Author: Gina Ruiz

Clapping and shouting, the spectators come to their feet as they focus on the gigantic screen before them. They’re ready to cheer or boo at a moment’s notice. But they’re not watching the Super Bowl or the World Series. They’re in a training seminar at the Cheesecake Factory, a formidable player in the restaurant industry with annual revenue of $1.2 billion and more than 112 restaurants and 27,000 employees nationwide.

    With its new upscale chain, Grand Lux Cafes, the Cheesecake Factory has cemented its place as one of the most lucrative concept restaurant companies in the country. Last year it netted $87.5 million, a 28 percent increase from 2004. Expansion is going at a breakneck pace. In the next five years, the company expects to more than double its number of restaurants and employees.

    Workforce training and development initiatives are ubiquitous in the restaurant industry. But there are only a handful of programs that can rival the breadth and depth of those that are offered by the company, says Mike Hampton, president of the Council of Hotel and Restaurant Trainers and dean at Lynn University’s

    College of Hospitality Management in Boca Raton, Florida. The Cheesecake Factory is in the league of Houston’s Restaurants and Buca di Beppo, which enjoy sterling reputations throughout the industry for innovative workforce development programs, he says.

    The firm spends an average of $2,000 on training per hourly worker each year. Everyone within the organization benefits from training and development initiatives. Servers get two weeks of on-the-job training. Candidates vying for a managerial position receive 12-week development courses. Even dishwashers are included in training initiatives.

    One way the company measures its return on investment is by examining turn­over rates, which are about 15 percent below the industry average of 106 percent. Workforce development programs also contribute to high consumer satisfaction rates, loyalty and repeat visits.

    Beyond monetary rewards, the training and development initiatives also honor the legacy of Oscar and Evelyn Overton, founders of the company. Tradition is something of a religion at the Cheesecake Factory, and Oscar and Evelyn are the central figures. The heart of their philosophy is doing anything and everything to guarantee satisfaction and exceed guest expectations. Since the Overtons started the business with one of Evelyn’s crowd-pleasing cheesecake recipes in Detroit during the 1940s, the menu has expanded to more than 200 items. Customers can dig into some 40 varieties of cheesecakes.

    With expansion, the company is going to great lengths to adhere to its fundamental values, but the speed of change could pose a threat. “One of our biggest challenges is the notion of how to get big, but remain small” in spirit, says Chuck Wensing, vice president of performance and development. If not handled properly, the high level of service that customers have come to expect could be eroded, he says.

    With this in mind, Wensing and his team have been refining more sophisticated workforce development programs to ensure that the quality of service lives up to Oscar and Evelyn’s ideals.

Training toolbox
    Since Wensing joined the firm nine years ago, human resources has evolved from being a function-oriented department to being more strategy-driven. The company has studied the HR tactics of such premier service providers as retailer Nordstrom and Ritz-Carlton Hotels. The transformation has paved the path for more formalized training initiatives.

    Relative to its peers, the Cheesecake Factory’s training and development programs are quite extensive, says Bryan Elliot, analyst at Raymond James & Associates. With more than 200 dishes on one of the most complex menus in the industry, in-depth training is a necessity. Corporate culture also plays a crucial role. And that culture is shaped by CEO David Overton, son of Oscar and Evelyn.

    “The CEO made a commitment to people development from Day One,” Elliot says.

    Wensing believes that getting support and approval for workforce training is fairly easy because the CEO values employee development. The strategy appears to have paid off. Elliot says the Cheesecake Factory has sales of $1,000 per square foot, more than twice the industry average. Employees receive individualized training related to their job responsibilities. There are three distinct training categories—kitchen, front desk and general management. The company uses a variety of educational tools, including coaching, interactive games, role-playing and on-the-job training.

    Every employee, from executives to dishwashers, benefits from the generous training initiatives. The company recently adopted an interactive training program, designed by LeapFrog, to help dishwashers master English as a second language. The learning tool, which costs about $325 per employee, is being tested with 15 dishwashers in California. The Cheesecake Factory employs 2,000 dishwashers.

    Much of the company’s training efforts, as one might expect, center on its serving staff. “Servers are on the front line. They are our public face,” Wensing says. Servers are a key component in the “Cheesecake Factory experience”—the hassle-free, friendly and fun dining that Oscar and Evelyn Overton envisioned. And since servers make up 40 percent of the total workforce, the company takes their training seriously. A typical restaurant unit has 11 managers and about 100 servers, split evenly between the day and night shifts.

Since servers make up 40 percent of the total workforce, the company takes their training seriously. Each candidate must go through a rigorous two-week certification process before becoming a full-fledged server. Thirty days later, they receive follow-up classes, as well as biannual training to coincide with the changing of the menu. Servers also must complete a recertification process once a year.

    Each candidate must go through a rigorous two-week certification process before becoming a full-fledged server. During this time, candidates are assigned a mentor for on-the-job training. They observe how experienced servers interact with customers and navigate diverse situations in the restaurant. They must also be well-versed in the Cheesecake Factory’s menu, as well as the ingredients that go into the dishes.

