Category: Staffing Management

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How Do We Pinpoint Succession Weak Spots?

Dear Future Is Passing:

The issue you raise is not uncommon — in fact, as the baby boomer retirement wave builds steam, the number of organizations challenged with succession planning issues will grow exponentially. Here’s how to think through such a challenge:

The first thing to do is define the requirements of the most critical senior jobs, including the CEO and the members of the executive team. Identify the responsibilities, challenges and performance expectations, as well as the knowledge, experience and personal characteristics needed in each role. Since this needs to be linked to your strategic plan, it’s important to take into account what will be needed 5-10 years from now, not just today. Doing this well takes a lot of work, so focus first on the enterprise jobs with the highest impact. Current incumbents are the primary source of this information, but the CEO and board members will have ideas as well.

Next, identify the people who are 1-2 management levels below each of the target jobs — specifically the best performers who have the potential to move up to bigger responsibilities. Conduct a formal talent review, where each person is measured against the experiences, knowledge, and characteristics needed across the jobs in the succession plan, using the people inside the company who are in the best position to judge. Include personal characteristics in your evaluations that are important both from a strategic and cultural perspective (e.g., bias for action, learning agility, being a team player).

Then, examine your vulnerabilities. You want to have 2-3 people who can be ready to move into each key job, but few organizations have such a deep talent pool. Are there gaps that are too big to fill with people inside your organization? Knowledge or experience can be gained through assignments, exposure, and education, but you may need to hire from the outside for personal characteristics. Do you have a few people who could fill many jobs? If so, this means that you don’t have as many successors as you think for a given position. Is there enough diversity in the talent pool? If not, look beyond the “usual suspects” to find diverse candidates whose development could be accelerated. And don’t assume that a designated successor actually wants that next job. Simply asking if this is part of his or her career game plan can easily avert this vulnerability.

Lastly, build talent review and development into your business planning process. Growing future leadership talent requires at least a ten-year horizon, starting with identifying of high-potential employees early. Focus on developing them through a series of assignments marked by increasing levels of difficulty, including jobs in different functions/divisions and “pivotal jobs” known to have great developmental impact. Appoint a group of senior executives to manage the process, as only they can make key development assignments available. Finally, be prepared to adjust the process as business conditions change and new opportunities and challenges emerge.

SOURCE: George Klemp, Cambria Consulting, Boston, Sept. 16, 2015.

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More Power to You: Taking Charge of Powerless Feelings

stress

Photo courtesy of Thinkstock.

A client of mine is a chief marketing officer for a well-known company. I’ll call her Chandra.

Chandra is a sought-after keynote speaker at conferences around the world, but when she’s around her boss — the CEO — she gets tongue-tied. It’s easy for her to speak to a room of 500 strangers. Talking with her boss, in a one-on-one meeting, is another story. His style makes her feel inept, and she has trouble presenting her ideas with wit and confidence.

Now let me switch gears. Remember the Deepwater Horizon offshore drilling platform explosion in 2010? That disaster claimed 11 lives and spewed more than 200 million gallons of oil into the Gulf of Mexico, causing massive environmental, economic and social destruction. Shortly after the event, Tony Hayward, then-CEO of BP, the company primarily responsible for the tragedy, caused an uproar when he said that while the event disrupted the lives of residents near the Gulf, it was also taking a toll on his personal life.

“I’d like my life back,” he said at the time, putting his discomfort on par with others, including those who had lost their lives or loved ones in the explosion.

What do these two examples have in common? Both Chandra and Hayward, despite their high-ranking roles, fell prey to low-rank feelings. Chandra’s high power sinks when she’s around her boss; the stress of the Deepwater Horizon spill overwhelmed Hayward, and he lost sight of his powerful role and his responsibilities. He focused on his perceived victimhood instead.

That’s human. We don’t always feel powerful, and it’s easy to get overwhelmed or caught up in the tensions and stresses of the moment.

But in a high-power role, our everyday, human tendencies can have enormous cost. When we act out of a feeling of weakness, we are prone to use our power poorly. Self-interest overrides organizational interest. Hayward put his inconvenience on par with one of the largest ecological and economic disasters of the century, precipitating a PR nightmare for his company and, ultimately, his own resignation. Or, as in the case of my client, Chandra, it may simply be a matter of losing effectiveness. By focusing on our powerlessness, we forget how to do our jobs.

The problem with social power, that is power that comes from one’s position or social status, is that the authority of the role doesn’t transfer into a feeling of power in every situation. Social power doesn’t always feel powerful.

Hayward sunk into a low-rank feeling right at the moment when he should have been most mindful of his high-ranking role. And Chandra loses her sense of power precisely when she needs it most.

Of all the misuses of power I’ve witnessed, almost all stem from a feeling of powerlessness. Like my client and Hayward, it’s surprisingly easy to abdicate the responsibilities of a role or put our self-interest first when we feel powerless, regardless of our social position:

  • Senior vice presidents become embroiled in turf wars, politics and competition with their peers on the leadership team. 
  • CEOs struggle to manage their executive teams and hold people accountable.
  • A doctor rushes through informing her patient of bad news because she’s afraid of his emotional response.
  • The mayor blames the media for reporting for his low approval ratings.
  • A supervisor avoids intervening in a staff dispute, paralyzed by fear of conflict.

John Adams once wrote, “It is weakness rather than wickedness which renders men unfit to be trusted with unlimited power.” Adams saw that curtailing the abuses of power begins with acknowledging weakness and how easy it is to fall prey to, as he put it, our “passion.”

If high power is what we chase, why doesn’t a powerful role protect us from feelings of low rank? Across the board, low rank is a stronger emotion than high rank. In fact, low rank is limbic.

The limbic system is the area of the brain in charge of managing emotion and forming memory. It’s ground zero for instinctual fears and motivations. Under threat, the limbic system — our emotional brain — kicks into gear. The amygdala sends signals that flood us with hormones, activating our automatic responses.

From an evolutionary standpoint, low rank is a matter of life and death. You’re at the mercy of something or someone with greater power. You could be killed, hurt or eaten. It’s a classic fight, flight or freeze moment. Even if we’re not physically threatened, we still respond with the same surge of hormones. Our emotional brain doesn’t parse probabilities. A critical comment, challenging remark or stressful event can trigger the same reaction as a charging tiger.

