Author: Jessica Marquez

Stress levels have gone from bad to worse on Wall Street. And if firms don’t do something to address the situation, they risk losing their remaining talent, according to a study by the Hidden Brain Drain Task Force, a consortium of 39 companies focused on retaining and recruiting women and minorities.

    The study, which is based on interviews with 200 Wall Street employees from February through July, found that 64 percent of workers were considering leaving their jobs because of stress. Twenty-four percent said they were looking for another job as a result of stress. Forty-nine percent of respondents cited unpredictability as the main source of their stress, up from 7 percent who gave that reason a year ago.

    “People went into these jobs with the understanding that they would work long hours under a lot of performance pressure,” says Sylvia Ann Hewlett, an economist and president of the Center for Work-Life Policy, the New York-based think tank that conducted the study. “But now, not only are they working much harder, but their salaries are down and their bonus is going to be slashed.”

    And that situation has only gotten worse since the study was conducted. “I recently spoke to one participant in the study who told me that his level of stress was a five out of 10 when we did this; now it’s a 10,” Hewlett says.

    Workers on Wall Street are paying the price for these stress levels, the study shows. Sixty-six percent said they weren’t getting enough sleep, up from 48 percent a year ago. Thirty percent said they needed a drink at the end of the day to relax, up from 23 percent a year ago.

    To come up with an action plan to address these findings, the members of the Hidden Brain Drain Task Force held a series of brainstorming sessions in March and June. Many of the firms’ ideas centered on communication.

    Failing to communicate about the status of the company, no matter how bleak, was a key mistake that a few firms made in the past few months, Hewlett says.

    “Firms thought that if they didn’t know what their future held that they should just shut up,” Hewlett says. “But having your boss share honestly about how things look and what could happen makes people feel like they are part of a team and a bit more in control.”

    Creating this kind of “no-spin zone” is a key way that companies can retain employees and keep them engaged, Hewlett says.

    Other ways that firms can do this is by offering career advancement opportunities that might not be connected to a pay raise as well as offering flextime or the ability to go to the gym at odd hours, she says.

    “Even just taking the team out for a drink after work can be enormously valued,” she says.

    Wall Street firms that are doing nothing to retain talent because they think their people have nowhere to go may be in for a rude awakening, Hewlett says.

    “We know that there is a lot of poaching of talent going on there,” she says. “The firms that are relatively well off are seeing this as an opportunity to cherry-pick talent.”

Workforce Management, November 17, 2008, p. 21 — Subscribe Now!

Despite the faltering economy, employers appear to be trying to avoid resorting to knee-jerk layoffs, according to a recent survey conducted exclusively for Workforce Management by Equa­Terra, a Houston-based global management consulting firm.

    The survey was conducted in the first two weeks of October and is based on feedback from 300 HR executives at organizations with 1,000 or more employees. The majority of the respondents represented companies with 3,000 or more employees.

    Eighty-six percent of HR executives surveyed say that their organizations are being affected by the economic environment, but only 34 percent say they are planning layoffs or have recently conducted layoffs. Meanwhile, 58 percent say they are curtailing hiring, while 44 percent say they are cutting back on important HR activities because of the economy.

    The survey’s results seem to indicate that most companies are taking a cautious approach to the economic downturn, says Stan Lepeak, managing director of research with EquaTerra.

    “I think the fact that they are reducing hiring rather than resorting to layoffs shows that there is still a question about how bad things are going to get,” Lepeak says. “They are putting more emphasis on cost avoidance than cost reduction.”

“The fact that they are reducing hiring rather than resorting to layoffs shows that there is still a question about how bad things are going to get.” —Stan Lepeak, managing director of research, EquaTerra

    Companies may be putting off layoffs until they know what their budgets are going to be for the next year, he says.

    HR executives cited lower employee morale as a major effect of the downturn. Twenty-six percent of respondents say they are dealing with serious morale problems.

    Morale issues came up often in the commentary section, Lepeak says. For example, a number of respondents noted that they were concerned that productivity was suffering because of employees’ fear about their retirement benefits and job security.

    “Workers know that employment stability is most at risk, and it causes a lot of stress,” one respondent wrote. “As a result, productivity is adversely impacted.”

    Only 15 percent of respondents say their companies are cutting employee benefits because of the economy, and just 4 percent say they are cutting retiree benefits.

    Twenty-three percent say the economic downturn is not having a material impact on their organizations.

Workforce Management, November 17, 2008, p. 22 — Subscribe Now!

Even before the recent market melt­downs, David, a 47-year-old engineer who lives in Portland, Oregon, was worried about being able to retire in 20 years. With two young boys in school, a mortgage and only David working full time, he and his wife, Stephanie, were growing increasingly concerned about their lack of savings. So they met with a financial advisor.

    It turned out that they were right to be worried.

    “The advisor said that if we saved very aggressively, I might be able to retire in my early 70s,” he says. “It wasn’t quite what I was hoping to hear.”

    And that was before David and Steph­anie, like millions of other Americans, saw their retirement accounts pummeled by the credit crisis and its effect on the stock market.

    The couple, who asked that their last names not be used, are in a situation that is emblematic of a whole generation of midcareer workers. In the wake of almost daily stock market drops, they might just now be realizing that they are going to have to work much longer than their parents’ generation did.

    Most of the baby boomers who retire in the next few years have had a defined-benefit plan at some point in their careers, and it will provide them with some

    guaranteed income. But the next generation, a group of employees who are now 40 to 50 years old, will be the first to have 401(k) plans as their primary source of retirement savings.

