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Health Benefits Paramount for Workers When Choosing an Employer

Employers contemplating cutting back on medical benefits might want to mull this: A new survey shows that workers place an extremely high value on health care coverage.


In fact, according to a survey of 1,200 adults sponsored by the Center for State and Local Government Excellence, 84 percent of the respondents said that health insurance has become a “very important” characteristic when choosing a new job.


In fact, medical insurance outranked all other 14 benefits and offerings in the survey. Remarkably, pay ranked 10th on the survey—right below “being creative and intellectually stimulated.”


Another benefit—the corporate pension plan—ranked fourth, cited by 76 percent of respondents as being most important when evaluating a potential job.


“Increasingly, people are becoming aware of the severe consequences of not having either health care or retirement benefits,” says Elizabeth Kellar, executive director for the center. “The responses likely speak to people’s growing insecurities, to the point where many people now say that they won’t even consider a job that doesn’t offer health insurance.”


The cost of providing health care has risen dramatically in recent years. During the past five years, the price of offering medical insurance to workers has increased by 63 percent, according to a study of corporate health care costs conducted by consulting firm Towers Perrin.


That rise, the report notes, has created an “affordability burden” for many employers. As a result, many companies are reducing fixed health-care costs and are shifting more of these expenses to employees through larger deductibles, more sizable employee contributions, and a greater reliance on consumer-driven health plans.


On the retirement side, Kellar points out that as corporations cut back on traditional defined-benefit pension plans to better manage expenses, employees are increasingly becoming dependent on defined-contribution plans, such as 401(k)s. This has prompted workers to place more emphasis on specific defined-contribution features—such as company matches in 401(k)s—when considering new job opportunities.


Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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ON-DEMAND IWorkforce Management-I Webcasts

 

Changing Engagement Challenges
 




*HRCI Recertification Credit: 1 hour


Expert Speaker: 
Ilene Gochman, Towers Watson

Regardless of an organization’s place on the economic recovery curve, there is a strong need to maintain or even increase productivity. A significant body of research has shown strong links between engagement and both individual and organizational performance. While this connection is clear, organizations still struggle with the specifics— what can they do to translate engagement into better performance?


In this webcast Towers Watson consultant Ilene Gochman will present ideas about how to turn engagement into tangible results. She will:

  • Define engagement and explain the actions that enhance it
  • Look at the roles that senior leaders, managers and people-programs play in driving engagement
  • Provide examples about how these engagement drivers affect performance

You will gain specific ideas about what your organization’s leaders, managers, HR teams and communications professionals can do to translate engagement into performance.

Event fee: Free to Members
Available until May 13, 2011
Sponsored by:  

Learning & Development Spending and Staffing Trends: Are There Signs of a Turnaround for Corporate Training?
 




*HRCI Recertification Credit: 1 hour


Expert Speaker: 
Karen O’Leonard, Bersin & Associates

After two straight years of spending and staffing cuts, U.S. training organizations are wondering if the worst is behind them. Find out in our latest study on L&D spending, staffing, and programs.

The webinar is presented by Karen O’Leonard, principal analyst and author of Bersin & Associates annual Corporate Learning Factbook. O’Leonard’s presentation is filled with statistics on spending, staffing, and programs that can be used for benchmarking your organization against its peers.


All attendees will receive a complimentary executive summary of the 2011 Corporate Learning Factbook. 

Event fee: Free to Members
Available until Jan 25, 2012
 
   
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Health Issues in the Hiring Process

As the workforce ages and more Americans are screened and treated for serious illnesses, a growing number of job candidates enter the hiring process with pre-existing health conditions and serious questions about insurance provisions during a change in employment.


At the same time, the rising number of uninsured Americans means that more job applicants have no health coverage and need information about waiting periods and exclusions.


These trends put recruiters and hiring managers in a difficult and potentially dangerous position. They want to sell the company, including its benefits programs, and they need to build rapport with candidates by responding to their questions and concerns.


But they must not engage in any conversation that might reveal information about the candidate’s health. To do so would open the door to a discrimination lawsuit under the Americans With Disabilities Act.


Responding to candidates’ concerns without running afoul of the ADA requires an understanding of the protections generated for candidates under both the ADA and the Health Insurance Portability and Accountability Act of 1996, or HIPAA.


“Recruiters should be wary of any situation where a candidate provides health information in case there is a later charge that the information colored the offer decision,” warns Phyllis Kupferstein, partner and head of the West Coast labor and employment practice for McDermott, Will & Emery in Los Angeles.


ADA prohibitions
   The ADA sharply prohibits recruiters and hiring managers from asking questions about the applicant’s health or questions that are likely to reveal the existence of a health problem or disability before making a job offer. This prohibition covers applications, written questionnaires and inquiries made during interviews.


Examples of prohibited lines of questioning during the pre-offer period include any query or comment that refers to health conditions, injuries, sick-day usage, medical insurance coverage, workers’ compensation claims, prescription drug use or mental health problems. In short, a recruiter should make no reference to a candidate’s health and carefully steer any conversation to avoid situations where the candidate offers health-related information.


