Chapter 10SPEAK© 2011 Cengage LearningLanguage a.docx

Chapter 10
SPEAK
© 2011 Cengage Learning
Language and
Oral Style
The chapter begins by briefly describing oral style and how it
differs from written style. Then you will learn some specific
strategies you can employ to ensure that your speech is
appropriate, accurate, clear, and vivid.
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The information herein is for informational purposes only and
represents the current view of Microsoft Corporation as of the
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date of this presentation.
MICROSOFT MAKES NO WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY, AS TO THE INFORMATION IN
THIS PRESENTATION.

1
The mind is
It's a strange world of language in which skating on thin ice can
get you into hot water.
~Franklin P. Jones
Learning Outcomes:
1. How does oral style differ from written style?
2. How can you word your speech to avoid offending some
listeners?
3. What should you do to make sure your language and style
is appropriate?
What should you consider to make sure your word choices will
be interpreted accurately by your audience?
What can you do to make sure your message is clear?
What are some strategies you can employ to make your ideas
vivid?
Action Step 6 - Practice Oral Language and Delivery Style:
Practice to develop an oral style using language that is
appropriate, accurate, clear, and vivid.
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other countries.
THIS PRESENTATION.
2
What Is Oral Style?
Oral style refers to the manner in which one conveys messages
through the spoken word.
An effective oral style differs quite a bit from written style,
though when giving a speech your oral style is still more formal
than everyday talk. In fact, the degree of formality required to
be an effective public speaker is based on the rhetorical
situation.
In other words, your goal is to adapt your language to the
audience and occasion. Although the language you use when
speaking to a small audience at a business meeting will be more
formal than when conversing with a friend , it will not be as
formal as when speaking to an audience of 100 or more at a
professional conference.
3

An Effective Oral Style…
tends toward short sentences and familiar language
features plural personal pronouns
features descriptive words and phrases that appeal to the ear and
are designed to sustain listener interest and promote retention
incorporates clear section transitions and signposts
As the speaker, your primary goal is to establish a relationship
with your listeners, so whatever situation you are in, your
language should reflect a personal tone that encourages listeners
to feel you are having a conversation with them.
These four characteristics distinguish an effective oral style
from an effective written style.
4
Speaking Appropriately
Speaking appropriately
means choosing words that enhance a connection with the
audience.
Verbal immediacy is language that reduces the psychological
distance between you and your audience.
Speaking appropriately means choosing words that enhance the
connection between you and the members of your audience.
Using appropriate language makes us more effective because it

demonstrates that we are adapting successfully to the rhetorical
situation. It also demonstrates that we are ethical
communicators who respect others, even those who differ from
us.
Speaking Appropriately:
Speaking appropriately means using language that adapts to
listeners’ needs, interests, knowledge, and attitudes and
avoiding language that alienates any listeners.
Verbal immediacy is language that reduces the psychological
distance between you and your audience.
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other countries.
THIS PRESENTATION.
5
Strategies for Speaking Appropriately
Use “we” language
Use bias-free language

Adapt to cultural diversity
Avoid offensive humor
Avoid profanity, vulgarity, and
hate speech
“We” language—the use of plural personal pronouns like “we,”
“our,” and “us” rather than “you” or “they”—conveys a sense of
connection with your listeners and involves them in the
communication event.
Bias-free language shows an ethical concern for fairness and
respect regarding to race, ethnicity, gender, ability, sexual
orientation, and diverse worldviews.
Avoid generic language (words that apply only to one sex, race,
or other group as though they represent everyone) and
nonparallel language (terms are changed because of the sex,
race, or other group characteristics of the individual).
Individualistic cultures tend to use low-context communication,
in which information is (1) embedded mainly in the messages
transmitted and (2) presented directly. By contrast,
collectivistic cultures tend to use high-context communication,
in which people (1) expect others to know how they’re thinking
and feeling and (2) present some messages indirectly to avoid
embarrassing the other person.
Needless to say, offensive, vulgar, and hateful language should
always be avoided.
6
Speaking Accurately
Accurate language conveys your meaning precisely. But using
accurate language is difficult because:
Language is symbolic
We must learn language

Each utterance is a creative act
The same words can be interpreted differently
Language is symbolic—that is, we use words to represent
things, ideas, events, and so forth. Words have no tangible
meanings in and of themselves; rather, we attach meaning to
them. Therefore, as a speaker you should use accurate words
that most closely match the thing or idea you want your
audience to see or understand.
We learn much of our language early in life from our families.
We then learn more in school, and we continue to learn more
throughout our lives. But we do not all learn to use the same
words in the same way.
Although on occasion we repeat other people’s sentence
constructions to represent what we are thinking or feeling, most
of our talk is unique. This can make it difficult to convey your
meaning precisely.
Finally, be aware that even though two people may know the
same words, they may interpret the meanings of the words
differently.
7
Factors Affecting Interpretation
Denotation
Connotation
Dialect
A word’s denotation is its dictionary definition. But meaning
may vary depending on the context in which the word is used.
Context—the position of a word in a sentence and its

relationship to the other words around it—has an important
effect on correctly interpreting which denotation is meant.
A word’s connotation is the positive, neutral, or negative
feelings or evaluations we associate with it. Our perception of a
word’s connotation may be even more important than its
denotation in how we interpret the meaning of the word.
Dialect, a regional or ethnic variety of a language, can also
affect listener understanding of your message. If your audience
doesn’t share the dialect you normally speak, using it during
your speeches can interfere with the intelligibility of your
message. Using dialect can also affect the audience’s perception
of your competence and credibility.
8
Strategies for Speaking Clearly
Use specific language
Choose familiar terms
Avoid jargon & slang
Provide details
Limit vocalized pauses
Specific language clarifies meaning by narrowing what is
understood from a general category to a particular item or group
within that category. Choosing specific words is easier when
you have a large working vocabulary. Try to increase your
vocabulary by studying vocabulary-building books, looking up
words you are unfamiliar with, and using a thesaurus.
Using familiar terms is just as important as using specific
words. In most situations, you should avoid jargon (he unique
technical terminology of a trade or profession that is not

generally understood by outsiders), slang (informal,
nonstandard vocabulary and nonstandard definitions assigned to
words by a social group or subculture), abbreviations, and
acronyms.
If the word you use does not have a precise synonym, you can
achieve clarity by adding details or examples.
Vocalized pauses are unnecessary words (e.g., “like,” “you
know,” “really,” “basically,” “um,” “uh”) interjected into
sentences to fill moments of silence. A few vocalized pauses
typically don’t hinder clarity, but practicing your speech aloud
will help you eliminate them.
9
Strategies for Speaking Vividly
Use sensory language
Use rhetorical figures & structures of speech
To develop vivid sensory language, use words to convey what
your subject looks like, sounds, feels (textures, shapes,
temperatures), tastes, and smells. To achieve this in your
speech, use colorful descriptors.
Rhetorical figures of speech make striking comparisons between
things that are not obviously alike and so help listeners
visualize or internalize what you are saying. Rhetorical
structures of speech combine ideas in a particular way.
A simile is a direct comparison of dissimilar things using the
word “like” or “as.” A metaphor is an implied comparison
between two unlike things, expressed without using “like” or
“as.” An analogy is an extended metaphor. Alliteration is the
repetition of consonant sounds at the beginning of words that
are near one another. Assonance is the repetition of vowel
sounds in a phrase or phrases. Onomatopoeia is the use of words

that sound like the things they stand for, such as “buzz,” “hiss,”
“crack,” and “plop.” Personification is attributing human
qualities to a concept or an inanimate object. Repetition is
restating words, phrases, or sentences for emphasis. Antithesis
is combining contrasting ideas in the same sentence.
10
I Have a Dream
Communication researchers suggest that the best speech is “I
have a dream” by Martin Luther King, Jr.
As you listen, write the powerful usages of language.
Metaphors
Similes
Alliteration
Parallelism
Antithesis
Alliteration
Repetition
http://video.google.com/videoplay?docid=173275490769854949
3
11
Impromptu Speeches
The structure is the same
Introduction
Attention grabber
Preview the topic and main point(s)
Body
Discuss main point (This may be the present condition)
Give an example, illustration, or experience.

