Tapping From a Small Pool Can Put Management in Rut

Q. My company, a retail store chain, has a policy of only promoting people to management level and executive positions from within the company. What’s more, only people who have been in sales positions ever seem to get promoted to management.

This seems like a bad policy to me, since so many of the salespeople within this company are cut from the same cloth and tend to think alike. They also seem to make pretty poor managers. What do you think of this policy?

--G.K., Brea

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A. There are obvious advantages to selecting lower-level employees who have been with a company for a while to become managers. The organization presumably is familiar with the abilities and potential of the current employees, and those employees know the company and should be more likely to understand and adhere to the company’s philosophy and goals.

You have, however, hit on some of the dangerous drawbacks to a strict promote-from-within policy. This type of management can suffer from like-minded thinking. There are benefits to having managers with experience in other organizations (including competing organizations) who can bring that experience to bear when making decisions and setting policy.

While the product and marketing knowledge possessed by salespeople is important for making decisions at the managerial level, there are also disadvantages to promoting only salespeople to these positions. The skills that are needed to be a successful salesperson are not necessarily the same skills that are required to be a successful manager.

As in most organizations, your company might benefit from bringing in some “outside blood,” and from looking more broadly at employees from all areas of the company when filling managerial positions.

--Ron Riggio

Director, Kravis Leadership Institute

Claremont McKenna College

A Hitch in Firm’s 401(k) Switch

Q. I was laid off the same day the company was switching 401(k) providers.

Two months later, I called the new provider to see about having my funds removed from the company account so I could roll it over into my own individual account.

I was informed that the funds hadn’t yet been transferred and that they were expected to arrive in a month. Once received, it would take the new company a week or two to “sort everything out.”

I’m concerned that I am losing interest on my funds while this transfer takes place. Since I will be taking my money out of this account, I’m also concerned that the new provider has no incentive to pay me my money quickly.

Is this typical and is this legal? Knowing that I was going to be laid off, should the company have pulled my 401(k) funds before closing the account with the former provider?

--K.A., Los Angeles

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A. You didn’t specify whether the service provider simply keeps records for your former employer’s Section 401(k) plan, or whether it also provides the investment funds as well. I will presume that the service provider also handles the investment options under the plan, and that you direct the investment of the amounts in your account.

If you are concerned that your funds in the plan are “uninvested” (that is, not earning any income) because of the change in service providers, you should contact your former employer. Because each provider has different investment funds, what typically happens is that the investments in the first provider’s funds must be sold and the cash transferred to the second provider. Once the second service provider receives the cash, it will invest it according to the investment instructions of the participants.

While the assets of the plan are held in cash, in my experience, they are always held in a liquid interest-bearing account, such as a money market fund. Company employees who are responsible for the operation of the plan have every incentive to make sure that the assets are invested at all times because they will have funds in the plan as well.

As to your question whether the employer should have liquidated your account because it knew that you were going to be laid off, such action would violate the employer’s duty to follow your investment instructions. Also, employers would be very reluctant to take such action before the layoff because (1) that person may not actually be laid off and (2) it would give the person advance notice that he or she is about to be laid off.

--Kirk F. Maldonado

Employee benefits attorney

Riordan & McKinzie

Company Can Define ‘Part Time’

Q. As a part-time employee, paid hourly, I have been told I must work 32 hours a week. At what point is one no longer part time and eligible for the benefits of a full-time employee?

--A.M., San Bernardino

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A. As a general rule, your employer can determine for itself how many hours an employee must work to qualify for full-time status and to receive the benefits that full-time employees receive.

Other than certain statutory benefits, such as family medical and maternity leave, there is essentially only one exception: An employer who provides pension benefits to its employees must allow employees who work at least 1,000 hours a year to participate in the pension plan.

--Michael A. Hood

Employment law attorney

Paul, Hastings, Janofsky & Walker