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The Nation | COLUMN ONE

No Gain, Know Pain

Incentive-driven Countrywide Financial is a model of how to boost output. But some workers are unhappy -- and suing.

March 02, 2004|David Streitfeld | Times Staff Writer

As corporate America carves more profit out of fewer employees, it relies on managers like Jaime Moncayo and Sean Reeves.

Thanks to new technology, the two supervisors at the Simi Valley customer service center of mortgage lender Countrywide Financial Corp. 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 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 American companies are boosting worker productivity.

As falling interest rates unleashed a massive demand for refinancings, Countrywide became more efficient. The Calabasas-based firm, one of the nation's largest mortgage lenders, made 165 loans per employee last year, up from fewer 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 comes at a price, and the company's relentless efforts to cut costs hang over just about every worker.

Sales agents in Countrywide's Rosemead office 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 nation's tremendous productivity gains in the last two years -- as well as the toll on workers.

Employee productivity rose 4.2% in 2003, a jump Federal Reserve Chairman Alan Greenspan labeled "stunning." That was on top of a 4.9% 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% in the second quarter of 2003 and 9.9% 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 Corp. agreed to pay $18 million and RadioShack Corp. said it would pay $29.9 million to settle overtime cases. T-Mobile USA Inc. said in November that it would pay $4.8 million as the result of a similar action. Last month, the closeout retailer Big Lots Ltd. said it would pay $10 million to settle claims.

The number of such overtime cases has nearly tripled over the last five years, to the point where they 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 maintains that its sales agents are exempt from overtime laws because they are management. It is attempting to get the case dismissed. A trial is scheduled for September in Los Angeles County Superior Court.

Linda Dardarian, a lawyer with Goldstein, Demchak in Oakland who is representing the agents, said it was an increasingly common tactic 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 specifics of the suit, Countrywide executives emphasized that 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 then used to upgrade their performance.

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