Author: Betty Liddick

Human resource executives eager to outsource some of their own work to global enterprises should know upfront about two possible, conflicting outcomes: They will almost certainly realize cost savings, but they may be disappointed with the quality of service.

   While 88 percent of respondents in a survey of large companies with HR outsourcing contracts reported short-term savings, and even more—92 percent—achieved longer-term savings, only 39 percent were satisfied with vendor services at the two-year mark.

   “No outsourcer has yet figured out how to mint satisfaction,” says a study of HRO effectiveness by Towers Perrin, a global professional services company. The vendor-client relationship is key in what the firm calls outsourcing’s seismic culture change.

   Steve Bohannon isn’t surprised by the study’s findings. He’s CEO of ExcellerateHRO, jointly owned by Towers Perrin and EDS, a provider of technology services. “We saw a very large hole in the provider marketplace in vendor management,” Bohannon says. “People think it’s simple to take a contract and make sure people do what they say they’re going to do. That’s a skill, and that’s part of the skill set we bring to the party.”

   ExcellerateHRO, based in Plano, Texas, exemplifies two emerging trends in outsourcing: It’s a third party providing sophisticated services. “An extension of the workforce will increasingly occur through the use of third parties—business process outsourcers, IT outsourcers and other suppliers,” says Julie Giera, vice president of Forrester Research.

“People think it’s simple to take a contract and make sure people do what they say they’re going to do. That’s a skill, and that’s part of the skill set we bring to the party.” –Steve Bohannon, CEO, ExcellerateHRO

   In addition, the rapidly growing number of outsourced services—her firm predicts that 3.3 million jobs will move offshore by 2015—won’t solely be low-end but will be highly intellectual, Giera says. “The role of HR is going to be crucial to ensure their organizations can mesh all of this talent seamlessly.”

   Outsourcing companies like ExcellerateHRO are designed to help HR deal with the complexity of managing multiple vendors with different time zones, languages, values and cultures. “Each new vendor rela­tion­ship costs the average company between 4 and 7 percent of the outsourcing contract to manage,” Giera says.

   ExcellerateHRO, which has 200 employees and uses many of EDS’ 3,200 employees to deliver its services, has more than 400 EDS clients served by 40 offices worldwide. In its first year, the company has added 30 clients, including International Paper. It provides services—ranging from traditional administrative work such as payroll to recruitment and training—to 33 million active and retired workers.

   “HR organizations are engaging us, saying, ‘I need your help beyond routine transaction support,’ ” Bohannon says. “‘If you have a different and approved way of sourcing talent for my organization, of performing testing and interviewing and helping me winnow down talent to those who suit my company best, I need your help with that.’ Certain parts of that segment of HR have been delivered in a very fragmented way around the world.”

   A large organization like ExcellerateHRO has the opportunity to deliver greater efficiency and savings to clients, Bohannon says. That frees HR to concentrate on companywide strategy.

    Ashok Bardhan—a researcher at the University of California, Berkeley’s, Haas School of Business—says that executives face many challenges. He recommends HR departments “take a fresh look at the entire demand for human resources to redefine and reorganize the workplace to come up with a more agile, competitive firm in today’s global economy.”

Workforce Management, April 10, 2006, p. 32 — Subscribe Now!

Employers will pay an average of $8,046 per worker for health insurance in 2006, an increase of 9.9 percent from 2005 and nearly double the amount paid six years ago, according to a new survey by Hewitt Associates.

    Containing the rising expense will continue to be the top concern for human resource professionals in the next three to five years. That’s the prediction from the Society for Human Resource Management, which asked its panel of experts on benefits and compensation to identify the most significant trends in their area. After health care costs, in order of importance, they are:

    An aging workforce: Older employers may elect to work to keep their medical coverage. Companies may offer phased retirement to keep them on the job.

    Diminished Social Security support: A growing senior population will be eligible for benefits; fewer younger workers will be available to pay for them. At the same time, the shift from company-sponsored pension plans to 401(k)s could mean retirees will have inadequate savings. Employees may demand more training in investment planning.

    Medicare prescription drug benefits: Employers may reduce medical coverage for older retirees.