A more complex situation arises when a candidate needs a modification in the recruiting process to accommodate a disability. Recruiters and hiring managers must exercise extreme caution in learning only the health- or disability-related information that is necessary to determine the modifications needed, and no more.


Under the ADA, employers are required to provide reasonable accommodation for disabled candidates. An employer does not have to provide a specific accommodation if it would cause an undue hardship, which the ADA defines as a significant difficulty or expense. However, an employer cannot refuse to provide an accommodation solely because it entails some financial or administrative costs.


If the requested accommodation causes an undue hardship, the employer is still required to provide another accommodation that does not. Reasonable accommodation can take many forms during the hiring process, including providing written materials in accessible formats, such as large print, Braille or audiotape; providing readers or sign language interpreters; ensuring that recruitment, interviews, tests and other components of the application process are held in accessible locations; providing or modifying equipment or devices; and adjusting or modifying application policies and procedures.


Responding to concerns
The difficulty recruiters face in dealing with candidates with health concerns is exacerbated by the complexity of HIPAA, which protects most workers from losing their health care coverage when they change employers. A little more than a decade ago, real concerns about labor mobility fueled support for legislation that would ensure continued coverage for workers changing jobs.


HIPAA’s passage quickly quelled concerns about job lock among economists and employers, but many job candidates remain unaware of HIPAA’s protections.
Consequently, recruiters and hiring managers may be faced with candidates who ask questions about the employer’s health plan and most commonly any waiting periods or exclusions for pre-existing conditions. Candidates may not understand that HIPAA rules out exclusions for pre-existing conditions for candidates that have coverage under their current employer’s plan or under COBRA, Medicare, Medicaid or an individual health insurance policy unless the candidate has had a significant break in coverage.


HIPAA defines a significant break in coverage as a break of 63 days or more. This 63-day break period may be extended under state law if the candidate’s coverage is insured through an insurance company or offered through an HMO.


Recruiters cannot respond to candidates’ coverage questions without full information on current and past coverage, which would put them into troubled ADA territory.


“But recruiters can tell candidates that they are generally protected by HIPAA and refer them to the Department of Labor Web site, which offers good materials on HIPAA and answers frequently asked questions,” Kupferstein says.


Recruiters can also tell candidates to contact the benefits department with specific questions about the employer’s plan, but they should instruct the candidate not to provide any health information.


“Recruiters should be very general in any discussion of the health plan and defer any questions to the post-offer phase,” Kupferstein says.


Recruiters can also offer to provide the candidate with a copy of the plan and promote the employer’s health insurance plan as part of their broader effort to sell the company, but the effectiveness of this strategy clearly hinges on the strength of the plan.


“Health coverage varies from employer to employer, and this can have an impact on recruiting,” says Tom Billet, senior benefits consultant at Watson Wyatt Worldwide in Stamford, Connecticut.


“Recruiters generally should not try to sell candidates on the basis of benefits unless the package is a differentiator,” Billet warns. “Most companies prefer to strike a middle-of-the-road position with their benefits, so recruiters can’t press the package as a positive point, but they can help ensure that it’s not viewed as a negative point or a detractor.”


Billet notes, however, that some companies have developed leading-edge health management tools and health improvement programs, and many of these are particularly useful for employees with chronic conditions.


“Recruiters can promote these tools and programs as an indication of the company’s commitment to employees’ health,” he says.


Most companies provide candidates with full information about benefits at the time of offer, but some companies are providing more information on their Web sites as part of the upfront recruiting process. This is a positive trend, Billet notes, and should take some of the pressure off recruiters.


Hiring the uninsured
With a growing number of uninsured workers applying for jobs, recruiters are encountering more candidates who are concerned about waiting periods and exclusions for employer coverage. Although the largest employers often do not impose a waiting period, many do.


At companies with more than 200 employees, 73 percent of covered workers face a waiting period before coverage is available, according to the 2007 Kaiser Family Foundation survey of health plans. In the retail industry, 94 percent of workers face a waiting period.


The average waiting period is three months in retail and 2.2 months across all industries, but some of the big-box retailers impose yearlong waiting periods. Although HIPAA effectively eliminates these provisions for workers with prior coverage, the uninsured are not protected.


“What employers are worried about in hiring people who have not had health care coverage is adverse selection, because we know these new hires use more health services,” says Helen Darling, president of the National Business Group on Health in Washington. “In retail, where many of the high-turnover jobs are based, employers often use a waiting period to protect against this.”


For jobs at the low end of the wage scale, Medicaid is considered credible coverage and new hires would have to be covered under the employer’s policy, according to Darling. For older workers, Medicare is also considered credible coverage under HIPAA.


As insurance has become more expensive, employers have pushed for longer waiting periods, Kupferstein reports. Any pre-existing condition exclusion period begins on the same day that the waiting period begins.


Some companies are rethinking their waiting periods, however.