    At the end of the two weeks, candidates are given examinations and are required to attain a letter grade of A. They are given two attempts to qualify, and if they can’t get that A, they’re not hired. Once accepted, their training and development continues. Thirty days after becoming servers, employees receive follow-up classes. Servers also receive biannual training to coincide with the changing of the menu. To maintain strict quality control, servers go through a recertification process once a year, Wensing says.

    The company provides standardized training tools and development programs across its entire workforce. This ensures that customers will receive consistent service, whether they are dining at a Cheesecake Factory in the flagship Beverly Hills location or in Birmingham, Alabama.

Connecting with the employees
    Because many of the company’s workers do not hold predictable 9-to-5 schedules, creating deep, long-lasting company ties can be a tricky undertaking. With this in mind, the Cheesecake Factory gathers employees every day for a formal meeting—a ritual long practiced by Ritz-Carlton. The sessions serve as a platform for talking about a variety of issues—from the best ways to keep the stores clean to safety tips to celebrating special events. Everyone at the Cheesecake Factory gets acknowledgments for birthdays and anniversaries.

    “We like to mix business with pleasure to make it a fun environment for everyone,” Wensing says. One example is the training seminar that brought the crowd to its feet. It was a session on legal issues in the workplace. Done wrong, it’s a topic that can be a real sleep-inducer. Instead, the company presented serious issues in a fast-paced answer-and-question format: “Law Jeopardy.”

    The company is generous when it comes to extending rewards and recognition for a job well done. Incentives include free meals and increased scheduling flexibility. It also offers monetary prizes like the opportunity to earn $3,000 for helping to open a new restaurant. Many of the incentives are offered through quarterly company drawings. An employee from Kansas City recently won an all-expenses-paid trip for two to Hawaii. The names of the winners are announced at the daily meetings.

    In its attempt to cement strong ties with workers and bolster retention, the company gives its new hires career road maps for professional advancement. Top servers are cross-trained in various disciplines to become certified serving trainers, which yields higher pay. On average, 25 percent of serving staffers at any given restaurant must be at the certified trainer level.

    The Cheesecake Factory is a big believer in promoting from within. At least 25 percent of restaurant managers come from internal ranks. This year, 800 new managing positions will be filled. Promoting internally on a frequent basis can have a positive effect on the morale of workers and can be instrumental in reducing turnover, says Teresa Siriani, president of People Report, a provider of workforce metrics for the food service industry.

    Companies that fill 25 percent or less of managerial positions using internal candidates have average turnover rates of 105 percent. By contrast, turnover rates for those that fill 25 percent to 50 percent of managerial slots with internal candidates average 102 percent. Considering that each percentage point represents an annual savings of about $190,000, the numbers aren’t insignificant.

    “The volume of workers and workload in the restaurant industry are such that every percentage point counts,” Siriani says.

    Cheesecake Factory employees receive above-industry-average pay and a benefits package that includes health insurance—even for hourly workers, so long as they average more than 25 hours per week each quarter. The waiting time for health insurance is six months. General managers, who run all aspects of a restaurant, receive a new BMW their first day on the job. Salaries for general managers can be in the six-figure range, according to Wensing—from $150,000 to $200,000, by some accounts. There are 113 general managers.

    The company also tries to help employees balance their work and life. There are strict guidelines barring restaurant managers from working more than 55 hours per week. Cheesecake Factory employees take advantage of flexible scheduling policies to pursue other goals, like earning a college degree. “Many of our workers are students or aspiring artists. We try hard to accommodate their scheduling needs,” Wensing says.

    In 1997, the company decided to decentralize its management training program, which had required a three-month stay in Southern California. For certain workers who lived in other parts of the country, this meant being away from a spouse or children for an extended period.

    “Some employees were turning down opportunities for professional advancement because they did not want to be away from their families for so long,” Wensing says. The Cheesecake Factory responded by creating training restaurants throughout the country, which makes it possible for employees to pursue managerial positions without being away from their families.

    Still, the company faces challenges. Turnover rates at the Cheesecake are in the 80 percent to 95 percent range, which, although lower than the 106 percent average for the restaurant industry, is still worrisome.

Shifting gears
    During Wensing’s tenure, the Cheesecake Factory has worked to sharpen its training and development programs. Now that the company is on firm ground with its educational initiatives, it is increasingly turning its attention to recruitment.

    “Selection is where it all begins,” Wensing says. The company is being influenced by the practices of former General Electric CEO Jack Welch andGood to Great author Jim Collins, who emphasize the importance of finding workers with the right fit. Going forward, being hardworking and efficient will not necessarily guarantee being hired by the company; candidates will also need to have the right Cheesecake Factory attitude and mind-set.

    “We can teach people how to set the tableware, but we have realized that we can’t teach them to smile and to be upbeat,” Wensing notes.

    The company has partnered with vendors like TalentPlus to help with its recruitment efforts. Hiring the right people is not just a tool for ensuring a particular level of performance at the restaurants, but also a way to potentially reduce turnover. The firm is in the process of identifying the traits that make a good Cheesecake Factory employee—someone who would not only thrive in the company environment, but also stay with the organization.

    In spite of bumps in the road, the Cheesecake Factory’s strategy has been paying off. On average, each restaurant serves 3,000 customers per day and enjoys annual sales of more than $10.5 million.