    Legal challenges: Employees have increasingly sued benefit plan fiduciaries the past two years. “If the class-action lawsuits and governmental investigations against plan fiduciaries are successful in obtaining recoveries for plan participants, this will continue to be a top issue for HR professionals,” the panel said.

    Work/life balance: Flexibility in schedules and workplaces will determine employers of choice.

    Tying compensation to business measures: Translating pay and benefits into business terms could raise human resources’ strategic profile.

    Avoiding identity theft: Protecting private information like Social Security numbers will be critical for human resources. Some companies have added identity theft assistance as a benefit for employees.

    New voluntary benefits: “Companies may need to more actively take their employees’ preferences into account,” the panel says.

Workforce Management, November 7, 2005, p. 54 — Subscribe Now!

The world of voluntary benefits has choices ranging from coverage for human organ transplants to physical exams for pet canaries. And it appears to have more than a few contradictions, too. When it’s time to decide on the benefits, employers and employees seem to experience a disconnect–not with each other but with their own intent and action.

    Human resources professionals herald the array of such benefits–ones workers pay for entirely or partially–as a way to boost the trifecta of recruitment, retention and productivity. But the percentage of companies offering benefits overall remained flat from 2003 to 2004, according to the 2004 Benefits Survey Report from the Society of Human Resource Management. And three significant categories of voluntary benefits–disability, long-term care and supplemental health accident insurance–declined in employer participation during that time. The share of employers offering long-term disability insurance dropped from 88 percent to 84 percent–down from 91 percent in 2002. Long-term care slid from 47 percent to 38 percent, while supplemental accident dropped from 49 percent to 42 percent, the survey found.

    Employees seem to act as ambivalently as employers. More than 70 percent cited loss of income as their No. 1 financial concern in the MetLife Study of Employee Benefits Trends, which polled employees and employers in the third quarter of last year.

    Simply put, employees worry that they might not be able to pay their bills if they lose their jobs, but many do nothing to protect their income–40 percent said they had no disability insurance. They value vacations more, reflecting perhaps the need to balance the demands of work and life, rather than indicating irresponsibility, a MetLife marketer says. Sixty-four percent of workers ranked paid vacations ahead of disability–at 26 percent–in importance.

    What’s wrong with this picture? The uncertain economy is one culprit. “Given the current economic environment, employers are focusing more on the core benefits to keep them competitive and control cost increases for them and their employees,” says Edward M. Pudlowski, a senior manager in the Dallas office of Ernst & Young. “Voluntary benefits are not getting as much play. In terms of the overall interest there was in the mid- to late ‘90s, there’s less focus on that area now.”

    The survey results are also understandable when viewed in a broader context, says Wayne Brockbank, clinical professor of business at the University of Michigan’s Ross School of Business. “In an era where every company is under both domestic and global pressures to be more productive, they have to continually ask themselves, ‘What investment dollars in any resource are getting the greatest return?’ “

    Another reason for the stabilization of voluntary benefits is today’s labor market, says Brockbank, co-director of Human Resource Education at the business school and director of its Center for Strategic Human Resource Leadership. “Benefits across the board play an important role in obtaining employees, but right now we’re in a relatively soft labor market,” he says. “Someday in the near or distant future, there will again be a tight labor market, and then the benefits will become relatively more important.”

Employee misconceptions
    Insufficient employee education also comes into play. Only 40 percent of employees–and 29 percent of those ages 21 to 30–understand which benefits best meet their needs, according to the MetLife study. Some underestimate employers’ contributions. One example, though not for a voluntary benefit: 28 percent of workers believed employers pay less than $1,000 a year toward their health insurance.

    “It was a big ’Wow–unbelievable!’ ” says Beth Hirschhorn, chief marketing officer for MetLife in New York. She recalls that when company president and chief operating officer C. Robert Henrikson announced the finding at a symposium with corporate clients, a hush swept the room, followed by a buzz of conversations.

    The average cost to employers for health insurance is actually more than $7,000 annually for family coverage and more than $3,000 for an individual, Hirschhorn says.

    The survey underscores the need for employers and the benefits industry to better communicate the value of what they’re delivering, she says. “We may offer a diverse and robust set of benefits, but when we do, the value is not being received.”

