Looking out for the planet is certainly an admirable goal. But without the added benefits of improved systems, it’s unlikely the environmental issue alone would’ve created the paperless campaign in force today. Consider the following benefits. A paperless office:
Personnel Journal, November 1996, Vol. 75, No. 11, p. 70.
Here are some practical recommendations you should think about when considering a job rotation program at your organization.
Personnel Journal, November 1996, Vol. 75, No. 11, p. 36.
Some of these reasons for failed assignments were given by participants in a study by the National Foreign Trade Council and Selection Research International:
Common practices in another 1995 survey by the two groups found:
SOURCE:“Expatriate Failures: Too Many, Too Much Cost, Too Little Planning,” by Reyer A. Swaak, Compensation & Benefits Review, Nov/Dec 1995, pages 50-52.
Personnel Journal, November 1996, Vol. 75, No. 11, p. 81.
Anyone—anyone at all—can edit a magazine. Or design one. Or sell ad space in one. That’s what I’ve learned in more than a dozen years of hiring staff members of Personnel Journal. Do you doubt it? Just ask the candidates.
In cover letters sure to amaze and amuse, candidates go through contortions to rival anything seen at “Cirque du Soleil” in an effort to demonstrate how they’re qualified to work as publishing professionals.
Those sports columns written for the high school newspaper 20 years ago? Ample qualification to write a magazine cover story. That unproduced play filled with scintillating dialogue? Surely more or less the same thing as reporting. And if you haven’t noticed the remarkable similarity between our cover stories and technical manuals that explain how to take apart a photocopier and reassemble it, job candidates have.
And those were the prospects with relevant skills. They certainly came closer to the mark than the myriad other people who argue—sometimes with a fervor that almost compensates for their missing credentials—that they are just perfect for us: The hand model tired of being exploited for her beauty, the food stylist weary of sculpting mashed potatoes, the mortician looking for a job with a little more life in it. (I promise you, I am not making these up.)
I particularly admire the candidates who have no faith in our ability to see the connection between previous work they’ve done and the available job and clarify the link for us: The auto mechanic whose cover letter assured us that fixing carburetors and grammatical errors employ essentially the same skills, the housewife whose handmade Christmas cards always elicited praise (as our covers surely did not), and the Girl Scout cookie sales champ who was ready to work her magic on ad sales.
I’m sure that you’ve read equally inventive job applications; anyone who has done any hiring has. What’s alarming to me is that, proportionately, these applicants now dominate. A decade ago, these candidates were the oddballs that offered a welcome smile while sorting through stacks of resumes from qualified applicants. Today, these off-the-wall prospects outnumber the serious applicants. I cringe every time we have turnover (which, mercifully, isn’t often) because finding qualified people to hire gets harder and harder.
Part of the problem is that we’ve all raised the bar. As knowledge has become the currency of today’s marketplace, we’ve redefined jobs to focus as much or more on thinking as on doing. We want people to take risks and work autonomously within the parameters of our corporate culture, and to keep up with a faster and faster rate of change. It’s no secret that the number of people prepared to meet those challenges is not as large as we would all like.
Fortunately for all of us, Contributing Editor Shari Caudron has found some HR professionals who have taken giant steps toward solving the problem. Her report offers several ideas that were new to me (and will be put to use next time I’m faced with a stack of resumes from short-order cooks) and I hope will be helpful to you.
As with most HR issues facing business today, there is no one solution. But working together, and sharing ideas, I do believe that we can make progress. If you have other ideas for how to face the staffing drought, we’d love to hear from you.
Personnel Journal, November 1996, Vol. 75, No. 11, p. 4.
Today’s workers: poor, tired, huddled masses. They work on the production lines for long, exhausting shifts, murmuring amongst their own in a flutter of foreign languages. Many are first-generation Italians, Germans, Greeks. The rest have migrated to the cities only recently, leaving their farm work behind for more trying, less rewarding labor. These employees just want to punch in, do their time and leave. Luckily the government is watching out to make sure they can do just that. Workers must be protected from their employers —corporate sharks constantly searching for a chance to exploit these innocents.