“It is becoming a more competitive environment, and there has been more media scrutiny of the benefits provided for low-wage workers, so some companies have improved their benefits offerings,” Billet notes. “Wal-Mart and other companies are attempting to provide some kind of health care coverage for part-time workers, and recruiters can use these benefits to help recruit for these positions.”


Retiree bottleneck
Although HIPAA relieved labor mobility issues arising at the hiring end of the health benefits issue, an extremely serious mobility problem is building at the retirement end. Recruiters and hiring managers who would like to bring in fresh talent increasingly encounter a shortage of job openings because workers without defined-benefit plans and retiree health coverage are unwilling to leave work even when it’s clear to everyone that they are no longer fully productive.


“The biggest labor mobility issue for employers is the question of retirement,” says Darling. “If you want a free flow of workers and real labor mobility, this problem must be addressed. If you don’t provide retiree health coverage—and most employers don’t—employees may stay on the job until they are Medicare eligible purely because they don’t have health coverage.”


The NBGH strongly recommends that employers provide health accounts for retirees to alleviate this problem.


According to the 2007 Kaiser survey, only 33 percent of all firms still offer retiree health benefits. Even among companies with 5,000 or more workers, only 52 percent provide retiree health plans, and most of these are concentrated in the state and local government sector. Health benefits have always been an effective two-pronged tool for recruiting employees into the organization and then easing them out, but with the discontinuation of retiree health benefits at most companies, the second prong is no longer effective.


Workforce management executives will have to shift their focus from recruiting top candidates to managing employees who postpone retirement too long.

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Is Defined-Contribution Plan Communication and Education Dead

At a global pension conference in Tokyo in fall 2007, Japanese plan sponsors—who are just beginning to grapple with defined-contribution plan issues—were seeking to learn from U.S. plan sponsors’ decades of experience.


One question attendees asked: How much plan-related communication and education is enough? As we know in the U.S., the answer is not simple. Indeed, after examining the 2006 Pension Protection Act, it is possible to conclude that the Japanese plan sponsors may not have been asking the right question: Perhaps it’s not how much communication and education is enough, but whether communication and education is useful when it comes to helping participants in defined-contribution plans reach their retirement income goals.


It’s true that the Pension Protection Act is filled with disclosure and notification requirements and supports plan-sponsor provided advice for DC plan participants. However, the bulk of the act’s regulation does not focus on communication and education. Instead, it is focused on automating plan features so participants in defined-contribution plans who do not take the time to plan for their own financial future can still benefit from the plan.


The act’s support of automatic enrollment, contribution escalation and diversified default investment alternatives implies that it might be better for the plan sponsor to simply place participants onto the appropriate financial path, rather than attempting to educate them in the hope that they will find the right path on their own.


There is no doubt that DC communication and education have shown their limitations:


  • According to the 2007 EBRI Retirement Confidence Survey, while 73 percent of workers saving for retirement used written educational material they received from their employer or employer’s retirement plan provider, only 15 percent found it the most helpful material in saving for retirement.


  • Meanwhile, 42 percent of DC participants in a John Hancock survey indicated they have little or no investment knowledge. About 50 percent believe they possess the skills required to manage their portfolios, but would rather spend time doing other things.


Still, to conclude that automation in defined-contribution plans can or should supplant communication and education would be unfortunate. After all, getting workers into a 401(k) plan, increasing their savings rate, and improving their diversification through default mechanisms is not necessarily synonymous with financial security.


A recent study by Annamaria Lusardia of Dartmouth College and Olivia S. Mitchell of the University of Pennsylvania examined baby boomer retirement security and the roles of planning, financial literacy and housing wealth.


The researchers found that those who report they undertook any planning—even “a little”—are much better off than those who said they planned “hardly at all,” according to the study.


In fact, the study found that people who engaged in even a small amount of planning were more prone to have sizable wealth holdings compared with those who had engaged in no planning.


What is “a little” financial planning? Psychological research shows that simply having subjects write down the specific steps they will take to implement a task can greatly increase follow-through. In other words, even engaging individuals at the most basic level when it comes to planning for retirement could improve the outcome.


Perhaps when it comes down to it, the right question to ask about defined-contribution communication and education is just this: What does the plan sponsor want to accomplish? If it is simply to increase plan participation, then automatic enrollment may be the right course of action.


But if the goal is to increase plan participation, and have participants value and appreciate the 401(k) plan, then communication and education can play an important role.


If the answer is to improve diversification, then diversified investment defaults may be sufficient.


But if the answer is to increase the potential for retirement income adequacy, then financial communication and education—at least according to the Lusardia and Mitchell study—may help.


The reality is that we have learned a lot about 401(k) communication and education in the past several decades. At least we’ve come far from the days when communication and education meant a 15-page color brochure that few took the time to read. So, in response to the basic question posed by the Japanese plan sponsors—what we do know about defined-contribution plan communication and education is the following:


Less is more. Simple one-page fliers have emerged as one of the most effective communication formats. This is especially true if they are focused on a single concept, are simple to understand and are easy to respond to. Plan sponsors have documented that one-page fliers asking employees to tear off and return a postage-paid response card so they can participate in the DC plan typically yield a 15 percent to 20 percent response rate.