But isn’t high rank emotional as well? Doesn’t it feel great to have power? Don’t we also feel proud, confident and assertive?

Indeed, high-power roles have an emotional charge, but not a life-threatening one. The emotions associated with low rank — fear, hurt, outrage, depression and anger — signal danger, and thus take priority over anything else happening in that moment, including the responsibilities of a high-ranking role.

Psychologists call this phenomenon the “negativity bias.” Negative events, emotions and memories take precedent over positive ones every time. Negative memories last longer than positive ones, and there are more words for negative emotional states than there are for positive feelings. People fear negative feedback far more than they anticipate positive feedback, and the emotional impact and psychological effects of bad experiences far outweigh the happy ones.

This is why, under stress, attack and significant pressure, the force of low rank clouds our ability to stay mindful of our high-ranking role. In Hayward’s position, we might all say something as bone-headed.

But there’s some good news. Whether we act on our feelings of low rank or not — whether that “amygdala hijack” takes over or not — is up to us. Power is a feeling, and how we feel depends on how we use our power. Our emotional state is more predictive of our behavior than our status or position. To do well in our high-power roles, to stay mindful of others when self-interest kicks in, to focus on responsibilities when fear or outrage overcome you, you need an essential set of skills — emotional skills. You have to know your feelings, know what sinks you and know how to manage the ups and downs of your emotional life.

Julie Diamond is an executive coach, leadership consultant and co-founder of Portland, Oregon-based Power 2 Leaderlab. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews and follow Diamond at @julie_diamond.

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How Do We Build a High-Performance Organization?

Dear Starting from Scratch,

Building a high-performance organization means successfully outperforming one’s competitors for the long haul. But, how exactly is this done? By looking at key characteristics of high-performing organizations, a blueprint for achieving long-term success emerges. I like to think of this in five steps, along with the “common traps” to avoid.

Step One: Ensure the organization understands and leverages its core capabilities.

This step requires some self-reflection on the part of the organization. What are its mission, vision and values (i.e., who we are, where we want to be, and what matters to us along the way)? This information will serve as the roadmap for the strategic planning that is to come in step two.

Common Trap: Senior leaders create “statements” that are either never disseminated or are decreed in such a way that employees do not fully understand or embrace the organization’s direction and ideals.

Step Two: Identify where the organization wants to be and have a clear strategy for getting there.

Data should be analyzed to better understand what makes the organization successful today (i.e., what we do well) and to identify improvements that will ensure success in the future (i.e., what we need to change to maintain competitive advantage).

Common Trap: Organizations assume what got them this far will help them stay ahead in the future. Yet, high-performing organizations realize that reinventing themselves or their offerings often becomes essential for future growth.

Step Three: Ensure the organization’s structure, people, policies and processes support and align with this strategy.

Once an organization has a clear idea of where it is headed, it can also identify what resources it needs to get there. High-potential organizations see clear linkages between how they attract and retain talent, how they structure and organize their talent and how policies and processes enable their talent to achieve strategic objectives.

Common Trap: Organizations focus too heavily on culture (i.e., what it is like to work here) or structure (i.e., how we break down levels to get the work done) and fail to recognize the intersection of the two. High-performing organizations recognize the value of teamwork and ensure that the structure facilitates collaboration throughout the organization.

Step Four: Anticipate change and map contingency plans to adapt to these changes (both internal and environmental changes).

Although the type and rate of change may vary greatly, all organizations undergo some measure of change. By taking steps to better understand the restrictions, constraints, threats and opportunities within the environment/industry as well as within the organization itself, high-performing organizations position themselves well for long term success.

Common Trap:While organizations see adapting to change as a reactive process, high-performing organizations take a proactive stance investing in things that foster creativity and innovation.

Step Five: Invest in your people because they will help you achieve steps one through four. Identify key performance indicators, or KPIs, to track progress and reactions to change.

High-performing organizations recognize that their employees are their greatest asset; therefore, they invest in developing solid selection systems (e.g., pre-employment tests, structured interviews) and development strategies (e.g., training, leadership assessments for development and coaching) to secure and retain top talent.

Common Trap: Organizations fail to plan for “how we will know how we are doing” against the overall strategy. Tracking progress is achievable if the organization has set both short and long-term specific, measurable, and challenging yet achievable goals. KPIs (e.g., quarterly sales, customer satisfaction, and employee engagement) can be tracked to help quantify the outcomes of the organization’s efforts toward lasting change.

SOURCE: Rebekah Cardenas, vice president of business development and assessment solutions, EASI Consult, St. Louis, July 10, 2015.

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Prescription Calls for Consolidation