    In the MetLife survey, employers ranked the objectives of benefits in this order: controlling health and welfare costs, retaining workers, increasing job satisfaction, increasing productivity, attracting workers and reducing HR administrative costs. Offerings today range from short- and long-term disability to accidental death; life insurance; specified health events, such as heart attack, stroke and coma; auto and homeowner insurance; legal services; and pet health insurance. Among those selections, life insurance premiums have seen the biggest increases because they rise with inflation and the cost of living.

    Despite many pretax advantages for employers and workers, some say the impact of voluntary benefits on the bottom line can be difficult to measure. “We’ve tried to capture it, but it’s just not out there,” says Lance Osborne, vice president of field force development at Aflac in Columbus, Georgia.

    Few studies have been done on benefits’ return on investment, Brockbank says, but employers have several straightforward ways of determining it. They can compare productivity before and after workers have benefits, and they can review sales, revenue and cash flow.

Growth areas
    Aflac, a Fortune 500 company, writes voluntary insurance policies for more than 300,000 payroll accounts. Its 2004 revenues were $13.3 billion, a 16 percent increase from 2003, with “a slight increase of 5 percent in new sales in 2004 over 2003,” Osborne says.

    Mirroring the survey finding, sales of long-term coverage have dipped at the company, Osborne says. “It’s a great product and very much needed, but we haven’t really found a way to market it in the work site. It’s a much more complicated buying process with lots of education and choices.”

    Short-term disability sales, however, are increasing, while accident coverage has seen the most growth, he says. “We introduced it in 1988, and today it’s surpassed cancer, which is our No. 3” benefit, Osborne adds.

    Transportation benefits are another fast-growing area, says Pudlowski at Ernst & Young. “It’s used to pay for public transportation or parking, basically on a pretax basis.”

    Pet health insurance barely registered on the SHRM radar. Only 3 percent of employers offer it, though its survey sample was small and self-selected; 459 employers responded to an e-mailed questionnaire.

    But Veterinary Pet Insurance, based in Brea, Calif., has seen revenue climb from $15 million to $100 million over a five-year period ending in 2004, with voluntary benefits accounting for 15 percent of that, says Bill Gorman, group sales manager of national accounts. “We’ve had huge growth–huge–and we anticipate growing.”

    Employees in group plans receive a 5 percent discount on policies, which cost $15 to $30 a month, depending on the pet’s age. The typical customer is a woman 30 to 50 years old with a family income of $75,000, Gorman says. “People have a tighter bond today with their pets,” he adds.

    Many customers are hospital employees. “The reason is that I think they understand medicine,” Gorman says. “They understand cost. They’re in stressful positions” and may have pets to relieve stress.

Size matters
    Valero Energy Corp., a Fortune 500 refining company based in San Antonio with expected revenues of $55 billion, offers a menu of voluntary benefits typical of large companies. Offerings include vision, legal services, cancer coverage, long-term care, and auto and home insurance. With a workforce of 20,000, the company’s employees are in a variety of life stages, says Mary Rose Brown, senior vice president of corporate communications. “Our plan allows young families, single parents, couples, empty nesters, etc., all the ability to choose a plan that is applicable for the phase of life they are currently in,” she says.

    The greatest participation is in traditional medical and dental coverage. “The benefits that seem to be the least popular are the supplemental plans like the legal plan and long-term care,” Brown says. “Employees who have taken advantage of benefits appreciate them, but the plans aren’t as popular as some of its other offerings like vision care.”

    Like other employers, Valero has seen the biggest increase in the cost of medical and prescription coverage, but its size gives it an advantage in other areas. “As Valero becomes larger and our buying power is greater, we are able to see some cost decrease in group plans such as group term life,” Brown says.

    Looking ahead, Aflac’s Osborne predicts that growth for the benefits industry will come from diversified products. “You’ll see more and more different types, based on consumer needs,” he says. Web enrollments will increase, and small companies will look to benefit carriers for employee education, Osborne adds.