Communication must pave the way to action. Through research and experience, we have also learned that it is not enough to hold a financial seminar for employees in the hope that they will take action. The success of the financial seminar will greatly increase if workers can respond immediately— at the site of the seminar—to sign up for the plan, for example.


The employee may be a reluctant consumer. Frequently, it isn’t that employees cannot understand the plan, but that they do not want to take the time to understand it. That’s where lessons from marketing and advertising can come in handy. Targeted and personalized messages can grab the attention of reluctant consumers of the plan and create interest where none previously existed.


There is more than one type of employee. Given that the typical employee base consists of a spectrum of workers who are diverse in such areas as age, gender and education levels, plan sponsors may wish to attack communication and education challenges from multiple angles, using a variety of communication channels. For example, some workers might respond well to a Web-based tool, whereas other workers may prefer more “high-touch” or paper-based communication approaches.


U.S. plan sponsors are fortunate to have the benefit of not only the Pension Protection Act’s support of plan automation, but several decades of experience in communicating with and educating defined-contribution plan participants. The lessons learned during those decades haven’t come easily, and they certainly should not be forgotten.

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Lockheed Agrees to Record Settlement in Racial Case

Lockheed Martin has agreed to pay $2.5 million to end a racial discrimination suit brought by an electrician who says he was subject to harassment and threats to his life during the two years he worked for the giant military contractor.


The settlement, announced Wednesday, January 2, is the biggest award ever obtained by the Equal Employment Opportunity Commission on behalf of an individual in a racial discrimination case. The consent decree reached with Lockheed has been filed in the U.S. Court for the District of Hawaii and is subject to the court’s approval.


In addition to the payment to Charles Daniels, an African-American avionics electrician who worked for the company from September 1999 to August 2001, Lockheed fired or barred from rehiring the team leader and four co-workers who verbally abused him. The company also agreed to establish a special anti-discrimination training program at its aircraft logistics centers.


The investigation and litigation took six years. But the long journey resulted in an outcome that likely will grab the attention of the corporate world.


“The EEOC hopes the settlement will send a message that racial harassment and discrimination will not be tolerated,” said William Tamayo, EEOC regional attorney for San Francisco. “We hope that Lockheed Martin will set a new tone in the industry.”


The company, however, accuses the EEOC of distorting the facts of the case. Daniels and the agency said his co-workers told him, “We should do to blacks what Hitler did to the Jews” and threatened to lynch him.


Those incidences didn’t come up in internal investigations.


“We couldn’t find any reference to those words being used,” said Joe Stout, director of communications for Lockheed Martin Aeronautics Co.


In a statement, the company stressed that the alleged conduct “involved a small number of first-line employees in a small, single operating unit of the company.”


Stout said that the consent decree is not an admission of guilt.


“We did not settle because we felt we had liability,” Stout said. “If this had proceeded to trial the facts would have substantiated that the company took the matter seriously, investigated and implemented appropriate remedial actions given the facts that had been reported.”


The case arose despite Lockheed’s no-tolerance policy on racial discrimination. The trouble started when one of Daniels’ colleagues lashed out against him following a decision by South Carolina to remove the Confederate flag from the Statehouse. Daniels, a Navy veteran, was part of a team that serviced military aircraft in Florida, Washington state and Hawaii.


“He decided to take it out on the first black person he saw, which was me,” Daniels said in a conference call with the media.


The situation escalated as the team moved from location to location. “It was pretty humiliating,” he said. “I was probably one of the highest-paid and top electricians at Lockheed at the time.”


The bullying became more sinister on Whidbey Island, Washington. While the team worked there, Daniels’ colleagues hinted that they could easily kill and dispose of him.


They said that “they could put my body 10 feet away from the road and I never would be found,” according to Daniels.


When he approached the Lockheed HR department, he was rebuffed, Daniels said. Officials waved off the discrimination, saying “boys will be boys,” and warned Daniels not to prosecute the company. They also continued assigning Daniels to the same team and eventually laid him off.


“They really just want to see if they can chase you away,” Daniels said. “I really didn’t expect [justice] after Lockheed Martin told me, ‘We never lose.’ ”


So, on his second-to-last day of work at Kaneohe Marine Corps Air Station in Hawaii, he filed a discrimination charge with the EEOC office in Honolulu.


“It takes an act of courage to stand up to the largest military contractor in the world and say that I have rights as a human being,” said Raymond Cheung, an EEOC attorney who led the government’s case.


This kind of case is becoming more prevalent at the EEOC. The number of racial harassment charges filed with the agency has risen from 3,075 in fiscal year 1991 to about 7,000 last year. In February 2007, the agency launched a national education and enforcement campaign to eliminate racial bias.


“We hope that this settlement bolsters the [EEOC] chairwoman’s initiative to deal with racial discrimination in the workplace,” Tamayo said.


Daniels’ attorney Carl Verady urged people who are suffering from discrimination to turn to the EEOC rather than their company for help.


