 3 days. So the record stays open for 3 days.

The hearing today is to learn about some of the more innovative programs of some of America’s most successful businesses. We will hear from 6 different businesses, 6 different industries – steel, natural gas, mechanical construction, textile and apparel, telecommunications, and computers. Today’s witnesses will describe their company’s most innovative practices.

A lot of the innovations recognize that employees are the backbone of the workplace. Employees are rightfully perceived as possessing unlimited potential, a potential that many employers do not want to waste. Workers are being recognized more and more for their ability to create, to innovate, and to adapt to constant change. In short, successful businesses appreciate their workers’ ability to think and learn. For that reason many businesses are relying on their employees increasingly as decision makers. Although this decision-making means more responsibility for the work, it also means more freedom and greater rewards if the business succeeds.

Today we will hear from a number of businesses whose greatest innovation lies in their ability to institute policies that use their workers to their fullest potential. This is part of an ongoing conversation with the American worker about what works and what doesn’t work in the American workplace and, more specifically, what innovative ideas can help the American worker to be more competitive in the future.

I will now yield to our ranking member, Mrs. Mink.

Mrs. Mink. Thank you very much, Mr. Chairman. I appreciate the opportunity to be here and to hear the statements of all of you who have taken the time to come to enlighten us about what to expect in the future and what the challenges are for the American worker.

I apologize in advance. I have to leave shortly before 11 o’clock. Mr. Kasich, who chairs the Budget Committee, suddenly convened us today at 11 o’clock for a debate and discussion on the budget resolution, and I serve on that committee as well, so I apologize in advance for having to leave.

I would like, Mr. Chairman, to take this opportunity to introduce students from Hawaii who are lined up in the back of the committee room. They come all the way, 5,000 miles, from Hawaii and are here on a 2-week field trip, first going to Kentucky, then to Washington and on to Arizona, and they are here to present their video and other materials that they have been working on in a high-tech sense.

What is so unique about this group is that they do their entire instruction in the native Hawaiian language, and we refer to that as the Hawaiian Language Immersion Program. And as I understand from the leader of the group, they have done this since the very beginning of their elementary education experience. All these students, I understand, are finishing and going on to higher education, some aspiring to be teachers, lawyers, and moving into other professions.

So this is what it’s all about, Mr. Chairman, the future of this country. And Hawaii is no exception in awaiting what challenging opportunities these young people will have in the future.

Thank you very much.

Chairman Hoekstra. Thank you.

[Song in Hawaiian.]

Mr. Mink. Aloha, and thank you very much. Mahalo.

Chairman Hoekstra. That is out of regular order.

Mr. Mink. I expect that to be in the record.

Chairman Hoekstra. Mrs. Mink always creates special challenges for the Chair or the committee, but this is one of the more delightful ones. So thank you. Thank you very much. That was beautiful. She also provided me with another challenge, because I thought the budget markup was starting at 1.

Mr. Mink. Well, he is going to walk through it for us at eleven.

Chairman Hoekstra. All right, so this is a tutorial for the other side of the aisle.

Mr. Mink. This is for the first time, Mr. Chairman.

Chairman Hoekstra. You could have asked me, I would have showed you yesterday.

Mr. Mink. Holding out on me again.

Chairman Hoekstra. No, that is Mr. Kasich. Let me introduce the panel.

 

We have Elizabeth Tilney. Good morning. Ms. Tilney. Good morning.

She is a Senior Vice President for Advertising, Communications, and Organization Development for Enron, the world’s leading integrated electricity and natural gas company. For 3 consecutive years, Enron has been named America’s most innovative company in Fortune Magazine.

That has to be a misprint because I think in my district I have 3 of the 100 best companies to work for, so I have got to believe that one of those 3 are the most innovative. Maybe you will clarify that for us.

Under Ms. Tilney’s leadership, Enron has introduced a global marketing program that highlights all of Enron’s business capabilities and customers while emphasizing an image of trust, leadership, and integrity. Her work has been recognized, as evidenced by her recent election to Advertising Age’s 1997 Marketing 100, in the Outstanding Women of America for 1997.

Thank you for being here.

We have Mary Joyce who is a Senior Director of Compensation and Benefits with Enron from Houston. Ms. Joyce has an MBA in finance and 15 years’ experience working with Fortune 100 companies in the areas of accounting, corporate finance, and various areas of human resources. Welcome to you, Ms. Joyce.

We have Mary Anne Walk. Ms. Walk has a 34-year career with AT&T, beginning as a telephone operator in Jonesboro, Arkansas. The comment was how could she have been there for 34 years? She looks like she is 34. Now, see, I couldn’t say that because that would have been a sexist comment, but Mrs. Mink said that.

Currently she is a Vice President of Labor Relations and Human Resources Business Management in New Jersey. She has an MBA in marketing and a Masters degree in management science from MIT as a Sloan fellow. Welcome to you, Ms. Joyce.

Then we have Mr. Houston, who is the President and Chief Operating Officer of T.D. Industries in Dallas, Texas and the current national volunteer president with Associated Builders and Contractors. T.D. Industries, which installs and services air conditioning and plumbing systems in six Texas cities, is ranked by Fortune Magazine as the fifth best place to work in America. I think that is after the Senate and the House. Mr. Houston is also a registered professional engineer and a master plumber. We are excited to hear what makes T.D. Industries one of the best companies to work for in America.

Welcome to you.

Mr. Houston. Good morning.

Chairman Hoekstra. We have Conchita Robinson. We met Conchita about 6 weeks ago. She is a Vice President for US Sales Centers with IBM and hosted us in Atlanta.

Ms. Robinson is a 15-year veteran with IBM and is responsible for establishing world class sales centers and is responsible for sales leadership of 1,200 IBM employees. She was also one of 10 professionals selected in 1996 as an outstanding Atlantan and was named to the Black Woman’s Corporate Hall of Fame in 1995. I had the privilege of visiting one of her sales centers along with Mr. Flannery and some other Members in February. Mr. Scott was there.

So thank you and thank you for being here.

Ms. Robinson. Thanks for inviting me.

Chairman Hoekstra. Then we have Mr. Paul Rausch, who is President of Local 9231 of the United Steel Workers with I/N TEK and I/N KOTE steel processing. As president, Mr. Rausch has led the union in creating systems and policies which empower autonomous work teams. We are excited to hear the success story with his steel plant’s combination of labor, management, and technology.

Welcome to you, Mr. Rausch.

Mr. Rausch. Pleasure to be here.

Chairman Hoekstra. Thank you, and with you is Mr. John Nielsen, who is Manager of Human Resources with I/N TEK and I/N KOTE. Before his current position, Mr. Nielsen has held several human resources positions with Inland Steel and was in the Army, where he commanded a personnel service company. In addition to his position with a steel company, he presently chairs a Work Force Development Board and the Regional Education to Careers Policy Board in northern Indiana.

Welcome to you.

And, finally, we have Mr. David Sloan. Mr. Sloan is the General Manager of Cotton Manufacturing at Delta Mills Marketing, a subsidiary of Delta Woodside Industries. Mr. Sloan has been with the textile industry for 30 years and Delta Mills Marketing for 22 years. He is currently in charge of three plants in North and South Carolina. Again we had the privilege to visit one of his plants in February, the Beattie plant which recently went through a major modernization that cost $62 million and the retraining of a work force that took 3 years. No easy task, and that also is a very exciting and enlightened visit.

So welcome to you, Mr. Sloan and thank you for being here.

So that is the introduction, that is who all your friends are at the panel today. I think it is a great panel and, Ms. Tilney, we begin with you.

Ms. Tilney. I may be out of order but I feel left out. Would you come to Texas and visit us, please?

Chairman Hoekstra. We have been to Texas, and I don’t know how we missed you. But maybe we will get back there.

Ms. Tilney. We would love to have you there, Mr. Chairman and Representative Mink. We would love to have the students from Hawaii as well. Maybe on their way to Arizona?

Chairman Hoekstra. We would love to have the students start our session every week. We have found our field visits to be very informative. From the visits we build off of them. Actually having visited a site we ask the individuals to come to Washington. It does help us put it in context. So maybe with you, we will have to do it backwards. Have you here first and then come for a visit. But we will put the pressure on. It all depends on how good your testimony is today.

Ms. Tilney. All right, you will be coming to Texas soon then.

Good morning. My name is Beth Tilney. I am senior vice president for advertising, communications, and organization development at Enron. I am joined today by Mary Joyce, who is a senior director for compensation and benefits. Good morning and thank you for the opportunity to discuss our company's philosophy on innovation.

For 3 consecutive years, Enron has been named America’s most innovative company by the Fortune 500 company CEOs, board members, and senior management who participate in the annual Fortune magazine survey. The 16,000 employees who work at Enron are extremely proud of this accomplishment and motivated by it, too. Let me tell you why innovation is so important at Enron. Actually, let me tell you why our chairman and CEO, Kenneth Lay, believes innovation is so critical to our company's success.

Last year, Mr. Lay was asked about the importance of developing an organization from the bottom up as opposed to the traditional top-down management style of most companies. His response was that all CEOs need to be very reluctant to tell somebody they shouldn’t do something.

Mr. Lay would say, "Quite often someone at Enron will come up with an out-of-the-box idea or approach, and I have to keep myself from saying, ‘We just don’t want to go that direction,’ and over the years, I have found that by holding off on that statement, I have learned a lot of things that initially looked to me to be unreachable, undoable, or maybe even unwise turned out to be brilliant. The point is if you start shutting down some of those ideas early on, well then, your employees won’t come to you at all."

Approximately 13 years ago, Enron initiated its transition from a heavily regulated domestic natural gas pipeline business with 10 million in revenues to the diversified business it is today, a fully integrated global energy company with $20 billion in revenues, committed to open markets and competition. What we found in that transition to a deregulated environment – where customers are the ultimate benchmark of performance, and innovation and creativity are the lifeblood of success – is that our workplace priorities needed to transition, too.

In our desire to cultivate a different kind of workplace, we quickly learned that it is more important to hire bright, capable people and give them the autonomy to find a niche than it is to write a job description and walk potential candidates through a laundry list of routine questions. Questions such as, "Where do you see yourself 5 years from now?" We have found that talented people create opportunities for themselves and for Enron.

Now and in the 21st century, we firmly believe that attracting and retaining the best intellectual capital will be the keys to Enron’s success and our country’s overall success. To that end, we compete hard for good people by focusing a significant amount of time and money on this effort. It appears that our commitment here is paying off. According to a recent survey by Fortune magazine, Enron ranks 13th among 417 companies in our ability to attract and keep good people. Additionally, graduates of top MBA schools around the country have put us in the top 10 percent of the companies they want to work for.

In return, we are committed to helping our employees work smarter and more efficiently.

For example:

At Enron we are not afraid to have different compensation structures to support the needs of our different businesses – and that is a nontraditional approach for a $20 billion company with 16,000 employees. We believe performance-based pay motivates our people to conduct their business activities like entrepreneurs. We are very proud of the fact that every employee owns Enron stock through the Enron stock ownership plan and savings plan, and we clearly believe that pride in ownership is reflected in performance.