    This phenomenon was already in the works before the credit crisis hit, experts note. With defined-benefit plans and retiree health care all but fading away and Social Security at risk, many midcareer workers already were confronting the fact that they would not have enough money to retire in their 60s, experts say. And as the past weeks have dem­onstrated, it can take just a few days of a plummeting stock market to seriously damage a nest egg.

    As a result, employers may soon find their ranks increasingly filled with employees bent on working well past the traditional retirement age of 65.

    At the very least, that could cause bottlenecks in companies’ plans to move people up the corporate ladders. But it might also mean something else: Firms could find themselves with a population of aging slackers—older workers who are doing just the bare minimum to get a paycheck without getting fired, warns Teresa Ghilarducci, the Bernard L. and Irene Schwartz chair in economic policy analysis at the New School for Social Research in New York.

    Even worse, disgruntled older workers could resort to litigation or work sabotage over their lack of retirement savings, experts say.

    “At the very least, employers may be facing employee disaffection,” Ghilarducci says. “Employee revenge often comes in the form of work slowdown. It’s not so hard to do just enough to get by without getting fired.”

    These scenarios mean that it is more important than ever for companies to have effective performance management systems, thorough financial education programs and processes in place to engage older workers and keep them productive, HR consultants say.

“… If we saved very aggressively, I might be able to retire in my early 70s. —David, 47, engineer, Portland, Oregon

    Employers who don’t think about this issue run the risk of becoming less competitive, says Alicia Munnell, director of the Center for Retirement Research at Boston College.

    “If companies think they are going to be stuck with less-productive workers who are being paid relatively high compensation, they have a financial incentive to help those people accumulate substantive retirement savings,” she says.

The great experiment
    When 401(k) plans were introduced in 1974, many large employers used them as a supplement to their defined-
benefit plans. But over the past 20 years, 401(k) plans have virtually replaced such plans. As of 2005, 63 percent of active workers had access only to a defined-contribution plan, the Employee Benefit Research Institute says.

    “We have a great experiment going on right now,” says Don Stone, president of Plan Sponsor Advisors, a Chicago-based 401(k) plan consultant. “And that experiment is about seeing whether people are willing and able to fund their own retirement.”

    Congress has tried to help employees take on this task through legislation. The Pension Protection Act encourages employers to automatically enroll employees in their 401(k) plans and automatically step up their contributions on an annual basis. As part of the law, the Department of Labor approved a number of investments, such as managed accounts and target-date funds, that are basically managed for the employees—so that even if employees do nothing, they should be on track to save for retirement.

    But although the Pension Protection Act may help younger employees just starting their careers, consultants aren’t sure it will do much for midcareer workers who until now haven’t focused on saving for retirement.

    “These employees didn’t have the same messaging that younger workers have been exposed to in terms of the need to save 10 percent of their pay starting at the beginning of their careers,” says Alison Borland, defined-contribution practice leader at Hewitt Associates. “They are just now struggling with how to make up for that gap.”

    How big an issue this will be remains to be seen, because research on exactly how much this group has put aside for retirement is spotty at best.

    A 2007 Fidelity Investments study shows that the average account balance for employees 40 to 49 is $31,000. But that doesn’t include individual retirement accounts, which are important because many workers roll over their 401(k) balances to these accounts when they leave their jobs.

    Data that include the 401(k)-turned-IRA holdings are not as recent. Research from the Center for Retirement Research, which based its figures on the Federal Reserve’s 2004 Survey of Consumer Finances, shows that the median amount in such accounts was $35,000 for a head of household 40 to 49 years old.

    Both studies, though, point to a huge gap between what is being saved and what will be needed in retirement. On average, a married couple looking to retire in 2030 would need to save $378,000 to purchase an annuity that would cover just out-of-pocket health care costs in retirement, according to the Center for Retirement Research.

    “We are going to have a major crisis 30 years from now unless we have a very strong economy and robust stock market,” says Ted Benna, COO of Malvern Benefits Corp., a 401(k) plan administrator. Benna is also known as the founder of the first 401(k) plan.

    Not everyone is convinced that these gloomy predictions are accurate.

    According to Aon Consulting, a 45-year-old woman making $50,000 per year (the median income in the U.S.) and just starting to save for retirement now would have to put away 14 percent of her salary annually until she is 65. Assuming a 7 percent rate of return on savings, she would be able to accumulate $361,000 by 65, according to Aon. “This person can do it even if there isn’t a company match,” says Cecil Hem­ingway, retirement practice director at Aon. “Everyone is wringing their hands over this stuff, but if you look at the facts, it’s not as ridiculous as it seems.”

Getting employees on track
    Aon’s estimates may be accurate, but many midcareer employees can’t afford to put away 14 percent of their salaries every year.

    With inflation around 5 percent and gas prices remaining high—not to mention nursery school expenses, a mortgage and the need to save for college—David, the engineer from Portland, says he can afford to contribute just 6 percent of his salary to his 401(k). His employer matches 25 cents on every dollar up to 4 percent of base pay.

    “I guess I will be working for a long time,” he says.

    One way employers are trying to help midcareer workers is by offering them financial education.

    Last year, for example, IBM launched MoneySmart, which gives its 128,000 U.S. employees access to personal financial planning over the phone. Although the program is available to all employees, one of the main reasons IBM launched it was to help out that “middle group” of employees, or those in their 40s and 50s, since the company froze its defined-benefit plan this year, says Karen Salinaro, vice president of compensation and benefits.

