ALLSTATE APPLIED SCIENTOLOGY METHODS TO TRAIN ITS MANAGEMENT
by Rochelle Sharpe, Wall Street Journal, March 22, 1995

Two years ago, an Allstate agent stood up at Sears's annual meeting to
ask what then seemed a bizarre question.  "To what extent," he
inquired, "are the teachings of L. Ron Hubbard's Church of Scientology
present today in Allstate and in Sears?"

Edward Brennan, chairman of Sears, Roebuck & Co., and Wayne Hedien,
then-chairman of Sears's Allstate Insurance Co.  unit, both appeared
bewildered.  Mr. Brennan said he had no knowledge of any relationship
at all.  Mr. Hedien said he didn't even know any Scientologists.  "I'm
a Roman Catholic myself," Mr. Brennan added.  Shareholders laughed,
and the board moved on to apparently more serious concerns.  But
today, the influence of Scientology at Allstate is no joking matter.
Between 1988 and 1992, it turns out, the Good Hands company entrusted
the training of workers coast to coast to a consultant teaching
Scientology management principles.  The consultant says more than
3,500 Allstate supervisors and agents participated in the nearly 200
seminars conducted by his firm, which was licensed by a Scientology
institute to teach such classes.  The course materials -- which
preached a rigorous, even ruthless devotion to raising productivity --
were developed by Mr. Hubbard, founder of the religion that some
critics claim is a cult.  One of the purposes of teaching
Mr. Hubbard's management program, a Scientology pamphlet states, is to
instill "the ethics, principles, codes and doctrines of the
Scientology religion throughout the business world."

Though the company recently banned and repudiated the courses, their
reverberations are still being felt -- and may even be growing.  Some
employees continue to use Mr. Hubbard's techniques, while other
workers weave conspiracy theories about an alleged Scientology plot to
infiltrate the highest levels of the company.  Some agents believe
they have been harassed and, despite repeated denials, the insurance
giant has been unable to put all the speculation to rest.  Recently,
agents in Florida have launched a drive to unionize the work force --
and they are using the Scientology issue as a centerpiece of their
attack on management.  Allstate employees who took the classes say an
important, although hardly exclusive, theme of the training was an
uncompromising commitment to the bottom line -- even if that meant
treating poor performers harshly.  The course materials warned
managers never to be sympathetic to someone whose productivity
numbers, or "statistics," were down.  "We reward production and up
statistics and penalize nonproduction and down statistics.  Always,"
the training booklet said.  "Don't get reasonable about down
statistics.  They are down because they are down.  If someone was on
the post, they would be up."  The course underscored this point by
advising that "reasonableness is the great enemy in running an
organization."

The program also taught psychological concepts such as the "tone
scale," which catalogs emotions and, Scientologists believe, can be
used to influence behavior.  Illustrated with cartoon characters, the
scale contains 41 levels, ranging from death, apathy and grief near
the bottom to exhilaration, action and "serenity of beingness" at the
top.  All of the levels are numbered: Covert hostility is 1.1,
boredom, 2.5.  Allstate managers learned to find a person's place on
the scale by analyzing the individual's favorite style of
conversation.  "If you wish to lift the person's tone, you should talk
at about half a point above their general tone level," the course book
advised.

A WELL-FINANCED ORGANIZATION

While such ideas appealed to some employees, others were amused or
offended.  David Richardson, who took the course in 1990, remembers
exchanging startled glances with a colleague and muttering: "If they
turn off all the lights and start singing John Denver music, I'm
walking out."

Allstate initially responded to questions from this newspaper with a
brief written statement: "There is absolutely no connection between
the Allstate Insurance Company and the Church of Scientology."  If any
Scientology materials were included in training sessions, it was "a
blip on the screen .  .  .  a very inconsequential, one-shot
situation," a spokesman said.  But later, Jeff Kaufman, a regional
vice president who participated in Allstate's decision to use the
Scientology consultant, acknowledged that the controversial courses
were taught to agents and managers nationwide.  Mr. Kaufman described
the employment of the consultant as "an accident."

"I feel like our intentions were very honorable," Mr. Kaufman says.
But now, he adds, the matter "is biting at me personally."  He
emphasizes that he didn't know at the time of the training that
Scientology principles were involved.  Many Allstate employees,
though, did know the connection.  For one thing, the introduction to
their course book declared the materials "were researched and written
entirely by" Mr. Hubbard, who died in 1986.  Some trainees recognized
the name instantly; others learned who he was from colleagues taking
the course.  Mr. Hubbard is best known not as a management guru but as
the science-fiction writer who founded the Church of Scientology
International in 1954.  Since its earliest days, the church has been a
target of anticult activists who say it exploits its members and
harasses opponents.  Church members counter that their organization
has been systematically misrepresented, even persecuted, by the media
and government.  Scientology, they say, is "an applied religious
philosophy" that helps people develop spiritual awareness.  Members
seek perfection by exorcising bad memories, or "engrams," from past
lives through a counseling process called "auditing."