At Enron, everyone feels the freedom to pursue new ideas. In fact, our President, Jeff Skilling, recently told all employees that he believes the best ideas at Enron are directly proportionate to their distance from the executive floor. When employees hear comments like this, they can feel confident that their ideas are desired and valued by management.

In addition, our strong commitment to helping employees work smarter is reflected in our annual $275 million information technology budget. This type of investment provides for state-of-the-art computer systems, mobile communication systems, and video conferencing rooms where employees around the world can talk in real time about patterning new deals from previous success stories.

In terms of addressing our employees’ personal needs, Enron emphasizes three areas that help foster a spirit of respect and loyalty among our work force.

The first is education. Enron’s education benefits give employees the opportunity to increase their knowledge database and obtain critical skills that will help them perform at the top of their field. One policy we are particularly proud of is that we reimburse our employees for 90 percent of their education costs, far exceeding the standard corporate benchmark. We also are firm believers in helping employees to develop their core competencies through innovative programs such as the Foundations of Finance and Accounting course and our new 3-day Executive Impact and Influence Program. These programs illustrate what we are doing to help develop internal resources.

In addition, we are equally committed to developing external resources through our participation in several programs.

In terms of developing future leaders, we recently initiated an innovative energy finance program in concert with a $3 million gift to the University of Texas Business School to help develop the talent and skills that are desperately needed in the energy business today and in the future.

We also support other Texas educational opportunities through grants at the University of Houston, the George Smith School of Government and Public Service at Texas A&M, and to the Rice University Center for Education. Enron also provides college scholarships for high school graduates, and employee participation in junior achievement helps local high school students learn about energy and benefits of deregulation.

A second area of focus is employee benefits. Enron offers a flexible creative menu of benefits that give employees the opportunity to choose the right combination of coverage for themselves and their families. Without going into the specifics of each program, the important point is that we make employee choice a priority. And we truly believe that given full information and access, employees, just like consumers, will know it is better for them than anyone else.

The third area of focus is on employee morale. Here Enron steps beyond the traditional boundaries to give employees the information they need and want. Our chairman and our president personally review all of the electronic mail and voice mail they receive, responding to both their ideas and their complaints. Additional programs such as employee meetings with open Q&A sessions, company newsletters, and executive-employee floor meetings keep the communication lines open. And once a year we take our entire management group off site for a 3-day conference to discuss critical business issues.

While I could go into much greater detail about the numerous programs we created for employees, I think the one thing that really differentiates our company is a strong commitment to corporate values. Enron Chairman Ken Lay spent a lot of time defining our values of respect, integrity, communication, and excellence. I still have his handwritten notes from those early drafts, and once he conceived the message that appropriately reflected the spirit of our company, he asked the management team, our company’s front line, to embrace it.

They have done so with a passion, and so have our employees. And today, with these values at the core of everything we do as a company, we are extremely well-positioned to pursue the innovative culture we have talked about today.

As a leader in creating and operating new businesses, Enron firmly believes our Nation’s future prosperity will be increasingly dependent upon innovation, on doing extraordinary things that other countries cannot or will not do. To that end we believe in fostering innovation so that our employees can pursue the unreachable and undoable as they perceive the ideas that will be brilliant in the end.

This concludes my statement. Mary Joyce and I are pleased to answer any of your questions, and again thank you for this opportunity.

Chairman Hoekstra. Thank you very much.

We are going to go to Mary Anne Walk. Mary Anne has somehow done some negotiating and I have checked her statement and I asked her this morning how long she was going to take and we have given her a little bit of extra time. She is going to take 10 or 15 minutes to enlighten us about what is going on at AT&T.

Ms. Walk. Thank you.

Chairman Hoekstra. Do we have a speaker for her or a microphone?

Ms. Walk. We can turn this one around. Is that okay? Great. Now if I can do the electronics.

Thank you for having me here today and thanks for giving me a little bit more time. Is that going to show up okay? All right.

We have actually done a lot of creative things over the last decade with our employees in the workplace to try and help them focus on their skills and competencies for the future. Oh, now we are going to have everyone go to sleep, right? Okay, I will try to avoid that.

We created a process in looking at what we needed to do for the future, and we came up with a program called Workforce 21.

Now what is it and why do we have it?

Well, it is the name given to a revolutionary organization design, and it includes all the processes and all the programs that support that new design. It assumes that people have an intrinsic value that grows when proper investment is made and people skills and competencies, as Beth just mentioned, are really at the center of the Workforce 21 design. People are deployed as work increases, decreases, and changes in response to customer needs, and work groups and organizations form and dissolve based on employee and customer demand.

A couple years ago, I was asked to look at some pretty staggering issues that were facing AT&T today and that would follow us into the 21st century. I began looking at those issues. One issue was how do we hire the new people that we need for the future and how do we retain the existing people that we need, based on skills and competencies that are contained in that valuable human asset?

We at AT&T lay off in parts of our business while we hire in other parts of our business. We are so large that this is a phenomenon that happens, and it is really having a negative impact not only on the people that work for us but also on potential employees that could come to work for us.

We also saw that there was a need for new competencies and skills. Technology was driving such a huge change in the workplace that we needed to update our people skills and competencies on a very, very, very quick basis. And then, of course, we have union partners. Fifty thousand of our employees at AT&T are represented by the Communication Workers of America and the IBW, and they have continually opposed subcontracting work out to subcontracting units. So we needed to think about how to go forward.

Then we have, of course, the Generation X work requirements. Those are all the people that have come into our workplace in the last few years and that will continue to come into our workplace. These are people that have very different work standards than the baby boomers, such as myself. They require that their skills be used at the edge of their competencies at all times. If AT&T is not willing to use those skills and competencies, they will take their human asset, their intellectual capital, and they will go to another company that will indeed pay for those skills and competencies. They perceive that work is work and life is life and they have a very different work standard. They expect a worker-friendly workplace.

So we had to take all those things into consideration with my small design team. We looked at several work force drivers that were affecting American business, and we found that 47 percent of U.S. businesses could not find enough skilled workers. We also found that over 10 million white collar workers had been laid off in the last 5 years. Now that seems like a contradiction, but what we were finding is that the white collar workers did not have the skills that American business needed. Already an estimated two-thirds of U.S. employees work in the services sector, and knowledge is becoming the most important product.

I will say this and emphasize this now, but the preponderance of work that is done at AT&T is considered knowledge work. We found that almost a third of American workers have variable relationships with their employers. They are part-time, they are consultants, and they sell their service to one company and go and sell that same knowledge as a product to another company.

The statistic that really shocked us was the forecast that 60 percent of the jobs that will be created between now and the year 2010 have not been designed yet. That means you are going to have to work with people in such a fast way to continue to update their skills that you need to have totally new training programs and processes that would help them increase their skills.

Now, if you will look with me for just a moment, this is a depiction, a graphical depiction of what we perceive as being an operating environment. If you look at the vertical access, you see the number of AT&T employees. If you look at the horizontal access, you see time. Now what we have at AT&T are 8 very different and diverse units and divisions. We are very large. We have the ability to move people from one part of our business to the other.

So what you have in this graph is a depiction of the types of people that help us do work for AT&T. At the bottom in the blue, you have the people that are permanently assigned to the business units and divisions of AT&T. At the top you have the out-sourced workers that help us with our peak loads. In the middle you have a group of employees in what is called a knowledge center, and that is the variable work force to the different business units and divisions of AT&T.

The theory of this project is that over time, if you will allow me, you will have fewer people that are in the business units and divisions of AT&T. You will have fewer jobs that are out-sourced, and you will have the preponderance of people in a knowledge center. That knowledge center then will be available for people to connect with other professional groups such as themselves to continue to update their skills on an adjusted time basis.

Now, what does this knowledge center look like? It is actually a stratified unit, a stratified group. As an example, you may have all your human resource people in one professional group, all your sales people in another, your technical people in another, and all your marketing people in another, and different groups support them.

What this really does, this puts the person at the center of your business. So when you have a CEO stand up and say that our people are our most important asset, they really start believing it and putting some effort behind supporting that asset as is needed. The different types of work groups that support this knowledge center and if I had to pick one that is the most important, I would pick the one that says Workforce Strategy and Administration Center. That is the group that actually works with our Strategic Planning Office to understand what our future plans are and all the human asset needs that are going to be required in order to execute the strategy.

From that work, you have the centers of excellence that will define the competencies and skills that are needed for the future for both our management employees and our occupational employees. You have the AT&T School of Business from which we have deployed some just-in-time training on the intra-net, on CD-Roms, on the extra-net. We even have that available to us.

We have a sourcing center because regardless of how many people you want to retain inside your company, you are always going to have to continually refresh the talent from the external market, from the external employment pool.

We have a replacement center that will move people on a just-in-time basis to where work is required in order to meet customer needs. Then we have a career support center. The career support center works with every individual that is in the knowledge center so that we can look at individuals of career interest and bump those up against the corporation’s need and be sure that we fill the gaps just in time from a skills and competency perspective.

Now, this program got so large that what we actually did was build a strategic intent. And the strategic intent is to have the world’s best work force. To do that, we found that we needed to create new ways and better ways of doing everything we do in human resources to support that human asset.

As a result, we broke the project up into strategic components, and I won’t take but a second but I will just mention a couple things on each one of these components.

Our workforce planning component. This was, as I said, one of our most critical. We really needed to have an HR executive sitting at the strategic planning table so that we could be there when the plans were made in order to meet our strategic needs for the future. By that, I mean that instead of just saying we are going to introduce product X in order to introduce product X, you need to have certain skills and competencies and certain numbers of people to be sure that you can get in the market at the time that our strategic planners say we need to be there.

Now, what had happened in the past was that we had not had that interaction with our strategic office. And what this does, when you bump up the human asset needs against the strategic plan, it changes all of your time horizons and all of your cost horizons. So with us now being at the planning table in order to imbed these needs, we have a more accurate reflection of what we need to do inside of human resources in order to help the people of AT&T succeed.

In our technological transformation what we did was we found that we needed to have one common platform that would support all the human asset requirements that we have at AT&T. We had about 60 different HR systems that didn’t talk with each other. That is a product of our 100-plus year heritage. So what we needed to do was retire the majority of those systems and have one common platform. So we had executives go to meetings to talk about business problems. They all talked from the same report. They weren’t then arguing about why does your report look different than my report, and then they started arguing about erroneous reports rather than the business problem that was there in front of them to grapple with.

So we have now been able to introduce a common platform for our human resource needs inside of AT&T. We have now retired almost 40 systems, and in doing so, we had a by-product of reducing our costs that we needed to execute on looking at the year 2000 compliance requirements. So in retiring 4-1/2 million lines of code, we also reduced costs and other parts of our business.