    “This middle group of employees has multiple concerns ranging from college savings to retirement to whether they need or want a second career,” she says. “They need a customized approach where they can sit with a counselor and go through the issues.” So far 50 percent of IBM’s workforce has registered for MoneySmart.

    IBM has also enhanced its 401(k) plan to allow workers to receive greater employer contributions to their accounts as they get closer to retirement, Salinaro says.

    After the company decided to freeze its defined-benefit plan and make the 401(k) its primary retirement savings vehicle, it wanted to ensure that those employees who were closer to retirement would be able to catch up, Salinaro says.

“These employees didn’t have the same messaging that younger workers have been exposed to in the terms of the need to save 10 percent of their pay starting at the beginning of their careers. They are just now struggling with how to make up for that gap.” —Alison Borland, defined-contribution practice leader, Hewitt Associates

    With the new 401(k) plan design, the workers furthest from retirement receive a basic match up to 5 percent of their pay and an additional 1 percent employer contribution. Employees closer to retirement receive a 6 percent employer match and an additional 2 to 4 percent employer contribution based on how close to retirement they are.

    “The idea behind the design was to make sure we were being as fair as we possibly could be to the employee groups,” Salinaro says.

    Silgan Containers, a Woodland Hills, California-based container manufacturer with 6,000 employees, is another company that has made efforts to ensure that its middle-age workers who joined the company after it froze its defined-benefit plan in 2007 will be able to retire when they are ready. This is of particular concern since the company’s average worker age is 49, says Tony Cost, vice president of HR.

    Silgan is raising new-hire pay to make up for the fact that new employees won’t have access to the company’s defined-benefit plan, Cost says.

    The company is considering adding products to its 401(k) plan to allow employees to receive a guaranteed rate of return. Specifically, Cost says he likes Prudential Financial’s IncomeFlex, an annuity product for 401(k) plans that allows employees to lock in a 5 percent rate of return when they turn 50.

    “We like that product because it essentially mixes the
defined-benefit plan with a defined-contribution plan, in that if someone wants to put all of their 401(k) money into it, when they retire they can have a guaranteed stream of income for life,” he says.

    Silgan also has a profit-sharing plan that has a contribution of 3 to 6 percent a year, depending on the company’s performance. “We really believe that with all of these things, people are not going to be working into their 70s and 80s at Silgan,” Cost says.

Planning ahead
    Even with the best 401(k) plan design and financial education programs, many employers may still find they have midcareer employees who won’t be ready to retire in the next 20 to 30 years, experts say.

    For some industries, like manufacturing, having a lot of workers who won’t retire could be devastating, says Anna Rappaport, a Chicago-based consultant. These companies need physically able employees doing their work. Without them, productivity would drop.

    But for employers with a large “knowledge” workforce, having a lot of older workers putting off retirement could be a blessing, Rappaport says. “If these are highly skilled, productive people, then companies are going to want them,” she says.

    The trick, then, becomes making sure these older workers remain productive. A number of employers are implementing programs to do so.

    IBM, for example, is trying to keep older workers by encouraging them to pursue outside interests, says Kari Barbar, vice president of workforce programs.

    In July, IBM unveiled Personal Learning Accounts, an employer-matching program in which IBM helps to fund employees’ outside education or training.

    IBM matches 50 percent of employees’ contributions toward their learning, which the company hopes will keep workers engaged by allowing them to pursue other fields or advance their current careers.

    “They could be learning a new language or they could be working on a cattle ranch,” Barbar says. Employees with at least five years of service are eligible for the program. So far 500 employees have signed up.

    “The majority of those that have signed up are older workers,” says Laurie Freidman, a company spokeswoman. IBM would not disclose the average age of its workers, nor would it say how many are 40 to 50.

    IBM also has programs aimed at ensuring it won’t have an excess of unproductive workers, regardless of age. All of IBM’s employees go through an extensive annual review that includes manager feedback and, when relevant, client feedback.

    Employees are assessed not only in how they met their individual goals, but also in how they performed as a leader and mentor to others. “Those are the differentiators we look for beyond metrics,” Barbar says.

    Developing people and gauging employees’ performance is an ongoing process at IBM, notes Barbar, who says she has weekly one-on-one calls with each member of her team about their development.

    The risk of not having effective performance management systems in place is that companies will end up with lots of older workers hanging on, doing just enough work to get by without being fired, says Ghilarducci from the New School for Social Research.

    “It’s like that Dilbert cartoon where one guy asks another if he is retiring soon,” she says. “The guy responds, ‘Retiring is for suckers, I just don’t do work and I get free coffee.’ ”

    Most forward-thinking companies, however, are putting processes in place to make sure that they are consistently assessing talent and understanding who is a contributor and who is not, says Paul Sanchez, a partner at Mercer.

    One way companies are doing this is by setting up assessment centers, where employees are invited to come in and work on real-life problems the company is facing, San­chez says. “Observers can determine if this person is a real team player and thinks creatively or are they just average,” he says.

    Another way to make sure the older workers remain productive and engaged is to increase performance-based compensation, Sanchez says.

    The companies that have invested a lot in performance management don’t anticipate a day when they will have a workforce filled with disengaged older workers.