“EEO internal processes turn out to be a cover-up … or a vehicle for the human resources people to expose the complainant,” Verady said. “Go to the EEOC. That is where your protection lies.”


Stout asserts that Lockheed embraces diversity.


“It is one of our core values,” he said. “We spend a great deal of time educating our workforce about it.”


—Mark Schoeff Jr.

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Heirs Not Apparent

The decisions by Merrill Lynch and Citigroup to ignore their own succession planning processes and look outside the companies for CEOs represent a failure of their boards of directors to properly plan for a void in leadership, experts say.


    “The board is ultimately accountable to make sure there is succession when it comes to the CEO,” says consultant Gary Rich, a former head of HR for American Express in Europe, the Mideast and Africa. “But I don’t think the board has a clear sense of what [talent] is beneath the CEO.”


    Experts say an over-reliance on incumbent CEOs to plan for succession makes it all but impossible for the board to obtain independent assessments of potential successors. HR, rather than being used as an independent resource, generally plays a supportive role to the CEO in succession planning.


    But when a board loses confidence in its CEO, it loses confidence in successors as well, says Alan Johnson, a compensation consultant. That’s one reason why boards look for CEOs outside the company in times of crisis.


    “The board’s main responsibility is to pick a successor, and some people think that trumps everything else,” Johnson says. “And if they’ve failed on that, they’ve failed on what their major responsibilities are.”


    Implementing its CEO succession plan might not have helped either Citigroup or Merrill avoid the aftershocks of the massive write-downs related to subprime mortgages, but it could have eased the transition, experts say.


    Soon after Merrill’s Stanley O’Neal resigned, the company announced his replacement: New York Stock Exchange Euronext chief executive John Thain. The void left by Charles Prince at Citigroup, which had no ready successor for him, has been more deeply felt.


    Shortly after Win Bischoff was appointed interim CEO at Citigroup, he sent a letter meant to placate employees concerned about massive layoffs, possible restructuring and diminished bonuses. The letter followed closely on the news of companywide cost-cutting measures, like the immediate suspension of all travel and other expenses for employees who don’t generate revenue.


    “We will continue to reward performance, seek to pay competitively and take the steps necessary to help assure your success,” Bischoff, who also is chairman of Citi Europe, wrote in the letter.


    Citigroup declined to comment on its succession planning, and Merrill also did not respond to requests for comment. Both companies state in their corporate governance charters that the board is responsible for succession planning, including executive leadership. The boards are expected to meet with the CEO to ensure succession planning is effectively managed.


    While the shake-ups and the leadership void that followed may not reflect a failure of human resource leadership to effectively steward a company’s succession planning, they offer some lessons.


    Succession planning is fraught with office politics and emotion, especially for a CEO who has spent a life climbing to the top of the corporate ladder.


    “Succession planning is like planning for a funeral,” says Brian Wilkerson, national practice director for talent management at Watson Wyatt. “It really is playing with people’s mortality.”


    A succession plan that evaluates candidates with measurable data is likely to give the CEO’s preferences some additional perspective and is less likely to crumble should the outgoing executive lose the confidence of the board.

    By developing a strong framework for objectively measuring and analyzing the strengths and weaknesses of employees, HR gives the board information it can use to make independent decisions about CEO succession, says Bob Brotherton, the director of leadership resources at Wachovia Corp. in Charlotte, North Carolina.


    “When you go through that process, you’ve got a list of potential candidates that rise to the top,” he says.

   Succession planning may be doomed to failure simply because it is trying to achieve certainty in a future that is anything but predictable, says Peter Cappelli, director of the Center for Human Resources at the Wharton School of the University of Pennsylvania.


    “So, instead of succession planning, we need a more flexible, broader process that develops candidates more generally for leadership positions,” he says.

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The New HR Organization

Governance is a hot topic. At times, it refers to government regulation of corporate affairs (e.g., Sarbanes-Oxley). More frequently, it refers to how an organization governs, or organizes, to make decisions. HR governance is about how the HR function is structured to deliver value.


    An HR structure must match the business structure. A holding company business structure would lead to a decentralized and dispersed HR organization. A single-business company would have an HR department organized by functions (staffing, training, rewards, organization design, etc.). But, since most large organizations diversify and operate with a multiple-business-unit structure, most HR departments are governed by more complex organization structures. Most large HR departments are emerging into five distinct roles and responsibilities, each with unique contributions.


Transactional work through service centers, e-HR and outsourcing
    HR departments increasingly are split into transactional work and transformational work. Transactional duties are standardized, routine and administrative, and are handled through service centers, e-HR and outsourcing. Transformational work, which is differentiated and strategic, is centered in embedded HR and HR centers of expertise.