We have to look at all of the employment relationship compensation and benefits, and I was happy to hear Beth mention that. You really do in a diverse workplace, you have to have different compensation plans and different benefit plans not only to support your business thrust but to support the needs of your employees. You have to attract the baby boomers who want a more stable environment as far as health care and pension plans go, and you need to attract the Generation X-ers that are coming in that want money. They want it now and they don’t care about pension plans at this time. And so you have to be able to design flexible compensation and benefit plans and health care plans to support that. And we have done that through this project.

I am going to skip human asset evaluation and talk just momentarily about future competencies and skills. This is probably the whole backbone of the project, and if we are not able to help our people change their skills, or make U-turns at high speeds, then we are not going to be successful. As I mentioned earlier, we have moved from a predominantly classroom training environment in our AT&T School of Business to a more virtual relationship for training with our employees. Transforming the culture is probably the most difficult component that we have. What we have to do is to help our executives understand that their worth is not tied to the number of people they have amassed underneath them. Executives can be a single contributor themselves and they will be just as valuable.

We are trying to help our employees feel good about the fact that they really are free agents, that the intellectual capital that they have in themselves is valuable. And with this project we are really trying to create an environment where the people will want to stay at AT&T and invest their human capital in our company and that we will benefit from that investment in turn.

Human asset valuation is a component of the project that is being designed in parallel with the rest of the components. The other areas that I have spoken about have to move in tandem with each other for there to be success, and we are indeed doing that. The human asset valuation piece envisions that after we can identify and measure the competencies and skills of our different employees. We can actually look at the people of AT&T – the 120,000-plus people – and say that their value is not just their wages and their benefit package, but it’s all the training that they have had. It is all the experiences that they have had. It is the relationships that they have inside and outside the business. Put an economic equation on that, add it up, and move it from the liability side of the balance sheet to the asset side of the balance sheet. You actually change the valuation of your business when you do that.

AT&T cannot do this alone. No one company can do this alone. We have to have every company in America be willing to change the valuation of their business. This involves interaction with the SEC, changes there, the IRS, the GAAP, so it is a very long project. But what we are discovering in even going down that road is the fact that we are creating some incredibly important decision models that our executives can use in thinking about human assets when they are looking at their financial horizons and where they need to go with our financials.

If we make it, great. If we don’t make it, we have already made significant progress in helping people have more stable employment.

What we are actually trying to do and this will be my last slide – and thank you for giving me the extra time – is to create an environment where we look at the corporation’s needs and wants, and we look at the individual’s needs and wants, and hopefully over time a greater overlap will be created. People will be willing to invest their intellectual capital in our company and then AT&T will benefit from that.

Thank you Mr. Chairman. I will take your questions whenever they are appropriate.

Chairman Hoekstra. Thank you very much. Mr. Houston.

Mr. Houston. It is very much an honor to be here especially in front of the committee and with such outstanding folks on the panel with me. I was actually moved to tears by the true future of our country, the wonderful greeting we had in song from the kids from Hawaii, and I am moved to tears already again because that is where it really is. So thank you for this time.

We are honored to be here, T.D. Industries. I am president of T.D. Industries. We are a company of about 1,000 partners, and we call ourselves partners because we do all own it together, and we operate across sort of the southern United States, having operated in about 26 States doing plumbing, heating and air conditioning work.

I am also the volunteer president of the Associated Builders and Contractors of America, and I would like to read first T.D. Industries’ vision statement and then the ABC vision statement because they are so close.

"We are committed," T.D. Industries, "We are committed to providing outstanding career opportunities by exceeding our customers’ expectations through continuous aggressive improvement." The operative word "career" is first, indicating the people are the important part. Customers, certainly, we must exceed their expectations and we must aggressively improve.

The Associated Builders and Contractors’ vision statement says, "We will provide the best training, government and legal representation, and programs to ensure members a competitive advantage, add values to the industry’s clients and to enhance the lives of the industry’s employees."

You were kind to mention the awards that T.D. Industries received as being No. 5 on Fortune magazine’s 100 best companies to work for in America, which was because of our goal of having the best careers. It was very moving to all of us. What we try to do is to create an individual environment where each can produce, while having fun, while we accomplish trust, servant leadership, quality, and sharing. And to have fun, every single item that we do begins with item No. 1, which is humor.

I will tell a quick story, you all may have heard it, on the Fortune’s top 100. Southwest Airlines was first. There were some great companies. We were 5, and Microsoft, Bill Gates’ company, was No. 8. And Bill Gates actually had a dream, they say, and his dream was that he had died and he was on his way to one of the two places. And when he got there in Purgatory, they said, "You've got a choice of which place you go. You are kind of on the border. You can either go to Heaven or to Hell." And he said, "Well, could I have a preview?" And they showed him a conventional Heaven, which had cherubs and parks and clouds, and they showed him Hell, which was ocean waves and a beautiful beach and palm trees. And he said, "Well, I believe I’m used to that, I think I will go to Hades." So they said, "We will come check on you in 6 months." In 6 months they returned, and here he was, in shackles and chains, he was whip-lashed all over his back, and they said, "How are you doing?" to which re plied, "Well, this is not at all what it was represented." And they said, "Well, we have to explain it to you. What you saw was Hell 95. What you got is Hell 98."

[Laughter.]

Well, we do like to begin our meetings with fun, but trust is the key element. Some companies have what they call an open door policy to management. We have a no door policy. We have all open office concepts. Every one of us, no matter what our rank in the company, has the same size office. Our entire culture then is based on trusting relationships between the stakeholders, clients, communities, partners, and suppliers.

Servant leadership. Everybody is considered a leader in our company. That is why we call ourselves partners because we are partners. We believe in Robert Greenleaf’s philosophy, as indicated in the book called Servant Leaders: All individuals are leaders and managers of their jobs. We also believe, as he did, that in order to lead, one must first serve those that are to be led.

Quality. We believe everything we do must strive for meeting our stakeholders’ needs. Most opportunities for improvement are accomplished through work teams focusing on the work at hand. We avoid the term "buy in" in our company because it implies someone has the correct answer and is going to go sell it to someone else. We prefer to have the best solution created by equal input from all participants.

Measurements and quality. We measure many, many things, for instance, partner satisfaction. This is extremely important and we benchmark this against the national Hay survey so that we know how we are doing against ourselves. We have been doing this for 20 years and how we are doing against national norms.

Supervisor survey. Every supervisor is rated by the people who work with them, and those reports are given to the supervisor themselves. It is confidential. And that supervisor is responsible for getting with his supervisor to see what items they can work on together to improve. Obviously, we must have customer surveys. Every customer is surveyed. We have a 9 out of a 10 goal. And if there is a problem, 7 or below, the customer is actually contacted.

Back to the individual. One with One reviews are required yearly with each partner and their supervisor. These must be at a time when pay evaluations are not occurring. Like many companies, we do pay evaluations twice a year. The productivity reports and safety reports, all go to the partners who can make the basic impact and affect those items in their individual work areas.

A key element is continuous improvement. We partners of T.D. Industries are our own greatest assets. So all partners, regardless of their position in the company, are asked to take a minimum, bare minimum of 32 hours. Many of us get 40, 80, 100, because we must sharpen our skills of the individual to assist in ensuring this continuous improvement of ourselves. We actually enhance that. We pay 100 percent of the training and a lot of it does end up being done at night, because if you are going to take a degree at night you are working as a construction worker you need to do it at night. So if you do more than 32 hours in any one year, we give an extra day of vacation to encourage our partners to improve themselves.

We do a lot of other training in meetings, because working together is the key element to our productivity. We have safety orientation, mentoring, 90-day orientation, 6 months benefit orientation, one year TDO opportunities, second year quality training which is taught, by the way, by our management team, breaking up all the partners in T.D. Industries to teach 16 hours of quality. And then structured, 3 through 6 years, training on diversity, teamwork, leadership and the seven habits of highly effective people.

We also go forward and use the Associated Builders and Contractors Wheels of Learning programs and technical and management programs to enhance the skills of our partners. And lastly, sharing. As a construction company, we have all the benefits that you would be used to, plus a few extras, wellness programs. We subsidize training every employee to have a health facility to work at. We also think our communities are vital, so a partner can come and get up to $100 cash to work in a community project, but only if they work in the project.

Continuing education, we have already spoken to. But we encourage participation in these associations, as I have mentioned. Sharing. Very, very vital. Financial incentives are paid to virtually every partner that has been in our company, based on the production of their own work unit, and also contingent upon partner satisfaction, supervisor score, customer satisfaction and internal partner satisfaction scores being adequate as well. These things must balance before we get these individual cash rewards or they are really earnings.

And then once we complete our work in our company, we are strong in employee stock ownership plan and a 401(k). Thirty percent of our corporate profits before tax are delivered back to these plans. And I must emphasize that we have virtually everyone in the company owns the stock, and there are no large stockholders in our company. The largest is our founder’s widow, and she is advanced in years. She owns maybe 7 or 8 percent at this time. And then it goes just a little bit at a time to each and every partner in the company, based on their contribution through the years in participating in the plans.

In summary, our partner success is based on having fun, trust, servant leadership, quality and sharing. And I would like to close with one of our superintendents’ comments when getting the notice that we were No. 5 on the list honored us. And I have already told you Bill Gates was No. 8 on the list. He sidled up to me and he said, "Well, what an honor to be No. 5, but," he said, "I think we maybe could have taken No. 8 and the money."

But in a closing remark which he said which closes my remarks, with the kidding aside, "I don't know," and these are his comments, "I don't know exactly what we did to earn this award, but what we got to do is just keep acting like we deserve it and everything will be all right." And that is what we at T.D. Industries and ABC are about, is trying to act in such a way that it is going to be all right.

Thank you very much.

Chairman Hoekstra. Thank you very much. That is a pretty high standard. See, we have had singing this morning, a comedian, and now we are going to go to Miss Robinson.

Ms. Robinson. By his jokes, I being from IBM, I don’t need to make any.

Mr. Chairman and members of the subcommittee, Thank you again for inviting me to testify here today. My name is Conchita Robinson and I am the vice president for US Sales Centers for the IBM Corporation.

I understand that last month you met one of my colleagues, Rick Martino. He is the Vice President for National HR Operations and the reason I am here today is to try to expand a little bit on the message that he delivered to you about the future of IBM and the future of business. I have been in the IBM company, on the IBM team now for 16 years. I can tell you IBM is changing. It really is true. We as a company are reinventing the way we do business, and it is beginning with the sales centers. We are the future of business. We are the "New Blue," as we call ourselves.

What is New Blue? It is a very diverse, creative, driven team, but most importantly, a successful one. IBM currently has 3 sales centers in North America; one in Toronto, one in Atlanta and one in Dallas. As vice president of the US Sales Centers, I have the responsibility for the operations of the Atlanta and Dallas facilities. These IBM sales centers have a combined total of about 1,800 employees in the U.S., and in 1997 this team brought in several billion dollars of revenue to the IBM corporation, and we did it all over the phone. I smile, because there was a team to visit us, and I got a lot of questions of disbelief on our ability to sell IT solutions, information technology solutions, over the telephone. But it is true, we do do this. We have simply changed the way we do business.