    But Wensing and members of his team don’t rest on their laurels. “We are never satisfied and are always looking for ways to improve,” Wensing says. “Oscar and Evelyn were relentless in striving for better performance.”

Workforce Management, April 24, 2006, p. 1, 22-29 — Subscribe Now!

Having a compensation package that offers health insurance and a retirement plan is something that, generally speaking, has concerned older workers. They’re typically the people who are balancing medical expenses, mortgages and other pressing financial responsibilities.

   But times are changing, and a new breed of young worker is on the rise.

   Today’s college undergraduates–burdened with credit card debt, worried about a potential collapse in the Social Security system and influenced by overprotective parents–are anxious about what the future holds and are increasingly turning to employers for stability and security, a recent study suggests. They are specifically searching for well-rounded compensation packages, mirroring benefits that have typically been coveted by older workers.

   Annual base salaries continue to be upcoming grads’ most important decision factor in considering a job offer, according to Claudia Tattaneli, CEO at Universum Communications. The Philadelphia-based research and consulting firm recently surveyed 29,046 undergraduates from 123 colleges. More than 80 percent of participants said they would accept or reject a job based on the salary that a company is willing to offer.

   However, considerations like medical coverage and a 401(k) plan are also on their radar screens, ranking in second and third place, respectively–ahead of vacation days, paid holidays and guaranteed annual bonuses. Almost 40 percent of undergrads responded that family health insurance would be a make-or-break factor when evaluating a job offer, even though most do not have dependents. And, while retirement is decades away, about one-third of undergrads said that having a retirement plan is also an important decision factor.

   This focus on security and stability among young people is partly a response to media coverage of issues like the collapse of Enron, the presidential elections and the September 11 attacks, which exposed vulnerabilities in the social and economic safety nets, Tattaneli says.

   In addition, undergraduates are of a generation that is highly influenced by their parents–aging baby boomers who are acutely aware of the important effect that health insurance and retirement plans can have on quality of life.

   The single most important step that companies can take to attract and engage the future workforce is to realize that young adults are savvy and unique, Tattaneli says. Indeed, today’s undergrads break the mold on many fronts.

   When asked in another survey which person–contemporary or historical–they would most like to have dinner with, the majority did not go with the cliché response of a rock musician or Hollywood star. Instead, they surprised researchers by selecting a figure from more than 2,000 years ago: Jesus.

   Unless companies are prepared to drop antiquated notions about how the next workforce generation thinks, they may struggle to achieve their hiring goals

Most employers are aware that the baby boom generation is getting older and inching closer to retirement, but few have implemented strategies to effectively handle the impending transformation. That’s the assessment from Ken Dychtwald, author and CEO of Age Wave, a San Francisco company that focuses on the mature workforce.

   By 2015, the number of workers 55 and older will hover around 30 million, or 20 percent of the total labor force. Today, this group constitutes just 12 percent of all workers, according to the Bureau of Labor Statistics. This strategically important segment will undoubtedly develop a host of specific needs along the way, including more schedule flexibility, enhanced opportunities for newer challenges and improved workplace ergonomics. And if employers want to keep business running smoothly and profits strong, they will have to adjust accordingly.

   Mature workers wield a lot of leverage, not only because they are among of the most experienced and well-trained employees in the workforce, but also because there aren’t bountiful numbers of younger workers waiting in the wings to pick up the slack.

   The good news is that persuading this group of workers to remain professionally active may not be too difficult. A Merrill Lynch survey reports that about 76 percent of baby boomers say they want to continue working in some capacity after they reach retirement age–but it will have to be on their terms. Those most likely to continue working are the ones who have experienced a high degree of professional success in physically undemanding jobs, such as professors, attorneys and executives.

   In his forthcoming book Workforce Crisis, Dychtwald gives specific examples of companies and best practices to manage the changes. He also dispels antiquated notions and myths about the mature worker. Dychtwald recently spoke to Workforce Management staff writer Gina Ruiz.

    Workforce Management: Experts warn of an impending shortage of workers caused, in part, by the aging of baby boomers. Should companies be worried?

    Ken Dychtwald: It is difficult to pinpoint how severe the shortage will be. Estimates range from 4 million to 10 million, depending on the source. I think that 5 million is a reasonable number. But the shortage is going to be just as much about a loss of talent and skills as it is about numbers. Worker shortage simply implies the number of warm bodies that can get up and go to work.

   What is happening is that the people who are going to be retiring–assuming that large numbers of the boomers migrate out–are some of the most gifted, brightest, skilled and well-educated group of men and women in the history of this country. Some industries are already feeling the pinch, like nursing and engineering.

    WM: What will an aging workforce mean for productivity levels?

    Dychtwald: The general myth is that young people are productive, older people are less so; young people are healthy, old people are less so; and that young people are a more worthy investment because they are younger and will be around for longer. Now let me respond to all three of these notions:

   First of all, younger people tend to work more quickly, but they also make more mistakes than older people. In assignments that have to do with thoughtful conclusions and smart solutions, older people outperform younger people in almost every situation.