Oh, wait, this isn’t the 1930s anymore, is it? It’s the 1990s, and workers’ education levels have risen threefold. Fewer work on the factory floor. More work in positions that were scarce or nonexistent in the past 60 years: customer-service reps, account execs, computer engineers. They’re eager to learn, anxious to get involved. Workers of the ’30s kept their hands busy because their jobs depended on the number of widgets they produced. Workers of the ’90s keep their heads busy because they’re judged on the ideas they produce.
At least that’s the U.S. government’s message. To be competitive in a global economy, we need employees who can think and do for themselves, who thrive on teamwork, who have a satisfying work/life balance. You hear the message from the floors of Congress to the podium of President Bill Clinton’s State of the Union address.
And yet, doesn’t it seem that the new employee-employer relationship is shackled by an old, outdated group of labor laws? Every time HR tries to get creative, it runs smack into a wall of legislation. The problem stems from the fact that, although government has changed its mindset about what the successful workplace looks like, it hasn’t changed its mind that employees are simpletons in need of protection from evil employers. “Most of our labor laws were written in the ’30s and ’40s and are based on the assumption that employers and employees always have divergent interests, that they can’t really cooperatively make decisions,” says Sandy Boyd, co-chair of the Flexible Employment, Compensation and Scheduling Coalition (FLECS) in Washington, D.C. “That’s why you have these laws that don’t allow employees to make choices. There’s the assumption that if you’re the employee, you check your brain at the door. We’ve passed that period. [Government] is urging us to pass that period: Be more flexible, be more family-friendly. Well, we can’t really do that.”
It’s frustrating, both for employers and employees. But things will have to change. If we’re going to evolve into businesses of the 21st century, we’re going to have to be governed by laws of the 21st century.
FLSA: Restricting flexibility.
In the 1930s, when most jobs were on the factory floor, flexibility in workplace and hours wasn’t possible. It’s different today. You want to offer more of your employees telecommuting options. Problem is, you’re not totally sure who is and who isn’t exempt, and you can’t very well let nonexempt employees head home where you can’t tally their hours.
You want to start a program that places top managers side-by-side with line managers for a substantial period of time. But you’re not sure if that would eliminate the top managers’ exempt status. And, you want to initiate compressed workweeks. However, your nonexempt employees wouldn’t be able to participate in a nine-day/80-hour schedule, because that means one week they’d work more than 40 hours and you’d have to pay them overtime. The law doesn’t allow them to just waive the pay, even if they’ll be getting a day off the next week.
You want to offer more flexibility in general, but the Fair Labor Standards Act (FLSA), created in 1938, won’t let you. The FLSA, as it currently stands, has several deficiencies that can wreak havoc in progressive workplaces. One problem area, as described in the scenarios above, is the exempt/nonexempt classification and the inability for nonexempt employees to waive overtime in exchange for more flexibility. For one thing, the classifications are outdated. The salary requirements for exempts in the private sector haven’t been revised since 1975, which leaves HR professionals with meaningless guidelines that allow exempt status to be triggered at $250 a week—that’s an annual salary hovering at the poverty level. Some guidelines for computer positions were tacked on several years ago, but with that booming industry, these also seem stale.
“It’s difficult to sit down with those regulations and look at your workforce and figure out who’s entitled to overtime and who’s not,” says FLECS’ Boyd. “It’s probably the No. 1 problem in the wage/ hour division. That’s an area we would like to see updated, but there hasn’t been any legislation on that yet.”
We’ve all been slotting employees into exempt or nonexempt positions without such updating, so what does it matter? A lot, says Boyd. “It ends up [damaging] flexibility programs,” she says. “If you knew for sure which employees were exempt, you might be more inclined to offer telecommuting to certain employees because you wouldn’t have to worry about keeping track of hours worked and where. But if you’re not sure, and you think there might be an overtime liability, you might not offer the program at all. The same goes with flexible schedules like 9/80 compressed workweeks. If you’re concerned about the effect on employee morale by offering it to your exempts and not your non-exempts, you might not offer it at all.”