Over the years, Scientology has been aggressive in its efforts to
attract new members -- including such celebrity adherents as Lisa
Marie Presley, Tom Cruise and John Travolta -- and to build an
efficient, well-financed organization.  Along the way, members credit
Mr. Hubbard with developing a comprehensive management system for
church operations using Scientology principles.  The system came to
Allstate through a circuitous route that began in 1979, when church
members formed a not-for-profit religious group, the World Institute
of Scientology Enterprises, to market Mr. Hubbard's techniques to
business.  In its book, "What Is Scientology?"  the organization
boasts that its courses have been taught at a number of the nation's
largest companies, including General Motors Corp., Mobil Corp.,
Volkswagen AG -- and Allstate.  Except for Allstate, all these
companies say they can't find any evidence that their workers took
such seminars.  Many Allstate employees would come to rue the
Scientology connection and to blame it on the company's top
executives.  Yet, ironically, it was a group of agents, rather than
anyone in top management, who sought out Scientology management
training in the first place.  The impetus was a companywide
restructuring of agents' jobs in the mid-1980s.  Under the new system,
agents had more responsibility to run their own businesses, hire
staff, manage expenses and attract new clients.

THE HUBBARD MANAGEMENT SYSTEM

The change put enormous new pressure on employees, many of whom had
previously sold insurance in Sears stores and had no entrepreneurial
experience.  (Sears, which once owned all of Allstate, sold a 20%
stake to the public in 1993 and plans to spin off the rest of the
company later this month.)  The pressure prompted a group of about 10
agents from the Sacramento area to band together in late 1987 to
search for ways to sharpen their business skills.  One member
suggested at a monthly meeting in early 1988 that the group consider
hiring outside consultants to help in the effort.  Karen O'Hara, a
relatively new agent based in the tiny town of Galt, Calif., replied
that she had a client who was a management trainer, three people at
the meeting recall.  But they say Ms. O'Hara didn't point out that she
knew the trainer, Donald Pearson, through a Scientology communications
class she had taken.  Ms. O'Hara confirms she took such a class but
won't comment further.  Soon Mr. Pearson, then 39 years old, was
meeting with the group to present his ideas.  Before long, he was
lecturing on organizational development to more than 40 Allstate
employees gathered at the Sheraton Hotel in Sacramento.  Agents say
Mr. Pearson didn't hide his religion or the origin of the training
program but stressed that the sessions had nothing to do with
Scientology.  "It was a management program, not a religious
promotional program.  .  .  .  They didn't buy Scientology, they
bought courses," Mr. Pearson says now.  "What's my religion got to do
with whether I'm a good consultant?"  A Scientology spokeswoman adds
that the same principles that are religious within the church can be
viewed as secular when applied outside the church.  Mr. Pearson,
though, was a top trainer for a firm called International Executive
Technology Inc., which was devoted to teaching the Hubbard management
system.  Materials Mr. Pearson distributed in his classes included
Mr. Hubbard's copyright notice at the bottom of many pages.  And all
of Mr. Hubbard's written words, including his management
pronouncements, are considered religious scripture by the church,
according to the Scientology pamphlet, "The Corporations of
Scientology."

One Scientology brochure predicts that as businesspeople use the
L. Ron Hubbard technology and "win with it, they will reach for and
apply LRH technology in other aspects of their lives and may become
Scientologists."

Mr. Pearson steered clear of these issues in his Sheraton talk, agents
say, and hewed to the subject of how insurance agents and managers
could do a better job of running their businesses.  By all accounts,
he was a huge success; agents later described the tall, sandy-haired
speaker as confident, direct, down to earth and authentic.  The
employees who heard him were so impressed that they invited him to
deliver the keynote address that fall at a meeting of Northern
California managers, held at a posh Lake Tahoe resort.  After that
presentation, requests poured in from managers for further assistance
from Mr. Pearson.  One high-ranking Northern California manager says
he persuaded executives at Allstate headquarters in Northbrook, Ill.,
to pay for intensive seminars for his employees.  For more than two
months in late 1988 and 1989, about 50 managers and agents in the
region spent two to three days each week in classes at Mr. Pearson's
Sacramento office, which was decorated with Mr. Hubbard's vivid
paintings of spaceships and moonscapes.