Elaborate on your idea (This may be your idea to make things
better than the present condition.)
Conclusion
Signal
Summarize what you have said
Let’s Practice
Choose from the following list of topics. You will have five
minutes to prepare and should present for 2 minutes
Tell about your most embarrassing experience.
Explain a time in your life that you changed your way of
thinking.
Tell about your scariest experience.
If you could be any animal, other than human, what would you
be and why.
ToTAL RewARds
Student Workbook

Benefits and Business at Aflac and L.L. Bean
By Sandra M. Reed, SPHR

Project team
Author: Sandra M. Reed, SPHR
SHRM project contributors: Bill Schaefer, SPHR
Nancy A. Woolever, SPHR External contributor: Sharon H.
Leonard
Copy editing: Katya Scanlan, copy editor
Design: Kellyn Lombardi, graphic designer
© 2009 Society for Human Resource Management. Sandra M.
Reed, SPHR For more information, please contact:
SHRM Academic Initiatives
1800 Duke Street, Alexandria, VA 22314, USA Phone: (800)
283-7476 Fax: (703) 535-6432

Web: http://www.shrm.org/education/hreducation
09-0235-SW
© 2009 society for Human Resource Management. sandra M.
Reed, sPHR
Reed, sPHR
Case overview
In its 2008 annual Job Satisfaction Survey Report, the Society
for Human Resource Management (SHRM) reported that for the
past five years, employees rated compensation and benefits
among the top three aspects most important to their job. But
despite the importance of these aspects, employee satisfaction
with their compensation and benefits packages remains low.
According to a Conference Board report, “employees are least
satisfied with their companies’ bonus plans, promotion policies,
health plans and pensions”. Employers are missing critical
opportunities to
maximize employee job satisfaction and other organizational
outcomes through their total rewards programs.1
In the book Dynamic Compensation for Changing organizations:
People, Performance & Pay, The Hay Group asserts that
traditional pay structures no longer keep
pace with the emerging, strategy-focused organizations that
exist in today’s globally competitive market. “What shifted
were organizational work values, work cultures and business

strategies. Although they have been largely overlooked,
dramatic changes in the organizational rules have frequently
rendered traditional compensation strategies ineffective.
Employees today are expected to work in teams rather than
solely on their own. They are expected to keep learning new
skills and to assume broader roles. They are expected to take
more risks and responsibility for results. As a consequence, we
are slowly coming to the realization that we may be
paying for the wrong things, sending inconsistent messages
about the company to its employees, or creating artificial
expectations of continued advancement and raises, no matter
how well the company performs.”2
Furthermore, in its publication Implementing Total Rewards
Strategies, SHRM notes that “the right total rewards system—a
blend of monetary and non-monetary rewards offered to
employees—can generate valuable business results. These
results range from enhanced individual and organizational
performance to improved job satisfaction, employee loyalty and
workforce morale.”3
Today, HR professionals are responsible for programs far
beyond the profession’s administrative personnel roots. They
are expected to measure the success or failure of HR practices
based on the achievement of organizational outcomes. Brand
identity, bottom-line profitability, employee job satisfaction and
increased management focus are all outcomes that can be
achieved in part through an organization’s total rewards
program. This case examines two very different organizations
and how they align their total rewards programs with their
organizational goals and values.

Aflac Insurance
comPany InformatIon
Aflac is a Fortune 500 insurance company founded in 1955 by
three brothers, John, Paul and Bill Amos. Today, Aflac employs
more than 4,500 people and has more than 71,000 licensed
independent agents throughout the United States and Japan. The
following is an excerpt from the New York Stock Exchange
business summary.
“Aflac Incorporated is a general business holding company and
acts as a management company, overseeing the operations of its
subsidiaries by providing management services and making
capital available. Its principal business is supplemental health
and life insurance, which is marketed and administered through
its subsidiary,
American Family Life Assurance Company of Columbus
(Aflac), which operates in the United States (Aflac U.S.) and as
a branch in Japan (Aflac Japan). Aflac’s
insurance business consists of two segments: Aflac Japan and
Aflac U.S. Aflac Japan sells cancer plans, care plans, general
medical indemnity plans, medical/sickness riders, living benefit
life plans, ordinary life insurance plans and annuities. Aflac
U.S. sells cancer plans and various types of health insurance,
including accident/disability, fixed-benefit dental, sickness and
hospital indemnity, vision care, hospital intensive care, long-
term care, ordinary life and short-term disability plans.”
aflac corPorate PhIlosoPhy
“Since its beginning, Aflac has believed that the best way to
succeed in our business is to value people. Treating employees
with care, dignity and fairness are founding principles of
Aflac.”

aflac’s mIssIon
To combine innovative strategic marketing with quality
products and services at competitive prices to provide the best
insurance value for consumers.
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GuIdInG PrIncIPles
To offer quality products and services at competitive prices and
use new technology to better serve our policyholders.
n Build better value for our shareholders.
n Supply quality service for our agents.
n Provide an enriching and rewarding workplace for our
employees.
the case at aflac
With a desire to be an employer of choice, Aflac Insurance is no
stranger to the competition for talent among employers in the
United States. In fact, according to the Bureau of Labor
Statistics (BLS), the unemployment rate in the insurance
industry was at 3.3 percent in March 2008, a number
consistently below the
national and state levels in other industries (Exhibits A and B).

This makes finding and retaining qualified individuals to
deliver positive results to shareholders an ongoing challenge.
Organizational outcomes related to human resources at Aflac
reflect many of the basic functions, including recruiting,
retention, diversity and training. At Aflac, the company strives
to deliver quality service to its 4,500 employees while staying
competitive in the insurance market. Aflac prides itself on being
ahead of the curve
from a consumer perspective and desires to mirror that
philosophy in its treatment of employees. How does the
company made famous by the duck maintain the integrity of its
brand while delivering results through its people? How
important are benefits and compensation to the company’s
ability to compete in a growing industry?
Casey Graves, vice president of human resources in charge of
compensation and benefits at Aflac, says that the needs of the
company’s employees continue to be the driving factor behind
Aflac’s total rewards programs. As with most programs, it
begins with an employee needs assessment and continues to be
measured through outcomes, which have been directly
influenced through the company’s enhanced total rewards
efforts. The consistent thread throughout this process, according
to Graves, is the quality of communication. Graves explains that
Aflac’s total rewards statements have evolved from a one-page
document to an in-depth review of the true value of the
employment compensation and benefits.
Employee satisfaction surveys and focus groups conducted in
2007 with Aflac employees and managers drove the needs
identification process. A key focus of
the survey was to help recruit talent and improve retention in an
industry with low unemployment rates. Although survey results
varied, Aflac’s response was consistent: to give employees what
they need from a benefits perspective while balancing the cost,