    “My crystal ball says that 10 to 15 years from now, there is still going to be a shortage of workers, so if that an older worker doesn’t want to be here anymore, I think he will be able to find something else to do,” says Ed Evans, executive vice president and chief personnel officer at Phoenix-based Allied Waste Industries.

    For now, most of the older workers who Evans sees in his workforce are continuing to work because they want to, not because they have to. “But this could be something down the road that might concern me,” he says. “I’m going to get my executive leadership to look at it.”

    Most companies aren’t worried about a workforce of aging Gen X slackers yet, experts say. Most are still focused on the talent shortage that they anticipate as the baby boomers leave the workforce.

    If companies really want to get ahead of the issue, they should connect their benefits experts with their workforce planning staff, says Jamie Hale, a senior workforce planning consultant at Watson Wyatt Worldwide.

    “These groups do not talk to each other,” she says. “So while the benefits people might be worried that this group of employees might not have enough savings to retire on in 15 years, that thought isn’t getting communicated to the workforce planning people.”

    Companies that wait too long risk finding themselves in a difficult spot, experts say.

    “Fifteen years from now, when people start realizing they don’t have enough in their 401(k) accounts to retire, they are going to get mad,” consultant Rappaport says. “And it’s the employers they are going to go after.”

Workforce Management, November 3, 2008, p. 1, 24-30 — Subscribe Now!

Employees know why they are—or should be—saving for retirement. Some want to travel. Some want time to sail, golf, garden or hang out with their grandchildren. In short, they want time to enjoy what used to be called the golden years.

    But what’s in it for employers?

    That’s one of the main issues with the 401(k) system. There are no real incentives for employers to ensure that their employees are saving enough for retirement, experts say. While employers in years past used pensions and other “welfare benefits” to stave off unions or weaken their influence, that’s less of a problem now, given the weakness of unions in the private sector.

    Some companies have a paternalistic culture and feel a social responsibility to do what they can for employees, but they are hardly the majority, says Teresa Ghilarducci, a professor at the New School for Social Research and author of When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them.

    “Employers are finding out that they don’t need to provide retirement benefits in order to keep up productivity and lower turnover,” Ghilarducci says. “If they want to do that with their rank and file, they can do it all with offering better health insurance.”

    The Pension Protection Act does offer a kind of incentive, in the form of protection against regulatory actions, to employers who take actions such as automatically enroll employees in their 401(k) plans and place them in target-date funds as the default option. Employers taking such steps are granted safe harbors from litigation and anti-discrimination rules.

    One way to address this issue under the current regulatory structure is by adding more safe harbors for 401(k) plans, says Lori Lucas, defined-contribution practice leader at Callan Associates, an investment consulting company.

“Employers are finding out that they don’t need to provide retirement benefits in order to keep up productivity and lower turnover.” —Teresa Ghilarducci, author When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them.

    For example, under current law employers are offered a safe harbor if they automatically enroll employees at a 6 percent contribution rate, with a cap at 10 percent.

    “I would argue that there is no reason to have a cap,” Lucas says. “Many people need to contribute more than 10 percent of their pay to get to a reasonable retirement savings level.”

    But enhancing safe harbors is not enough to ensure that employers will police employees to make sure they save enough for retirement, says Alicia Munnell, director of the Center for Retirement Research at Boston College.

    “That doesn’t stop employees from taking money out of their 401(k) plans,” she says. “In hard times like these, there is a huge incentive for employees to take that money out.”

    From a philosophical standpoint, many employers don’t see it as their role to go beyond offering a best-in-class 401(k) plan, says Alan Glickstein, a senior consultant at Watson Wyatt Worldwide.

    “Also, it might not be appropriate to assume that they are going to be in the company’s employment for their entire career,” he says. “It’s presumptuous to say, ‘In the five years you work with me, this is the right way to save for retirement.’”

    However, as companies begin confronting situations in which they can’t control when employees retire, they are going to have an added incentive, Glickstein says.

    “Part of the answer to that is the defined-benefit plan,” Glickstein says, adding that he believes many companies will return to offering these plans in the next few years.

    Given the markets’ dips and plunges in recent weeks, a guaranteed retirement benefit, such as a defined-benefit plan, may become a more effective recruiting and retention tool, he says.

    “I think companies’ need to do better workforce planning, along with the recent market volatility, will result in increased momentum in a swing back to defined-benefit plans,” Glickstein says.

Workforce Management, November 3, 2008, p. 30 — Subscribe Now!

As workers arrive at Nancy Hoffmann’s loft in New York’s Chelsea neighborhood, they are asked to take off their shoes and put their business cards in a bowl on the table.

    Hoffmann, who runs an online branding company called TomatoDesign.net, offers up coffee. Doughnuts are supplied by Heather Quinlan, a telecommuting producer for Discovery Science Channel’s Web site.

    On one side of the room, freelance programmer Ken Smith works on software to enhance GPS technology. On the other is Tony Bacigalupo, a telecommuting project manager at Desktop Solutions Software, a Hauppauge, New York-based Web design company, who catches up on his e-mail while chatting with Quinlan about her site.

    This is the world of Jelly, a new type of casual co-working that thousands of workers participate in worldwide.

    Each week in cities from Melbourne, Australia, to Birmingham, Alabama, workers get together to participate in Jellies, which got their name from jelly beans, according to Amit Gupta, a 25-year-old Web entrepreneur who founded the first Jelly three years ago.

    “We figured that a big part of Jelly was the collaboration and co-creation with people of varied skill sets and backgrounds,” Gupta says. ” ‘Jelly’ felt like it could become a good word to describe that.”