   Secondly, it is true that older bodies are more inclined to have health problems, but younger people actually hurt themselves more on the job and miss more days of work due to illness than their elder counterparts. They are also more likely to show up to work intoxicated and are more likely to be distracted.

   Third, young people may have more longevity ahead of them, but they hop jobs frequently. So (if) you invest in a 23-year-old, you are basically training them up for their next job. The average 20- to 30-year-old worker changes jobs every three years. The average 40-plus worker changes jobs up to about every 15 years. It sounds ironic, but you will get more years back by retraining and investing in a 45-year-old than a 25-year-old.

   When you only look at speed or physical strength as measures of productivity, then you could probably conclude that older workers are less valuable than younger ones. But if you widen the equation to include experience, loyalty and being responsible, older workers fare very well.

    WM: What are some of the most common health concerns affecting mature workers?

    Dychtwald: Clearly, the body is inclined to certain kinds of chronic problems in larger percentages among older people–cardiovascular conditions, hypertension and high cholesterol. Osteoarthritis is also an issue. But many times these conditions don’t have any negative effect on one’s ability to produce because they can be managed through diet, exercise and medication.

   In terms of physical capacity, 60-year-olds and 40-years-olds are not too drastically different. Employers should not focus on older workers as their only liability. There are a lot of 30-year-olds who are overweight or out of shape, which poses its own set of risks.

    WM: Health care costs present a significant problem for employers. How can they manage this critical issue?

    Dychtwald: Companies are going to have to be more proactive by encouraging informed decision-making among employees, launching wellness programs and promoting usage of generic drugs and mail-order refills. There are structures, like health savings accounts and retiree health accounts, that are flexible and promote consumerism.

   Helping employees understand their health-related needs and expenses is crucial.

   Big employers, like Ford Motor Co., have other options. They can work with health services providers to bring down costs. Ford, for example, requires performance metrics from vendors, like hospitals, to ensure that its employees are getting the best price for quality care.

    WM: Should companies try to usher employees into early retirement to reduce the cost of health care benefits?

    Dychtwald: Early retirement is not the solution because, in many cases, it will create a shift in expenses from employee health care accounts to retiree health care accounts. If we were to evaluate the situation carefully, companies should really be trying to hire people over 65 because they already have health coverage–only it is provided by the government or, perhaps, by a former employer. This avenue has worked well for the Vita Needle Co., which actually lowered its cost structure by hiring mature employees.

   Besides, we are not talking about hiring an 85-year-old. Most of the illnesses that we associate with older men and women tend to rise up in the mid- to late 70s and early 80s. The truth is, there is quite a number of 50-, 60- and even 70-year-olds who are still employable, talented and gifted. They may turn out to be some of your most valued workers.

    If you look at the obesity and the drug dependency and the anxiety levels of young people, it is not easy to make the case that they are that much more physically fit than an elder worker. There are some additional health costs with older workers, but when you look at the equation in terms of their reliability, missed days at work, energy and capacity to make a contribution, it pretty much balances the scale.

    WM: What can companies do to address the special physical needs of mature workers?

    Dychtwald: This is an area where the Americans With Disabilities Act has led to enormous strides. Many employers have already modified public environments and won’t have to make too many drastic changes to meet the needs of mature workers. Some common-sense measures include turning doorknobs into door levers, building walkways which offer ramps as alternatives and improving lighting.

   Certain companies give workers special keyboards to prevent carpal tunnel syndrome or larger screens that are easier on the eyes. The world of office design and public environment has been impacted by a movement toward universal design, which is not making things more orthopedic looking, but rather designing environments that people of different capacities can use.

    WM: How can companies enhance their success in recruiting mature workers?

    Dychtwald: CVS is strong when it comes to recruiting older workers. Some 17 percent of the company’s workforce is 50 or older, a figure that has more than doubled in the past 13 years. There are some common-sense measures that companies can adopt to be successful. For instance, they can be more sensitive when placing job wanted ads. Oftentimes the wording of job listings–high-energy, fast-paced, fresh-thinking–could be interpreted as being geared for younger employees. Companies need to be more aware. The words that are music to the mature workers’ ears are more along the lines of loyalty, maturity and experience.

   Targeting mature workers can also be made easier by recruiting at places that draw this audience, such as senior centers or through the AARP. Other organizations that employ large numbers of mature workers are Home Depot and Wal-Mart.

    WM: What will companies need to do to retain mature workers?

    Dychtwald: Baby boomers like the idea of working after retirement. But they don’t want to work as many hours and they may not even want to be doing the same thing. This is where a new model–flexible retirement–comes into play. Scaling down to working four, three, maybe even two days per week could be a possibility. Another option is to allow workers to cycle back and forth between work and leisure. Maybe being on for six months, then off for six months.

   Companies could also allow mature workers to switch positions. Maybe somebody has been in the bookkeeping department and now would like to try a hand in the training department. There are many configurations of flexible retirement.

    WM: Is flexible retirement a feasible option considering that it is vastly different from the current model and could be considered too disruptive?