all within a rapid period of growth.
Throughout the process, the company focused on providing
value-added programs that would improve employee job
satisfaction, support organizational initiatives and provide
opportunities for professional development. Aflac seeks to
accomplish this by:
n Providing Aflac products to employees at little to no cost—for
example, offering employer-paid life insurance, a company-paid
cancer policy and company- subsidized accident protection
insurance.
n Providing total rewards in line with philanthropic goals. Aflac
dedicates resources to efforts that support the community in
four areas: health, education, youth and the arts. One benefit
offered to Aflac employees is the recognition of a “Volunteer of
the Month,” in which an employee is awarded for the time spent
volunteering at his or her charity of choice.
n Developing employees for their next career level through
extensive employee training and leadership programs to keep
pace with the strategic growth goals being executed company-
wide. More than 91 percent of Aflac’s
employees at the senior vice president level and above have
been promoted through the ranks. Aflac’s corporate training
department hosts two employee learning initiatives. The first is
a leadership development program with on-site courses for all
employees from entry level to senior management. There are
three levels of classes; some classes require employees to have
taken prerequisite courses that are

a part of the offered curriculum. Instructor-led classes offer a
variety of subjects for workers seeking both career and personal
development and are designed to help employees achieve a
quality work/life balance. Course topics range from “Managing
Your Career” to “Preventing Diabetes.”
Cost-containment is on every HR professional’s mind when
discussing employee benefits. According to the National
Coalition on Healthcare, the cost of offering health insurance
continues to outpace inflation. In fact, “in 2007, employer
health insurance premiums increased by 6.1 percent, which was
two times the rate of inflation. The annual premium for an
employer health plan covering a family of four averaged nearly
$12,100. The annual premium for single coverage averaged over
$4,400.” And, as Graves points out, that is added to the cost of
steadily growing the business each year, which includes adding
staff. Suddenly, employee benefits become a conspicuous line
item on profit and loss statements and must therefore enhance
the achievement of organizational outcomes in order to be
justified. An important theme in Aflac’s communication to its
employees is that the health care cost containment is an
employer and employee shared responsibility.
Aflac seeks to administer benefits in a cost-effective manner
while staying true to the concept of employee service. Aflac
recognizes the actual value of
employee benefits, and as a result, its overall philosophy is that
“it’s all about the employee.” For Aflac, in addition to
competitive salaries, it includes designing benefits packages
that reflect the needs of a multi-generational workforce—some
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seeking portability, others seeking stability. It is about creating
a positive work environment that is conducive to productivity—
by offering one of the largest on-site child care facilities in the
United States. Aflac sponsors outdoor adventure days,
on-site fitness centers and service discounts. It pays 100 percent
of the employee premium for its ground-breaking cancer
insurance, in line with the company’s philanthropic
commitments as a socially responsible organization, positioning
Aflac to lead its industry to enhanced service levels. These
benefits, according to Graves, send the message to employees
that they and their lifestyles are important to the organization.
The proof continues to be demonstrated in recent employee
survey results:
n Approximately 90 percent of employees were attracted to and
remain at Aflac because of company reputation.
n Employees are happy with the profit-sharing bonus, with 81
percent of employees saying they believe it is better than that of
other companies.
n Eighty-nine percent of employees consider Aflac’s total
rewards statement an effective communication tool.
Perhaps most telling of all in the competitive world of
insurance—employee turnover fell below 10 percent in the first
quarter of 2008.

exhIbIt a: the bureau of labor statIstIcs, aPrIl 2008
Insurance carrIers and related actIvItIes: naIcs 524
employment, Unemployment & Layoffs:
data series dec. 2007 jan. 2008 feb. 2008 mar. 2008
Employment (in thousands)
Employment, all employees (seasonally adjusted)
2,316.8
2,313.9
(P) 2,310.2
(P) 2,314.1
Employment, nonsupervisory workers
1,848.0
1,836.0
(P) 1,839.7
Unemployment
Unemployment rate
2.3%
2.9%
2.6%
3.3%
Layoffs
Mass layoff events

9
13
7
Initial claimants for unemployment benefits
514
1,022
468
Footnotes (P) Preliminary
(Source: Current Employment Statistics, Current Population
Survey, Mass Layoff Statistics)
exhIbIt b: the bureau of labor statIstIcs, unIted states cIvIlIan
unemPloyment rate, all IndustrIes
year jan feb mar apr may jun jul aug sep oct nov
dec
Labor Force statistics from the Current Population survey
1998
4.6
4.6
4.7
4.3
4.4
4.5
4.5
4.5
4.6
4.5

4.4
4.4
1999
4.3
4.4
4.2
4.3
4.2
4.3
4.3
4.2
4.2
4.1
4.1
4.0
2000
4.0
4.1
4.0
3.8
4.0
4.0
4.0
4.1
3.9
3.9
3.9
3.9
2001
4.2
4.2
4.3
4.4
4.3
4.5
4.6

4.9
5.0
5.3
5.5
5.7
2002
5.7
5.7
5.7
5.9
5.8
5.8
5.8
5.7
5.7
5.7
5.9
6.0
2003
5.8
5.9
5.9
6.0
6.1
6.3
6.2
6.1
6.1
6.0
5.8
5.7
2004
5.7
5.6
5.8
5.6

5.6
5.6
5.5
5.4
5.4
5.5
5.4
5.4
2005
5.2
5.4
5.2
5.1
5.1
5.0
5.0
4.9
5.1
5.0
5.0
4.8
2006
4.7
4.7
4.7
4.7
4.7
4.6
4.7
4.7
4.5
4.4
4.5
4.4
2007
4.6

4.5
4.4
4.5
4.5
4.6
4.7
4.7
4.7
4.8
4.7
5.0
2008
4.9
4.8
5.1
5.0
5.5
5.6
5.8
6.2.
6.2
6.6
6.8
7.2
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L.L. Bean

comPany InformatIon
L.L. Bean is a privately held outdoor apparel specialty catalog
and retail store founded in 1912 by Leon Leonwood Bean, an
outdoor enthusiast and entrepreneur. In his autobiography, My
Story, Bean wrote that nothing eventful occurred before his
40th year when he created a leather-topped, rubber-bottomed
hunting shoe.
As the legend goes, he sold his first 100 pairs by mail order
with a 100 percent satisfaction guarantee. When 90 pairs were
returned defective, he kept his promise and made the refunds.
Bean borrowed $400 from his brother to perfect the design and
went on to become a clothing consultant for the military during
World War II, an author and, of course, the president and
founder of a retail giant. As described by Yahoo finance online:
“With L.L.Bean, you can tame the great outdoors—or just look
as if you could. The outdoor apparel and gear maker mails more
than 200 million catalogs per year.
L.L.Bean’s library includes about 10 specialty catalogs offering
products in categories such as children’s clothing, fly-fishing,
outerwear, sportswear, housewares, footwear, camping and
hiking gear, and the Maine hunting shoe upon which the
company
was built. L.L.Bean also operates about a dozen retail stores and
some 15 factory outlets throughout the Northeast. In addition, it
sells online through English- and Japanese-language Web sites.”
L.L.Bean’s annual sales grew from $616.8 million in 1990 to
$1.169 billion in 2000, with an average annual growth rate of
6.8 percent. In 2000, L.L.Bean paid a 10 percent company-wide
bonus.
More than 11,000 people worked for the company during the
2006 holiday season, and in 2007 the company reported $1.5
billion in sales, with approximately 80 percent of those sales