    Unlike traditional co-working spaces, Jellies, which are usually limited to 15 to 20 people, foster brainstorming and creative exchanges, Gupta says.

    Until recently, Jelly participants largely have been freelancers and entrepreneurs, but regulars say there are a growing number of workers who telecommute.

    “Working from home can drive you crazy,” says Bacigalupo, who organizes the New York City Jelly events. The New York listserv for Jelly has 500 people signed up and is growing every day, he says.

    “I would say normally half of the people that come are regulars and half are newcomers,” he says.

    For employers, Jellies could provide a great opportunity to motivate employees who telecommute, says Kathie Lingle, executive director at WorldatWork’s Alliance for Work-Life Progress in Scottsdale, Arizona.

    “Particularly with younger workers, this is a great way to keep them motivated and getting the creative thinking going,” Lingle says.

    Yahoo has recognized the potential of Jellies and in August agreed to sponsor them on a national level.

    “We have found that some of the best ideas come from just talking and surrounding yourself with people from different areas,” says Sean Florio, a director of marketing at Yahoo. Particularly since the majority of Jelly participants are in the technology field, Yahoo thinks it’s a perfect fit.

    As part of the sponsorship, Yahoo will send its own telecommuting employees to Jellies as well as occasionally provide lunches and speakers, Florio says.

    “We definitely are getting the word out to our employees in San Francisco about Jellies,” Florio says. However, the challenge for Yahoo is to support the Jellies without taking them over, he says.

    Employers with telecommuting workers may want to get a handle on whether any of them attend Jellies, since they could be a great recruiting source, observers say.

    Indeed, job offers are common at a Jelly. Smith says he has gotten a few referrals, while Quinlan, a Jelly first-timer, says she is hoping to find some writers to hire.

    But companies should make sure their own talent doesn’t get poached at one of the events, Lingle advises.

    Companies also might want to remind teleworkers attending Jellies about making sure they keep trade secrets to themselves, warns Douglas Wickham, a partner in the Los Angeles office of Littler Mendelson.

    “Collaboration and exchanging ideas is a wonderful thing, but at the same time if your workers are sitting next to a competitor it could be pretty easy for someone to take a peek at their screen,” Wickham says. “Companies need to make sure that telecommuting employees are aware of these issues.”

Target-date funds have become the darling of the 401(k) industry because they are so easy for plan participants to understand and use.

But many plans sponsors are learning that what may appear simple and clear-cut for plan participants is actually incredibly complex for fiduciaries to oversee.

Proponents of these funds, which automatically move from an aggressive to conservative asset allocation as the investor ages, say they fight the problem of investing inertia. Employers can automatically enroll participants into these funds and they never have to do anything. Fifty percent of plan sponsors that automatically enroll employees into their 401(k) plans default them into target-date funds, according to Watson Wyatt Worldwide.

And target-date funds are incredibly easy to understand, proponents say. For example, a target-date 2040 fund is designed for employees who plan to retire that year.

But employers and their consultants are wrestling with how to gauge the performance of these funds. Given the recent market volatility, the pressure to monitor performance is more intense than ever. A number of companies, such as Dow Jones, Morningstar and Standard & Poor’s, have launched or are developing target-date indexes employers can use to compare the performance of the target-date funds in their plans.

“Plan sponsors and consultants really need to have a neutral, objective and transparent benchmark that enables them to hold their providers to,” says David Krein, senior director of institutional markets for Dow Jones Indexes, which has two target-date fund indexes.

But not everyone is convinced that it makes sense for employers to use benchmarks with target-date funds because there are so many variables.

“Managers would argue that the benchmarks might not be representative of their strategy. For example, let’s say the benchmark doesn’t include Treasury inflation-protected securities, but the target-date fund does,” says Lori Lucas, defined-contribution practice leader at Callan Associates, a San Francisco-based consultant.

Since these funds change asset allocation constantly, it’s difficult to know whether a fund has outperformed its benchmark during a given time due to its asset allocation or managerial skills, experts say.

“Benchmarking target-date funds is a huge challenge for plan sponsors, but it’s critical that they figure out how to do it right,” Lucas says. “We believe that the majority of defined-contribution plan assets will end up in target-date funds.”

Standard benchmarking approach
Traditionally, plan sponsors use third-party benchmarks to gauge the performance of the mutual funds in their 401(k) plans. For example, a company could compare the performance of a large-cap growth fund with the Standard & Poor’s 500 Index.

But since target-date funds invest in a slew of asset classes and have a moving asset allocation, it hasn’t been clear how companies should benchmark their performance. As a result, many companies were just measuring the performance of the underlying funds that make up their target-date funds against their appropriate benchmarks.

But now, with so many target-date fund indexes in development, plan sponsors are wondering how to choose which one is best for them, experts say.

“A year ago the topic on everybody’s conference agenda was, ‘How do you benchmark these funds when there are no benchmarks?’ ” says Joe Nagenast, co-founder of Target Date Analytics, a year-old company that offers four series of target-date benchmarks. “Now the story is that there are several suitable benchmarks out there, and plan sponsors need to decide which to use.”

Dow Jones came out with the first target-date indexes in 2005. These indexes, however, only take into account stocks, bonds and cash, reflecting the trends in target-date fund holdings at the time.