It is important to know that IBM is utilizing both sales centers and customer service centers to satisfy customer needs, hopefully resulting in increased customer loyalty. Like IBM, many other corporations use call centers to receive inbound 1-800 calls relating to customer service or product purchasing. However, IBM is utilizing a new model to extend its reach, to extend its level of service, and therefore its competitiveness, and this we call the sales center.

In the spring of 1996 when I joined this team, IBM made a decision to consolidate all of its phone sales activity in North America into these 3 megacenters that I mentioned earlier. Now, that is quite a daunting task. We had 50-plus locations. Why did we do it? Because we came to realize that it was a core competency for us. It was key to our competitiveness, and therefore future success, and because IBM understands that sales centers can conduct some business much more efficiently than face-to-face sales reps. So, the consolidation began. We relocated 300-plus employees and hired another 400 to 500 employees. But IBM’s sales force in that year, believe it or not, not only met but exceeded its revenue objectives for 1997, and that is what this New Blue team is all about.

Now that you understand the background of the IBM sales centers, please allow me to tell you a little bit more about the Atlanta Sales Center which some of you visited earlier in the year. In 1997, the Atlanta Sales Center handled 2.3 million inbound and outbound phone calls. Telesales reps took 70,000 orders. Large account relationship reps handled almost 19,000 orders and small- and medium-size business representatives or sales reps handled an additional 9,000 orders.

To support this huge volume of calls, teaming is essential in the Atlanta Sales Center as well as the other North America centers, teaming within the centers as well as with our colleagues that are doing face-to-face selling. It is the reason that we have increased customer satisfaction and generated so many orders.

One very unique way that the Atlanta Sales Center facilitates teaming is with the employee work groups or pods. Each pod consists of a manager and 15 sales representatives. And I have got to share this with you, because it is hard to imagine if you have not visited the facility. We really have a one-story facility that houses about 1,050; 950-plus of these individuals are in pods, so not offices. They truly are 15 folks sitting in pods, with the manager enclosed in a glass enclosure, not quite four-sided glass enclosure in the middle of the pod.

Now it is unlike the old IBM, where the new managers actually sit in this enclosed cubicle in the middle of their pods. There are fewer physical barriers to obstruct face-to-face communications and coaching. Managers are always available to answer questions or to help close a sale. The reason the sales centers are so successful is because they make it easier for customers to do business with us via phone, via fax or via the Internet. IBM, as you know, is a huge corporation, and we understand that to be successful, customers have to reach us. We understand what customers want, but most importantly, we understand what customers don’t want. They don’t want to be put on hold, they don’t want to play phone tag, and they don’t want to explain their customer’s life story and the business that they are in every time they need a product or service from us.

And that is where we come in. The sales centers provide customers with one point of contact no matter what their need. One-stop shopping, so to speak. Our team consists of industry, product, and services specialists, so that no matter what the customer’s need, an expert is always right around the corner. Basically IBM sales centers house individuals who work together to sell solutions. We provide unparalleled phone and electronic sales capabilities to our customers. The Atlanta Sales Center is unique because it handles sales from beginning to end, and sometimes it starts with telemarketing. Now, I know sometimes that is a dirty word, but I got to tell you, these telemarketing professionals are not to be confused with the people who call you and annoy you during dinnertime. These individuals conduct scripted outbound calls to inform IBM customers of new IBM solutions, or they take inbound calls that are tied to previous campaigns, working at all times to identify and qualify customer leads.

Now, a qualified lead for us is one, which passes three out of four pre-identified criteria for becoming a potential sale. And what we do once these leads are qualified, is that we pass this customer’s need or this lead to an opportunity management team who verifies that it is indeed a lead for IBM equipment or solutions. They deploy it to the appropriate business partner or to the appropriate IBM sales rep.

So, you see, this team is truly strategic to the future success of IBM. We generate leads and cultivate them to the sale. We offer industry product and services specialists to handle customer needs. We employ a motivated and expert sales force which acts as a single point of contact for all customer inquiries. But the bigger news here is that the sales centers are not only the future of IBM and other IT firms, they are the future of businesses in all industries.

IBM is not the only company to realize the value of sales centers. In fact, I must tell you that the sales center leadership team continually offers executive briefings to other corporations who have heard about us, have witnessed us or just wish to emulate it. IBM even sells consulting services to other companies to help them to create and implement enhanced marketing strategies that will insure future competitiveness and success.

Although these types of teams are key to the growth of business, we are facing one major challenge. Currently we are forced by law to pay sales center professionals on an hourly basis. That law is greatly impacting our productivity and the flexibility that we have as we work with salesmen that just happen to be housed in the center and working as phone-centric versus car-centric, as we call it. These employees are sales professionals, and we need to be able to pay them as if they are. The Committee on Education and the Workforce passed H.R. 2888, and I guess it is called a Sales Compensation Act, and I just ask your help in passing it this year.

Our future is about working smarter and not about working harder. The future is about providing a variety of ways for your customers to reach or do business with you. Having highly skilled tele-professionals available when the customer wants them, providing one-stop shopping, a window into the mass resources of any corporation, is the one thing that is working for IBM. It is truly strategic to our future success. We are indeed the New Blue.

Thanks again for inviting me today.

Chairman Hoekstra. Thank you.

Mr. Rausch. Do we go to Mr. Rausch or do we go to Mr. Nielsen? Mr. Nielsen first?

Mr. Nielsen. Thank you. We are going to do this as a tag team. I will provide a brief overview of our facility and the nature of our business and then Paul will get to the heart of the labor-management relationship.

Thank you for inviting us. I am John Nielsen, Manager of Human Resources at TEK and KOTE. We are steel processing facilities located in New Carlisle, Indiana, and we are joint ventures held by Inland Steel Company and the Nippon Steel Corporation. Our enterprise represents a $1.2 billion commitment to advance technology and, equally important, to the socio-technical systems approach to the performance of work.

Our companies are distinguished by the partnership forged between the United Steelworkers of America and management. The plants are operated and maintained by self-directed work teams which perform, without supervisors, around the clock, 7 days per week. Management personnel are relied upon as socio-technical resources whose role is to facilitate team dynamics and promote constant improvement.

Members of the Joint Advisory Committee, comprised of 12 top union and management leaders, work together to develop plant policies by consensus. In 1997, which is the eighth year of operations for our Greenfield site, I/N TEK produced slightly more than 1-1/2 billion tons of cold rolled steel which was consumed by automotive appliance and office furniture makers. I/N KOTE generated almost 1 million tons of galvanized steel, which is used by virtually every auto manufacturer producing vehicles in the United States today.

Now my colleague, Paul Rausch, who is President of the United Steelworkers Local 9231, will discuss our distinctive competence; that is, the leadership role of the United Steelworkers in our business success.

Mr. Rausch. Good morning, Mr. Chairman and members of the subcommittee. On our way down here, we spent a great deal of time talking together, trying to identify just a few key things that have helped us become successful in our endeavors in New Carlisle, Indiana. The history of the steelworkers and the major integrated steel producers on the Great Lakes has been one of an adversarial relationship, and it was built over a great number of years for a great many reasons.

John and I, by virtue of our positions, were asked to sort of break tradition there and understand that there needed to be a better way for organized employees under a union to get along better with management. So given that as a little bit of a foundation, we shared with you a four-page document that you should have gotten.

A number of the headings in this document, Purpose and Intent, Philosophy of the Enterprise, Equality of Treatment, Self-Managed Work Teams, the Role of Union-Management Joint Decision-Making – these paragraphs are lifted directly out of the collective bargaining agreement. We believe that that is one key element that has allowed us to be very successful in our undertaking because it tends to put both parties feet to the fire.

This relationship and a drive to be successful in our marketplace is not one that is coached and counseled simply by one of two parties involved in our plan. The union has a vested interest on behalf of its membership that we are successful for their long-term goals and the raising of their families and their needs. We believe that we can challenge each other when the times are tough that we can go back to the collective bargaining agreement and refocus ourselves and our understandings on what it is we said we wanted to be about, from a very long-term perspective.

I think the other key to our success has been team training, team member training. Our facility is new technology in the steel industry, highly computerized. It was understood by both parties immediately that we would have to undertake expensive technical training just to produce product in that plant. So that was a no-brainer really. We needed to figure out logistics, how to get people to Japan to see the technology they were going to be asked to master, again in a small corn town in New Carlisle.

But beyond that, we also believed that in order to be successful for the long term, team members had to understand our place in the business world as a company. No longer would it be enough to be very good at pushing buttons or very good at turning wrenches, but that we had to believe that training and education would become a way of life for employees at I/N.

That again was a break in tradition, especially in a union shop. Normally you would garner skills early in your career and hold those skills and expect to have a 30-year career with those skills. We broke that mold at I/N very early. Beyond that, we wanted our folks to understand who was using our product and what they were making with our product.

You can walk through our facility at any point – any time day or night. Whatever team is producing in the plant, they can tell you who the customer is, the quality requirements of that particular coil of steel, and the end use of that coil, whether it is an internal component in a Ford Motor car or the wrapper on an Amana refrigerator. They know in real time as the product is being run, the end user.

That has been very successful for us, because we have garnered a sense of ownership in our process. Around those ideas, we try to build a compensation program that would tie all of those new ideas together in a meaningful way, and John is going to share with the committee this morning how we have based our compensation program.

Mr. Nielsen. The key to how this all comes together is the outgoing education that Paul alludes to and the fact that these are true business people throughout the organization. They genuinely understand the basis for the creation and sharing of wealth and how we can lose those opportunities. They focus very strongly on the things which are identified jointly by the parties, negotiated in the collective bargaining agreement, which are at the heart of our business success.

Currently we give great emphasis, and perhaps you are hearing recurring themes here from Ms. Tilney’s earlier remarks relative to the variety of variable incentivization programs in her organization. This is perhaps more of the same. We highlight throughput of product, which we refer to as an inefficiency quotient. We look at a working ratio, which is the out-time of the facilities, and certainly the quality of the product. We are now talking about innovative approaches to the reduction of plant costs, and the sharing equally of the returns on those reductions. So there is a lot of pull in that plan. People tend to make a good income at I/N TEK and I/N KOTE. The average earnings for people represented by the United Steelworkers in 1996 were approaching $65,000 per year, 40 percent of which is leveraged in the variable program.

People here in our organizations truly understand what the customers are looking for and they know, as Paul said, from minute to minute what the parameters are on a number of these factors that are incorporated in the reward program. And, in brief summary about the kinds of things that I think that you have heard in your investigations and you will continue to hear from presenters such as ourselves, there are 7 or 8 probably key factors that are underpinnings of these high performance kinds of organizations.

And we are pleased to tell you that those things don’t change in a union-organized environment. They continue to be the same drivers. We have founded the organization on rigorous recruitment standards that are based on clear analysis of performance requirements. We know what we are looking for, and we also know how to find that. These facilities and the enterprise and our culture isn’t for everybody.