And if you do offer flexibility, you do so with little ease. Newark, New Jersey-based Prudential wants to allow employees whose jobs are compatible with flexible work arrangements to take advantage of such arrangements—from compressed workweeks to alternative work schedules. But, says John Teehan, personnel policies consultant, the recordkeeping requirements are egregious: “We’re trying to be flexible and meet employees’ needs, but then we’ve got the government saying, ‘You’ve got to know exactly when they’re in and not in, when they take breaks, when they have lunch.’”
On top of all that, having the legislation sends the wrong message. “There’s really a lack of flexibility on how creative you can be with your nonexempt employees,” says Boyd. “It sets up an unfortunate and unnecessary caste system, in effect.”
Laura Janusik, recruitment manager for Digital Directory Assistance Inc. in Bethesda, Maryland, believes the lack of flexibility is ironic this election year. “I think we’re getting back to a generation that’s putting much more emphasis on free time and family life. With that type of philosophy, it’s easier to accommodate an employee with flexible scheduling. But that’s not really permissible with the FLSA. Family values are such a big election-year issue, but unless government redoes the regulations, it’s denying employers the opportunity to jump on that bandwagon and support it.”
This may change if the comp-time bill, which passed the House in August and at press time was pending in the Senate, becomes law. The bill would allow nonexempt employees to bank overtime at time-and-a-half in a comp-time bank for future use. Boyd supports the idea not only because it allows employers more room to work with employees on flexible scheduling, but also because it announces a shift in attitude. It concedes that employees, for the first time under the FLSA, are able to choose how they’d like to be compensated for overtime, and acknowledges that employers and employees may work cooperatively to find a plan that best fits them.
Employees seem to like the idea, according to a survey conducted by New York City- and Washington, D.C-based Penn + Schoen Associates Inc. Seventy-five percent of more than 800 respondents said they favored the proposal of allowing them to choose; 57% said they’d take the time off.
Still, says Teehan, it’s far from perfect. Nonexempt employees still must receive comp time at time-and-a-half, no maneuvering allowed there. “You’re trying to have management provide flexibility to employees, but then they get hammered if they do,” he says. “They have to run a business, so while they’re trying to provide flexibility, they have to look at the bottom line.” A look at the bottom line will remind most that flexibility comes with a time-and-a-half price tag.
What should happen in the long run? Janusik echoes the desire of other forward-thinking HR professionals: She’d like government to extend its credo of innocent until proven guilty to employers. “The assumption when the FLSA was written was that the employer is bad. I’d like to see that reversed. I’m not Pollyanna enough to think every employer out there is fair, so I understand the need for regulations. But I think it ties the hands of fair employers. There needs to be a mechanism that would allow employers more flexibility if they can demonstrate a willingness of employees and a benefit for both the employees and employers.”
The TEAM Act: Employee involvement gets vetoed.
Back in the 1930s, some employers kept their workforces from unionization by forming bogus company unions. The Big Boss would pick a group of employees, call them a union, and then “bargain” with that phony union. The result: Management maintains the status quo. The Wagner Act, passed in 1935, put an end to this by creating a broad prohibition against employers working with groups of nonunion employees if the employees discuss terms and conditions of employment. As many legal professionals read it, even two employees count as an illegal, employer-dominated group if they discuss workplace problems with management in an effort to resolve the issue. Section 8(a)(2) of the National Labor Relations Act (NLRA) prohibits such discussion in a nonunion setting.
The law is taxing, to say the least, in today’s business setting in which 75% of all employers and 96% of large employers have incorporated employee involvement (EI) into their workplaces. At least a dozen companies, from Polaroid to DuPont, have been forced by the National Labor Relations Board (NLRB) to cease-and-desist their employee-involvement projects (the NLRB can’t levy fines). The legality of EI practices has been doubtful since 1993, when the NLRB ruled that employee committees at Electromation Inc. were actually employer- dominated labor organizations and therefore illegal. Since then, employers have felt they’re on shaky ground as companies continued to fall under NLRB rulings.
The bipartisan TEAM Act (Teamwork for Employees And Managers) was businesses’ bright hope that this would all change. The Act, passed by the House in September 1995 and the Senate in July 1996, would have amended the NLRA, making it legal for an employer to “establish, assist, maintain or participate in any organization in which employees participate to address matters of mutual interest.” Basically, it would allow companies to let their employees truly make a difference.