But in February, the New York-based company launched the Dow Jones Real Return Target Date Indexes, which take into account other asset classes included in target-date funds, such as real estate, commodities and inflation-linked bonds, Krein says.

Having benchmarks is a critical piece in getting target-date fund managers to understand what performance they should be hitting, he says.

“It doesn’t mean the managers have to follow the index,” Krein says. “But it’s a way of saying, ‘This is the standard you are being held to.’ “

He argues that benchmarks are the best way to gauge performance of target-date funds because they are transparent and objective.

Plan sponsors opting to use benchmarking will soon have more options. Standard & Poor’s and Morningstar both plan to launch target-date fund indexes in the next few months, according to officials at the companies.

And they may not be alone, observers say.

“There are a lot of indexes in development,” says Callan Associates’ Lucas.

To determine the appropriate benchmark, plan sponsors need to understand how the indexes take into account issues such as asset allocation, managerial skills and the needs of the participants, experts say.

It can be extremely difficult, but if nothing else, plan sponsors need to make sure they get beyond the marketing talk, Nagenast says.

“Companies need to make sure they understand the fundamentals behind the index,” he says.

Beyond benchmarking
Despite the growing number of available target-date fund indexes, many 401(k) consultants feel that fiduciaries need a more holistic approach to evaluating the performance of their target-date funds.

Just picking an index to benchmark the performance of the funds in a company’s plan doesn’t take into account the goals of the plan and the needs of participants, says Don Stone, president of Plan Sponsor Advisors, a Chicago-based 401(k) consultant.

“Plan sponsors need to look at what they are trying to do with these funds,” he says.

A company with an older employee population may want a different kind of target-date fund series that accepts less risk than another company.

Also, target-date funds are changing rapidly in terms of their holdings, Stone says. Five years ago it was virtually unheard of for these funds to invest in anything other than stocks and bonds. Today, many include real estate, Treasury Inflation-Protected Securities and alternative investments.

“These funds are changing as we speak, but the benchmarks are static,” he says.

Still, Stone opts to gauge the performance of target-date funds by looking at their peer groups. Through this approach, Stone studies all target-date funds in a series, such as all of the 2020 funds, and determines the median performance.

“At least then we get a median allocation and performance to work from,” he says.

But Krein argues that peer groups don’t have the same kind of transparency that third-party indexes have.

“Indexes avoid the trap where an advisor assembles a peer group and it becomes an insular process where the plan sponsor only knows the peer group returns,” he says. “They don’t know what makes up the peer group, what the risk exposure is and what the asset classes are. It’s just an opaque mechanism for benchmarking the manager.”

Nagenast argues that peer groups don’t prove much since so many target-date funds have inherent issues, such as being too aggressive or not properly suiting their investors’ needs.

“If you are just comparing against everyone else, you might look fine but you are ignoring the potential for improvement,” he says.

As more providers offer indexes, they can play a part in plan sponsors’ reviews of their target-date funds. But given the complexity of these products, most consultants suggest taking a more holistic approach to reviewing performance.

This requires digging into the “glide path,” or how the asset allocation of the funds shifts, as well as understanding the needs of the participants.

“At least by looking at the peer group, a plan sponsor can put a stake in the ground and say, ‘Here is what the performance should look like,’ ” Lucas says.

As target-date funds continue to evolve, plan sponsors will have to continually ask themselves if their performance review process is right, she says.

“This is really challenging, and as these funds continue to develop, we think it’s only going to become more challenging,” Lucas says.

Being able to support colleagues is an essential attribute for Accenture employees, since so many of them work in teams that are spread out around the world. The culture of people helping one another, despite being thousands of miles away, is often a hard concept to grasp for new hires, says Janet Hoffman, managing director of Accenture’s global retail practice.

    “This was something I wondered about when I started,” she says.

“People genuinely want to help each other out.” —Janet Hoffman, Accenture’s global retail practice

    Hoffman recalls that on one of her first assignments, she was sent to Lyon, France, to help a client implement a software program. She had to explain aspects of the software program to an array of executives who were in five countries.

    “I didn’t know how I could get them all looking at the same software at the same time,” she says. “I just didn’t know what capabilities Accenture had to do this.”

    Hoffman sent an e-mail to a colleague, who then e-mailed a few more consultants. Within 24 hours, six people had gotten back to Hoffman with answers on how to present the software virtually. “People genuinely want to help each other out because we have all found ourselves in a position where we need help,” she says.

Workforce Management, September 20, 2008, p. 23 — Subscribe Now!

One danger of being able to work anytime from anywhere is burn­out. Without having the traditional boundaries of home and office, many workers lose sight of the division, says Kathie Lingle, director of the Alliance for Work-Life Progress.

    To address this at Accenture, the company tries hard to address employees’ personal needs, as well as their professional ones, says Richard Westphal, director of Accenture’s U.S. Retain Talent group.

    A few years ago, when Westphal and his team began hearing that employees wanted the ability to take a sabbatical or extended vacation, executives came together to see what they could do.

    “Particularly younger employees were saying that they didn’t want to have to be here for 10 years before they could take several weeks at a time off,” he says. “So we held focus groups of employees and asked them if they would be willing to self-fund a sabbatical program.”

“[We asked employees] if they would be willing to self-fund a sabbatical program.” —Richard Westphal, director of Accenture’s U.S. Retain Talent group

    The answer was a resounding yes.

    In January, Accenture launched its Future Leave program. Through the program, U.S employees can arrange to have a portion of their paycheck set aside for future time off, which can be as long as three months.