    One in five employers in the MetLife survey said their most important benefits strategy was to provide a wider assortment of voluntary benefits. Many employees–34 percent, with the greatest interest among young workers–also want more. Additional benefits boost morale, industry observers agree, but contrary to conventional wisdom, they don’t necessarily provide a competitive edge, Ernst & Young’s Pudlowski says. Pensions, however, play an important role.

    As for helping retention, many other factors influence why an employee stays or leaves. “Benefits are usually third or fourth on the list,” Pudlowski says. “As we do exit interviews with employees, one of the top things we find is that it has to do mostly with salaries. After that, it’s their work environment, the culture.” There is also a very human, often unpredictable dynamic: “How well they get along with their managers.” Too bad there’s no insurance for that.

Workforce Management, April 2005, p. 68-69 — Subscribe Now!

At 56, Alice Waterhouse had been confident that retirement beckoned only six years away. She believed she and her husband had adequate 401(k) plans, mutual funds and savings. But in the course of a single hour, as a cascade of facts swept over her, Waterhouse realized the inevitable: She’ll be working until she’s 65.

    Her epiphany arrived during a program on financial planning for women offered by her employer, Weyerhaeuser Co., at its international headquarters in Federal Way, Washington. “It got me inspired about the importance of saving and planning for retirement,” says Waterhouse, an employee service center representative. “All of a sudden my eyes opened up.”

    Weyerhaeuser–a giant forest product company with annual sales of $19.9 billion and 55,000 employees worldwide–has offered financial literacy programs for more than 20 years. “Special Considerations for Women in Planning for Their Financial Future” was the latest. Sally Hass, benefits education manager, designed and leads it. She has reached as many as 1,000 women annually for the past five years, spreading her message to foresters, office managers, production workers and others in 40 locations in North America.

    “Benefits are a key differentiator in becoming an employer of choice, but we know that employees of all levels really don’t understand the value of those benefits–not until you couple that with appropriate education,” Hass says.

    Women especially need financial information for a host of cultural and economic reasons, including today’s complexity of choices, she says. “And if you get to them with information they can digest and take action on, that affects their attitude about the company. We spend a lot of money in corporate America on benefits communications. If we would take some of that money and put together an effective program that puts those benefits in the context of people’s lives, it just could be we could get our employees to maximize what those benefits could do for them.”

    Overall financial education helps retain employees and builds loyalty, Hass says. It gives a company a competitive edge and increases productivity. In research reported in 1996, E. Thomas Garman, a textbook author, adviser and professor emeritus at Virginia Tech, found that 15 percent of American workers experienced financial distress to the extent that it diminished their productivity. New research he’s done for a report to be issued this month shows that “one-fifth of American adult workers are overly indebted and financially distressed,” Garman says.

    They lose work time talking to creditors on the phone, taking days off to deal with money problems and making court appearances. Garman has calculated that if employers increased financial education even slightly–one point on a 10-point scale–they would realize a $450 annual return per employee from reductions in absenteeism and time wasted.

    They also might reduce the risk of litigation, he says, citing scores of worker lawsuits filed in 2004 alleging employer negligence in teaching them how to invest.

Pervasive poverty
    Hass and other experts make the case for human resources’ tailoring financial education for women because of special challenges they face. She created Weyerhaeuser’s program for them after attending a think tank sponsored by the National Endowment for Financial Education and the AARP. The impetus was learning the number of women heading into retirement barely above the poverty line, she says.

    In her hourlong talks, she tells women they need to take financial education more seriously. Her first PowerPoint illustration shows a busload of older women–“little old ladies,” she says. Then she asks, “Ever wonder why you don’t see a bus full of little old men? It’s a life-span issue.” Women outlive men by almost seven years and must stretch their income further.

    One result is that substantial pockets of poverty remain among older single women, according to a report by the Center for Retirement Research at Boston College. “Of all the factors associated with poverty in old age, the most critical is to be a woman without a husband,” the report says, citing the vulnerability of 28 percent of single older women who are impoverished or nearly so.

    When they’re widowed, women’s Social Security benefits decline, and few have pensions–27 percent, compared with 47 percent of men, according to a study by the nonprofit Institute for Women’s Policy Research in Washington, D.C.