coming from Internet and catalog sales. The company continues
to evolve into a multi-channel sales giant through mail order,
telephone, Internet and in-store sales.
the brand
L.L.Bean has always been a marketing professionals’ dream of
creating a brand into an institution. Strategists, marketing
specialists and other business professionals (including the
competition) have tried to duplicate the company’s
achievements with varying degrees of success. A brand is built
on perceptions about quality, service and status created by using
a particular product or working with a specific
company. A brand can be built using marketing techniques such
as visual imagery, wording that identifies what the organization
does, and advertising campaigns targeted to a desired
demographic. Strong brand identity can build a relationship
with the consumer. In L.L.Bean’s case, this is a relationship
with Maine and the great outdoors. The company operates on
the belief that the brand should reflect Bean’s values, not just
the products it sells. This case examines how L.L.Bean built the
brand by using employees as the critical channel through which
to accomplish strategic directives.
When Leon Gorman, grandson of Leon Leonwood Bean,
assumed the presidency of the company in 1960, he sent a
message to employees defining their stakeholders— those to
whom L.L.Bean was ultimately accountable in a values-driven
business.
L.L.Bean’s stakeholders were its customers, employees,

vendors, communities and the natural environment.
In addition to a strong customer focus, the company sought to
solidify the brand through social responsibility. Social
responsibility is a business concept driven by the principles of
ethically sound practices, awareness of the business imprint on
the
environment, and improvement of the quality of life of the
company’s employees and the communities in which it operates.
Social responsibility at L.L.Bean is divided into four categories:
n The environment
With company products geared for outdoor use, L.L.Bean
focuses its philanthropic efforts on preserving the environment.
Examples include green building, charitable giving and
employee participation in preservation activities.
n Paper procurement
L.L. Bean is committed to sustainable, responsible paper
procurement, an important consideration because the company
mails more than 200 million catalogs each year. It uses recycled
fiber, and suppliers are required to have programs in place to
support sustainable management of natural resources.
n Labor rights
When the company decided to move some operations offshore,
it made a commitment to labor rights, including human rights
monitoring. In fact, the company terminated at least three
offshore vendor relationships that did not meet its human rights
standards. Included in Bean’s Vendor Code of Conduct are
standards for safety, non-discriminatory practices, and fair
compensation
and benefits. This code of conduct includes processes for

auditing and investigating complaints.
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n Charitable giving
Charitable giving at L.L.Bean is based on Gorman’s concept of
the stakeholder and the company’s heritage in the outdoors. The
company has donated more than
$5 million toward environmental conservation efforts to groups
like The National Park Foundation and Ducks Unlimited. It
sponsored the Peace Climb up Mt.
Everest, during which more than three tons of trash was
collected. In addition, quality of life of the Bean employee and
customer is reflected in the company’s charitable giving efforts
to groups such as United Way and the Portland Symphony
Orchestra.
the Problem
The company spent the 1970s and 1980s developing the brand
into an American institution. L.L.Bean operated on the premise
that profits are an outcome of strong customer service. Profits,
therefore, were a byproduct rather than a corporate
focus. Growth was strong, particularly in mail order. By 1990,
however, sales were stagnating, productivity was declining and
the mailing list was not growing. The

U.S. economy slipped into a recession, and as a result, 1990 was
the worst year for L.L.Bean in a decade. Sales growth improved
in 1992 when the company expanded into the Japanese market.
In 1995, Bean launched their e-commerce web site. There was
significant upper-management turnover, though, and Gorman
believed that because of the rapidly changing external
environment, the company had lost direction. In 1996, sales
flattened again, and for the first time under Gorman’s
leadership, the company reported a decline in sales. It was the
first time the board of directors voted to not award annual
bonuses to employees.
the case at l.l.bean
L.L.Bean launched a strategic review. The 80+-year-old
company had been through decades of change, yet its core
business model had consistently provided excellent growth and
profit. This was no longer the case by the 1990s when the
competitive landscape reflected a more technically savvy and
cost-conscious customer and global employee market. The need
to reorganize became obvious to Gorman.
The strategic review process began in 1996 and included
analyses of both strategic and operational processes, including
brand identity, target markets and operational competencies
(employees). HR was one of the strategic business units (SBUs)
developed as an outcome of the review process. The SBUs were
part of
a decentralization process in which each unit had responsibility
for its profit and loss and was held accountable to a balanced
scorecard approach in performance metrics. This designation for
the HR department allowed it to develop operational tasks such
as compensation and benefits into a strategic process with
measurable outcomes—for example, linking pay to performance
and increasing employee job
satisfaction. In addition, total rewards were used as strategic

solutions to many of the
issues identified in the review process, including global
outsourcing, multi-channel marketing initiatives, employee
recognition and the redefining of the brand.
Multi-channel marketing was another outcome of L.L.Bean’s
strategic review. Multi-channel marketing is the ability to offer
customers more than one way to purchase a product. The
company decided to expand their brick-and-mortar stores and
capitalize on the opportunity presented by the Internet (Exhibit
A). According to Gorman, Internet retail sales doubled each
year since 1996.
A weakness identified in the strategic review was that the
company’s financial and human resources were geared to grow
the catalog business but not retail expansion or Internet sales.
The diversification initiative took staffing to another level. For
example, the decentralization of the management team to other
locations required concentrated efforts by the company to infuse
the non-corporate facilities with L.L.Bean values. The
development of new jobs required thorough market research,
including a comprehensive job analysis process. The lack of
technical skills such as data processing threatened to topple the
organization if it didn’t acquire the staff with the required
knowledge, skills and abilities to perform in a highly
competitive market at an organization that was used to setting
the standards for quality.
Developing job descriptions and conducting salary surveys
allowed the company to develop a comprehensive compensation
and benefits framework to manage this period of rapid growth

and diversification.
As a result of the strategic review process, total rewards at
L.L.Bean became a core business practice critical to the
accomplishment of organizational goals. Traditional benefits
offered at L.L. Bean include performance-based bonuses and
cafeteria- style health care. Non-traditional benefits include
store discounts, on-site fitness programs and the use of
company-owned outdoor gear such as tents and canoes.
The company continues the tradition of outdoor adventure days
and trips as a way to connect employees with the L.L.Bean
values—the love of the outdoors. L. L. Bean himself believed in
profit-sharing with employees long before it became a strategic
compensation practice. Back in the days when pay was 18 cents
an hour, paid in brown envelopes of cash, Bean surprised
employees with bonuses calculated as a percentage of profits—
Bean’s employees were paid when the company performed.
These practices reflect the L.L.Bean philosophy that the
employees’ passion for the company and its products will
translate to the customer. As far as Bean was concerned, the
company had an obligation to stakeholders, and it began with
employee satisfaction. As Leon Gorman put it:
“Our stakeholders have invested their patronage, careers,
finances, social services and outdoor values in our enterprise.
They trust us to tell the truth, to sell quality products, to
guarantee satisfaction, to pay fair wages and provide
opportunities for growth, to secure their investment, to
participate in society, and to sustain our natural environment.
They trust us to grow to the extent that we can enhance our
benefits to them. They trust us to go the extra mile in
everything we do.”4
Reed, sPHR