    Service centers emerged in the late 1990s as HR leaders realized that many administrative tasks are more efficiently done in a centralized, standardized way. As one HR executive said, “If we move the HR work 400 yards, we might as well move it 3,000 miles.” Employees are increasingly willing to find answers to routine, standard questions through a service center, and technology enables these centers to access employees as well or better than other ways. Service centers enjoy econo mies of scale, enabling employee needs and concerns to be resolved by fewer dedicated HR resources. In addition, service centers require a standardization of HR processes, thus reducing redundancy and duplication. Service centers offer new ways to do traditional HR work like employee assistance programs, relocation administration, benefits claims processing, pension plan enrollment and administration, applicant tracking, payroll and learning administration.


    E-HR has gained use as technology enables employees to manage much of their own HR administrative work. They can access information on HR policy and usage, such as vacation days allotted and taken, retirement provisions such as 401(k) status, job or career opportunities and qualifications needed, and their own skill levels (via self-assessment surveys). They can also take care of many routine transactions whenever they wish, because automated systems don’t keep office hours. About 60 percent of employee HR questions or transactions can be answered online by employees themselves.


    Outsourcing draws on the premise that knowledge is an asset that need not be owned to be accessed. HR expertise can be shared across boundaries by means of alliances, where two or more firms get together to create a common service, or by outright purchase from vendors who specialize in offering it. Vendors take advantage of econ o mies of both knowledge and scale. Economy of knowledge allows them to keep up with the latest research on HR issues and with the latest technology, so as to offer transaction support that accesses the most recent ideas and is delivered in the most efficient way. Economies of scale make it possible to invest in facilities and technologies beyond what is realistic for a single company. Firms like Hewitt, Accenture and Towers Perrin are therefore able to offer bundles of HR services with the goal of moving client companies away from the traditional idea of outsourcing to multiple vendors—one for staff ing, another for training, another for compensation, and so on, all taking somewhat different approaches to their work.


Corporate HR
    HR professionals who perform corporate HR roles address six important areas of need within the emerging HR organization:


  • They create a consistent culture face and identity to serve external stakeholders like customers, investors and communities.


  • They shape the programs that implement the CEO’s agenda such as innovation, globalization or customization.


  • They ensure that all HR work done within the corporation is aligned to business goals.


  • They arbitrate disputes between centers of expertise and embedded HR.


  • They take primary responsibility for nurturing corporate-level employees.


  • They ensure HR professional development.


Embedded HR
    In complex organizations, some HR professionals work in organization units defined by geography, product line or function. These HR professionals, whom we call “embedded HR,” go by many titles: relationship manager, HR business partner, HR generalist. Whatever their specific title, they work directly with line managers and with the leadership team of an organizational unit to clarify strategy, perform organization audits, manage both the talent and the organization, deliver supportive HR strategies and lead their HR function.


  • They engage in business strategy discussion, represent employee interests and explore the implications of change.


  • They define requirements to reach business goals and identify where problems may exist.


  • They select and implement the HR practices that are most appropriate to the delivery of the business strategy.


  • Finally, they measure and track performance to see whether the HR investments made by the business deliver the intended value.


Centers of expertise
    The fourth HR role is the center of expertise. Centers of expertise operate as specialized consulting firms inside the organization.


    Depending on the size of the enterprise, they may be corporate-wide or regionally based—Europe, for example, or by country. They often act like businesses with multiple clients —the business units—using their services. In some cases, a fee for use or a “chargeback” formula plus an overhead charge for basic services may fund them. The financing of centers of expertise is sometimes set to recover costs, and in other cases is pegged at market prices. Typically, businesses are directed to go to the center by their embedded HR units before contracting for independent work from external vendors. If, in working with the center experts, the decision is made to go to outside vendors, the new knowledge provided by these vendors is then added to the menu for use throughout the enterprise. Center-of-expertise HR professionals play a number of important roles:


  • They create service menus aligned with the capabilities driving business strategy.


  • They diagnose needs and recommend services most appropriate to the situation.


  • They collaborate with embedded HR professionals in selecting and implementing the right services.


  • They create new menu offerings if the current offerings are insufficient.


  • They manage the menu.


  • They shepherd the learning community within the organization.


Operational executors
    A large number of HR departments have attempted to deliver all of the capabilities I’ve discussed here through service centers, centers of expertise and embedded HR. But many of these departments are finding that some work continues to fall through the cracks.


    While the embedded HR professionals are expected to be strategic and do organization diagnosis, they often find themselves overwhelmed by operational HR work that conflicts with their main purpose and renders them unable to make time to be strategic. They report that they spend a growing amount of time doing individual casework, such as handling disciplinary issues; performing operational tasks, such as setting up and attending recruiting interviews; doing analysis and reporting, such as managing compensation reviews; delivering initiatives, such as creating development experiences; implementing business initiatives, such as doing the analysis and execution for a new organization structure; or implementing initiatives from the centers of expertise.


    For example, Laurene Bentel, vice president of HR at Takeda Pharmaceuticals North America, points out, “The operational demands on our HR generalists make it extremely hard for them to remain focused on their strategic agenda.”


    Service centers typically do not perform these operational tasks since they require personal attention. Centers of expertise do not do them since they usually require deep and unique knowledge of the business and strong internal business relationships. Line managers do not do them since they lack the technical expertise.