    More dismaying truths about women at work:

• They earn median weekly wages of $552 versus men’s $695, according to a Bureau of Labor Statistics report released last year. That reduces Social Security benefits.

  
  

• They’re more likely to work part time–26 percent do, compared with 11 percent of men, reducing wages and retirement benefits even more. Waterhouse worked part time for years, she says. “I was raising children, but even after the kids were gone, I was happy working part time. Time off was more important than money. I wasted all those years!”

  
  

• They put in less time on the job–often leaving to rear children or care for aging parents. They typically work 32 years, compared with men’s 44, according to the Boston College study.

  
  

    “Women have gaps in their careers, and they have longer life expectancies than money,” says Barbara O’Neill, a professor and specialist in financial resource management at Rutgers Cooperative Extension in New Brunswick, New Jersey. “They’re disadvantaged at both ends, and a lot of women are in a major catch-up mode.

    “The reality is you can’t count on job security,” she says. “You can’t count on government (with impending changes to Social Security). You can’t count on family–look at the divorce rate.”

    Garman is equally pessimistic about women’s prospects for financial security: “It’s not a pretty picture; it’s red alert.”

Taking action
    In her presentations, Hass offers specific steps for women to take charge of their financial future, the central message being “Stop procrastinating.” While she hasn’t tracked the program’s impact on 401(k) contributions and savings, Hass asks participants to write letters committing to two or three of the steps within 90 days. She collects the letters and sends them back to the women by that deadline.

    Among the steps they can choose: determine financial goals and review them quarterly; get organized with files and folders; develop a financial education plan, including books, magazines and classes; do estate planning and review insurance protection; or use a financial service’s Web site, such as Vanguard’s, to calculate how long your savings will last.

    The calculation can be a wake-up call for many women, as it was for Waterhouse. She considered retirement planning important. “But I really didn’t want to think about it,” she says.

    Results of a national survey mirror her experience. While more than 90 percent of women polled believe a comfortable financial retirement is important, and a majority are more involved in household financial decisions, 40 percent to 50 percent aren’t confident they’ve sufficiently prepared to meet their goals, and 80 percent want help with financial decisions.

    Prudential Financial’s 2004-05 Study on the Financial Experience and Behaviors Among Women also found that only 12 percent of women are very confident they won’t outlive their savings. But, curiously, only 10 percent said they would definitely take action leading to more financial security.

    The “confidence gap” revealed in the Prudential poll–the difference between the importance of a financial goal and confidence in achieving it–underscores the need for employers to target financial education to women.

    The goal in that effort should be empowering them and increasing their financial confidence, says Rutgers’ O’Neill. “I don’t think it’s all about dollar bills and numbers. Women can understand that if they’re behind the eight ball now, they can still do something to get started, even if it’s putting 1 percent in a 401(k). That’s giving them confidence to feel they can believe in the future.”

Workforce Management, January 2005, pp. 54-55 — Subscribe Now!

Companies that want to offer financial education for women–or employees in general–might want to consider the characteristics of successful programs identified by the nonprofit Institute for Socio-Financial Studies in Middleburg, Virginia.

The institute developed a list of effective practices from its study of 90 companies and organizations. “For women’s programs, each dimension should be shaped both to attract and to meet the special needs of women participants,” says Lois Vitt, the institute’s chair and founding director. The dimensions included in its report on financial literacy education nationwide are:

• A clearly articulated mission, defining values, priorities and goals.
• Targeted outreach.
• Adequate resources to design a course, develop materials and train instructors.
• Evaluation and follow-up to determine participants’ application of the education and to improve the course.
• Accessibility. “In most cases, employees report that supervisors are very supportive of allowing time off to attend programs,” the institute says.
• Relevant curriculum, geared to participants’ level of literacy and sensitive to their cultural backgrounds.
• Community partnering, such as enlisting the help of a commercial bank or mortgage banker to help design the course and supply teachers.

The institute’s report, commissioned by the Fannie Mae Foundation, was issued before Weyerhaeuser began its women’s program. Even so, it lauded the company as one of six nationwide offering outstanding financial education. A summary of the report is at http://isfs.org/exec-summ.html.

Workforce Management, January 2005, p. 55 — Subscribe Now!