Reed, sPHR
Global outsourcing of operations brought intense scrutiny to the
function of compensation and benefits. This resulted in Gorman
leading the challenge for fair wages at the company’s global
subsidiaries and vendors and, in some cases, firing those who
failed to comply.5 In addition, global benefits were markedly
different from U.S. benefits because they were infused with
cultural purpose. For example, among Japan’s official holidays
are Respect for the Aged Day, a Cultural Day,
the Emperor’s Birthday and Physical Fitness Day. In addition,
although Japan’s retirement system was similar to the United
States (a combination of Social Security and employer-
sponsored plans), Japanese employees typically collect one
lump-sum severance payment at the time of retirement based on
years of service. Commuter costs and housing subsidies are also
common fringe employment benefits in Japan.6
Did the 1996 strategic review work? Were employees rewarded
for their continued excellence, loyalty and dedication to the
corporate objectives? Let’s look at L.L.Bean’s 2006 Year in
Review press release, as reported by PR Newswire:
l.l.bean Inc. rePorts 2006 net sales results
“For the 2006 fiscal year ending February 25, 2007, L.L.Bean
reported record annual net sales of $1.54 billion, a 4.6 %
increase over 2005. The company also announced that its Board
of Directors approved a cash award of 7.5% of annual pay to
eligible employees, a payout of approximately $25.5 million.

An additional $8.8 million will be allocated to the pension plan,
keeping the plan fully funded.
“It’s a well deserved bonus,” said Leon Gorman, L.L.Bean’s
Chairman of the Board. “2006 was a year in which we made
excellent progress on a variety of strategic initiatives important
to the future of our business. We are pleased to be in the
position of rewarding Bean employees for their achievements.”
Chris McCormick, L.L.Bean’s President and CEO, expanded on
the year-end results for 2006. “We had a strong start and strong
finish to the fall and winter selling season,” he said. “Although
unseasonably warm weather had an impact on sales in December
and early January, our business performed very well and the
product line continues to hit the right mark with our customers.
I am very proud of all that we accomplished in 2006 through our
employees’ hard work and dedication,” he continued. “It was an
exciting year with a lot of energy and growth, including the
opening of three additional stores, launching $90 million
in investments in our hometown of Freeport, and making further
progress on the international side of our business.”
exhIbIt a: l.l. bean-bureau of labor statIstIcs for electronIc
shoPPInG & maIl-order houses, establIshments PrImarIly
enGaGed In retaIlInG all tyPes of merchandIse usInG non-store
means such as cataloGs or electronIc medIa
The eight industries with the highest productivity growth rates
over the 1990–2000 period, each experienced growth in output
per hour of more than 12 percent per year, on average.

Industries with highest labor productivity growth rates, 1990-
2000
31.7
27.0
16.2
14.5
13.9
13.8
13.4
12.4
35%
30%
25%
20%
15%
10%
5%
Electrical & electronic goods wholesalers
Communications eqt mfg
Software publishers
Electronic shopping & mail-order houses
Electronics & appliance stores
Professional & commercial eqt wholesalers
Semiconductor & other electronic comp. mfg
Computer & peripheral eqt mfg
0%

Reed, sPHR
Reed, sPHR

Society for Human Resource Management. (2008). 2008 job
satisfaction: A survey report by SHRM. Alexandria, VA:
Author.
The Conference Board. (2005, February 28). U.S. job
satisfaction keeps falling [press release]. Retrieved from
www.conference-
board.org/utilities/pressDetail.cfm?press_ID=2582.The Hay
Group (1996). Dynamic compensation for changing
organizations: People, Performance & Pay. New York: The Free
Press.Heneman, R. L. (2007). Implementing total rewards
strategies. Alexandria, VA: SHRM Foundation. Retrieved from
www.shrm.org/hrdisciplines/benefits/Documents/07RewardsStra
tReport.pdf.Gorman, L. (2006). L. L. Bean: The making of an
American icon. Cambridge, MA: Harvard Business School
Press.Gorman, L. (2006). L. L. Bean: The making of an
American icon. Cambridge, MA: Harvard Business School
Press.The Japan External Trade Organization. Human Resources
and Payroll [fact sheet]. Retrieved from www.jetro.
org/documents/fact_sheets/f_hr.pdf.

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1800 Duke Street
Alexandria, VA 22314-3499
Benefits and Business at
Aflac and L.L. Bean

By Sandra M. Reed, SPHR
ToTAL RewARds
Student Workbook
Project team
Author: Sandra M. Reed, SPHR
SHR M project contributors: Bill Schaefer, SPHR
Nancy A. Woolever, SPHR
External contributor: Sharon H. Leonard
Copy editing: Katya Scanlan, copy editor
Design: Kellyn Lombardi, graphic designer
© 2009 Society for Human Resource Management. Sandra M.
Reed, SPHR
For more information, please contact:
SHR M Academic Initiatives
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (800) 283-7476 Fax: (703) 535-6432
Web: http://www.shrm.org/education/hreducation
09-0235-SW
Reed, sPHR 1

Case overview
In its 2008 annual Job Satisfaction Survey Report, the Society
for Human Resource
Management (SHR M) reported that for the past five years,
employees rated
compensation and benefits among the top three aspects most
important to their
job. But despite the importance of these aspects, employee
satisfaction with their
compensation and benefits packages remains low. According to
a Conference Board
report, “employees are least satisfied with their companies’
bonus plans, promotion
policies, health plans and pensions”. Employers are missing
critical opportunities to
maximize employee job satisfaction and other organizational
outcomes through their
total rewards programs.1
In the book Dynamic Compensation for Changing organizations:
People, Performance
& Pay, The Hay Group asserts that traditional pay structures no
longer keep
pace with the emerging, strategy-focused organizations that
exist in today’s
globally competitive market. “What shifted were organizational
work values, work
cultures and business strategies. Although they have been
largely overlooked,
dramatic changes in the organizational rules have frequently
rendered traditional
compensation strategies ineffective. Employees today are
expected to work in teams
rather than solely on their own. They are expected to keep

learning new skills and
to assume broader roles. They are expected to take more risks
and responsibility for
results. As a consequence, we are slowly coming to the
realization that we may be
paying for the wrong things, sending inconsistent messages
about the company to its
employees, or creating artificial expectations of continued
advancement and raises,
no matter how well the company performs.”2
Furthermore, in its publication Implementing Total Rewards
Strategies, SHR M
notes that “the right total rewards system—a blend of monetary
and non-monetary
rewards offered to employees—can generate valuable business
results. These results
range from enhanced individual and organizational performance
to improved job
satisfaction, employee loyalty and workforce morale.”3
Today, HR professionals are responsible for programs far
beyond the profession’s
administrative personnel roots. They are expected to measure
the success or failure of
HR practices based on the achievement of organizational
outcomes. Brand identity,
bottom-line profitability, employee job satisfaction and
increased management focus
are all outcomes that can be achieved in part through an
organization’s total rewards
program. This case examines two very different organizations
and how they align
their total rewards programs with their organizational goals and
values.