    Dychtwald: Back in the 1970s, women began to migrate into the workforce. Eventually, they began asking companies for accommodations to cope with having children. Back then, employers said that this would be impossible because it was too disruptive. There was a standoff for a while. But eventually the value of these women became very apparent, and company after company began to change the game. Before you knew it, companies were offering child-care programs and even child-care centers on their campuses in some cases. Now it has become quite normal for companies to offer (parental leave) benefits for women and even men. When that transformation began everybody thought it was going to be very disruptive, but companies adjusted. I think we are about to see a similar transformation of work for older workers.

   IBM, HP, CVS and Apple Computer are already creating the next generation of flexible retirement programs. They are figuring out how to reconfigure their benefits and pension programs to accommodate the aging segment of the workforce. The response from these older men and women has been tremendous–turn­over rates are dropping and productivity is rising. This is the beginning of a revolution. Ten years from now, what we consider radical and innovative will become standard.

    WM: Aren’t there regulatory restrictions that hinder flexible retirement? What are these legal hurdles and how can companies navigate around them?

    Dychtwald: There are rules from the Employee Retirement Income Security Act, the Internal Revenue Code and the Age Discrimination in Employment Act that make true flexible retirement impossible for most employees. But there are legal ways to get around these norms. Companies can introduce retiree-return programs, in which workers retire for a specified limit of time, a month or so, and then return to the company. Retirees can come back as contractors, but the glitch is that they can only work a maximum of 1,000 hours per year. To get around this restriction, companies can bring back retirees as independent consultants. There are ways to implement flexible retirement, but companies just need to be imaginative. Mitre and Monsanto have vibrant programs for their retirees.

    WM: It seems that employers will be making a lot of concessions to accommodate the aging workforce. Will mature workers have to compromise on anything?

    Dychtwald: Yes. Mature workers are going to have to struggle with the issue of compensation. One of the reasons that companies want to get rid of mature workers is because they cost more. Oftentimes, the more years a person has worked for a company, the higher their pay scale–especially for union workers. Companies are trying to keep their eye on the bottom line. Older workers may have to learn that they are in a competitive job marketplace where they will more likely be paid based on merit–what they do–versus tenure, how long they have been doing it. This is going to be a tough bullet to bite for a lot of older people who have gotten used to the idea that just by being around longer they deserve more money and entitlements. I think that that is going to be washed away.

Workforce Management, March 27, 2006, p. 32-36 — Subscribe Now!

Limited-benefit health plans have been around for almost two decades, but they have mostly remained on the fringes, with barely a million enrollees throughout the U.S. But two recent watershed events–Aetna’s acquisition of Strategic Resource Co., one of the pioneers of limited-benefit health plans, and a groundbreaking insurance initiative sponsored by the HR Policy Association–could bring these low-cost insurance products out of the shadows.

   “Limited-benefit health plans gained instant credibility when Aetna got into the game last year and have gathered even more momentum with the HR Policy Association’s program,” says Ben Rozum, senior vice president of sales at Phoenix-based Star HRG, one of the largest providers of limited-benefit medical plans in the country. He predicts the industry will experience double-digit rates of growth in the years to come.

   The expansion of limited-benefit health plans, which cover routine medical visits but not catastrophic health events, is being met with heated debate.

   “There are two ways of looking at limited-benefit health plans,” says John McDonough, executive director of Healthcare for All, a Boston-based grass-roots organization. “If they are being put in place where there was nothing before, then one could argue that there is an improvement, but if they are being rolled out to substitute comprehensive insurance, then there is a significant step backwards.”

   Until recently, these plans have been offered predominantly to contract employees and part-time workers. But as they generate media buzz and more employers feel financial pressures, they are beginning to trickle into the mainstream workforce as well.

   A burgeoning number of companies are supplanting conventional health insurance with limited-benefit plans, including Ratner Cos., the owner of several hair salon chains. The company, which employs about 13,000 people, decided to replace its HMO policy with a limited-benefit health program to stem dramatic cost increases, says Candice Mendenhall, senior vice president of human resources. Ratner pays the insurance premiums, but since limited-benefit programs have fixed expenses, the company has an easier time planning its budget.

Double-edged sword
   Enrollees in limited-benefit plans pay low premiums, sometimes as little as $28 per month, Rozum says. By contrast, the monthly premiums for traditional health plans run about $307, according to the Kaiser Family Foundation.

   There is, however, a significant catch to limited-benefit plans: If enrollees suffer a catastrophic medical event, they are financially on their own. These programs have low liability caps, usually maxing out at $10,000. Limited-benefit health plans are designed primarily for routine doctor consultations, typically covering no more than 10 visits per year.

   In spite of those risks to employees, companies are finding the plans attractive. Unlike conventional employer-sponsored programs and some consumer-driven health care products, limited-benefit health plans are not generally subsidized by companies. And even though employees bear all of the costs, companies can reap the benefits of bolstering employee recruitment and retention because, technically, they are offering an insurance program.

   Workers in high-turnover industries where benefits are scant, such as restaurants and retail, may be more open to accepting these plans. Limited-benefit health products may also appeal to employees who do not have health insurance at all–such as through a spouse or parent. Finally, faced with the option of losing all coverage because their employers can’t afford to extend insurance anymore, employees might see a limited-benefit plan as something that’s better than nothing.