that federal regulators bless UnitedHealth Group Inc.’s $12.8 billion acquisition of Catamaran Corp. later this year, it appears to be a relatively small price to pay for a deal that some experts contend will boost competition rather than shrink it among pharmacy benefit manager companies.
The deal announced this spring would create the nation’s third-largest PBM company by combining UnitedHealth Group’s pharmacy-benefits business, OptumRx, with Schaumburg, Illinois-based Catamaran, which manages more than 400 million prescriptions annually on behalf of 35 million people — about 1 in every 5 prescription claims in the United States.
But when companies grow bigger, some argue that a more powerful industry player could justify raising prices and limiting access to vital prescription drugs. With the skyrocketing costs of these drugs, along with the perception of a dwindling marketplace in the post-acquisition landscape, caution is understandable. 
“There was concern in the marketplace that this would lead to some of these PBMs being able to charge what they want, which would lead to a lack of price competitiveness,” said Ritu Malhotra, vice president and national pharmacy benefits practice leader at consultancy Segal Co. The UnitedHealth deal, however, could foster fresh competition among industry heavyweights Express Scripts Holding Co. and CVS Health Corp. “The industry had gotten a little lopsided, and the third and fourth players were distant from the top two.”
Adam Fein, president of Pembroke Consulitng Inc., echoed those sentiments in an email, stating: “By acquiring Catamaran, OptumRx is signaling that it wants to compete more seriously as a stand-alone PBM. Large employers will now have a third large, viable competitor when bidding their PBM business.” 
PBMs are the intermediaries between the employer and other players in the health care system, Malhotra said. They can save companies significant dollars by using the buying power of enrollees to bargain for lower prices from drugmakers and contract with pharmacies. They can also help patients adhere to their medications through specialty pharmacies and disease management experts and act as the employer’s guide through the increasingly complex world of prescription drugs.
And the role is in high demand. Managing pharmacy benefits is expected to quadruple to a $400 billion market in 2020, up from $100 billion in 2014.
It may come as a surprise to some that a union of this size only moves UnitedHealth into the No. 3 slot among the nation’s largest PBMs, but Express Scripts holds the top spot by volume, with 90 million lives covered while CVS is No. 2 at 85.1 million lives, according to a study from publishing and information company Atlantic Information Services Inc. UnitedHealth will reach about 65 million covered lives when the deal is completed.
The pervading fear around any large-scale consolidation, whether it’s UnitedHealth’s acquisition of Catamaran or RiteAid’s proposed purchase of EnvisionRx for $2 billion in combined cash and stock, which is also expected to close later this year, is that the deals will decrease competition and ultimately hurt the employers who, in theory, would be at the mercy of their PBMs.
This year’s activity comes four years after Express Scripts’ blockbuster $29.1 billion acquisition of Medco, and SXC Health Solutions Corp.’s $4.4 billion deal to acquire Catalyst Health Solution Inc.
The Express Scripts deal ignited lawsuits charging antitrust violations by shrinking competition and raising consumer prices, shining a spotlight on an industry that few tracked and even fewer understood. 
Yet UnitedHealth Group’s acquisition of Catamaran differs in that the combined strengths of the two companies creates a competitive third PBM at the top of the industry to negotiate prices and drive down costs for both employers and employees.
“The combined entity has a unique value proposition,” Malhotra said. “Catamaran comes in with really strong technological sophistication. With UnitedHealth Group’s clinical analysis, the pairing makes them a really unique PBM.”
Traditionally, competition, not industry domination, has been the driving force behind corporate consolidations, explained Jonathan Roberts, an executive vice president at CVS Health. 
“The industry has been consolidating for quite some time, and I think it will continue to consolidate,” said Roberts, who is also the president of CVS/caremark, the pharmacy benefit management and mail service pharmacy division of CVS Health. “Size and scale are important in this business. You need to be able to invest back in the company with technology enhancements, whether that is a move to digital or to keep up with regulatory changes. We view what continues to happen as a natural evolution of the industry.”
Companies, like living organisms, evolve to compete against their peers and defend against predators. The predator in this instance is the rising cost of prescription drugs. With the help of mergers and acquisitions, PBMs are able to bargain for lower prescription drug costs more effectively and work to ensure that the health of the employees taking these drugs is protected.
Feat of Strength 
The role of a PBM is not new. Express Scripts has been in existence for 28 years. The historical lack of interest in PBMs has a lot to do with the fact that, for the past 15 years, the pharmacy industry has been relatively steady because of a rich pipeline of generic drugs. Easy access to generics kept the price of branded drugs low, a fact that gave many employers the courage to navigate the prescription drug market on their own. 
“Historically, because pharmacy costs were relatively flat, the benefit didn’t have to be aggressively managed,” Roberts said. 
Until 2014, the year-to-year inflation rate for generic drugs held below 1 percent, according to the 2015 “Workers’ Compensation Drug Report” conducted by Helios, a workers’ compensation PBM headquartered in Memphis, Tennessee. Then in 2014, the average wholesale price of generic drugs rose nearly 10 percent. 
Without generics to act as a deflationary agent in the market, the cost of specialty drugs skyrocketed. According to an Express Scripts study, “Super Spending: Trends in High-Cost Medication Use,” 575,000 Americans had medication costs in excess of $50,000 in 2014 — almost $29 billion and an increase of 63 percent from 2013. Cancer and hepatitis C drugs lead the way as the most expensive, according to the report (See “Specialty Drug Costs: Hard Pills to Swallow,” June 2015, p. 34). 
Hepatitis C drugs, in particular, were costing patients $1,000 a day and in excess of $150,000 to cure, said Brian Henry, vice president of corporate communications at Express Scripts. Many employers’ response to the high cost put their employees at risk.
“In a marketplace where there was really only one drug available, what a lot of companies did was ration the care for only the sickest patients,” Henry said. “As you can imagine, if you had hepatitis C you would want to get the treatment, but that wasn’t an option for the majority of patients.” 
Suddenly, PBMs were a hot topic among employers. 
Using its size and consequent buying power, Express Scripts was able to intervene on the part of employers and employee patients when a competitor drug entered the market last December. Express Scripts brokered a deal to provide exclusive access to the new drug, which had similar adherence and clinical data at a much more accessible price point. As a result, the PBM was able to drive down the cost of care by 67 percent.
But all large PBMs are not created equal, which keeps the market competitive. 
More than One Way to Get the Job Done
Express Scripts’ strength lies in its size, brokering expensive deals as in the case of the hepatitis C medication. According to Henry, it operates on a “pure-play PBM model,” meaning that it focuses on mail order and specialty drugs and primarily deals with its members over the phone. 
“Our size gives us the ability to act as an independent counterweight for clients in the marketplace,” Henry said. 
CVS/caremark runs on an integrated model that includes the PBM, retail pharmacies, specialty pharmacies, immediate care clinics and pharmacy advisers, Roberts said. CVS’s approach addresses another leading reason prescription drugs are so expensive: nonadherence. In order to be considered adherent to a prescription drug regimen, a patient must take their medication 80 percent of the time. 
“If you take 100,000 retirees, for example, their medical costs are around $1.2 billion,” Roberts said. “If we could keep all of those retirees on their medications, we could actually reduce the overall health care cost by $230 million. When people historically think of a PBM, they think about managing drug costs, but I think people often miss the value we can deliver to their members around keeping them on their medication.” 
The strength of UnitedHealth’s new OptumRx is its ability to collect and analyze user data. Tracking patient usage data as soon as possible in the claim means that employers are less likely to spend wastefully. 
“You want to capture a company’s pharmacy expenses as soon as possible so that you can start looking at that data and then manage it clinically to ensure that they are related to the claim and that it is the right medication for the disease and stage of the disease as well,” said Sarah Berger, vice president of marketing at Helios. 
Even though Helios is a smaller PBM, it provides a platform that manages patient data similar to Catamaran’s. The process begins with the first prescription, or “first fill,” that an employee receives after a company partners with a PBM. From there, all data regarding patient usage, response to the medication and market cost are tracked to ensure that the employee is healthy and the employer is not overspending.
PBMs that effectively deliver utilization management services to company clients are expected to be in high demand, especially with the anticipated release of a new specialty drug developed to treat high cholesterol later this year. 
The injectable drug, known formally as PCSK9 inhibitors, for instance, is a more expensive treatment than the generic statins such as Lipitor to treat and manage high cholesterol, Roberts said. The generic equivalent of Lipitor costs between $200 and $300 a year. This new drug will likely cost between $6,000 and $10,000.
Utilization management technology will allow employers to effectively discern which employees should be on which drugs based on their past response to statins. 
“It should be used by people whose condition is not controlled by statins,” Roberts said. “They’ve been on a statin, and their cholesterol is still higher than it should be. Or they can’t tolerate statins. If we use the new drug to treat those people, then the cost is more justified than if you just opened it up and let anyone who wanted to be on the new drug be on it.”   
Small Package, Big Results 
Access to upward of 68,000 pharmacies across the United States has historically given large PBMs like Express Scripts and CVS the advantage over their smaller competitors. However, Roberts and Malhotra both anticipate a move to formulary solutions that will make smaller players more competitive in the pharmacy benefits market. 
The PBMs will create a preferred list of products that will be vetted by pharmacy therapeutic committees made up of leading physicians, pharmacists and experts across the country, Malhotra said. They will analyze the formulary design strictly from a clinical lens and not a cost lens. Narrowing the selection of prescription drugs in this way will increase competition among drug providers and drive down costs for employers. 
“In the end the manufacturers give the PBMs a rebate for any of their products the benefits manager chooses to dispense,” Malhotra said.
A narrower market helps smaller providers that typically have access to only 20,000 pharmacies, Roberts said. 
Bells and whistles aside, choosing the correct PBM comes down to knowing an organization’s workforce and its needs.
“At the end of the day it’s collaboration and communication,” Berger said. “And we find the most success when we can have frank, open communication with our clients where we can work together toward a goal of right medication, right time to get the right results.”