2 © 2009 society for Human Resource Management. sandra M.
Reed, sPHR
Aflac Insurance
comPany InformatIon
Aflac is a Fortune 500 insurance company founded in 1955 by
three brothers, John,
Paul and Bill Amos. Today, Aflac employs more than 4,500
people and has more
than 71,000 licensed independent agents throughout the United
States and Japan.
The following is an excerpt from the New York Stock Exchange
business summary.
“Aflac Incorporated is a general business holding company and
acts as a management
company, overseeing the operations of its subsidiaries by
providing management
services and making capital available. Its principal business is
supplemental health
and life insurance, which is marketed and administered through
its subsidiary,
American Family Life Assurance Company of Columbus
(Aflac), which operates
in the United States (Aflac U.S.) and as a branch in Japan
(Aflac Japan). Aflac’s
insurance business consists of two segments: Aflac Japan and
Aflac U.S. Aflac Japan
sells cancer plans, care plans, general medical indemnity plans,
medical/sickness
riders, living benefit life plans, ordinary life insurance plans
and annuities. Aflac U.S.

sells cancer plans and various types of health insurance,
including accident/disability,
fixed-benefit dental, sickness and hospital indemnity, vision
care, hospital intensive
care, long-term care, ordinary life and short-term disability
plans.”
aflac corPorate PhIlosoPhy
“Since its beginning, Aflac has believed that the best way to
succeed in our business
is to value people. Treating employees with care, dignity and
fairness are founding
principles of Aflac.”
aflac’s mIssIon
To combine innovative strategic marketing with quality
products and services at
competitive prices to provide the best insurance value for
consumers.
Reed, sPHR 3
GuIdInG PrIncIPles
To offer quality products and services at competitive prices and
use new technology
to better serve our policyholders.
Build better value for our shareholders. n
Supply quality service for our agents. n

Provide an enriching and rewarding workplace for our
employees. n
the case at aflac
With a desire to be an employer of choice, Aflac Insurance is no
stranger to the
competition for talent among employers in the United States. In
fact, according
to the Bureau of Labor Statistics (BLS), the unemployment rate
in the insurance
industry was at 3.3 percent in March 2008, a number
consistently below the
national and state levels in other industries (Exhibits A and B).
This makes finding
and retaining qualified individuals to deliver positive results to
shareholders an
ongoing challenge.
Organizational outcomes related to human resources at Aflac
reflect many of the
basic functions, including recruiting, retention, diversity and
training. At Aflac,
the company strives to deliver quality service to its 4,500
employees while staying
competitive in the insurance market. Aflac prides itself on being
ahead of the curve
from a consumer perspective and desires to mirror that
philosophy in its treatment of
employees. How does the company made famous by the duck
maintain the integrity
of its brand while delivering results through its people? How
important are benefits
and compensation to the company’s ability to compete in a
growing industry?

Casey Graves, vice president of human resources in charge of
compensation and
benefits at Aflac, says that the needs of the company’s
employees continue to be the
driving factor behind Aflac’s total rewards programs. As with
most programs, it
begins with an employee needs assessment and continues to be
measured through
outcomes, which have been directly influenced through the
company’s enhanced
total rewards efforts. The consistent thread throughout this
process, according to
Graves, is the quality of communication. Graves explains that
Aflac’s total rewards
statements have evolved from a one-page document to an in-
depth review of the
true value of the employment compensation and benefits.
Employee satisfaction surveys and focus groups conducted in
2007 with Aflac
employees and managers drove the needs identification process.
A key focus of
the survey was to help recruit talent and improve retention in an
industry with low
unemployment rates. Although survey results varied, Aflac’s
response was consistent:
to give employees what they need from a benefits perspective
while balancing the
cost, all within a rapid period of growth.
Reed, sPHR

Throughout the process, the company focused on providing
value-added programs
that would improve employee job satisfaction, support
organizational initiatives
and provide opportunities for professional development. Aflac
seeks to accomplish
this by:
Providing Aflac products to employees at little to no cost n —
for example,
offering employer-paid life insurance, a company-paid cancer
policy and company-
subsidized accident protection insurance.
Providing total rewards in line with philanthropic goals. n
Aflac dedicates
resources to efforts that support the community in four areas:
health,
education, youth and the arts. One benefit offered to Aflac
employees is the
recognition of a “Volunteer of the Month,” in which an
employee is awarded
for the time spent volunteering at his or her charity of choice.
Developing employees for their next career level through
extensive n
employee training and leadership programs to keep pace with
the strategic
growth goals being executed company- wide. More than 91
percent of Aflac’s
employees at the senior vice president level and above have
been promoted through
the ranks. Aflac’s corporate training department hosts two
employee learning
initiatives. The first is a leadership development program with
on-site courses for

all employees from entry level to senior management. There are
three levels of
classes; some classes require employees to have taken
prerequisite courses that are
a part of the offered curriculum. Instructor-led classes offer a
variety of subjects
for workers seeking both career and personal development and
are designed to
help employees achieve a quality work/life balance. Course
topics range from
“Managing Your Career” to “Preventing Diabetes.”
Cost-containment is on every HR professional’s mind when
discussing employee
benefits. According to the National Coalition on Healthcare, the
cost of offering
health insurance continues to outpace inflation. In fact, “in
2007, employer health
insurance premiums increased by 6.1 percent, which was two
times the rate of
inflation. The annual premium for an employer health plan
covering a family of four
averaged nearly $12,100. The annual premium for single
coverage averaged over
$4,400.” And, as Graves points out, that is added to the cost of
steadily growing the
business each year, which includes adding staff. Suddenly,
employee benefits become
a conspicuous line item on profit and loss statements and must
therefore enhance the
achievement of organizational outcomes in order to be justified.
An important
theme in Aflac’s communication to its employees is that the
health care cost
containment is an employer and employee shared responsibility.

Aflac seeks to administer benefits in a cost-effective manner
while staying
true to the concept of employee service. Aflac recognizes the
actual value of
employee benefits, and as a result, its overall philosophy is that
“it’s all about the
employee.” For Aflac, in addition to competitive salaries, it
includes designing
benefits packages that reflect the needs of a multi-generational
workforce—some
Reed, sPHR 5
seeking portability, others seeking stability. It is about creating
a positive work
environment that is conducive to productivity—by offering one
of the largest on-site
child care facilities in the United States. Aflac sponsors outdoor
adventure days,
on-site fitness centers and service discounts. It pays 100 percent
of the employee
premium for its ground-breaking cancer insurance, in line with
the company’s
philanthropic commitments as a socially responsible
organization, positioning
Aflac to lead its industry to enhanced service levels. These
benefits, according to
Graves, send the message to employees that they and their
lifestyles are important
to the organization. The proof continues to be demonstrated in
recent employee
survey results:

Approximately 90 percent of employees were attracted to and
remain at Aflac n
because of company reputation.
Employees are happy with the profit-sharing bonus, with 81
percent of employees n
saying they believe it is better than that of other companies.
Eighty-nine percent of employees consider Aflac’s total rewards
statement an n
effective communication tool.
Perhaps most telling of all in the competitive world of
insurance—employee turnover
fell below 10 percent in the first quarter of 2008.
Reed, sPHR
exhIbIt a: the bureau of labor statIstIcs, aPrIl 2008
Insurance carrIers and related actIvItIes: naIcs 524
employment, Unemployment & Layoffs:
data series dec. 2007 jan. 2008 feb. 2008 mar. 2008
Employment (in thousands)
Employment, all employees
(seasonally adjusted)

2,316.8 2,313.9 (P) 2,310.2 (P) 2,314.1
Employment, nonsupervisory workers 1,848.0 1,836.0 (P)
1,839.7
Unemployment
Unemployment rate 2.3% 2.9% 2.6% 3.3%
Layoffs
Mass layoff events 9 13 7
Initial claimants for unemployment
benefits
514 1,022 468
Footnotes (P) Preliminary
(Source: Current Employment Statistics, Current Population
Survey, Mass Layoff Statistics)
exhIbIt b: the bureau of labor statIstIcs, unIted states cIvIlIan
unemPloyment rate, all IndustrIes
Labor Force statistics from the Current Population survey
year jan feb mar apr may jun jul aug sep oct nov dec
1998 4.6 4.6 4.7 4.3 4.4 4.5 4.5 4.5 4.6 4.5 4.4 4.4
1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0
2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9