    Hence, embedded HR professionals feel drawn into this operational work by the volume of it, even when they have the skills and self-confidence to be more strategic and are encouraged to focus on their transformational role. It is also the case that these embedded HR professionals often come from an implementation background and lack the self-confidence and skills to comfortably play a more strategic role. For these individuals, the urgency (and comfort) of the operational present outweighs the importance (and developmental interest) of the more strategic future.


    Too often, HR professionals in centers of expertise offer insight and menus of choice, but they do not facilitate or act as partners in the operational implementation of these ideas. Service centers deal with administrative challenges, but they do not deal with implementation of new administrative systems and practices at the business level.


    What has been lacking in some HR restructurings is the capacity to deliver and implement the ideas from the center while maintaining focus on the business and its customers. While this work ideally occurs through an integrated team, someone needs to be in charge of this team and direct how it works. We are finding that companies are responding to these missing implementation requirements in different ways.


    One company established the role of “junior business partners” assigned to the HR generalists or business partners. These individuals would be required to turn the strategic ideas into operational practice within the business.


    Another company created a team of “HR operational consultants” who were assigned to a business to help turn the strategy into action. They were focused on project work with an emphasis on implementing specific projects within the business. The “consulting pool” had HR professionals who were gifted at making HR initiatives happen, and secondarily served as a preparatory and testing ground for individuals who are slated for senior embedded HR professional roles.


    A third company uses a case advisor who comes from the service center to follow through on employee requests.


    Each of these companies—as well as others—is experimenting with how to solve a common problem: making sure that HR plays a role in implementing the state-of-the-art strategies that are tailored to the needs of the business. My colleagues and I call this an “operational executor” role. These HR professionals will be required to meld what the business requires for success (driven by the embedded HR professionals) with innovative, state-of-the-art HR practices (driven by the centers of expertise) into an operational plan that can be executed in a timely way. This operational executor role will continue to become clearer as these HR professionals make sure that HR investments turn into capabilities that deliver on the vision and goals of HR.


Workforce Management, December 10, 2007, p. 40-44 — Subscribe Now!

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Calculator Estimates Cost of Employee Health Problems

Many of today’s corporate executives want more than promises that wellness and preventive health-care programs will lower medical insurance premiums and other costs related to workplace illnesses.


C-suite executives want hard data, say corporate health experts touting a new tool that helps make clearer the connection between wellness and savings.


The more information, the better, is the thought behind Blueprint for Health, a free online tool now being used by companies small and large to estimate how illnesses among workers affect medical costs, employee absences and productivity.


Developed by several organizations, the tool—essentially an online calculator—takes into account an array of information specific to a company, including gender, age, geographic location, salary and marital status, to produce estimates on the number of absences per employee, per-employee doctor visits and prescription costs, and percentage of employees who will be impaired during the workday.


According to John Riedel, president of the Denver-based Riedel & Associates Consultants, who also helped build the Blueprint for Health, the estimates are based on more than 1 million data points from several large employers.


“We loaded input variables, looking at absence data, [employee] impairment data and… we created estimators on these large company data points,” he says. “In essence, we created algorithms in that database to gather estimates, creating a very robust tool for estimates.”


In addition to work by Riedel & Associates, a health and productivity management consulting firm, other organizations involved in building the tool include the Health as Human Capital Foundation, the American College of Occupational and Environmental Medicine and the National Business Coalition on Health. In addition, Bridgewater, New Jersey-based pharmaceutical maker Sanofi-Aventis U.S. supported the effort with a grant and a national advisory committee of corporate medical directors and benefits experts also helped steer the project.


Riedel says the tool is an easy way for employers to learn about their employees and the costs related to keeping a healthy workforce.


Once an employer fills in the online questionnaire, reports are generated providing estimates of costs for all employees, including those likely to have chronic conditions such as diabetes, high blood pressure, high cholesterol, hypertension, insomnia, as well as obesity and heart-related conditions, among others. A summary, charts and bar graphs provide employers with total estimates.


Riedel says more than 700 companies have used the free estimator since its inception in early 2006.


“The tool is pretty good if you are going to be using it for estimates specific to your organization,” says Laurel Pickering, executive director of the New York Business Group on Health. “When [statistics] say, ‘Diabetes costs the workplace X amount of dollars a year,’ it’s really not specific to one organization. [Companies] really need the specifics for their organization and the Blueprint for Health allows them to do that.”


Pickering, whose organization provides guidance for companies in the arena of health and welfare, says some employers have used the tool to justify their wellness programs, including everything from exercise incentives to smoking cessation program.


For example, Peoria, Illinois-based Caterpillar used Blueprint for Health to help executive officers better understand the need for a wellness program now in development, says Dr. Steve Goldman, Caterpillar’s medical director, who also served on the Blueprint for Health’s advisory committee.


“This tool helps us see the cost of medical care and realize why employees’ health is a lot more affordable when you take care of them before they get sick,” he says.


