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Productivity gains help companies, not always employees

By David Streitfeld
Los Angeles Times

	STEPHEN OSMAN / LOS ANGELES TIMES Michael Nash, a customer-service representative at Countrywide Financial in Los Angeles, works surrounded by his awards. The mortgage lender is a model of how companies are increasing productivity.
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Thanks to new technology, the two supervisors at the Los Angeles customer-service center of mortgage lender Countrywide Financial can, in effect, stare over the shoulders of their team members all day long.

Moncayo and Reeves know who is on track to answer the daily minimum of 68 calls and who is going to miss the quota of eight referrals to the sales department. If someone's lagging, they encourage. If someone's leading, they congratulate and reward.

At the end of every day, Moncayo passes out play money. The rep who answered the most calls gets $2. So does the one who made the most referrals. The dollars are redeemable for such trinkets as candy and candles.

A few aisles away, Reeves promises pizza if his 13 reps score more referrals than another team.

The cash the supervisors are spending is their own. And why not? They have their own incentives: as much as $350 a month in bonuses.

By melding computer advances, updated management techniques and the sort of immediate reinforcement most people haven't seen since kindergarten, Countrywide is a model of how U.S. companies are boosting worker productivity.

As falling interest rates unleashed a massive demand for refinancings, Countrywide became more efficient. The Calabasas, Calif., company, one of the largest U.S. mortgage lenders, made 165 loans per employee last year, up from less than 100 five years ago. A 2-year-old program to seek out productivity improvements has yielded $200 million in savings, according to internal audits.

Among the other benefits: a near-tripling of earnings in 2003 and a stock price that doubled. The most determined and successful employees can share in the profit, with top sales agents earning six-figure incomes.

But the hard work and constant pressure come at a price, and the relentless efforts to cut costs hang over just about every worker.

Sales agents in Countrywide's Rosemead office east of Los Angeles are suing the company, saying they regularly put in overtime without pay. Other Countrywide workers in California have been warned that their jobs are likely to be transferred to states with laws less favorable to employees.

Countrywide also is accelerating plans to move operations offshore. By the end of next year, it will have 250 employees at a call center in India, each of whom will represent a savings of $35,000 over a U.S. worker.

Multiply Countrywide's example by thousands of hungry companies, and an explanation emerges for the United States' tremendous productivity gains in the past two years — as well as the toll on workers.

Employee productivity rose 4.2 percent in 2003, a jump Federal Reserve Chairman Alan Greenspan labeled "stunning." That was on top of a 4.9 percent gain in 2002. Together they marked the best back-to-back growth in worker output in five decades.

The gains stoked corporate profits, which rose 10.3 percent in the second quarter of 2003 and 9.9 percent in the third.

Yet average wages barely budged. Many workers say they're pushed to put in additional hours without proper compensation. Some are retaliating in court.

In 2002, Starbucks agreed to pay $18 million and RadioShack said it would pay $29.9 million to settle overtime cases. Bellevue-based T-Mobile USA said in November it would pay $4.8 million as the result of a similar action.

Last month, the closeout retailer Big Lots said it would pay $10 million to settle claims.

The number of overtime cases has nearly tripled in the past five years. They now exceed employment-discrimination cases.

Craig Strah, a former sales agent in Countrywide's Rosemead office, wrote in a court declaration that "in order to meet production demands and pressures," he usually worked "at least 10 hours per day, five days per week without any meal breaks. Approximately three times per month, I worked an additional nine-hour day without any meal breaks."

Countrywide, which is trying to get the case dismissed, says its sales agents are exempt from overtime laws because they are management. A trial is scheduled for September in Los Angeles.

Lawyer Linda Dardarian, who is representing the agents, said it's becoming increasingly common to give rank-and-file workers fancy titles to lull them into thinking they were executives, and thus not entitled to overtime.

"It's a way to get more juice from the orange," Dardarian said. "Companies are squeezing every drop they can."

Although declining to discuss the suit's specifics, Countrywide executives emphasized there was no place for slackers to hide at the 34,000-employee company. Technology would root them out.

Countrywide's 800 customer-service reps, for example, are so closely tracked by computers that they generate a constant stream of data, which is analyzed and used to upgrade their performance.