2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.5 5.7
2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0
2003 5.8 5.9 5.9 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.8 5.7
2004 5.7 5.6 5.8 5.6 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4
2005 5.2 5.4 5.2 5.1 5.1 5.0 5.0 4.9 5.1 5.0 5.0 4.8
2006 4.7 4.7 4.7 4.7 4.7 4.6 4.7 4.7 4.5 4.4 4.5 4.4
2007 4.6 4.5 4.4 4.5 4.5 4.6 4.7 4.7 4.7 4.8 4.7 5.0
2008 4.9 4.8 5.1 5.0 5.5 5.6 5.8 6.2. 6.2 6.6 6.8 7.2
Reed, sPHR 7
L.L. Bean
comPany InformatIon
L.L. Bean is a privately held outdoor apparel specialty catalog
and retail store
founded in 1912 by Leon Leonwood Bean, an outdoor enthusiast
and entrepreneur.
In his autobiography, My Story, Bean wrote that nothing
eventful occurred before
his 40th year when he created a leather-topped, rubber-bottomed
hunting shoe.
As the legend goes, he sold his first 100 pairs by mail order
with a 100 percent
satisfaction guarantee. When 90 pairs were returned defective,

he kept his promise
and made the refunds. Bean borrowed $400 from his brother to
perfect the design
and went on to become a clothing consultant for the military
during World War II,
an author and, of course, the president and founder of a retail
giant. As described by
Yahoo finance online:
“With L.L.Bean, you can tame the great outdoors—or just look
as if you could.
The outdoor apparel and gear maker mails more than 200
million catalogs per year.
L.L.Bean’s library includes about 10 specialty catalogs offering
products in categories
such as children’s clothing, fly-fishing, outerwear, sportswear,
housewares, footwear,
camping and hiking gear, and the Maine hunting shoe upon
which the company
was built. L.L.Bean also operates about a dozen retail stores and
some 15 factory
outlets throughout the Northeast. In addition, it sells online
through English- and
Japanese-language Web sites.”
L.L.Bean’s annual sales grew from $616.8 million in 1990 to
$1.169 billion in
2000, with an average annual growth rate of 6.8 percent. In
2000, L.L.Bean paid a
10 percent company-wide bonus.
More than 11,000 people worked for the company during the
2006 holiday
season, and in 2007 the company reported $1.5 billion in sales,
with approximately
80 percent of those sales coming from Internet and catalog

sales. The company
continues to evolve into a multi-channel sales giant through
mail order, telephone,
Internet and in-store sales.
the brand
L.L.Bean has always been a marketing professionals’ dream of
creating a brand into
an institution. Strategists, marketing specialists and other
business professionals
(including the competition) have tried to duplicate the
company’s achievements
with varying degrees of success. A brand is built on perceptions
about quality,
service and status created by using a particular product or
working with a specific
Reed, sPHR
company. A brand can be built using marketing techniques such
as visual imagery,
wording that identifies what the organization does, and
advertising campaigns
targeted to a desired demographic. Strong brand identity can
build a relationship
with the consumer. In L.L.Bean’s case, this is a relationship
with Maine and the
great outdoors. The company operates on the belief that the
brand should reflect
Bean’s values, not just the products it sells. This case examines
how L.L.Bean built
the brand by using employees as the critical channel through

which to accomplish
strategic directives.
When Leon Gorman, grandson of Leon Leonwood Bean,
assumed the presidency of
the company in 1960, he sent a message to employees defining
their stakeholders—
those to whom L.L.Bean was ultimately accountable in a values-
driven business.
L.L.Bean’s stakeholders were its customers, employees,
vendors, communities and
the natural environment.
In addition to a strong customer focus, the company sought to
solidify the brand
through social responsibility. Social responsibility is a business
concept driven by
the principles of ethically sound practices, awareness of the
business imprint on the
environment, and improvement of the quality of life of the
company’s employees and
the communities in which it operates. Social responsibility at
L.L.Bean is divided
into four categories:
The environment n
With company products geared for outdoor use, L.L.Bean
focuses its
philanthropic efforts on preserving the environment. Examples
include green
building, charitable giving and employee participation in
preservation activities.
Paper procurement n

L.L. Bean is committed to sustainable, responsible paper
procurement, an
important consideration because the company mails more than
200 million
catalogs each year. It uses recycled fiber, and suppliers are
required to have
programs in place to support sustainable management of natural
resources.
Labor rights n
When the company decided to move some operations offshore,
it made a
commitment to labor rights, including human rights monitoring.
In fact, the
company terminated at least three offshore vendor relationships
that did not meet
its human rights standards. Included in Bean’s Vendor Code of
Conduct are
standards for safety, non-discriminatory practices, and fair
compensation
and benefits. This code of conduct includes processes for
auditing and
investigating complaints.
Reed, sPHR 9
Charitable giving n
Charitable giving at L.L.Bean is based on Gorman’s concept of
the stakeholder
and the company’s heritage in the outdoors. The company has
donated more than

$5 million toward environmental conservation efforts to groups
like The National
Park Foundation and Ducks Unlimited. It sponsored the Peace
Climb up Mt.
Everest, during which more than three tons of trash was
collected. In addition,
quality of life of the Bean employee and customer is reflected in
the company’s
charitable giving efforts to groups such as United Way and the
Portland Symphony
Orchestra.
the Problem
The company spent the 1970s and 1980s developing the brand
into an American
institution. L.L.Bean operated on the premise that profits are an
outcome of strong
customer service. Profits, therefore, were a byproduct rather
than a corporate
focus. Growth was strong, particularly in mail order. By 1990,
however, sales were
stagnating, productivity was declining and the mailing list was
not growing. The
U.S. economy slipped into a recession, and as a result, 1990 was
the worst year for
L.L.Bean in a decade. Sales growth improved in 1992 when the
company expanded
into the Japanese market. In 1995, Bean launched their e-
commerce web site.
There was significant upper-management turnover, though, and
Gorman believed
that because of the rapidly changing external environment, the
company had lost
direction. In 1996, sales flattened again, and for the first time
under Gorman’s

leadership, the company reported a decline in sales. It was the
first time the board of
directors voted to not award annual bonuses to employees.
the case at l.l.bean
L.L.Bean launched a strategic review. The 80+-year-old
company had been through
decades of change, yet its core business model had consistently
provided excellent
growth and profit. This was no longer the case by the 1990s
when the competitive
landscape reflected a more technically savvy and cost-conscious
customer and global
employee market. The need to reorganize became obvious to
Gorman.
The strategic review process began in 1996 and included
analyses of both
strategic and operational processes, including brand identity,
target markets and
operational competencies (employees). HR was one of the
strategic business units
(SBUs) developed as an outcome of the review process. The
SBUs were part of
a decentralization process in which each unit had responsibility
for its profit and
loss and was held accountable to a balanced scorecard approach
in performance
metrics. This designation for the HR department allowed it to
develop operational
tasks such as compensation and benefits into a strategic process
with measurable
outcomes—for example, linking pay to performance and
increasing employee job
satisfaction. In addition, total rewards were used as strategic