Provided that federal regulators bless UnitedHealth Group Inc.’s $12.8 billion acquisition of Catamaran Corp. later this year, it appears to be a relatively small price to pay for a deal that some experts contend will boost competition rather than shrink it among pharmacy benefit manager companies.

The deal announced this spring would create the nation’s third-largest PBM company by combining UnitedHealth Group’s pharmacy-benefits business, OptumRx, with Schaumburg, Illinois-based Catamaran, which manages more than 400 million prescriptions annually on behalf of 35 million people — about 1 in every 5 prescription claims in the United States.

 
But when companies grow bigger, some argue that a more powerful industry player could justify raising prices and limiting access to vital prescription drugs. With the skyrocketing costs of these drugs, along with the perception of a dwindling marketplace in the post-acquisition landscape, caution is understandable. 
 
“There was concern in the marketplace that this would lead to some of these PBMs being able to charge what they want, which would lead to a lack of price competitiveness,” said Ritu Malhotra, vice president and national pharmacy benefits practice leader at consultancy Segal Co. The UnitedHealth deal, however, could foster fresh competition among industry heavyweights Express Scripts Holding Co. and CVS Health Corp. “The industry had gotten a little lopsided, and the third and fourth players were distant from the top two.”
 
Adam Fein, president of Pembroke Consulitng Inc., echoed those sentiments in an email, stating: “By acquiring Catamaran, OptumRx is signaling that it wants to compete more seriously as a stand-alone PBM. Large employers will now have a third large, viable competitor when bidding their PBM business.” 
 
PBMs are the intermediaries between the employer and other players in the health care system, Malhotra said. They can save companies significant dollars by using the buying power of enrollees to bargain for lower prices from drugmakers and contract with pharmacies. They can also help patients adhere to their medications through specialty pharmacies and disease management experts and act as the employer’s guide through the increasingly complex world of prescription drugs.
 
And the role is in high demand. Managing pharmacy benefits is expected to quadruple to a $400 billion market in 2020, up from $100 billion in 2014.
 
It may come as a surprise to some that a union of this size only moves UnitedHealth into the No. 3 slot among the nation’s largest PBMs, but Express Scripts holds the top spot by volume, with 90 million lives covered while CVS is No. 2 at 85.1 million lives, according to a study from publishing and information company Atlantic Information Services Inc. UnitedHealth will reach about 65 million covered lives when the deal is completed.
 
The pervading fear around any large-scale consolidation, whether it’s UnitedHealth’s acquisition of Catamaran or RiteAid’s proposed purchase of EnvisionRx for $2 billion in combined cash and stock, which is also expected to close later this year, is that the deals will decrease competition and ultimately hurt the employers who, in theory, would be at the mercy of their PBMs.
 
This year’s activity comes four years after Express Scripts’ blockbuster $29.1 billion acquisition of Medco, and SXC Health Solutions Corp.’s $4.4 billion deal to acquire Catalyst Health Solution Inc.
 
The Express Scripts deal ignited lawsuits charging antitrust violations by shrinking competition and raising consumer prices, shining a spotlight on an industry that few tracked and even fewer understood. 
 
Yet UnitedHealth Group’s acquisition of Catamaran differs in that the combined strengths of the two companies creates a competitive third PBM at the top of the industry to negotiate prices and drive down costs for both employers and employees.
 
“The combined entity has a unique value proposition,” Malhotra said. “Catamaran comes in with really strong technological sophistication. With UnitedHealth Group’s clinical analysis, the pairing makes them a really unique PBM.”
 
Traditionally, competition, not industry domination, has been the driving force behind corporate consolidations, explained Jonathan Roberts, an executive vice president at CVS Health. 
 