Dr. Goldman says the Blueprint for Health is the first tool he’s seen that looks at the relationship between sickness and productivity. “We see that [the cost of] medical care is only the tip of the iceberg. A lot of [the productivity] costs are hidden and difficult to get to.”


The Blueprint for Health is available at blueprint.hhcfoundation.org and features five applications: How to estimate total health-related costs including absences and presenteeism; understanding the skewed distribution of health-care cost, absence and presenteeism; estimating the cost of various health conditions; understanding salary level and salary equivalence on productivity loss; and understanding the dynamics of the migration of employees from year to year between the various cost levels.


Filed by Louise Esola of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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All in a Day’s Work No Comp for Crack Dealer

Continually selling crack cocaine amounts to employment and thus is sufficient cause to terminate permanent total disability compensation, Ohio’s Supreme Court has ruled.


The high court’s decision December 21 in State ex rel. Lynch vs. Industrial Commission of Ohio upheld a March 1998 finding by Ohio’s Industrial Commission that Henry Lynch’s ongoing crack-cocaine enterprise constituted “sustained remunerative employment.”


The Industrial Commission terminated Lynch’s benefits, and an appeals court earlier this year upheld the termination of benefits.


Court records show that Lynch suffered an industrial accident injury in 1967. In 1997 he was indicted for possession, sale and distribution of crack that was earning him $300 to $500 per week, the court records state.


After pleading guilty, Lynch was incarcerated and Ohio’s Bureau of Workers’ Compensation moved to terminate his permanent total disability compensation. The case eventually reached the state Supreme Court, where Lynch argued, among other points, that his activities cannot be considered sustained employment because they are illegal.


The Ohio Supreme Court disagreed and found that Lynch “cannot use the illegality of his pursuits as a shield,” and he “exchanged labor for pay on a sustained basis.”


The ruling upheld an appeals court decision on the matter.


Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Pension Protection Act Boosting 401(k) Participation, Survey Concludes

The passage of the Pension Protection Act in 2006 has led to higher participation in 401(k) plans, in large part due to increased implementation of automatic plan features such as automatic enrollment, according to a survey by Diversified Investment Advisors Inc.



The survey of 223 companies with 1,000 or more employees found that 62 percent have implemented or are implementing automatic enrollment, a 7 percent increase from the previous year. Another 33 percent say they were considering automatic enrollment.



The 2007 report was based on the 2006 plan year. This is the fourth year the Purchase, New York-based firm has conducted the survey. The data were collected in the third quarter.



The number of companies with 1,000 to 4,999 employees that reported a 90 percent or better participation rate in their company 401(k) plan doubled from the year before. The survey also determined that plans continued to grow, with 92 percent of the companies reporting defined-contribution assets of $25 million or more, a 9 percent increase from the year before.



“This is a landmark time for retirement plans,” Laura White, vice president of marketing at Diversified, said in an interview. “They’ve truly been redefined by the PPA. What’s surprising is how quickly the companies are responding to the legislation.”



Twice as many companies have or are implementing automatic deferral increases (30 percent in 2006 versus 15 percent in 2005). There have also been increases in the number of plan sponsors offering automatic rebalancing (31 percent versus 24 percent in 2005) and managed accounts (37 percent versus 32 percent in 2005).



The increase in automatic services has not taken away from the plan executives’ desire to improve employee education, however. According to the survey, improving employee education (47 percent), adding investment options (43 percent), offering investment advice (28 percent), offering financial planning (27 percent) and allowing Roth 401(k) contributions (27 percent) were the top five actions plan executives said they expected to consider within the next 12 months.



“I’m glad to see that plan sponsors didn’t look at automatic services as the silver bullet,” White says. “They’re not seeing automatic services as a replacement for employee education.”



The survey also found an increase in the number of 401(a) plans offered. Forty percent of the companies said they offered the plans, versus 36 percent for the previous year and 11 percent in 2004. The increase is largely because of a decline in defined-benefit plans, as 401(a) plans are often used to replace terminated or frozen pension plans, White says.



Despite that increase, the 2007 report seemed to indicate a slowing of the defined-benefit decline. The percentage of plan executives who said they were planning to terminate their defined-benefit plans was 14 percent. That’s down from 25 percent in 2005 and 23 percent in 2006.



Another survey finding that White said she found surprising was the six vendors a company used on average to administer a defined-benefit plan because so many vendors offer a bundled service that is often cheaper than using several different vendors. The survey also found that the number of plans using multiple vendors has increased over time.



The low number of plans that outsource all administrative functions associated with defined-contribution and defined-benefit plans was also surprising, according to White. Only 13 percent of firms said they had implemented or were in the process of implementing outsourcing, while 29 percent said they were considering it, 26 percent said they had considered it but decided against it, and 33 percent said outsourcing was never seriously considered.



Of the companies that went to outsourcing, 75 percent were satisfied or very satisfied, while 18 percent said it was too soon to determine and 7 percent were dissatisfied.



“I was a little surprised plan sponsors hadn’t sought out relief for all the work they’re doing themselves,” White says.



Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.