Currently, there are more than 45 million uninsured individuals in the U.S. “Limited-benefit health plans provide peace of mind for those people who fall through the cracks.” –Ben Rozum, Star HRG

   However, there are segments of the workforce in which limited-benefit health programs could meet intense resistance–particularly among white-collar professionals or employees in high income brackets. “These plans are not a competitive benefit for companies trying to attract lawyers, for instance,” says Helen Darling, president of the Washington, D.C.-based National Business Group on Health.

Limited success
   Companies will have a tricky time getting large numbers of workers to buy into limited-benefit plans, regardless of employee type or industry.

   “If given the option, people gravitate to what they are familiar with. They tend to want access to the ‘real thing,’ ” says John Gabel, vice president at the Center for Studying Health System Change in Washington, D.C. Employees are very likely to respond to these plans with a healthy dose of confusion and skepticism. Unless there’s a comprehensive information campaign and hands-on support, expansion of the plans could stall.

   State governments have learned this lesson the tough way. None of the 30 states that have rolled out low-cost, bare-bones coverage–roughly resembling limited-benefit health plans–to uninsured individuals has been successful. Experts attribute their low participation rates in part to a lack of awareness and understanding about the programs among potential participants.

   The HR Policy Association–which is based in Washington, D.C., and includes high-profile employers like General Electric, IBM, Sears Holdings and Avon Products–is experiencing difficulties as well. It rolled out its program in mid-December, with the collaboration of UnitedHealth Group, Cigna and Humana. Under the program, limited-benefit health plans are offered to contract and part-time workers who lack insurance coverage. So far, 10 companies are actively participating in the coalition. Only 5,726 out of 909,000 eligible workers have signed up for the limited-benefit health programs being offered. The second phase of the program will be introduced in July, at which time more companies will be able to join.

   One reason for the low participation rates could be because up to 85 percent of employees in this pool already have coverage through other sources, such as an insured spouse, says Marisa Milton, spokeswoman for the association. Another potential reason for the lack of participation is the inherent difficulty in targeting and reaching this segment of the workforce, given their irregular work schedules.

   The HR Policy Association is analyzing data about its program and how it is being used. “We are looking to get better information so that we can target people better and meet their needs,” Milton says.

   One way to shed light on best practices may be to take a look at how Avon is handling its limited-benefit program. The company boasts 4,000, or 70 percent, of the total number of enrollees in the HR Policy Association’s program. Avon attributes its success to the multiple channels that it can use to connect with its sales representatives, a force of 500,000.

   The company is using targeted mail, e-mail, monthly meetings, posters and 800 numbers to raise awareness and educate representatives about the program, according to Michele Schneider, director of U.S. benefits. One key factor in its success is that all of Avon’s workforce is connected via e-mail. “This is a very powerful and consistent way to reach people,” Schneider says.

Not consumer plans
   There are those who worry that the initiative could be the beginning of a disturbing new trend. “I hope that the endeavors of the HR Policy Association won’t be used as a subterfuge to ultimately shift the cost of health care benefits onto the mainstream workforce,” McDonough says. Critics of limited-benefit health plans say that these programs would only help employers treat the symptoms of exorbitant health costs without addressing the root causes.

   Experts say that limited-benefit health plans do not foster careful and thoughtful consideration about health care planning among consumers. “Because they get the benefits upfront, there is no incentive for them to shop around for quality or value,” says Alexander Domaszewicz, consumer-driven health care expert at Mercer Human Resource Consulting in San Diego.

   Unlike consumer-driven plans, limited-benefit health programs do not have a purported agenda of creating informed consumers–individuals who have access to informational tools that allow them to make educated decisions, such as determining appropriateness of type of doctor.

   Health care experts stress the importance in differentiating limited-benefit health plans from consumer-driven plans. In contrast to limited plans, consumer-driven products provide coverage for big-ticket medical expenses, leaving enrollees to pick up the tab for routine care.

   But proponents of limited-benefit health plans say that, regardless of their drawbacks, they are one of the few ways for a large chunk of the population to access health care. Currently, there are more than 45 million uninsured individuals in the U.S. About one-third of those are eligible for Medicare and another third qualify for Medicaid, but the last third has no safety net, Rozum says. “Limited-benefit health plans provide peace of mind for those people who fall through the cracks,” he says.

   Proponents argue that limited-benefit health plans can help companies to reduce exorbitant health benefit prices. Employers have been pummeled with average cost increases of 12.4 percent for health care benefits over the past four years and are scrambling for ways tame costs.

   “There is no question the current system has its flaws.” Darling says. “The key for companies is finding a balance that is financially sensible without compromising the well-being of workers.”

Workforce Management, March 13, 2006, pp. 42-44 — Subscribe Now!

When Ford Motor Co. launched its employee assistance program in 1976, its primary objective was straightforward: combating alcohol abuse in the workplace. The company, aware that some 40 percent of industrial fatalities are linked to substance abuse, joined forces with the United Auto Workers to introduce the incentive.

    The EAP was very basic, modeled after a traditional Alcoholics Anonymous 12-step program to treat substance abuse.