solutions to many of the
Reed, sPHR
issues identified in the review process, including global
outsourcing, multi-channel
marketing initiatives, employee recognition and the redefining
of the brand.
Multi-channel marketing was another outcome of L.L.Bean’s
strategic review.
Multi-channel marketing is the ability to offer customers more
than one way to
purchase a product. The company decided to expand their brick-
and-mortar stores
and capitalize on the opportunity presented by the Internet
(Exhibit A). According
to Gorman, Internet retail sales doubled each year since 1996.
A weakness identified in the strategic review was that the
company’s financial and
human resources were geared to grow the catalog business but
not retail expansion
or Internet sales. The diversification initiative took staffing to
another level. For
example, the decentralization of the management team to other
locations required
concentrated efforts by the company to infuse the non-corporate
facilities with
L.L.Bean values. The development of new jobs required
thorough market research,
including a comprehensive job analysis process. The lack of
technical skills such as

data processing threatened to topple the organization if it didn’t
acquire the staff
with the required knowledge, skills and abilities to perform in a
highly competitive
market at an organization that was used to setting the standards
for quality.
Developing job descriptions and conducting salary surveys
allowed the company
to develop a comprehensive compensation and benefits
framework to manage this
period of rapid growth and diversification.
As a result of the strategic review process, total rewards at
L.L.Bean became a core
business practice critical to the accomplishment of
organizational goals. Traditional
benefits offered at L.L. Bean include performance-based
bonuses and cafeteria-
style health care. Non-traditional benefits include store
discounts, on-site fitness
programs and the use of company-owned outdoor gear such as
tents and canoes.
The company continues the tradition of outdoor adventure days
and trips as a way
to connect employees with the L.L.Bean values—the love of the
outdoors. L. L.
Bean himself believed in profit-sharing with employees long
before it became a
strategic compensation practice. Back in the days when pay was
18 cents an hour,
paid in brown envelopes of cash, Bean surprised employees with
bonuses calculated
as a percentage of profits—Bean’s employees were paid when
the company
performed. These practices reflect the L.L.Bean philosophy that
the employees’

passion for the company and its products will translate to the
customer. As far as
Bean was concerned, the company had an obligation to
stakeholders, and it began
with employee satisfaction. As Leon Gorman put it:
“Our stakeholders have invested their patronage, careers,
finances, social services
and outdoor values in our enterprise. They trust us to tell the
truth, to sell quality
products, to guarantee satisfaction, to pay fair wages and
provide opportunities
for growth, to secure their investment, to participate in society,
and to sustain our
natural environment. They trust us to grow to the extent that we
can enhance our
benefits to them. They trust us to go the extra mile in
everything we do.”4
Reed, sPHR 11
Global outsourcing of operations brought intense scrutiny to the
function of
compensation and benefits. This resulted in Gorman leading the
challenge for fair
wages at the company’s global subsidiaries and vendors and, in
some cases, firing
those who failed to comply.5 In addition, global benefits were
markedly different
from U.S. benefits because they were infused with cultural
purpose. For example,
among Japan’s official holidays are Respect for the Aged Day, a
Cultural Day,

the Emperor’s Birthday and Physical Fitness Day. In addition,
although Japan’s
retirement system was similar to the United States (a
combination of Social Security
and employer-sponsored plans), Japanese employees typically
collect one lump-sum
severance payment at the time of retirement based on years of
service. Commuter
costs and housing subsidies are also common fringe employment
benefits in Japan.6
Did the 1996 strategic review work? Were employees rewarded
for their continued
excellence, loyalty and dedication to the corporate objectives?
Let’s look at
L.L.Bean’s 2006 Year in Review press release, as reported by
PR Newswire:
l.l.bean Inc. rePorts 2006 net sales results
“For the 2006 fiscal year ending February 25, 2007, L.L.Bean
reported record
annual net sales of $1.54 billion, a 4.6 % increase over 2005.
The company also
announced that its Board of Directors approved a cash award of
7.5% of annual pay
to eligible employees, a payout of approximately $25.5 million.
An additional $8.8
million will be allocated to the pension plan, keeping the plan
fully funded.
“It’s a well deserved bonus,” said Leon Gorman, L.L.Bean’s
Chairman of the Board.
“2006 was a year in which we made excellent progress on a
variety of strategic
initiatives important to the future of our business. We are

pleased to be in the
position of rewarding Bean employees for their achievements.”
Chris McCormick, L.L.Bean’s President and CEO, expanded on
the year-end
results for 2006. “We had a strong start and strong finish to the
fall and winter
selling season,” he said. “Although unseasonably warm weather
had an impact
on sales in December and early January, our business performed
very well and
the product line continues to hit the right mark with our
customers. I am very
proud of all that we accomplished in 2006 through our
employees’ hard work
and dedication,” he continued. “It was an exciting year with a
lot of energy and
growth, including the opening of three additional stores,
launching $90 million
in investments in our hometown of Freeport, and making further
progress on the
international side of our business.”
Reed, sPHR
exhIbIt a: l.l. bean-bureau of labor statIstIcs for electronIc
shoPPInG & maIl-order houses, establIshments PrImarIly
enGaGed In retaIlInG all tyPes of merchandIse usInG non-store
means such as cataloGs or electronIc medIa
The eight industries with the highest productivity growth rates
over the
1990–2000 period, each experienced growth in output per hour

of more
than 12 percent per year, on average.
Industries with highest labor productivity growth rates, 1990-
2000
C
o
m
p
uter &
p
erip
heral
eq
t m
fg
35%
30%
25%
20%
15%
10%
5%

0% S
em
ico
nd
ucto
r &
o
ther
electro
nic co
m
p
. m
fg
P
ro
fessio
nal &
co
m
m
ercial
eq
t w

ho
lesalers
E
lectro
nic
s &
ap
p
liance
sto
res
E
lectro
nic sho
p
p
ing
&
m
ail-o
rd
er ho

uses
S
o
ftw
are p
ub
lishers
C
o
m
m
unic
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ns
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E
lectric
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g
o

o
d
s w
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31.7
27.0
16.2
14.5 13.9 13.8 13.4
12.4
Reed, sPHR 13
1. Society for Human Resource Management. (2008). 2008 job
satisfaction: A survey report by SHR M.
Alexandria, VA: Author.
The Conference Board. (2005, February 28). U.S. job
satisfaction keeps falling [press release]. Retrieved from
www.conference-board.org/utilities/pressDetail.cfm?press_ID
=2582.
2. The Hay Group (1996). Dynamic compensation for changing
organizations: People, Performance & Pay. New
York: The Free Press.
3. Heneman, R. L. (2007). Implementing total rewards
strategies. Alexandria, VA: SHR M Foundation. Retrieved

from
www.shrm.org/hrdisciplines/benefits/Documents/07RewardsStra
tReport.pdf.
4. Gorman, L. (2006). L. L. Bean: The making of an American
icon. Cambridge, MA: Harvard Business School
Press.
5. Gorman, L. (2006). L. L. Bean: The making of an American
icon. Cambridge, MA: Harvard Business School
Press.
6. The Japan External Trade Organization. Human Resources
and Payroll [fact sheet]. Retrieved from www.jetro.
org/documents/fact_sheets/f_hr.pdf.
shrm members can download this case study and many others
free of charge at
www.shrm.org/education/hreducation/pages/cases.aspx.
If you are not a shrm member and would like to become one,
please visit www.shrm.org/join.
1800 Duke Street
Alexandria, VA 22314-3499

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