Clinton vetoed the TEAM Act in August, and with Congress lacking the votes to over-ride the veto, the TEAM Act goes to rest until next year. What does that mean to HR? “It’s confusing to HR folks in terms of whether their employee involvement and use of teams is in fact legal,” says Chuck Nielson, vice president of HR at Texas Instruments (TI) in Dallas. “[At TI], we’ve emphasized for our whole history that we don’t obey just the letter of the law but the spirit of the law. My employees naturally are asking me whether what we’re doing is legal.”
It’s truly a tough call. In Clinton’s explanation of his veto, he writes: “Current law provides for a wide variety of cooperative workplace efforts. It permits employers to work with employees in quality circles to improve quality, efficiency and productivity. Current law also allows employers to delegate significant managerial responsibilities to employee work teams, sponsor brainstorming sessions and solicit employee suggestions and criticisms.”
Veto leaves employers in a quandary.
To avoid violation of the law, the AFL-CIO has suggested that companies using EI should allow committee members to be elected by coworkers, rather than selected by management. But some labor lawyers disagree that employee-participation programs are illegal at all. Basically, no one really is sure. Clinton himself has conceded that “recent NLRB decisions have created uncertainty as to the scope of permissible cooperation. ” And there’s the rub: It’s a bit difficult to promote full-throttle teamwork when you’re not sure where the legal boundaries are.
Further frustrating pro-TEAMers is what they believe is the Clinton Administration’s slap in the face to business: Congress approved the bill. More than 600 CEOs across America wrote to Clinton in support of the bill. The TEAMwork for America Initiative, a coalition of more than 250 businesses and professional associations, has supported the TEAM Act. Both Clinton and Vice President Al Gore have proliferated pro-team rhetoric in speeches ranging from their 1992 campaign manifesto to the 1996 State of the Union address.
So why a veto? “Because of total union pressure,” says Jeff McGuiness, president of Washington, D.C.-based Labor Policy Association, an organization of more than 230 HR officers interested in federal employment-policy issues. “It’s pure, absolute politics. Here you have a Secretary of Labor [Robert Reich] who for four years [encouraged] employee cooperation and then recommended a veto. I think in his case it’s just totally dishonest intellectually.”
Talk to anti-TEAM people and you’ll of course, hear another story. They believe the current law gives enough leeway for employee involvement and that the TEAM Act peels away employees’ protections. Employers that have horrible working conditions will avoid unionization by setting up mock employee teams—a repeat of the ’30s situation. Unlikely, counters McGuiness. “The law is very clear that company unions are illegal under current law, and they’d still be illegal under the TEAM Act. It was a bogus argument they used to defeat it. The unions are terrified that workers would start speaking for themselves and not through a union. But the way the workplace is going and education levels have risen, that’s going to happen [anyway].”
The worst thing about the veto, many TEAM proponents say, is the tone it sets toward the vast majority of U.S. employees who aren’t in unions: That they must be protected. “What I’m afraid the message going out to 85% of the U.S. workforce is that the Administration doesn’t have enough respect for them to believe they’re capable of making decisions,” says Nielson. “I think that’s too bad.”
This is particularly unfortunate in view of current employee attitudes: A national survey sponsored by the federal Dunlop Commission found that workers prefer employee involvement over unions by a three-to-one margin. Nielson recalls a TI employee’s testimony to Congress on what her job was like before and after teaming: “She said, ‘The difference is that I used to make things and now I make decisions. Even better, the people I work with have enough respect for me to think I’m capable of making decisions.’ That’s pretty powerful stuff.”
So what now? Most companies are forging—albeit cautiously—ahead. At nonunion Suburban Water Systems, a workforce of 100 in Covina, California, employee involvement has influenced everything from performance reviews to company operations. Last year, Suburban won the Management Innovation Award from the National Association of Water Companies for “building a common vision through employee involvement.” Says Rick Hagar, HR manager: “Employee involvement has become a fairly integral part of our HR strategy. It’s sort of spooky that the president is gun-shy.” Yet, worker involvement will continue at Suburban, as it will at Texas Instruments, a company celebrated for its employee work teams. Nielson will be part of the 1997 effort to push the TEAM Act back through Congress and to the president—whomever he may be. “I think in 1934, when you talked about teams, they were something you took time out from your job to do and then went back to work,” he says. “Teams are the way we do work now. They’re integrated into every single thing we do at every level of the company. Teaming is here and we’re going to do it,”—law or no law.