TIPS ON OFFICE ORGANIZATION

The seminars gave loads of tips on office organization and
goal-setting.  Filled with Mr. Hubbard's special terms, the materials
discussed ways not to waste "attention units"; what "hats," or duties,
workers had; and how to construct an "org board," a chart of the
organization's functions.  The classes also showed how employees could
be divided into three categories: "the willing," "the defiant
negative" and "the wholly shiftless."

To help managers understand their own personalities, consultants
administered a 200-item questionnaire similar to the ones
Scientologists pass out on street corners.  The Allstate employees got
back graphs that rated them on 10 counts, including stability,
certainty and composure.  They also practiced staring at colleagues
and examining their facial features in an effort to like the co-
workers more.  But the seminars focused mostly on management by
statistics, a concept that involved charting income and production on
weekly graphs.  Employees who produced so-called up statistics weren't
to be questioned, no matter how they behaved.  "Never even discipline
someone with an up statistic.  Never accept an ethics report on one --
just stamp it `Sorry, Up Statistic' and send it back," Mr. Pearson's
materials advised.  Workers with declining production had to be
investigated immediately, the course taught.  "A person with low
statistics not only has no ethics protection but tends to be hounded,"
the training manual said.  It also quoted Mr. Hubbard's writings
blaming the Depression, the failure of communism and even the decline
of ancient Greece on people's willingness to reward or excuse
so-called down statistics.  The Allstate classes included
Mr. Hubbard's statement that about 10% of the population was "nuts"
and that "2 1/2% are the chief nuts."

Rather than resist the course, many who took it appeared grateful for
the lessons and eager to apply them.  "It was invaluable," says Edmund
Kramer, who took the classes when he was a marketing sales manager in
California.  "I know some people are afraid of it because they think
it has religious connotations.  But once you touch it, you're going to
carry something with you from it forever.  It's very powerful in its
simplicity."

The first wave of managers to try the course, all from California,
appear to have focused primarily on how to chart their business
fortunes -- and to react quickly to any downward trend.  It is unclear
whether any of the California managers followed Mr. Hubbard's harsh
rhetoric on poor performers.  In any event, by the end of the year,
sales and profits were up significantly, managers say.  So many
managers outside the region clamored for information about the
training program that Mr. Pearson and Allstate manager Lindal Graf
were invited to promote it in Southern California, Tennessee and
Kentucky.  Mr. Pearson also spoke to 130 Allstate managers from all
over California who had gathered in the city of Ontario for a
conference.  Six weeks later, in November 1988, he had his debut at
Allstate's corporate office, leading a seminar for 30 sales managers
from throughout the country.  Within months, corporate executives who
had heard the favorable reviews were seeking Mr. Pearson's
participation in a series of three-day sessions for managers
nationwide.  Before they offered him that pivotal assignment, though,
they asked him to conduct a tryout session at corporate headquarters
for visiting managers.  That is when executives first heard complaints
about Scientology, says Kenneth Rendeiro, a former sales manager who
was in charge of setting up the training programs.  Two California
managers, scheduled to participate in the sessions, refused to take
part because, they explained, Mr. Pearson was affiliated with
Scientology.

ADVANCED-MANAGEMENT SEMINARS

Corporate executives then convened a series of meetings to discuss
whether it was a mistake to hire a Scientologist, and Mr. Pearson
reassured officials that his training program was separate and
distinct from the religion.  As a result, William Henderson, then vice
president of sales, decided to give Mr. Pearson the job, Mr. Rendeiro
says.  However, Mr. Henderson, now retired, denies any involvement.
He says the company is trying to blame it "on the old guy who
retired."