It is important to give realistic job previews so that employment candidates know what they might be getting into if, in fact, they choose to continue on in the selection process. Actually 25 to 30 percent of our candidates opt out before getting into the first step, given realistic job preview.

Orientation to the organization’s mission and values, which are jointly defined by the United Steelworkers and our management team, is very important to getting people's head screwed on right regarding behavioral norms in our culture and society. And the United Steelworkers stand very firmly behind those behavioral norms, and drafted with management the team management philosophy and guidelines.

Paul has spoken to lifelong learning, our team-based work organization, flexible job assignments, which for the first time in my 20-year career, we were pleased to see that United Steelworkers not only favored but asked for flexible job assignments in our culture, performance-driven incentive pay, an abundance of communication. When we survey our work force, they say communications around here stink. Everybody has access to electronic mail. We are on the telephone constantly. It is a small organization. You can see practically everybody in the work force on a daily basis. The communications are not good enough.

Security, which is borne of trust and our competitive stature in the industry, true security for working people who, despite catastrophic circumstances which have befallen us two or three times in the past 10 years, have never been laid off or stuck back in the organization, continue to make money day in and day out. Okay?

Mr. Hoekstra. Thank you. Mr. Sloan?

Mr. Sloan. Good morning. Mr. Chairman, thank you for inviting me. It is really an honor to be in the presence of such great companies and outstanding individuals this morning.

As a representative of an American textile and apparel manufacturer, I want to speak to you from the perspective of an industry which has seen a substantial amount of its business move offshore, significantly affecting the livelihood of many of this country’s residents. Our industry has seen times where it has struggled to survive and be literally forced to find new and creative approaches in its manufacturing methods, processes, and equipment in order to face the growing challenges to successfully operating a business in this country.

Many of the challenges we face are similar to those faced by other industries and types of businesses. These are due to increased competition from ever-changing technology. However, a major portion of our stumbling blocks to success is that created by the bureaucratic red tape of our own country.

There has been such a promulgation of laws and regulations applicable to American businesses over the past 20 years that notwithstanding the merit of the laws themselves, our ability to operate our businesses efficiently, effectively, and profitably has been reduced drastically. This is due to the technical requirements corresponding with those laws that have been imposed upon us.

We have had and will continue to have new challenges to face in the coming years. Some we can deal with effectively, some we have no control over. When we were faced with competition gaining the edge on us because of the new technology, we were repeatedly told that with our mature work force and outdated equipment, we could not survive. Instead, we faced and successfully overcame that challenge by modernizing our Beattie plant and retaining our fine work force.

The Beattie plant is a textile manufacturing facility located in South Carolina. In 1962, the construction of the original plant was state of the art to produce print cloth. In recent years, that business deteriorated and profits turned to losses. The equipment capability was obsolete in both quality and productivity. The conversion at Beattie to produce fabrics for the bottom weight market took place in 1995 and 1996. There were significant increases in production rates and quality.

The plant had everything replaced except the roof and some of the walls. Instead of separating the employees from the plant during the rebuilding period, they were left on the payroll, at tremendous expense to the company. The employees were able to watch the change take place and continue receiving wages as the plant was rebuilt. The plant was designed to be safe, clean, and comfortable for both people and machines. Safety results are excellent in comparison with the industry and other plants. Numerous programs are in place to recognize achievements and accomplishments of associates. Training was accomplished by using formal classes at the equipment manufacturer, in-plant engineering training programs, and on-the-job instruction.

Automation replaced most of the physically demanding jobs. Employees who had never touched a computer are operating machines controlled by microprocessors. They are using computers to provide data analysis. Virtually every piece of equipment in the plant is linked to computers to journey deeper into evaluation of quality of the first quality in an effort to take quality to a level that no other competitor has been able to do in the textile industry.

Employees are encouraged and empowered to make decisions and take corrective actions based on the data generated from these systems to determine optimum machine settings and maintenance schedules. They are interacting with the original equipment manufacturers and even suggesting to their engineers how they can improve their machines.

They were initially apprehensive about the change, but they and their managers together, side by side, learned the new skills required. No longer was either our plant or our work force obsolete. Employees from our other plants have visited and left with confidence that they, too, could learn the necessary skills of manufacturing in the computer age, even though they have less than a high school education.

In April 1997, the plant was awarded the South Carolina Governor’s Quality Achiever Award. In November of 1997, it received the Energy User News Certificate of Merit in the lighting category, for innovation in lighting design and energy efficiency saving over 4 million kilowatt hours a year.

Beattie plant had been transformed from a dead market to one that is strong. The plant is a world class operation, the envy of many throughout the world.

It is becoming increasingly difficult, however, to continue to survive and grow with the cumbersome requirements imposed upon us by the government. Flexibility and adaptability are keys to this growth and survival, yet we are constantly being bound tighter and tighter by the restraints of technical compliance with overwhelming regulatory schemes. As a result, we would encourage a review of and a reduction in these regulations in order to make American businesses and our economy as strong as they can possibly be. Thank you.

Mr. Hoekstra. Thank you very much. How many acres do you have under roof?

Mr. Sloan. Ten acres.

Mr. Hoekstra. We went through them and I just couldn’t remember. I knew it was a lot

Mr. Ballenger?

Mr. Ballenger. Thank you, Mr. Chairman.

I would like to, as a member of this body sitting up here and also a member who is an owner of a manufacturing company back home and still has it running, I would like to commend each and every one of you and back up what Mr. Sloan said. In my operation, I run into the same difficulties with EPA and OSHA and all the rest of it, that you will never know what the rulings are, because my little company only has about 250 employees, so we can’t hire some specialist for each and every one of those particular areas where maybe Enron can. And I notice you did say that Enron has employee scholarships to college.

That is rather fascinating to me, because in my company we put in employee scholarships to college, and we ran it for about 3 years until Internal Revenue and the Federal Government came in and said, "We are terribly sorry. You are going to have to cancel out your employee scholarship program," and I asked why. And they said, "You never turned anybody down." And I said, "Well, you know, I didn’t realize that was one of the necessities."

I could have brought my daughter in here and had her turned her down. But that is one of the most stupid things I ever heard of and that is Uncle Sam’s way of doing things. I have a couple of questions.

You mentioned, Conchita, HR 2888. I will let you know that something is moving along those lines that Republicans – and I am on what they call the whip team around here, checking about how everybody is going to vote, and they had me whipping that one yesterday. So, I mean, somebody, somewhere, is planning on doing something with that bill. I would love to know, if you could, without getting too deeply into it, how much can one of these inside salespeople that work for you, how much can they earn if we were to set them free from Federal regulation? How much could they earn?

Ms. Robinson. The truth is, right now the starting salary – and this is the base salary, so experience in the market and degrees kind of a thing will add to it – but the base salary I think is somewhere between 30 and $32,000 starting salary. But they are on a sales plan, just as any other sales representative in the IBM company, and the funding for the sales plans, so at success, do you understand, the average funding is somewhere between 130 and 140 percent.

So that says given that you not overachieve your objective, but make your objective, you can expect your salary to be 130 to 140 percent of the 32 if you are starting, you know, at base. The concern we have, and where this gets difficult for me, is that sales guys are sales guys, and they want to be able to maximize their sales in a specific area and set customer’s environment.

And when they are being paid hourly, right there are rules. I am a salesperson, so I didn’t know about these rules until I came into this situation. There are rules that say if the guy is selling 40 hours a week and now he is deciding to stick around to do some of his paperwork or do his notes and put it in, then I am sending him home because I can’t afford to pay him the 41st hour or the 42nd hour because I have got to pay him overtime, and that is not the biggest deal.

You learn that after your commissions and your awards and things that you give them are on this, you know, time and a half, kind of, plus their 40 hours a week. So you end up in a situation, whereby if you were more experienced or just better at doing your job, meaning time, or if you didn't dot all the I's and cross all the T's, but you are very, very successful, it took me 60 hours to do the same thing, I truly could get paid much more for doing equal performance in my territory. And that is not a way you pay a salesman.

Mr. Ballenger. I would love to be able to tape what you just said and play it next week when the bill comes up. That really isn’t all that bad to give people the opportunity to earn a little bit more money, if they really want to create it without government regulations.

Mr. Hoekstra. Will the gentleman yield? Let the record show that the sales center in Atlanta did have guys and gals.

Ms. Robinson. Did I know? It is okay if I say "guys."

Mr. Hoekstra. That is all right. You get away with murder.

Ms. Robinson. That is true. My population is about 40 percent female. I am more proud of this. It is 40 percent female, it is 30 percent people of color. And the thing I guess I am even more proud of is that it streams all the way up the management line. So when I do the management versus non-management, we are about 35 to 42 percent female. And we are the same with people of color.

I was joking prior to coming over here because imagine the building. This was the first new building that IBM has built in quite some time. Since we have been going in the other direction, we truly had do some imaginative bathrooms on size of the population.

Mr. Hoekstra. The trip there really was fascinating.

Mr. Ballenger. I can imagine.

Mr. Hoekstra. Because not only the salaries, but the building and seeing how they work, but also the explanation of what they sell, and the people on the phone are selling what I think you said, systems that are worth millions of dollars are being sold over the phone. Go on.

Mr. Ballenger. You mentioned the team effort and how you get together. Knowing that most IBM operations are nonunion, of course, you realize you are breaking the law. Teams are not allowed to work together because of Federal regulations. And I just thought maybe we will turn you in. He is going to explain how you get around it. How do you get around it?

Ms. Robinson. He says I am very conservative about what I discuss in teams. I have got to go learn more about that one, apparently.

Mr. Ballenger. No problem. But I kid everybody. I get a chance to say that anybody in the United States today that is in the manufacturing business must have teamwork where you are involved by sitting down with your employees and discussing this whole thing of which is the best way to do something and which is not. Now next year the Steelworkers, obviously, with the union, they are legally allowed to do that. But if you have a nonunion operation, you are illegal.

And I just thought maybe I would warn you about that in case you ever get into real deep trouble. But knowing IBM, I don’t think you have a real worry about that. I would like to ask Mr. Nielsen, since I am a businessman and I keep running into all of this kind of stuff, I wonder how you generate your synergy bonus?

On the basis of Federal law, you are not allowed to project a bonus ahead of time. If you base a bonus on the success of your business, don’t you have to go back for the rest of the year and add that to their hourly pay?

Mr. Nielsen. Yes.

Mr. Ballenger. Do you do that?

Mr. Nielsen. Yes, we do.

Mr. Ballenger. Phew.

Mr. Nielsen. Actually, we pay it on a quarterly basis, and we look back and we adjust for overtime hours that were worked and we increase the pay-out accordingly, in accordance with the Fair Labor Standards Act.

Mr. Ballenger. I commend you for it. It always seems so complicated to me. I couldn’t figure out how in the world you can pay bonuses. The only way you can pay bonuses is don’t tell anybody you are going to get one.

Mr. Nielsen. It takes some getting used to, sir.