    Leap forward 30 years, and Ford’s EAP is virtually unrecognizable. The core mission–helping workers improve their lives and retain employment–remains firmly intact, but the support that employees receive is much more sophisticated and comprehensive, says Tom Kindree, Ford’s human resource associate of labor affairs.

    Today, most of the company’s 122,877 workers in North America can access support for a wide spectrum of issues–ranging from finding day care for children to planning for the purchase of a new home.

    Like Ford, many large companies are giving their EAPs significant makeovers–going far beyond treating alcohol abuse and into helping employees cope with other burgeoning pressures, such as caring for elderly parents, which is swiftly becoming one of the most sought-after EAP benefits.

    The role of EAP providers is also changing. Many companies are recognizing the value of involving them in tactical matters, such as the workforce side of mergers and acquisitions or corporate restructuring. The strategic importance of having a healthy workforce cannot be understated, says Dr. Jeffrey P. Kahn, CEO of WorkPsych Associates and clinical associate professor of psychiatry at Cornell University’s Weill Medical College in Manhattan.

    The combined indirect financial toll that depression and anxiety have on businesses is estimated to be $146.2 billion per year. Meanwhile, stress-related physical and mental illnesses can cost companies as much as $7,500 per worker in absenteeism and lowered productivity each year, according to the Department of Labor. Even long-standing workplace issues like substance abuse continue to wreak havoc. Employees who use drugs take three times as many sick days as other workers and are five times more likely to file a workers’ compensation claim, putting further strain on already exorbitant costs of providing health care benefits, the National Institute on Drug Abuse reports.

    The role that EAPs play in attenuating these potentially disruptive issues is difficult to assess because companies zealously guard results of their programs from the public eye. EAP pro­viders, however, contend that their services are a critical component in lowering the cost of health care and in bolstering productivity. EAPs can reduce absenteeism and tardiness by 10 percent and potentially boost productivity by as much as 25 percent, says Dr. John Maynard, CEO at the Employee Assistance Program Association, a trade organization.

    Companies are investing in these programs because they are seeing some results. “Ford’s program pays dividends not only in terms of doing something that is good for our workers but also in maintaining solid productivity rates,” Kindree says.

Changing with the times
    The increasing popularity of EAPs has heightened expectations for more innovative, multitiered support. Tools for helping employees handle legal and financial affairs, considered cutting-edge just a few years ago, are no longer enough to keep clients satisfied, says Bill Bowler, senior vice president of client services at Employee Services Inc., an EAP provider in Wellsville, New York.

    One way in which EAP providers are stepping up to this challenge is by launching more sophisticated online tools, such as chat rooms, Web demos, videos and, in some cases, even coaching. Another unfolding trend is to integrate EAP services with work and life programs, creating a one-stop solution for helping workers cope with complex personal matters.

    But the biggest movement in the EAP arena today is the shift toward designing services that help employees manage senior care. SEI, which serves 850,000 employees from a diverse pool of large and small-sized companies, now ranks senior care issues as its third most frequent type of consultation–trailing behind marital problems, the most prevalent consultation, and substance abuse. This is a huge leap, considering that senior care was ranked 17th just two years ago. And given the graying of America, this trend will likely continue for many years to come.

    “One of the biggest challenges for employers over the next 10 to 15 years will be handling the issues associated with the aging baby boomers,” says Richard Chaifetz, chairman and CEO of Chicago-based ComPsych Corp. EAP providers are responding to demand by launching services aimed at an aging workforce.

    SEI and ComPsych both provide support relating to senior care, ranging from nutritional advice to helping secure reliable supervision. Ceridian has launched a Web-based counseling and training tool, Medicare Interactive, which was created for employee caregivers and mature workers to enhance their understanding of Medicare coverage and eligibility. “EAPs reflect what is happening in society,” says Katie Borkowski, professional services director at the Employee Assistance Program Association.

    In addition to devising novel, innovative support tools for workers, EAP pro­viders are increasingly lending a strategic helping hand to companies. They often provide workforce-related guidance on tactical matters, including mer­gers and acquisitions, company restructurings and even coping with disasters like Hurricane Katrina.

    Beckman Coulter, a manufacturer of biomedical testing tools and systems in Fullerton, California, is relying on its EAP provider to aid with its ongoing restructuring plan. One of the first steps that the company took to help employees affected by the first round of layoffs was to send EAP counselors to key sites.

    “Going through a restructuring pro­cess can be very traumatizing,” says Cathy Bailey, benefits consultant at Beckman Coulter. Going forward, the 7,400 employees who are covered by the EAP will have ongoing access to counseling services, both online and in person.

Some hurdles remain
    In spite of their popularity and increased visibility, EAPs are up against some major challenges. Usage rates hover around 5 percent to 7 percent, Borkowski says. The programs aren’t meant to have 100 percent or even 80 percent usage rates, but these figures are nevertheless low and could indicate that many workers are not taking full advantage of the benefit.

    One explanation for the low usage may be that EAPs are having a tough time shedding their image as a program for treating alcohol abuse. “Some workers may think, ‘I don’t have a drinking problem, so I won’t attend the EAP meeting,’ ” Bowler says. Another reason for low usage rates could be lack of awareness of services. EAP programs can get lost in the clutter of what are often intricate benefits packages.