“The industry has been consolidating for quite some time, and I think it will continue to consolidate,” said Roberts, who is also the president of CVS/caremark, the pharmacy benefit management and mail service pharmacy division of CVS Health. “Size and scale are important in this business. You need to be able to invest back in the company with technology enhancements, whether that is a move to digital or to keep up with regulatory changes. We view what continues to happen as a natural evolution of the industry.”
 
Companies, like living organisms, evolve to compete against their peers and defend against predators. The predator in this instance is the rising cost of prescription drugs. With the help of mergers and acquisitions, PBMs are able to bargain for lower prescription drug costs more effectively and work to ensure that the health of the employees taking these drugs is protected.
 
Feat of Strength 
 
The role of a PBM is not new. Express Scripts has been in existence for 28 years. The historical lack of interest in PBMs has a lot to do with the fact that, for the past 15 years, the pharmacy industry has been relatively steady because of a rich pipeline of generic drugs. Easy access to generics kept the price of branded drugs low, a fact that gave many employers the courage to navigate the prescription drug market on their own. 
 
“Historically, because pharmacy costs were relatively flat, the benefit didn’t have to be aggressively managed,” Roberts said. 
 
Until 2014, the year-to-year inflation rate for generic drugs held below 1 percent, according to the 2015 “Workers’ Compensation Drug Report” conducted by Helios, a workers’ compensation PBM headquartered in Memphis, Tennessee. Then in 2014, the average wholesale price of generic drugs rose nearly 10 percent. 
 
Without generics to act as a deflationary agent in the market, the cost of specialty drugs skyrocketed. According to an Express Scripts study, “Super Spending: Trends in High-Cost Medication Use,” 575,000 Americans had medication costs in excess of $50,000 in 2014 — almost $29 billion and an increase of 63 percent from 2013. Cancer and hepatitis C drugs lead the way as the most expensive, according to the report (See “Specialty Drug Costs: Hard Pills to Swallow,” June 2015, p. 34). 
 
Hepatitis C drugs, in particular, were costing patients $1,000 a day and in excess of $150,000 to cure, said Brian Henry, vice president of corporate communications at Express Scripts. Many employers’ response to the high cost put their employees at risk.
 
“In a marketplace where there was really only one drug available, what a lot of companies did was ration the care for only the sickest patients,” Henry said. “As you can imagine, if you had hepatitis C you would want to get the treatment, but that wasn’t an option for the majority of patients.” 
 
Suddenly, PBMs were a hot topic among employers. 
 
Using its size and consequent buying power, Express Scripts was able to intervene on the part of employers and employee patients when a competitor drug entered the market last December. Express Scripts brokered a deal to provide exclusive access to the new drug, which had similar adherence and clinical data at a much more accessible price point. As a result, the PBM was able to drive down the cost of care by 67 percent.
 
But all large PBMs are not created equal, which keeps the market competitive. 
 
More than One Way to Get the Job Done
 
Express Scripts’ strength lies in its size, brokering expensive deals as in the case of the hepatitis C medication. According to Henry, it operates on a “pure-play PBM model,” meaning that it focuses on mail order and specialty drugs and primarily deals with its members over the phone. 
 
“Our size gives us the ability to act as an independent counterweight for clients in the marketplace,” Henry said. 
 
CVS/caremark runs on an integrated model that includes the PBM, retail pharmacies, specialty pharmacies, immediate care clinics and pharmacy advisers, Roberts said. CVS’s approach addresses another leading reason prescription drugs are so expensive: nonadherence. In order to be considered adherent to a prescription drug regimen, a patient must take their medication 80 percent of the time. 
 
“If you take 100,000 retirees, for example, their medical costs are around $1.2 billion,” Roberts said. “If we could keep all of those retirees on their medications, we could actually reduce the overall health care cost by $230 million. When people historically think of a PBM, they think about managing drug costs, but I think people often miss the value we can deliver to their members around keeping them on their medication.” 
 
The strength of UnitedHealth’s new OptumRx is its ability to collect and analyze user data. Tracking patient usage data as soon as possible in the claim means that employers are less likely to spend wastefully. 
 
“You want to capture a company’s pharmacy expenses as soon as possible so that you can start looking at that data and then manage it clinically to ensure that they are related to the claim and that it is the right medication for the disease and stage of the disease as well,” said Sarah Berger, vice president of marketing at Helios. 
 
Even though Helios is a smaller PBM, it provides a platform that manages patient data similar to Catamaran’s. The process begins with the first prescription, or “first fill,” that an employee receives after a company partners with a PBM. From there, all data regarding patient usage, response to the medication and market cost are tracked to ensure that the employee is healthy and the employer is not overspending.
 
PBMs that effectively deliver utilization management services to company clients are expected to be in high demand, especially with the anticipated release of a new specialty drug developed to treat high cholesterol later this year. 
 
The injectable drug, known formally as PCSK9 inhibitors, for instance, is a more expensive treatment than the generic statins such as Lipitor to treat and manage high cholesterol, Roberts said. The generic equivalent of Lipitor costs between $200 and $300 a year. This new drug will likely cost between $6,000 and $10,000.
Utilization management technology will allow employers to effectively discern which employees should be on which drugs based on their past response to statins.
 
“It should be used by people whose condition is not controlled by statins,” Roberts said. “They’ve been on a statin, and their cholesterol is still higher than it should be. Or they can’t tolerate statins. If we use the new drug to treat those people, then the cost is more justified than if you just opened it up and let anyone who wanted to be on the new drug be on it.”   
 
Small Package, Big Results 
 
Access to upward of 68,000 pharmacies across the United States has historically given large PBMs like Express Scripts and CVS the advantage over their smaller competitors. However, Roberts and Malhotra both anticipate a move to formulary solutions that will make smaller players more competitive in the pharmacy benefits market. 
 
The PBMs will create a preferred list of products that will be vetted by pharmacy therapeutic committees made up of leading physicians, pharmacists and experts across the country, Malhotra said. They will analyze the formulary design strictly from a clinical lens and not a cost lens. Narrowing the selection of prescription drugs in this way will increase competition among drug providers and drive down costs for employers. 
 
“In the end the manufacturers give the PBMs a rebate for any of their products the benefits manager chooses to dispense,” Malhotra said.
 
