P.M.P.

(Performance Management Pain?)

September 13, 2005

On Sept. 6 Standard & Poor’s negotiators invited Audrey O’Keefe, Manager of Learning Programs, to the tenth Guild bargaining session. As a follow-up to her visit of June 30, O’Keefe presented a computer demonstration of the company’s new Performance Management Process (PMP). According to O’Keefe, half of the PMP is concerned with goal-setting (which she had explained on June 30), while the remaining half deals with five “core competencies” established by our corporate parent, McGraw-Hill. O’Keefe described what these competencies are, specific behaviors that McGraw-Hill wants employees to exhibit. They are 1) to display strong personal integrity; 2) to communicate effectively; 3) to drive for results; 4) to lead by example; and 5) to create superior customer value. 

 It’s very a convoluted system made somewhat understandable by using the manual written for it, and its accompanying two-sided, four color, glossy, preserved-in-plastic, matrix chart that we know is onerous and detested by our managers. 

For purposes of discussion, and not as a proposal, the Guild negotiating team, led in this particular task by Andreea Popa, prepared a significantly updated electronic version of the current Guild evaluation (that is in hard copy form) that comprised most of the elements of the PMP. The Guild prototype  “PMP Light,” as it has been called at the bargaining table, would, we feel, reflect the company’s purpose but in a form that is simpler, fair, and less stressful for all involved in the evaluation process. We hope the company will see the advantages of “PMP Light,” as negotiations continue.

McGraw Sends Envoy To Help Explain The 401(k) And Its Options

During the afternoon session that same day, John Campbell, from the McGraw-Hill Treasurer’s office, appeared to answer questions from Guild negotiators and to speak about the company’s 40l(k) plan’s structure and fees. Campbell, who is Manager of Benefits and Financing, assured the Guild that all management and administrative fees are included in the fund expenses figures published on the plan’s Web site. This was in response to a Guild information request that had been previously submitted to management.

The union asked if additional choices, such as small and mid-cap index funds, could be added to our investment options. Guild committee member Carol Wood explored the possibility of adding separate growth-stock and value-stock funds, since the three Retirement Assets Funds are all “premixed.” Campbell replied, “Adding options is doable.”

It’s worth noting just how poor performance has been for the company’s plan’s Special Equity Fund, which focuses on small and mid-cap stocks. Over five years, through March 31, the fund lost 4.5% (according to the latest data on the plan’s Web site), while iShares S&P Small Cap 600 (an exchange-traded fund that mirrors the small-cap index) has gone up 61%. Over three years, Special Equity has returned 3.5%, while the iShares shot up by 77%. For this, investors have shelled out, 0 .71% of assets each year!

Then there’s the plan’s Core Equity Fund, appealingly described as being largely based on the universe of stocks ranked 5-STARS by our own knowledgeable S&P analysts. This universe, however, is ultimately controlled by the manager. The fund has barely kept up with the S&P 500, though it carries a high fee of 0.92% of assets. Meanwhile, expenses for the S&P 500 Index Fund are 0.14%. As we at Standard & Poor’s often tell the public, “Low fees are essential to ensuring investment returns.”

Nonetheless, Campbell said that later this month, he would take to the company’s Pension and Investment Committee the Guild’s proposal to introduce new options, including the S&P 400 and 600 index funds. “Since these are S&P products, they have a much better chance of being adopted than would the Russell 2000,” he added with a chuckle. (The Russell 2000 is a small-cap index.) Steve Zavatski, Local Representative and chief spokesperson for the Guild at the negotiations added, “We hope you bring back good news for us regarding our proposal.”

Our next meeting is September 15, at which the company has said, it anticipates having all of its non-economic in proposals ready, in writing.

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9/13/05