Mr. Ballenger. Delta Woodside? I would like to say I commend you for leaving out the part of your speech that you had written. I read it, and it applies. I am from North Carolina. You are from South Carolina. We both run into the same problem. But I would like to ask each and every one of you if you have the difficulty that it appears to me that is fairly common, and that is the people you can hire today, the one young, first job, second job sort of situation.

They are not really qualified to work because the education they supposedly got that was not very competent. I don't know, Enron, you might start so high up. I mean, it might be the only one that is the bottom of the totem pole that Mr. Sloan and myself because you probably get them on the fifth or sixth time around, and by then they become educated how they work.

Beth, do you find that the employees that come in, first time, straight out of high school, or maybe you don’t hire high school workers. But the fact that they don’t read real well, they don’t know math very well. We had to build a whole little…what do you call it? A school room on the back of our plant. And we went to the community college system and asked them to give us some teachers so that we could have our employees. We had a bunch of Vietnamese.

And we had to teach them to speak English and we had to teach math. We had to teach all of these things that normally you would expect people to have when they come out of school. But I just wonder, do you run into that problem?

Ms. Tilney. We are concerned about the quality of education in America, no question about it. One of the points that we hope to make in my testimony is we feel it is incumbent upon companies like Enron that have the resources and ability to give back, and either get our people involved in helping with education or give grants, create programs like we are doing. I think it is a real concern and we are focused on it and hope other companies will be. In terms of our direct hiring, we don’t hire what I call sort of entry level people of the kind that you are describing.

Mr. Ballenger. Right.

Ms. Tilney. So I think we aren’t feeling it as much perhaps as other companies directly, but we know it is out there, and we want to help work on it.

Mr. Ballenger. Well, I think Mary Anne is about to grab the thing, but I know Mr. Houston. Mary Anne, you go first.

Ms. Walk. I will say that we hire 14,000 people a year, that hits our normal attrition about 14,000 people a year. And we do have significant issues with regard to the education that people have received before they come to us, and most of our 14,000 are entry level jobs which are high school graduates. So we have a lot of programs at AT&T where we partner with the government and we partner with educational facilities to wire classrooms for computers, to wire Internet into the schools.

We spend a lot of money every year doing that in hopes that will cut down on some of our training requirements once we bring these people on the payroll. But we spend hundreds of millions of dollars each year on training programs to bring people up to speed.

Mr. Ballenger. Mr. Houston? I think I would just like to say that it appears to me the educational system – and you have got to realize this committee is also in charge of education as well as any kind of labor issues – but it appears to me that we have finally abdicated the need for schools to provide educated workers. We have abdicated that to business.

How do you work out, Mr. Houston?

Mr. Houston. Well, first of all, we suffered some of the same opportunities. But we consider them as an opportunity because we consider life training as a part of T.D. Industries. So, everyone that comes to T.D. Industries takes the entrance examination to our community college system or the equivalent. You experts can probably say what that is and specifically in reading and math, because people think of the construction industry incorrectly. We have robots in our industry. All of our superintendents now have laptop computers. All of our entry of payroll and productivity is done by our superintendents and foreman in the field.

So our partners come in, get the assessment, and then we immediately put them into a career path, encouraging them to do remedial math and English, reading, if necessary. But we don’t consider it a major obstacle. We consider it an opportunity. It’s an opportunity to help folks improve, and then to go from that point on to whatever they wish to do, continue to be a tradesperson forever and teach and mentor others to be great in working with their hands, or move through career paths to computer-aided drafting, to estimating, to project management, to accounting, because I guess we are in trouble.

We are still paying for college educations and masters degrees. I got mine at night, my masters at night through…

Mr. Ballenger. Just as long as you turn some people down, you are okay.

Mr. Houston. We haven’t done it yet. We are in trouble, I guess.

Mr. Ballenger. Yes, watch out.

Ms. Robinson. I would like to add a little bit. Most of the folks in the sales centers are college graduates. But even though we have that, there is a lot of education that is done in a professional development kind of a stance that does enhance writing and speaking capabilities. But outside of that, when you talk to helping the educational system start to send to the work force folks that are more ready to work, we spend a lot of time in IBM, of course, with reinventing education grants. I think that is greater than $30 million that we are investing back in the K through 12 kind of educational system.

One of the things that we pride ourselves on, as most people, if not all on the panel, is the community linkage, giving back to the community. One of my priorities that we talk about, and one of five is, that the folks in the community have to be real happy that we are here, too. So it is as customer loyalty, it is employee loyalty, and it is also the community.

We spend a whole lot of time with the adopting of schools. We spend a whole lot of time actually having folks in the center in the schools. And in many cases, this is the K through 12 environment – role models helping with reading and writing. Another thing is that we chose these locations because of the feeder institutions. Therefore, we spend, in Atlanta and Dallas, for instance, a lot of time with the colleges and universities, even looking at some of their curriculums to help them to modify, or go in and do some guest lecturing, I guess, to some of the classes to better ready them for what it really is out here.

Mr. Ballenger. I would like to ask Mr. Sloan a question, because, like I say, I have a plant right on the South Carolina line, in Forest City, North Carolina, where we moved to get away from labor shortage. And just about the time we got that thing built and ready to go, BMW decided to double the size of their operation down there in South Carolina.

You must have an unbelievably wonderful plan to keep your employees. I don’t know how far south, what part of South Carolina you are in, but if you are in the Greenville-Spartanburg area, how do you find anybody to work?

Mr. Sloan. We are in the Greenville-Spartanburg area. We are about 15 miles south of Greenville, and BMW has moved in. We haven’t lost a lot of people to BMW, but the satellite companies that are supporting BMW, we have lost a few. Unemployment in that region is 1.1 percent, right. And those coming around really applying for a job, aren't really looking for a job, we found. So it is tough, but we think with the environment we work in, the jobs we have, that we are doing a pretty fair job of keeping the people happy that are in the plant.

Mr. Ballenger. Well, the rest of the world may not recognize the industrial growth of that particular area, but…

Mr. Sloan. It is tremendous.

Mr. Ballenger. I moved in Forest City because their unemployment rate was 5-1/2 percent, and now it is 3 percent over near Hickory, North Carolina. And as soon as I get there, the BMW comes along and sucked everybody there was. And I think the 5-1/2 percent dropped down to about 3 percent. And we are not cheap. I went over there to compete with the textiles and furniture, because I can whip them, I pay better than then they do. But I don’t pay better than BMW, let’s put it that way.

Mr. Sloan. And they just announced an expansion, hiring about another 1,000 people.

Mr. Ballenger. My plant is only about a year and a half old.

Mr. Sloan. The region is growing so fast. There are a lot of people moving into the area and that is supplying a big portion.

Mr. Ballenger. Right. I would like to say, Mr. Rausch, you may have not gotten the image that sometimes this committee is a little bit biased on one side or the other politically, as you might gather. But I would like to commend the effort of your company and your union working together.

This is the first time I ever seen a union contract laid out like that. And basically living in North Carolina, where I don’t know whether we recognize unions or not, but very much as you might gather. But I would commend you, because it appears…

Mr. Rausch. We will come down and visit you, though.

Mr. Ballenger. I figured that might have been a possibility. But I would like to commend you both because it appears to me that you couldn’t be as successful, Mr. Nielsen, if you didn’t have the working arrangement and a dedicated union that is willing to go with you on all the new stuff, especially when you started off with the part of your work force was coming from an old plant, and that usually people that have been in old plants don’t like new stuff.

Mr. Nielsen. That is correct, Mr. Ballenger. I think that it could not have been what it has become absent the partnership of the United Steelworkers. The people who came from the old plant were also represented by the United Steelworkers and demonstrated a very strong desire for change altogether.

Mr. Ballenger. Right. Mr. Chairman, I think I have overdone my…thank goodness you weren’t running a clock on me, I would have really been in trouble. I appreciate the opportunity to question these. That is a lot of votes. We have a problem.

Mr. Hoekstra. The rumor is that there may have been a series of votes, but there are only announced two votes. The rule--whatever it is--two votes--the previous question in the room.

Do you have any more? Are you finished?

Mr. Ballenger. I am finished.

Mr. Hoekstra. We are going to have to take a little bit of a break in 5 minutes, but I am hoping you can stay. I can run down and come back and ask some questions. This is a fascinating panel.

I have a couple of questions. All of you are, I think, in some ways pushing the envelope in human relations, in worker relations and how to be competitive. Mr. Ballenger thinks that some of you may have kind of broken through the envelope. But if it is the envelope as defined by Federal rules and regulations and, the legal framework that surrounds your business and how you relate to your employees and the benefits that you can provide, do you find that the legal framework facilitates what you want to get done?

Or is the barrier saying, boy, you know, really if we want to continue at the cutting edge and we want to be innovative, here is what we would like to do and here is what we think our employees would like to have us do. But, you know, we have hit the wall because, we can’t go that far. We can’t take teams that far. We can’t take inside sales that far. We can't take compensation that far.

Beth, why don’t we start with you, and tell us about the experience at Enron, too?

Ms. Tilney. Yes. I’m going to ask Mary Joyce if she could answer that for you.

Mr. Hoekstra. Okay.

Ms. Joyce. It is at times very imposing to continue to move forward, given the legal restraints. Some of the redesigns, for instance, in comp and benefits. We have what is believed to be archaic legal requirements, or we are waiting on regulations so that we can move forward with some of these programs.

So we do believe in, free market competition and allowing flexibility. And what Mr. Ballenger referred to, I could speak for 30 minutes, regarding he is absolutely right in what we had to go through in order to provide money to children of our employees.

Mr. Hoekstra. Okay. I mean, what are some of the areas where you just run up against the wall?

Ms. Joyce. For instance, we redesigned our pension plan, which many of you probably are aware of. It is called the cash balance approach, which is the more career average. It is easier for employees to understand, yet it is a better design, and it is responding to a portable and mobile work force. Some of the regulations, technical IRS regulations, were still written for older-type designs, what is called like a final average pay plan.

Here is a technicality, 417(e) whipsaw problem, that they could actually come in and disqualify our plan, given certain discount rates, for instance. Highly technical, but very difficult; and for years, we didn’t get the regulation. We still don’t have it. Some of the groups we work with, we work to try to help the government, help the Department of Labor say we really need legislation and education as to what we are trying to do. That is just for instance.

The scholarship is another instance. It cost us $100,000 to file our plan, write the plan documents, get an IRS approval letter in order to give money to our employees.

Mr. Hoekstra. I thought pagers were supposed to be down today. The satellite is back up. That is too bad. Mary Anne?

Ms. Walk. I actually have more problems with the lawyers than the law. When we redesign our plans, we have to submit all that through our legal department. And, frankly, we have not been put into a situation where we couldn't do what we needed to do for our people. And we did just ourselves redesign our pension plans to go to cash balance pension plan, and we have just negotiated that plan with our unions.

So, you know, we live in such a regulated environment anyway, I almost don’t pay attention. We live within the law. And so therefore, you just do the things you have to do to create the programs. And I really haven’t bumped up against any that we felt were so restrictive that we couldn’t do what we needed to do for our people.