A narrower market helps smaller providers that typically have access to only 20,000 pharmacies, Roberts said. 
Bells and whistles aside, choosing the correct PBM comes down to knowing an organization’s workforce and its needs.
 
“At the end of the day it’s collaboration and communication,” Berger said. “And we find the most success when we can have frank, open communication with our clients where we can work together toward a goal of right medication, right time to get the right results.”
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Blog: Chipotle Rolls Part-Time Employees Into Tuition Program

Customers can now enjoy their burritos knowing the hourly worker who assembled them gets tuition reimbursement and other employee benefits. (Photo courtesy of Wikimedia Commons)

While burger-fryers continue to fight for higher wages, Chipotle Mexican Grill’s taco technicians are about to get tuition.

Starting July 1, the Denver-based chain will offer tuition reimbursement, among other benefits, to its part-time employees. Of the company’s 53,090 employees, approximately 48,500 are hourly. The company will reimburse 90 percent of tuition, books and fees up to $5,250 per calendar year.

Chipotle’s announcement is another link in a chain of them — in May, Fiat Chrysler Automobiles Inc. began an up-front tuition plan for its dealership employees, and Starbucks Corp.’s College Achievement Plan expanded pay for all four years of Arizona State University Online education. Like its counterparts, Chipotle is aware how supporting employees’ college education can help its success. Unlike its counterparts, it’s not afraid to admit that as the first reason to extend benefits to part-time workers.

Because it doesn’t have franchised restaurants, Chipotle has an easier time pushing talent up through the ranks, making tuition reimbursement an investment in the company’s as well as the employees’ future.

“It’s an incredible statement by our leadership about how much we want to invest in the best people we have and to keep them with us,” said JD Cummings, Chipotle recruitment strategy manager, at the annual Summer Brand Camp marketing and human resources conference last week.

Chipotle’s target hiring demographic is the high school and college-aged population. Workforce senior editor Ladan Nikravan wrote last week about a new study by EdAssist that shows Gen Y wants development above all else from their jobs. It seems like Chipotle read the same research.

Like any quick-service food establishment, however, Chipotle has seen its fair share of angry employees. There are currently nine lawsuits in six states against the company, all alleging that employees were cheated out of their overtime pay. But as McDonald’s struggles to align its benefits for workers — many of whom work for franchised restaurants, removing them even further from corporate control — Chipotle, like Starbucks, is franchise-free and might have an easier time not only assuaging employee complaints but also delivering on its tuition assistance promises.

At the very least, other quick-service restaurant industry players might kick up their own tuition offerings. Otherwise, their sandwich stackers could become burrito bundlers.

This blog originally appeared in Workforce‘s sister publication, Chief Learning Officer.

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How Do We Test Employees for Intoxication?

Dear Sidestepping,

There are numerous methods to test an employee for the presence of either drugs or alcohol if you suspect an employee is impaired on the job. The most common testing includes breath, urine, blood or hair.

You specifically inquired as to the difference between breath tests and blood tests.

A breath-alcohol test is the most common test for finding out how much alcohol is currently in the blood. The person being tested blows into a breath-alcohol device, and the results are given as a number, known as the Blood Alcohol Concentration (BAC), which in turn tells you the degree of the employee's impairment. For positions regulated by the Department of Transportation, for example, a BAC of 0.02 is enough to justify stopping someone from performing a safety-sensitive task and a BAC reading of 0.04 or higher is considered a positive test and requires immediate removal from safety-sensitive functions.  

A blood test, on the other hand, measures the actual amount of alcohol or other drugs in the blood at the time of the test. With blood tests, there is a very short detection period, as most drugs are quickly cleared from the blood and deposited into the urine. Thus, if you are searching for the presence of drugs, a urine specimen is more reliable than a blood test.

As to the specific question of breath vs. blood for suspected intoxication: Although a blood test potentially is more accurate, it is not sufficient to justify, in most cases, the added burden and expense of a blood draw vs. a breath test.

A blood test is the only way to determine legal intoxication (think a serious injury or death), with scientific certainty. Thus, in most instances, a breath test will provide sufficient evidence of intoxication for employment purposes.

SOURCE: Jon Hyman, Meyers Roman Friedberg & Lewis, Cleveland, Ohio, June 4, 2015.

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Dissed Loyalty

Employers have long valued their employees’ loyalty, since those loyal employees could be trusted to do their best.

But in recent years employee loyalty, like pensions and mainframe computers, has become a dinosaur. It’s clear that loyalty has been on the decline.

New research from the American Management Association (editor’s note: the author works for the association) titled “Is Employee Loyalty Still Valued?” reveals that after nearly two decades of cutbacks, restructurings, organizational changes and overwhelming workloads, that more than 1 in 2 managers — 52 percent — see their employees as less loyal than five years ago. After all, the concept of lifetime employment is no longer feasible for many organizations. So if loyalty is indeed like a dinosaur, it appears to be stuck in a tar pit and headed for extinction.

What Does Loyal Behavior Look Like?

In the American Management Association’s terms, loyalty is defined as steadfastness, constancy and dedication to something or someone outside of oneself.

Employees can express loyalty through
many different behaviors, including:

• Thinking critically but fairly about the ideas and plans of others.

• Providing helpful feedback in a caring way.

• Acting to support the plans and desires of others.

• Respecting people’s positions, rights and authority.

• Fighting for the best interests of the team and the organization.

• Giving credit where credit is due.

• Accepting responsibility and accountability for results.

• Living and standing up to the values of the organization.

• Protecting the reputations of people not able to protect themselves.

Loyalty is not:

• Blindly adhering to a policy that may be unethical.

• Doing whatever management says when it’s known to be wrong.

• Lying or covering up inappropriate behaviors.

• Making decisions based primarily on self-interest.

Source: AMA training curriculum on “Achieving Leadership Success through Loyalty”

Or, is it just another phase of the evolution of the employee-employer relationship? The same AMA study found that many organizations still seek to make employee loyalty a core part of their culture. When presented in terms of whether promoting such loyalty is a “major focus” at their companies, respondents provided a mixed picture.

One in five respondents said “yes,” loyalty is a major focus at their organization. Some 56 percent said “no, not a major focus, but valued nevertheless” and only 24 percent reported “no, it was never valued nor a major focus.”