There's no dispute, however, that Mr. Pearson ended up traveling
around the country with two other trainers unaffiliated with
Scientology, giving seminars to managers in about half the company's
28 regions.  Mr. Pearson says these seminars, for which Allstate paid
him $4,500 per three-day session, were given from 1989 to 1992.  The
classes became so popular that many regional managers invited
Mr. Pearson back, at $5,000 a day, to do special sessions geared
toward agents.  Allstate's Mr. Kaufman says he had specifically
forbidden trainers from selling any books at the advanced-management
seminars.  But once Mr. Pearson began teaching large numbers of
agents, questions arose about whether he was abiding by the rules.
"He snuck in about a half-hour on the promotional literature," says
John Softye, a New York agent who took Mr. Pearson's Agent Prosperity
Seminar in 1989.  "He said: `You buy these books and you can see how
to benefit yourself and improve your thinking."'  The seminar
materials also advertised a series of books available from Mr. Pearson
and his company: Mr. Hubbard's "Science of Survival" for $50, his "How
to Live Though an Executive" for $31.25, and a three-pack of his
"Money and Success" tapes for $145.  By this time, several other
consultants who worked with Mr. Pearson were also training Allstate
agents in Scientology management practices.  At least one of the
consultants pitched another book to agents: "Dianetics," Mr. Hubbard's
seminal book on Scientology.  Mr. Pearson says he told the consultant
to stop the practice, since Allstate had banned the sale of religious
materials at the seminars.  Mr. Softye claims, though, that
Mr. Pearson also sold copies of "Dianetics" at his seminar, an
allegation that Mr. Pearson denies.  In this phase of the training
program, reports from the field began to grow less favorable.  In
Arizona, for example, workers say they noticed a disturbing change in
a key supervisor's management style after their Hubbard training in
July 1990.  After taking the classes, territorial-sales manager
Jeffrey Swanty talked constantly about management by statistics, says
David Richardson, the former Allstate manager who attended the course
with him.  To apply the ideas, Mr. Richardson says, Mr. Swanty
developed a system under which the worst-performing agent and the
worst-performing manager in his territory would be required to reach a
series of daily, weekly and monthly goals.  Frequently, Mr. Richardson
says, the goals were unreachable, requiring that business be doubled
or tripled within a short period.  "It allowed management by
intimidation.  It was vindictive -- a way to try to remove people,"
Mr. Richardson says.  "We would harass agents" by calling them
constantly and visiting them repeatedly.  (Mr. Richardson had his own
run-ins with Mr. Swanty and was reprimanded at least once.)

One incident that employees still talk about involved William Wesler,
a 35-year-old Phoenix manager, who was suffering from lymphatic cancer
in 1990.  Everyone in the office knew about Mr. Wesler's condition and
his efforts to reduce stress as part of his treatment, Mr. Richardson
says.  Nonetheless, a month after taking the Hubbard training course
in July, Mr. Swanty placed Mr. Wesler on a rigorous program to improve
his performance.

THE HUBBARD COURSE MATERIALS

During the following 120 days, Mr. Wesler was supposed to double his
district's sales, hire at least one female and one minority agent,
attend public-speaking classes and enroll in a college course on
interpersonal skills, his August 1990 job evaluation states.  He also
had to meet with Mr. Swanty every other week to receive an evaluation
of his progress.  "It was a workload for three people," says
Mr. Wesler's widow, Sherry Scott.  She says her husband completed most
of the work but quit in October 1990.  He died in May 1992.  "When I
saw Jeff Swanty at the funeral, I turned and walked away," says Greg
Peterson, who had worked for Mr. Wesler and says he watched
Mr. Swanty's behavior change after the management classes.  "I feel
his actions worsened Bill Wesler's health," he adds.  Mr. Swanty
acknowledges that he was impressed with the Hubbard course materials
but says he didn't implement much of the program because he feared it
would create too much paperwork.  He says he didn't know at the time
that Mr. Hubbard was connected to Scientology.  He knew Mr. Wesler was
ill, Mr. Swanty adds, but denies he treated him unfairly in light of
his declining performance.  "We treat people with dignity," says
Edward Moran, an in-house Allstate lawyer who also denies that
Mr. Swanty was unfair.  He says Mr. Wesler was having serious problems
with managing and communicating with agents for some time before he
received his negative evaluation in August 1990.  In addition,
Mr. Moran says, Mr. Swanty began drafting the evaluation in June,
before he took the Hubbard lessons.  However, the performance review
is dated Aug. 14.  Across the country, a number of agents were making
complaints similar to those voiced in Arizona.  Lawsuits and Equal
Employment Opportunity Commission complaints were proliferating; more
than two dozen have alleged fraud, harassment or discrimination by
Allstate, often in connection with wrongful-discharge cases.  One
manager joked about forcing so many to quit that they would have to
bring in "body bags" to cart them away, while others described agents
with low productivity as below the "scum line," workers said in
pretrial statements related to these lawsuits.  The company says the
number of suits isn't unusual for a firm its size.  The allegations
reflect the failure of some agents to prosper under the more
entrepreneurial system Allstate set up in the mid-1980s, it adds.  The
agents are falsely blaming Scientology and company officials for their
own shortcomings, Allstate says.  "Bless their hearts, they wish it
were still 1965," says Michael Simpson, Allstate's recently retired
vice president of sales.  The company would never condone harassment,
Mr. Simpson says, though he adds the firm couldn't be aware of the
actions of every single worker.  "Allstate has always been extremely
ethical and right-treating of its employees," he says.  Yet given the
philosophy espoused in the Hubbard training program, many agents
became convinced, rightly or wrongly, that the hardball tactics they
saw many managers adopting were inspired by the Scientologists'
training methods.  Many knew that the church has been accused
repeatedly of spying on and harassing its opponents.  Under its "Fair
Game Law," written by Mr. Hubbard in 1967, an enemy of Scientology is
"fair game" and can "be deprived of property or injured by any means
by any Scientologist, without any discipline of the Scientologist.
May be tricked, sued or lied to or destroyed."  The church says
Mr. Hubbard rescinded this law in 1968, although critics contend that
only the term, not the concept, was discontinued.