Mr. Hoekstra. I think when we talked this morning at breakfast you also talked a little bit about manager-less environments. That was first time I had actually heard the term manager-less environments.

Ms. Walk. It is a trial that we are going to implement called the level-less organization. The thing that we have to do is stay cognizant of all the equal work/equal pay law. Now that is not something that I find oppressive, I find it something we need to do. But we have to find a way, other than our normal job evaluations system, that allows us to do what we need to do, but stay within the law to do it.

And would I say it would be easier for us to create this plan if we changed our laws? No. Because you still have people that want to be sure that when they do work that is equal to someone else’s input, that they get appropriate pay for it. So we do have to work within the laws to create these new plans.

Mr. Hoekstra. All right. Ben, we are going to take a break, okay, so I can go vote. And I hope I will be back in about 10 or 15 minutes. So let’s take about a 10 or 15-minute break and we will get back together. Thank you.

[Recess.]

Mr. Hoekstra. The subcommittee will reconvene. Good news for the panel, the projection is we won’t have another vote for 3 hours, so…

Ms. Walk. Good news or bad news?

Mr. Hoekstra. The good news is there will be another vote. The bad news is it won’t be for 3 hours. I think we are taking Mr. Houston’s technique. We now need to start every hearing with fun. So that is a pretty tough standard.

I think we were talking if there are barriers towards labor law. Before we go to you, Mr. Houston, I just want to ask Mary Anne, when you get to the manager-less teams, don’t you run into problems with starting to define and the questions that you have about who is exempt, who is nonexempt? The reason I ask is because I run into that now in the high-tech industry. Trying to put people in the classification as to whether they are exempt or nonexempt is an old way of thinking and doesn’t fit the knowledge workers, how many of you now view your workers.

Ms. Walk. You are absolutely right. The one thing I want to be real clear about is that we are starting this as a trial, as a pilot. And we are starting it in a predominantly management organization, a very small management organization, to see if we can even get the components right to do this. You are taking me to the next step or beyond, where we currently are defining this program. And that is, if it works, then what do you do with it, and how do you put it into an occupational management type of environment?

Now, without question, we have labor agreements for 50,000 of our workers at AT&T. You can’t ignore those. So we have a lot of development to do before we can institutionalize this across AT&T. And we may find that it may not work. So it is a trial. We are developing it as we go. And I am writing down your comment to be sure that I don’t lose it.

Mr. Hoekstra. Yes. Okay. Mr. Houston?

Mr. Houston. There are items that are of serious concern to us, but they are not items that are just technical details in the work place. The items that I want to speak to exclude major classes of the people from the chance to participate in the work area. Number one is salting abuse. The House has just passed recently, and I thank you for your vote for H.R. 3246, but salting is that a union salts -- come into a small business or a business, not for the purpose of organizing, but for the purpose of destroying the business.

And they utilize and they file false charges with the National Labor Relations Board, which then are prosecuted against the small businessman or woman and keeps them completely tied up, using the funds on false charges of the National Labor Relations Board. Their own tax money, to prosecute them. The House has already passed this. It is going on to the Senate.

This is extremely important to workers. One of the greatest benefits in the construction industry today is that this is one of the few industries where a person like myself can come in as a helper – working with tools, and advance to own your own company. But you don’t start out with a company with a thousand people, you start out with a small company.

And if the government funds of the NLRB can be used to prosecute false charges against you, then it eradicates jobs from the markets and the opportunities for many people. So salting is one.

Two, training. We have many States today who permit only select groups, union groups, to train for their qualified apprenticeship programs, excluding many, many workers from the opportunity of taking programs that other associations such as Associated Builders and Contractors, Independent Electrical Contractors, and there are 170 others that do have opportunities for training precluding them from training the work force.

Training is vital. There is no legislation here today, but we need to take a good look at the apprenticeship rules in our country to be sure that everyone has equal access to equal training. so that is training, looking at our rules on training.

The last one is the most difficult of all. Our president and vice president have committed on the $215 billion highway bill, to go with union-only project labor agreements. Well, according to the Bureau of Statistics, 85.5 of the Americans have decided, have chosen not to belong to a union.

This is discrimination. This is the same kind of discrimination that we can have against people that happen to be of one color or another or people that are old or young or people that are of a different religion. To say that only people that have elected to join a union can work on these projects is inappropriate. In fact, it excludes the 85.5 percent of American workers from working on the very projects which they pay the taxes to build.

If I were a union worker, I would oppose this, because this is not America. Will it stop? Will open competition hurt unions? My judgment says no. What will happen is all of us, merit shop, union alike, will be forced to sharpen our personal skills and our corporate skills in order to compete better. Will it help the taxpayers? Yes. The taxpayers will get a better product in open competition. Will it help us in the international market? Yes, by reducing the cost of work. Because of open competition, we will become a more competitive force in the world market.

And we are there. The world market is all around us. It is here each and every day. Steel goes to Japan. Textile goes to Malaysia. So open competition is where we need to go. And there is a bill, House 1378, Senate 606, which simply says all Americans have equal access to the work that exists. And this is vitally important to us.

Thank you very much.

Mr. Hoekstra. Thank you.

Ms. Robinson?

Ms. Robinson. We have in IBM probably over 250 lawyers that help make sure that we are in compliance or operating within the law. But as I have gotten a little bit of education since the question came to me on the Team Act. I tell you, without the Team Act, there truly is a chilling effect on something that we think is very important; and that is our diversity groups that we have within IBM that we started, I guess back in the 1995 time frame, where we have asked populations of like individuals to come together and help IBM to understand how to and I don’t know if these are the words the IBM Corporation uses as they advertise this, but basically I want the best and brightest from the college campuses of each one of those groupings to want to come to work for me. I want them to feel that IBM is a place that they want to stay and have a career.

And from the business side of this, I want to make sure that I am getting as much market share from those communities themselves as possible. So I want these groups to help me with that piece, too.

What I have learned in the last hour or two are that there are rules. You are not supposed to discuss wages and benefits, but things like scheduling, and time. And imagine a group of women coming together and wanting to give some feedback to the IBM Corporation on how to make it a better place for women. And we are known in Working Women and the like as a place which women truly value, want to come to work. If they can’t talk about scheduling issues because some of the input has even affected some of our rulings on part-time work and shared work and the like.

So, yes, there are laws out there and rules out there, outside of the inside sales. The hourly pay, that affect us because the place is changing. The environment, the workplace is changing. And I think that just from what I have learned, the laws were put in place for good reasons, maybe, when they were put in place, but the environment is changing.

I really appreciate the fact that you took the subcommittee on the tour, because with the knowledge now that you bring back, you have a better opportunity to effect the laws in a positive manner to support us to be more global, to support us in being more competitive as a Nation, and to support the taxpayers in what we get and have to offer one another.

Mr. Hoekstra. With technology development, you have consolidated sales into three operations.

Ms. Robinson. Yes, sir.

Mr. Hoekstra. What do you think about home work? Moving work into the home?

Ms. Robinson. We still have a lot of that.

Mr. Hoekstra. You do?

Ms. Robinson. Yes, we do. When I talk to you about the sales centers, all of IBM salespeople are not in sales centers today. We still have a lot of face-to-face sales folks. What we have done, though, is we have asked our customers how they want to buy. You know, a lot of our customers do stuff over the Internet and don't even have to talk to us in some cases. Some do it via phone; some between the two, where you can be on an Internet and you might get to a point – and this is a vision we are playing with, or dream I guess you would say – we have not got it there yet, but where you are actually on the Internet and you can click on a phone if you have questions. And the person on the phone can actually pull up the page that you are on and either assist you through it, take it from you, and go.

But we have people working out of their homes quite a bit, still today.

Mr. Hoekstra. I am not talking about people who work out of their homes like field sales who go and visit customers, but actually maybe another step in the technology, where some of the people that might actually otherwise work in the sales center would make a conscious decision and say, you know, if we just took them up electronically at home, you know, we wouldn't have to buy them a cubicle, we wouldn't have to get the space. Now that is not good, because I have got large office furniture manufacturing companies in my district, so they like it when you all buy cubicles.

But I mean, you know, where you say the work now is such that we can be connected and we can leave the person at home to do the work.

Ms. Robinson. Right. Can I envision a day when there are people that roll out of bed and plug into something that allows them? Yeah. But I don't think that is all or nothing. Just like I don't think all the people should be face to face and all the people should be in phone centers. What I lose_just first thought here on that_is we truly get a whole lot out of having people with differing skills and differing backgrounds sitting together calling on one another to help our customers, because it is very hard with technology and all the different offerings that we have.

IBM is_we have competitors in all different niches of our business, and one of our strengths here is that we are solution problems. I am not a software company, I am not a consultant company, I am not a services company and, therefore, our strength is being able to tie all of these offerings together and provide a customer with an answer to a business problem.

If I have got everybody in a different place with a specialty, it makes it a bit tougher. But I am sure there are some pieces of our business_and we talk about it, I mean we play around with it: Is there a day where you can do some of that? So I wouldn't want to have any rules or laws out there that would stop me from going there. And I guess my key_

Mr. Hoekstra. Don't worry, they are there already.

Ms. Robinson. I am learning. But I mean, the key here to me is just something, to have flexibility as we go to market, because now_I mean we joke in IBM now about decisions aren't years; decisions and products and things get developed in Web years, which are 90-day periods of time, to maintain competitiveness in this global marketplace. I have got to change the way I go and do. In time_the decisions never would have been made before, and therefore the laws have to allow for some flexibility within, that that have a win-win for everybody involved.

Mr. Hoekstra. Thank you. John? Paul?

Mr. Rausch. I would like to offer a few comments. While this panel seems to be made up of a number of enlightened people in terms of labor relations, how they view building a world class organization to compete well into the next century, I think for working people and trade unions especially, we view certain pieces of legislation such as the Team Act in a much different way.

We look at that and say, if those people can't be duly elected by the employees which they are being asked to represent, then we are taking steps backwards. We are going back 40 and 50 years to an era of company-run unions where the employees' wishes weren't necessarily the views of the committee so chosen by that employer.

So we have a very fundamental difference of opinion on what the down side could be in a company that isn't as well as enlightened as these folks are. And I think we all have to assume and know that there are unenlightened employers out there somewhere.

The other thing I would like to comment on is the fact that while it is very real that our economies are tied inexplicably to the rest of the world, workers in the United States cannot be asked to enter into a race to the bottom in terms of wages and benefits to compete with workers in other countries.

And while everyone who sits around the supper table, whether they are eating pork and beans or they are eating prime rib, depending on their lot in life, they all understand that they cannot compete with people making 50 cents an hour in a foreign country. They want to work, they want to be proud of their work, and they want to keep their job. But they also know they need an even playing field.

And until our government can find the importance in not only constructing trade agreements with our trading partners but agreements that include in the body of the document human rights, workers' protections similar to our OSHA, environmental protections, we cannot compete. The day will come where the work continues to go offshore, and there is nothing enlightened unions or enlightened employers can do to keep Americans working at home.