But let’s take a look at loyalty and see if it still has a place within the organization.

Loyalty often reflects senior leadership’s attitude because cultural values, which are frequently driven by the upper echelons of management, demonstrate what behaviors they value and reward in employees. The AMA study, which includes responses from 1,213 North American senior-level business, human resources and management professionals and was completed in December 2014, shows that many respondents believe their senior leadership should value and cultivate employee loyalty.

Loyalty is important to leadership because it ensures that people at all levels in the organization are respected and there is greater consistency in both word and deed. As Rensis Likert, an American educator and organizational psychologist, said, “The greater the loyalty of the group toward the group, the greater is the motivation among the members to achieve the goals of the group, and the greater the probability that the group will achieve its goals.”

A lack of loyalty can clearly be detrimental and result in loss of trust, higher absenteeism and turnover, shoddy work, gossiping, the formation of cliques and, in extreme cases, incite a mutiny.

That evolution, if you will, finds organizations moving away from talking in terms of employee loyalty and toward employee engagement — a broader term that includes commitment and advocacy for both the job and the employer.

It may be that management today is ambivalent about promoting employee loyalty and whether it still sees it as an ideal. After years of the breakdown of the implied lifetime employment contract between employees and employers, today’s leaders may be embarrassed to use loyalty as a frame of reference and feel more comfortable with promoting instead the broader yet elusive concepts of engagement and disengagement.

Not surprisingly, respondents were also asked to gauge their own organization’s loyalty to its employees, and the findings reflect a similar decline. Fully 42 percent believe their organization is less loyal, and 45 percent indicate it is about the same as five years ago. Only 13 percent believe their organization is more loyal compared with five years ago.

Yet despite loyalty’s supposed death march, the survey findings also make it clear that organizations are keenly aware of the dangers of weak employee loyalty. Asked about the impact of declining loyalty, respondents cited low morale (84 percent), high turnover (80 percent), disengagement (80 percent), growing distrust (76 percent) and lack of team spirit (73 percent).

Along the same lines, respondents were quick to identify the positive signs that employees have strong loyalty to the organization. These indications are directly related to business performance, so loyalty ought not to be disregarded; its merits are evident.

Given this fact, it is not surprising that the AMA study also found that 46 percent of senior leaders believe loyalty has a direct relationship to profits. Managers understand loyalty brings out higher levels of contribution and effort, along with pride and respect for the company.

Promoting loyalty is not the same as encouraging employees to blindly follow. Diversity of opinion and a devil’s advocate role are crucial to critical thinking. While there are tangible business benefits in cultivating loyalty, the same may be said for promoting a loyal opposition. As a leader or manager, there are several benefits of having loyal opposition from within the team as this can stimulate critical decision-making, prevent group-think, draw out different perspectives and discourage the sycophants.

Stemming the Decline in Loyalty

Though loyalty may seem like an old-fashioned notion, don’t go building a wing for it in the natural history museum just yet. What can organizations do to stem the decline in loyalty? Develop a productive manager-employee relationship to foster loyalty. Employees first need their basic needs met, such as fair compensation, a safe and nontoxic work environment as well as opportunities for career development.

Coaching, job skills training and learning opportunities show that the company is serious enough about employees to invest in their future. Managers should engage employees in decisions about their work and give input into the how, why and what they do. This will go a long way toward helping employees become more personally invested, interested in the outcome and rewarded by their work.

And let managers know; they need to set an example by demonstrating their own loyalty. They should support the decisions of leaders and not criticize them publicly or otherwise subvert their authority. They need to protect employees from unwarranted attacks and criticism.

They should also stress the importance of honesty, quality and customer service. The aim should be informed loyalty, not blind loyalty. Honest debate ought to be encouraged, and individuals helped to understand that people can disagree in an agreeable way and still support the decisions made.

Managers need to give clear reasons for decisions. If there is disagreement, they must step up and seek support and loyalty for the benefit of the organization.

The Future of Employee Loyalty

When asked to look to the future, respondents were generally pessimistic. Only 20 percent expect employee loyalty to grow in importance, while 34 percent say it will remain a core value for their organization. But 46 percent believe employee loyalty will probably decline.

But there are reasons why loyalty will remain a core value for many organizations, at least as part of the broader goal of employee engagement. Devoted employees know the business, focus on the job and are less alienated and more committed. Loyalty and engagement aid people at all levels because employees then work with the best interests of the organization in mind.

A lack of loyalty can infect an entire enterprise and cause increased absenteeism and turnover. Loyalty provides real business benefits, and the value loyalty brings to an enterprise is far from dead.

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Talent Management Strategy Template

This template walks you through the steps required to create an effective talent management strategy. It shows you how to map out HR goals and priorities for the year that are linked to your organization's strategic plan and goals. It comes complete with fill-in-the-blank tables and examples so you can use it to draft your own HR talent management strategy.

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How Do Recruiting and Succession Strategy Fit Together?

Dear We Have Needs:

A successful succession strategy should be deeply interconnected with ongoing recruitment practices. Having the right people in place, from the top down, is critical to ensuring a seamless, streamlined transition when necessary. Additionally, from a recruitment perspective, good candidates often look at the job trajectory of the more senior executives. When it’s clear that a company frequently promotes from within, candidates are able to visualize their career growth, an added value tied to the position on the table. It also means that companies are more likely to secure top talent.

Now, let’s dive a bit deeper into the connection between recruitment and succession planning. At its core, succession planning is simply filling a vacant position with the right person. To ease these transitions, companies often look to promote from within — there’s an organizational familiarity, client or workload overlap, etc., which makes a shift less challenging for all involved. As a result, when companies are seeking to fill a position — in fact, any position —they must look ahead, investing in hires that will be able to support the future growth of the organization, even as they mature within the company.

It’s important that companies make this connection between recruitment and succession. When discussing a client’s needs, we always ask if they have established a succession plan. About half the time, companies don’t have a plan in place, nor have they explored developing a formal strategy. Additionally, for those with a succession plan in place, the companies often lack specific benchmarks or goals indicating how employees can progress within the organization. Because most job seekers prioritize career growth, it’s crucial for companies to present a clear and consistent message about where the role will lead in three, five or 10 years down the road. It also ensures a company has a comprehensive succession plan that will help guide the company, securing a sound future. 