    Bowler suggests making EAP information meetings mandatory for employees, both to dispel myths about the nature of the programs and to raise awareness about their existence. But even when EAP benefits enjoy a high level of understanding and awareness, there are other hurdles.

    Geriann Shaw, human resource benefits manager at Atmel Corp., a maker of advanced semiconductors in San Jose, California, is not concerned about usage rates at her company. They are five times the national average. She is, however, puzzled over how the EAP is being used. The program, which covers 2,500 workers, has much lower usage among minorities than Caucasians.

    Atmel’s usage patterns are anything but unusual, as research indicates that minorities generally are less likely to use these programs. African Americans and other minorities tend to shy away from seeking help because of social stigmas, Maynard says.

Reaching workers
    There are great incentives for employers to improve usage rates of EAP services. Besides being a good device for improving employee retention and recruiting new hires, EAPs offer a highly visible tool for promoting goodwill in the workforce–at an average annual cost of only $18 to $30 per employee.

    That’s why companies are going to great lengths to enhance understanding and awareness of EAPs. Ford, for example, changed the name of its EAP benefits to “employee support services program.” Not only is the new name free of any negative connotations, but it also denotes the comprehensive nature and complexity of the benefit.

    Giant Industries, a marketer and refiner of oil products, is introducing its EAP this month. The Scottsdale, Arizona, company is raising awareness about the new program through its annual benefits meetings and is distributing written material to educate the 1,700 workers about the new service, says Delbert Tingey, director of benefits management. The company also is training management to learn how to use the program and disperse information to its workers.

    The key is to maintain an ongoing dialogue with workers and to educate them on the services that are available to them, Ford’s Kindree says. Ford believes its enhanced EAP benefits are not only key in attracting talent, but are also beneficial in achieving employee satisfaction and retention. “Workers will bring issues from their home when they walk through the doors,” he says. “Our goal is to help them resolve their issues because if we let them fester, productivity will undoubtedly take a hit.”

Workforce Management, January 16, 2006, pp. 46-47 — Subscribe Now!

In spite of economic volatility, companies are plowing forward with innovative practices to suit the evolving needs of today’s dynamic workforce, according to the National Study of Employers published recently by the Families and Work Institute.

    The institute surveyed a national sample of 1,092 companies to shed light on the trends of more than 13 benefits–including flexibility, child care assistance and health care–that are available in the workplace.

    A dissection of the study shows that big companies offer benefit packages that are often more abundant and comprehensive than those of their smaller counterparts–not surprising, considering that large employers have deeper pockets and more resources at their disposal. What is mystifying, however, is that these generous fringe benefits do not guarantee corporate titans a definitive edge over smaller firms in terms of generating positive capital among employees.

    This incongruity could perhaps be explained by the fact that small companies are at the forefront when it comes to offering flexibility. Small companies appear to have a better handle than large ones on making work “work” for both employer and the employee, particularly in the arena of flexibility, explains Ellen Galinsky, president of the Families and Work Institute. The employer study found that small companies are significantly more likely than large companies to offer flexibility to all or most employees.

    Galinsky notes that flexibility is one of the most prized benefits in the workplace because it gives employees greater control over important lifestyle decisions, such as phasing into retirement, compressing a workweek or taking time off. Workers at small companies enjoy greater access to a “culture of flexibility,” meaning that supervisors are more supportive and understanding when work/life issues emerge. What this ultimately translates into is a work environment in which employees perceive their supervisors as being in tune with their needs, Galinsky says. And under these circumstances, employee retention is high, as is productivity.

    Ward’s Furniture exemplifies how small companies are on the cutting edge when it comes to practicing flexibility. The Long Beach, California, company employs 17 staffers, many of whom have been around for 10 to 20 years. Brad Ward, vice president of the 60-year-old family business, attributes the longevity of employee retention to the company’s willingness to adapt to the needs of workers.

    “We have good people and we don’t want to lose them,” Ward says, adding that some of the company’s flexibility practices allow workers to share job responsibilities and work part time from home. Flexibility has paid off for the company. While other furniture retailers have gone through tough times in neighboring communities and states, Ward’s Furniture is experiencing 5 percent to 10 percent growth in annual sales.

    Discerning whether the enhanced flexibility practices found at small companies trump the far-reaching benefit packages offered by large companies would be a tough call–the needs of employees vary drastically. However, many large companies are not taking any chances with the importance that flexibility plays in the workforce, and they are striving to gain lost ground, Galinsky noted.

    Deloitte & Touche USA, for example, is rolling out the Team Effectiveness Process, a program designed to help its 32,000 employees achieve a better balance between work and life. Through a series of dialogues and surveys, the program will enable supervisors to better understand and respond to the needs of workers, says Stan Smith, national director for the company’s Employer of Choice Next Generation Initiatives. The program also provides software tools to help supervisors keep track of flexible work scheduling for their employees.

    Technology helps employees find a balance between work and life because it allows them to work virtually, notes Smith, adding that flexibility is an important tool in employee retention. “All of our research indicates that flexibility is paramount,” he says. “We want to keep our workers happy. Losing specialization is too costly.”