Chairman Hoekstra. John, do you want to say anything or we will go on to David?

Mr. Neilson. I agree with your outlook relative to the Fair Labor Standards Act and the distinctions between exempt and nonexempt personnel. Particularly in knowledgeable workers, that is a problem for us in our location. It is confusing and it doesn't need to be so.

I also agree with Mary Anne Walk, and I think one of your observations was that we become so accustomed to the recordkeeping burdens inflicted upon us by lawmakers that we just take them as second nature anymore, and there are so many other things out there that are not even legislated.

Today, competition in our industry requires that we become ISO and QS certified, and the recordkeeping associated with those endeavors certainly parallels or transcends that required by government. We are just getting used to having to do all that stuff. I would rather that it wasn't the case, but we need to obtain and maintain those certifications and the records associated with them in order to sell steel in the United States.

Chairman Hoekstra. Thank you. David?

Mr. Sloan. I think the emphasis of this panel has been our most valuable asset and that is our employees, and we don't want to lose sight of that. But there are a couple things that have detracted us, one being Executive Order 11246, with all the paperwork required on that. We don't add extra staff to comply with the order, we just assign that to somebody in the company and they have to pick those duties up, and it detracts from the time they spend with the people.

Another good example is the Family Medical Leave Act. This act has caused additional paperwork in our facilities. Our company leave policy is extremely lenient, but this act has forced us to become more conscious of the act and less mindful of our employees' needs and that is_ we see that as wrong.

Chairman Hoekstra. Thank you. How competitive is your business?

Ms. Tilney. How competitive is our business? Oh, not at all.

Chairman Hoekstra. Not at all. Good, we were looking for one of those.

Ms. Tilney. Not at all. In what way are you asking?

Chairman Hoekstra. Well I am thinking about, you know, one of the things that we are trying to do through this, and some of you have mentioned_I think Mary mentioned that the cost for the IRS was_the IRS with the educational thing was $100,000. Mary Anne has mentioned that the_you know, did you say_no, I think Conchita said that she has got 250 lawyers, and Mary Anne just said we have got too many lawyers. Being a lawyer, I probably agree with that.

I mean, one of the things that we are trying to do is say_I mean, my impression today is that every one of you is in a very competitive market whether you are competing against U.S. companies, or whether you are in the steel or you are in the textile business, whether you are competing internationally. The companies we have met with, they are all trying to save pennies.

And when you take a look at_we are trying to get a handle on the costs that are imposed on you by government that don't have value. What are those? And how do we eliminate that and still provide the basic safety net or whatever that they were intended to find? And are those costs 5 percent of your business, and you think you can get rid of 3, you know, you can get rid of half of them? Are they 10 percent of your business? Because if you are in a competitive environment and you are taking a look at all the costs in the other parts of your business, but you take a look at this stuff over here and say, oh, man, that is Washington, that is the Federal Government; we don't even look at that anymore, we just assume it is a given and we just factor it into our business costs, and it is over there because we don't think it is going to go away and I_

Ms. Tilney. Well, I think you know a little something about Enron. We like to push, we like open markets, we are for competition; we think, you know, the playing field being equal, that our people are going to win, you know, going to come up with an innovative idea, build a new business, create opportunity. But it is tough and, you know, we are operating all over the world. Our margins are very thin, particularly on some of our core businesses.

So I mean, yes, Mr. Chairman; I mean, it is the people too, it is the paperwork, it is the time, it is the how do you get around or how can we help change it. So on a percentage basis_I mean, Mary, what would your_

Ms. Joyce. On a percentage basis, I wouldn't quote a percentage. Just in terms of compensation and benefits, as people have alluded to, the attorneys you have to hire to interpret; and then if you come up with a new idea, you try to submit an advisory letter seeking advice from the Department of Labor or the IRS. It is a lengthy process, it slows down competition, it is costly, it is money we can direct somewhere else.

In terms of a percentage, I couldn't. I do commend some of the efforts that have been undertaken to work with some of the business groups, to work with corporations, to work with and see what the impact is and try to simplify. But representing Enron_and personally it is still too much, and we have to continue to work together and push the envelope to reduce the cost of having to comply, because I would rather spend, anyone would rather spend money on quality programs, training programs, et cetera, than compliance for something that was really designed for a work force and a work environment that existed 10 and 20 years ago.

Chairman Hoekstra. I am thinking it is pretty much the same across, as we have heard that consistently. I am going to ask one question and we will go down the line. Maybe we will start with you, David, so that you don't feel left out at that end of the table.

I mean, the question that we are struggling with is how do we identify those costs, okay, and how do we begin this dialogue. Number one, most businesses don't even want to do business with the Federal Government. I mean, you are focused on what you like to do, which is to serve your customers.

But these are important issues, because if we can help you reduce your costs and be more productive, those dollars can be used for a number of things. They can lower the price of your products so that you can perhaps gain a greater market share. They can be used to be reinvested in the business, whether it is capital or whether it is training and those types of things, or it can be used to provide a greater compensation to the employees.

Only good things happen when we_well maybe not; somebody might argue with that. Many good things can happen when you take and reduce the costs in the business and you eliminate unnecessary costs.

How do you reduce costs in your business? You know, do you have a suggestion program, employee involvement and those kinds of things? How could we involve each of your businesses in taking a look at how government puts costs on you? And if you could come up with_could you take that and put it into your cost saving system and would you be willing to do it?

I guess that is three: How do you save costs? Could you factor in the costs that are imposed on your business by the Federal Government? And would you be willing to do it?

Mr. Sloan. First of all, we have to save costs to remain a viable entity. In the textile and apparel industry, in the last 17 quarters. The apparel price has deflated 14 of the last 17 quarters. And so to remain a viable company, you have to continue cutting costs. And one of the ways you do it is modernize.

And the modernization we just went through in the baby plant, $62 million. Ten years from now we will probably have to do that same thing again. So we have to cut costs, we have to find ways to make profit so we can continue.

Now, how do we identify the cost savings? We haven't_I don't know why we put a set definition on it. I made my statement. The lawyers really love it. We put them in business and maybe we could cut out the kind of money we spend on the legal fees.

Chairman Hoekstra. I mean, could you take a look at those regulations and rules_because I am assuming you do process analysis in your business all the time_but one of the areas where I don't think you have taken a look at process analysis is the costs that are imposed on you by the Federal Government.

Mr. Sloan. That could be identified, but in most cases it is just adding to the workload of those administrators that are already there. Instead of working 40 and 50 hours a week, they are working 60- and 80-hour weeks to do what they need to do to make it to the end of the day.

Chairman Hoekstra. So you are not sure you could find it.

Mr. Sloan. No.

Chairman Hoekstra. Okay. John and Paul?

Mr. Neilson. You are right that we have_or at least I haven't done much thinking about it, or a very good job of the process analysis associated with it. But certainly in my organization, if you aren't making steel there is a good question as to whether or not you are in fact adding any value. You are not making it or selling it; why are you here? A lot of why we are here has to do with administration that is not value-added required by legislation.

I think that we could identify the costs associated with that. And the greater task that you_or issue that you pose for us is that legislation, legislation in the environmental, occupational safety and health, EEOC kinds of areas, exists because employers have not historically by themselves done correct things. We want the protections of the law as organizations, as companies, as employers and employees, without necessarily the burden of administration that is imposed on us. I think we can identify costs associated with nonvalue-added administrative stuff and go back and talk about it.

Chairman Hoekstra. Okay. Thank you.

Ms. Robinson. I must agree with the comments that John just said. We definitely have the costs. I cannot quantify them for you here today. I would share with you I flew into a Washington office that is here for this purpose alone, and that is not all the costs that_the IBM Corporation has to do what it is you are asking us. But I would like to ask that they take this back and give you some input, because I know, just as John has said, we do a whole lot of staff analysis inside of IBM because it is a very, very competitive marketplace, as David has said, and the prices are going down, the margins are going down. And we do a lot of self-analysis that says, hey, if you are not making, selling_you know, it goes back to the same thing; if you are not making steel, then what is the value add? And we are having to cut staffs and trim teams and that kind of thing every day so that we can remain competitive. So I would like to ask the team to let's go back and talk about it because I am sure this is something that would be of interest.

Chairman Hoekstra. Thank you.

Mr. Houston.

Mr. Houston. I would say that from our standpoint, I can't quantify it specifically for any item at this second, but from our standpoint, in general, deregulation tends to reduce costs immeasurably. We have seen construction projects. I saw one recently where I made a comparison in Las Vegas, and under certain work rules the project costs about $6-1/2 million more than it would have been under a free competition set of work rules, enough to build an entire elementary school for that community, and the only difference was not having free competition. And so I think deregulation specifically is there.

If I could respond to our ability to compete as Americans just for a minute, I think we can. I can see in our own company, places where we have put groups of partners working on a problem, and we have changed our ratio from 1.33 to .2. That is, to an 85_I don't know how to even quantify it. It is 15 percent of what the grand total was before, because great minds, technology, energy, freeing up, working out of the box clears us out. We can compete as Americans and we can compete in a world environment, and the people of the world do deserve to be able to operate in better working conditions, but we can compete.

I think I kind of got off your question, and I apologize.

Chairman Hoekstra. Thank you.

Mary Anne.

Ms. Walk. Actually I work on a council at AT&T called the Productivity Counsel and it is intended to look at all of our cost structures as well as our productivity components of the business and see how we can cut out costs and increase productivity so we have a formal platform there that we could look at something like this.

Have we done it? No. We have actually not tackled anything that we did not feel like we had control over. And you know, you have to do what you can with what you have got, all right.

Now, would we want to do this? I don't know. I don't know if we would or not. I think we could spend some money and take a look at it on a cursory level and give you some feedback. But I am also told by a representative here from the U.S. Chamber that last year they did a survey of 800 of their members and came up with this type of analysis, and we can provide that to this committee as part of the record, if you would like that, and I think that is what you are really looking for. And I think if we can indeed cut costs, administrative costs, from our business in order to reinvest it, I think that is what we are all looking for, all the people.

So thank you.

Chairman Hoekstra. Thank you. You are right; I am not sure you would want to do it either. Working with us gets to be a fairly frustrating process.

Ms. Walk. We have got a lot of high-level managers at AT&T. They are a little frustrating, too, so we get used to it after a while.

Chairman Hoekstra. All right, thank you.

Ms. Tilney. If we had a commitment that something productive would be done with the information, you are absolutely right, we will put people against it, and then we will reinvest money in the business. No question about it, no question about it.

I am going to ask Mr. Houston if he will join Enron after this meeting. I am all for his deregulation speech. We believe in it totally.

Chairman Hoekstra. Thank you.

I think we are all set. I would like to thank you all for being here. It is a great panel.

The committee will be adjourned.

Mr. Houston. I would like to say for all of us, we appreciate what you all are doing. It is an awesome undertaking. Thank you very much.

[Whereupon, at 12:45 p.m., the subcommittee was adjourned.]