    Employees who have been with the company for three consecutive years and have manager approval can apply for the program. For the first half of this year, 100 employees were participating.

    Accenture also gauges employees’ perceptions of how well work and life are balanced at the company through a personal engagement survey.

    While most employers ask employees to rate the company’s effectiveness in career or professional development, Accenture has started asking employees how well Accenture is doing in giving them a good quality of life. The company also asks them to rank quality-of-life issues compared with such elements as pay and benefits. Employees also rate Accenture’s performance in such areas as diversity and reputation, opportunities, work, competitive rewards and people. They rank these in order of personal importance as well.

    Supervisors use these personal engagement surveys with their direct reports. Career counselors use them as part of their annual midyear discussions with employees, says Jill Smart, chief human resources officer.

    “We recognize that not everyone wants the same thing, so this is a way for us to understand what employees want,” she says.

    Accenture is leading the way in bringing the personal-life discussions into performance management, Lingle says.

    “Too often companies make the discussions about employees’ personal goals as window dressing,” she says. “By having employees talk about their personal priorities for the upcoming year as well as their career goals, Accenture is really bringing together the personal and professional, which is almost unheard of today.”

Workforce Management, September 22, 2008, p. 24 — Subscribe Now!

Five years ago, when Rose Stanley’s 81-year-old mother broke her hip while they were vacationing in San Diego, Stanley did what most people would do: She called 911.

    And then she spent the next several days on the phone with various hospitals and nursing facilities.

    Her mother needed major surgery. And after the operation, she couldn’t travel by plane or car back to her hometown of Chandler, Arizona, for six weeks. This meant that Stanley had to find a nursing home in San Diego where her mother could stay while she recovered. She also needed to find someone to help her mother get around the house when she returned home.

    “It was an extremely stressful time,” Stanley says.

    Stanley reached out to friends and family for help, and asked her supervisor for time off to deal with the situation. But it never occurred to her to call her HR manager and find out if her employer, WorldatWork, could provide assistance.

    “I was the typical employee,” she says. “At no time did I think of calling HR.”

    If Stanley had called HR, she, like many employees elsewhere, would have learned that her company’s employee assistance program offered information on elder care services.

    As people are living longer, many employees in their mid- to late 40s are finding themselves in Stanley’s situation. Many have young children, but they also act as caregivers for their parents.

    Despite this trend, only a small number of employers provide elder care services, experts say. Thirty-nine percent of employers today offer information about elder care services to employees. That’s an improvement over 1998, when 23 percent made such services available, according to the Families and Work Institute.

    Most of the employers offering elder care services do so as part of their employee assistance programs and don’t do enough to promote them, says Kathy O’Brien, senior gerontologist with the MetLife Mature Market Institute.

    However, this is starting to change. An increasing number of employers are recognizing the return on investment in these programs, experts say. Employers such as Baptist Health South Florida, the law firm of Bryan Cave and WorldatWork are launching or enhancing their programs to help employees identify and receive care for parents. Elder care assistance can range from simply providing employees with a referral service to companies contracting out backup care providers to help employees.

    During the first nine months of offering backup care to employees, Baptist Health has seen $65,000 in savings. The cost savings is a direct result of not having to replace employees who need to take days off. It doesn’t take into account productivity losses that have been avoided.

    “Part of the reason that I have so much enthusiasm for this benefit is the fact that it has such a significant hard-dollar ROI,” says Lil LeBlanc, corporate director of work/life effectiveness at Baptist Health South Florida, which launched a backup care program for its 12,000 employees in July 2007. “Very few work/life benefits yield this type of tangible savings.”

    And the business case behind offering elder care programs seems to be clearer every day, experts say.

    Thirty percent of employees expect to have some kind of elder or adult care responsibilities in the next five years, according to a recent survey of 10,000 employees conducted by Summa Associates, a Tempe, Arizona-based provider of backup care and referral services for employers. Twenty-four percent of respondents say they are affected by co-workers’ elder care responsibilities.

    MetLife estimates that productivity lost as a result of employees taking time to deal with elder care issues amounts to $33 billion annually.

    And this is just the beginning, says Carol Sladek, principal global leader of work/life consulting at Hewitt Associates.

    “Most of the employers that we work with are aware that it’s an issue, but haven’t felt the pain yet,” she says.

Not just another work/life benefit
   For several years, Baptist Health South Florida has provided employees with support groups for elder care issues, as well as information on where they could go for backup care. The health care provider introduced a formal backup care program for employees in July 2007, in response to employee demand. During the past few years, employees were increasingly stating in annual work/life surveys that they wanted more information on elder care services.

    Unpredictable absences can be extremely difficult for a health care provider to manage, LeBlanc says. But picking the right provider was also particularly challenging, given the fact that Baptist Health’s own employees are experts in providing care to the sick and disabled.

    “Our employees tend to be more attuned to ways of caregiving and have higher expectations,” she says.

    As a result, Baptist Health took a year to perform due diligence on backup care providers, talking to clients, checking references and visiting providers’ sites. In the end, the company chose Superior, Colorado-based Work Options Group.

    Under Baptist Health’s program, employees can receive up to 100 hours per year of care for loved ones at $4 an hour.

    “That fee covers the cost of one or three dependents,” LeBlanc says. “So it could be for a parent and two kids, for example.”

    From January through June, employees have used 5,052 hours of backup care—32 percent of which was specifically for caring for an adult.