"We can reach down from the executive level to see that Billie Sue isn't cutting it," said Steve Bailey, Countrywide's chief operations officer. "A poor performer can be more easily trapped and dealt with and trained or moved out. We pay for performance now."

That training is often done by managers who have themselves been trained by a 70-person productivity department. Such departments have become standard at many companies. Bank of America has a "quality and productivity" unit; Washington Mutual has a Technology Solutions Group.

Countrywide's Performance Management Group has trained 1,000 midlevel managers over the last two years. Participation is voluntary, although some divisions now require attendance before a manager can be promoted.

The growing use of these techniques at service companies such as Countrywide is notable, because they have historically lagged in productivity gains. Unlike factories, companies that deal directly with the consumer must depend on human beings, who tend to be much less malleable than a piece of equipment.

Countrywide executives say they are mindful of this distinction.

"It's more complicated than turning up the dial on a machine. People are not machines," said John Ardy, the executive in charge of the Performance Management Group.

Still, he calls Countrywide "a people factory" and says his work is made easier by the way there always has been "a sense of the factory floor."

From its founding in 1969, the company has prided itself on using technology to seize market share. Agents talk about "manufacturing" a home loan.

Just as electricity keeps a factory running, the Los Angeles customer-service room runs on recognition. It's practically instantaneous. It's transparent, too, in the sense that everyone in the call center knows how everyone else is doing.

There are so many balloons in this huge windowless office that it has the aura of a children's birthday party. "Way to Go!," they exhort, and "Congratulations!"

"We spend quite a few thousand a month on Mylar balloons," said Terry Tracy, first vice president of customer contact. "Every balloon means something."

So do the awards. Some reps have so many of the proclamations, they're running out of places to post them in their cubicles. Adrienne Teems has one Spotlight, two People's Choice and nine Walk of Fame awards. Golden balloons in the shape of dollar signs float overhead.

Two-thirds of the people who contact Countrywide each month do so online or through automated phone systems. That still leaves 900,000 callers who want a live human being.

Answering phones for Countrywide is "a hard job," acknowledged Victoria Kelly, who runs the Los Angeles center.

And getting harder. The minimum number of calls the reps are supposed to respond to each day has risen from 55 last summer to 62 in the fall to the current 68.

No wonder, Kelly said, "We try to keep it light and fun."

Fun is institutionalized. Everyone has pompoms on their desks, which they shake at celebratory moments. The workers get to vote on what clothes their supervisors wear. They recently competed to see who was best at rolling a frozen Cornish game hen down the aisles.

Not all employees have been having such a jolly time. The lawsuit by three agents in the Rosemead office has mushroomed into a class-action case that includes 400 past and current agents.

The suit gives examples of e-mail messages from Rosemead managers: "If you want to make it here ... put in lots of extra hours." Another says: "Work your tails off. That means 10-hour-plus days."

Marlene Veal, a former Rosemead agent, says she worked as hard as she could, missing years of watching her children grow up.

"In order to meet production demands and pressures, I worked approximately 50 to 55 hours per week," Veal said in a court declaration. On the instructions of management, she regularly worked through lunch, eating the Chinese food or pizza the company supplied.

This was called a "lunch-in." On lunch-in days, sales agents said they needed special permission to leave the office. According to court papers filed in June, lunch-ins were ordered nearly every day from 2000 to 2003, with the exception of a few months.

Veal, who now works in a Countrywide branch office, said she took off three months in late 1999 for stress-induced depression stemming from her job.

Agents who have worked in Rosemead said every completed loan earned them a credit of about $100 to $150. But "dings" would be subtracted.

A ding was a rules infraction. "Not reading a wrap-up script verbatim, that was a ding," the agent said. "There was an actual chart of dings — they cost anywhere from an eighth of a credit up to a whole credit. People viewed the dings with resentment, as the company trying to chip away at what they made."

One way to get dinged was to close fewer loans than colleagues. It was yet another way the company kept up the pressure.

If a Rosemead worker could avoid many dings, and keep up with the rising work pace, he or she could earn more than $100,000. But the hours were so long, it was like working two jobs.

A Countrywide spokeswoman, noting the company was "vigorously defending this case," said it was lobbying to have the national overtime laws changed. Advocates for labor say the proposed revisions will greatly reduce overtime protection.

Copyright © 2004 The Seattle Times Company