Being able to visualize that future is equally important to the candidate as it is for the company. Candidates are looking for opportunities at companies that provide a clear path for upward mobility and growth, and it’s a recruiter’s job to ensure the candidate’s goals align with a company’s succession plan. For example, if a company has a number of senior executives who are Boomers, they should expect to fill those positions in the next few years as these executives begin to retire. Therefore, in recruiting for mid-management positions, companies should be looking three to five years down the line, hiring candidates that will be able to step into these more senior roles when the time comes.

Ultimately, succession planning decreases the room for error when selecting a candidate and helps companies and employees both feel more secure in their shared future. How that succession strategy develops, however, varies vastly between organizations — some focus on key positions like the C-suite, while others seek a plan for the entire organization. If you’re an organization that allows employees to move between departments or roles, you’ll need universal succession plan in place. Remember, a succession strategy that aligns with recruitment goals translates into a company and employees that are co-invested in a successful future. In planning your next hire, don’t be afraid to think big and look ahead.

SOURCE: Scott Hopkins, founder, CVPartners, San Francisco, division of Addison Group, Jan. 30, 2015.

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Office ‘Hoteling’: Some Companies Offer Reservations, but Some Workers Have Reservations

DILBERT © 1995 Scott Adams. Used by permission of UNIVERSAL UCLICK. All rights reserved.

“We’re taking away your individual cubicles,” Dilbert’s boss explains in a 1995 edition of the workplace comic. “In the new system, you’ll sign up for whatever cube is open that day.”

The cartoon was mocking office “hoteling,” a practice that allows employees to reserve workspace on a need-to-use basis. But though Scott Adams made fun of the concept in 1995, in 2015 hoteling is increasingly being adopted as a method of cutting costs and improving collaboration among workers.

Typically employed by consultancies and other firms whose employees often travel or work from remote locations, hoteling enables companies to drop the square footage of their office space without shrinking their workforce: Instead of each employee being allotted a desk, workspace is shared among staff, cutting down on real estate requirements.

“You’ve got reduced costs of real estate per employee, so you’re able to make more efficient use of your space,” said Ben Johnston, the marketing director for RMG Networks.

RMG Networks, a communications technology provider based in Dallas, offers software that can be used to streamline the hoteling process by making it easy for employees to check in and reserve rooms. Johnston said having some form of digital reservation system is key to making hoteling work.

“At the minimum, most companies that are employing hoteling will have some sort of reservation system, whether that’s Microsoft Outlook or other systems like that,” Johnston said. “In a lot of cases it’s from an interactive touch screen in the foyer or the reception area where employees can come in and swipe a badge or scan an ID to check into the system, see what’s available, reserve the room and get to work.”

Though hoteling has been around for some time — Crain’s Chicago Business reported on IBM’s switch to a desk reservation system in 1994 — the trend has recently picked up steam. “Big Four” accounting firms Deloitte and EY, formerly Ernst & Young, are among companies that have adopted office hoteling in the past year. Instead of assigned desks, companies like American Express Co. are offering employees storage lockers to hold their files and supplies. Rather than being tethered to landlines, employees at GlaxoSmithKline carry laptops equipped with Internet phones.

Even the federal government has gotten in on the trend with the U.S. General Services Administration using hoteling as part of its efforts to reduce federal office space and increase efficiency and collaboration. Charles Hardy, the GSA’s chief workplace officer, said the hoteling model has enabled it to assign 3,400 people to its headquarters, a building that previously only housed 2,200.

“There’s this balance between people who are coming into the office and people who are either at home or at a client site,” Hardy said. “Seats are being used probably around 45 to 50 percent of the time, and if you create a hoteling environment that increases your ability to actually manage the capacity level you have in a building at any given day.”

The extent to which cutting back on real estate actually succeeds in cutting costs is up for debate: A 2013 study by the U.S. Government Accountability Office was unable to determine the “accuracy and validity” of the U.S. Patent and Trademark Office’s estimated cost savings from hoteling and other efforts to reduce its space needs over the past decade.

The same study found that hoteling “may not be appropriate” for everyone, such as employees who work with classified documents.

Additionally, some workers find the hoteling environment counterproductive. Allison Arieff, a New York Times architecture columnist, wrote a commentary for CityLab, part of The Atlantic Monthly Group, that said: “I worked in an open plan environment where everyone sat at ‘kitchen tables’ (with someone at either side of you, across from you, behind you) and many of us were ‘hoteling’ (where you check in to a different desk each day, when and if one is actually available). To be honest, it seemed as if no one ever got anything done.”

Kris Dunn, the chief human resources officer at Kinetix who also writes a column for Workforce, also questions the benefits of hoteling.

“There are a lot of employees who value a sense of place, of belonging and of ownership of space,” Dunn wrote in an email. “Hoteling is a great way to save on real estate costs and accommodate remote workers visiting, but when it impacts employees who spend 50 percent or more of their time in the office, it usually becomes a burden.”

However, proponents of the hoteling system laud its ability to provide flexibility and enhance collaboration among staff.

“You get happier workers in some cases,” Johnston said. “It breaks up the monotony.”

At the GSA, where 80 percent of desks are unassigned, hoteling gives workers the option of different types of workspaces, ensuring that people can find a work environment that accommodates whatever type of job they’re doing that day.

“If I’m coming into the office one day and I need to do heads-down work, there’s a location for that where I can get away from folks and do heads-down work,” Hardy said. “If I’m coming in and we’re brainstorming or doing teamwork, there’s a place where collaboration can occur.”

While hoteling may be better-suited to some companies than others — for example, Johnston said the model works best for larger firms with employees who travel often — Hardy said any company can adopt hoteling as long as it chooses the appropriate degree of implementation. Where one office might function perfectly well with 80 percent of its desks unassigned, another firm might work better with only 20 percent unassigned.

“It’s certainly a great strategy,” Hardy said. “We’re paying for our chairs and our workstations and our offices, and you want to maximize their actual use. I think hoteling allows us to get a better utilization of the assets we’re putting in place.”

Of course, room service is not included.

Amy Whyte is a Workforce editorial intern. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.