    One of the main challenges employers encounter in offering elder care is making sure employees are aware of the program so they can take advantage of it when they need it, says Stanley, who is the practice leader of professional development at WorldatWork. It’s not like child care, she says, noting that employees are often reluctant to make public the fact that they are caring for a parent.

    WorldatWork, which has 150 employees, is working to consistently send out communications about its elder care services. The Scottsdale, Arizona-based organization has offered elder care information and support through brown-bag lunches and through its EAP for years.

    Two years ago, it contracted with Health Advocate, a Philadelphia-based company that provides employers with a referral network of backup care services, says Karen Rozanoff, benefits manager at WorldatWork. Employees or loved ones can call a number and get assistance on choosing a nursing facility or finding a respite care provider in their area.

    WorldatWork puts communications about the program on its intranet every other week and holds webcasts to further spread the word. The organization also hangs posters in break rooms at times when people might be thinking about their parents, such as Mother’s Day and Father’s Day, Rozanoff says.

    Communications also was a challenge at Baptist Health. Its employees are spread across five hospitals and 10 outpatient centers, LeBlanc says. The biggest hurdle is that employees don’t know that elder care benefits exist, she says. They tend to find out about them just as Stanley did—while in the throes of an elderly parent’s health crisis.

    To counteract that problem, LeBlanc made 34 presentations to employees. “I really felt that the opportunity to hear a personal explanation about the program really helped,” she says.

    Baptist Health also did a number of e-mail blasts and had many discussions with managers so they could discuss the benefit directly with employees, LeBlanc says.

    Communicating the benefits of an elder care program gets easier with time, she says. “The longer we have the program, the more employee testimonials we have,” she says. Word-of-mouth goes a long way with such a program, she says.

    The St. Louis-based law firm of Bryan Cave introduced backup care services in June and also has found communications to be a challenge, says Lori Johnson, chief human resources officer.

    Bryan Cave has signed up with Bright Horizons Family Solutions, a Watertown, Massachusetts-based provider of backup care services. Under the program, the law firm’s 1,882 employees in London and the U.S. have access to 20 days of backup care per dependent annually. Employees pay $4 an hour for the service.

    One challenge with such programs is getting people to sign up before they need backup care. It’s much easier if they pre-register and avoid having to do all the paperwork when they find themselves with a sick child or disabled parent, Johnson says.

    “When you don’t pre-register, you are kind of scrambling,” she says.

Elder care evolution
   As the need for elder care support increases, experts say employers are going to have to think hard about offering flexible work arrangements that complement their backup care programs.

    “Work/life flexibility is an untapped resource for elder care,” says Carol Sladek, global leader of work/life consulting at Hewitt Associates. “Employers can provide a lot with offering flexibility without spending a lot of money.”

    WorldatWork is discussing adding additional paid days off for employees who need to take care of sick children or parents, Rozanoff says.

    To get the full return on investment from elder care programs, companies need to embrace them as part of their culture, rather than just offer them as an ancillary benefit, gerontologist O’Brien says. For example, elder care issues could be a topic for manager training about generational differences in the workplace, she says.

    “This has to be part of the culture so that people are encouraged to use this benefit,” O’Brien says. “Employers can offer this benefit, but unless managers buy into it, it’s worthless.”

It’s clear by looking at the demographics of Japan’s population that diversity initiatives aren’t just a “nice to have” for Japanese companies. They are a business imperative.

Twenty-two percent of the population in Japan is over the age of 65, according to the Central Intelligence Agency’s World Fact Book. At the same time, Japan’s birthrate is almost half of what it is in the U.S.—with only eight births per 1,000 people.

“Companies don’t have anyone to replace the workers who are retiring,” says Jan Combopiano, vice president and chief knowledge officer at Catalyst, a New York-based nonprofit that focuses on workplace diversity issues. “What many of them are trying to do is make up for decades of not having women in the workforce.”

Retaining key talent, regardless of their gender, has become more important for companies as Japanese workers have become more mobile, and thus more likely to job hop, says Akitsu Ito, a human capital consultant in the Tokyo office of Mercer Japan.

Also, as Nissan has noticed, women in recent years have become a dominant force as consumers, Combopiano says.

While Japanese companies have gotten support from the government, which has declared gender equity as a goal for all employers in the country, the main challenges these firms face is changing the culture of their organizations, consultants say.

Despite laws supporting gender equity, Japan still is a male-dominated culture, Combopiano says.

To address this, companies need to approach diversity initiatives as they would any type of change management program, Ito says.

This means the company’s top management has to be clear with its messages on the importance of diversity, he says.

Internal training needs to be part of these initiatives so that managers and employees throughout the organization understand why diversity is important and how it links to the company’s business results, says Kimiko Inoue, another human capital consultant in Mercer’s Tokyo office.

And it’s not just the male managers who need the training, she says. Women employees often need help understanding their opportunities throughout the organization, since this is a new way of thinking for many of them, she says.

However, to really get women employees understanding the potential for their careers at the company, firms need to have more female role models in top positions, consultants say.

According to a 2007 white paper issued by the Japanese government, female managers make up only 10 percent of all managers at Japanese companies.

“The lack of role models means there are a lot of women who don’t see any possibility for them to be managers,” Combopiano says. “Women are self-selecting out of the management track.”

But as more companies in Japan focus on these issues, progress is being made, consultants say.

“Diversity is a hot issue in Japan right now,” Inoue says. “Many companies have come a long way.”