MANY AGENTS WERE CONCERNED

By 1990, many agents were concerned enough to confront their
supervisors about the use of the Hubbard materials.  In some
instances, employees protested the implementation of management-by-
statistics programs in Allstate offices.  In South Florida, a Catholic
agent balked at participating in a program linked to another religion.
His opposition caused such a furor that the Hubbard-inspired program
was curtailed, agents say.  In 1992, without acknowledging any past
problems, the company scaled back its reliance on Mr. Hubbard's
teachings.  By 1993, Mr. Pearson had stopped giving any seminars at
the company.  But fear of Scientology persisted at Allstate, and the
brief Scientology discussion at Sears's 1993 annual meeting did little
to ease agents' concerns about the Scientology link.  One reason was
that agents were still finding elements of Mr. Pearson's training
program in Allstate management seminars.  That fall, for example, some
agents participating in a new training program, the Agency Development
Process, noticed two pages, titled "Statistics Graphs, How to Figure
the Scale," that were identical to those found in the Scientology
material.  The references to L. Ron Hubbard had been deleted.
Allstate's new companywide Better Prospecting Seminar also had some
similarities to Mr. Hubbard's program, focusing on statistical
analyses of performance and describing employees' various tasks using
the Scientology term "hats."  The new program offended some agents,
who say they felt they were being taught to deceive and confuse their
customers.  In May 1994, New York agent Mr. Softye, who describes
himself as a devout Catholic, refused to take a test that preceded
participation in the Agency Development Process, which he believed was
related to Scientology training.  He initially received a
"job-in-jeopardy" reprimand, though it was rescinded when he
complained to corporate headquarters that the test conflicted with his
religious values.  The incident fueled agents' drive to uncover their
company's apparent links to Scientology.  The National Neighborhood
Office Agents Club, NNOAC, a group of Allstate agents who are critical
of management, began printing special reports outlining what it knew
about the Scientology connection.  In addition, the group sent Hubbard
training materials that had been used at Allstate to each member of
the board of directors.  Someone also mailed an anonymous letter to
the company's investment bankers at Lehman Brothers Inc.  claiming a
Scientology connection.  These actions finally grabbed the attention
of top management.  Allstate senior vice president Robert Gary flew
three NNOAC agents to Atlanta last August and met with them in a tiny
Delta Air Lines conference room at the airport.  Mr. Gary says he
acknowledged the company's involvement with the Hubbard management
training.  He told the agents the seminars were "initially embarked on
in innocence," but he agreed they were a mistake.  The senior vice
president promised the company would write to employees admitting the
error and would order that all the Scientology material be deleted
from Allstate's training books.

COMPLETE REVIEW OF THE PROCESS

Later that month, Allstate President Jerry Choate wrote the three
agents a letter disavowing the Hubbard management materials.  "The
inclusion of these materials was unfortunate because the ideas and
views expressed in them were clearly inconsistent with Allstate's
values," Mr. Choate wrote.  "The people who were responsible for
screening the consultant's training materials failed to recognize that
they were inappropriate and remove them."

He promised a complete review of the process that led to the hiring of
Mr. Pearson.  He also said the Hubbard materials hadn't been
distributed for several years and that, in March 1994, he had ordered
instructors to stop using any of the old texts, even if they weren't
objectionable.  But last October, an incident in Florida showed that
speculation among Allstate agents about the influence of Scientology
on the company is far from dead.  On Halloween, 16 agents from Orlando
were called into a brief meeting, where territorial-sales manager
Daryl Starke reprimanded agents for failing to sell enough life
insurance.  "This is serious business, folks; wake up!"  one agent
quoted Mr. Starke as saying.  He told workers that unless they
produced six life-insurance policies within 90 days, their jobs would
be in jeopardy, three employees at the meeting say.  Within a few
weeks, many of these workers happened to hear about the Scientology
issue for the first time.  They suspected that Mr. Starke had taken
the Hubbard course, as Allstate now says he had.  One agent was so
disturbed that he talked to his priest about the matter.  In recent
months, he and another agent filed religious-discrimination claims
with the EEOC.  Allstate denies the charges.  The cases are pending.