That sounds suspiciously like an acknowledgment of cooperation between employees and employers to better the workplace—a very 1990s sentiment. Let’s hope somebody’s listening.
Personnel Journal, October 1996, Vol. 75, No. 10, pp. 66-74.
Here are four types of Self-service Options:
INTERACTIVE VOICE RESPONSE
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Applications:
KIOSK
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Applications:
INTRANETS
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Applications:
E-MAIL AND ELECTRONIC FORMS
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Applications:
Fiona C. Cribb, senior human resources coordinator at Arthur Andersen in North Sydney, Australia, says:
Panel interviews historically are associated with the rigid recruiting processes of large bureaucracies. This unfortunate association, coupled with the concern that panel interviews may intimidate some candidates, has tarnished the reputation of what can be an effective and time-efficient approach to candidate selection.
Panels are most effective when comprised of three to four stakeholders— preferably the recruit’s prospective line manager, a key customer, an HR representative and a prospective peer. Ideally, all panelists should be coached in behavioral interviewing techniques.
Prior to the interview, panelists should jointly agree with the mix of competencies—knowledge, skills and attitudes—required to fulfill the job role and the desired degree of proficiency expected in each area. They should prepare interview questions targeted to these competencies.
One panelist should be appointed facilitator. The facilitator’s responsibilities will include introducing panel members to candidates; explaining the interview structure; facilitating clear communication during the interview; keeping the interview on track; and ensuring all competencies are satisfactorily probed and that no one panel member dominates the discussion.
Questions that are asked early should help relax the candidate and establish the flow of conversation (questions about recent work experience or educational background are strongly recommended). Then, panelists should move through their preagreed questions, retaining sufficient flexibility to follow any leads into other areas relevant to the position.
Following each interview, panelists should evaluate candidates twice across each competency—first independently, then as a group. This ensures no one individual view dominates the eventual decision. Panel interviews aren’t universally appropriate, but their advantages make them worthy of serious consideration.
Caroline-Anne Tylko, human resources manager at The Westin Hotel, Ottawa in Ontario, says:
Some managers believe everyone who will be collaborating with the incumbent should be included. But a 12-member panel not only can intimidate candidates, but also can hinder the evaluation/decision-making process—rendering it more difficult and becoming too time-consuming. Panels can be kept to a minimum by steering individuals who absolutely want to have input to submit questions to panel members ahead of time.
Panelists also should be trained. Proper training helps the panel commit to the process, develop targeted and legal questions, define potential responses, collect and evaluate relevant data, and make good hiring decisions. Training also ensures the most important factor in the process is highlighted—the candidate.
Trained panelists can ensure a candidate’s self esteem remains intact by simply paying attention to panel behavior. Curtailing behavior such as staring out the window, whispering, passing notes, doodling or brushing away imaginary lint during the interview, can make a candidate feel more valued, confident and comfortable.
Finally, the chairperson doesn’t have to be an HR representative, but a good facilitator. The chair is responsible not only for greeting the candidate and introducing the panel and interview format, but also for facilitating the entire process. It’s the chairperson’s responsibility to make sure office politics and personal agendas don’t interfere with the best candidate being hired.
Personnel Journal, October 1996, Vol. 75, No. 10, p. 111.
You and your employees have a 50% chance of running into a situation this year that a lawyer can be helpful in solving, according to the American Bar Association, based in Chicago. Life—the simple act of living—has always required its fair share of legal dalliance. Marriage, births, adoptions, deaths all bring with them their portion of attorney paperwork.
Recent years have only increased the chances of winding up in court. Does the phrase “litigious society” mean anything to you? Filing lawsuits seems to rival baseball as America’s favorite pastime: You’re three times more likely to go to court this year than to the hospital. Yet, while employers tinker endlessly with hefty medical plans, it’s a relatively rare company that offers legal-services plans.
This situation is, however, beginning to change. According to a 600-company survey conducted late last year by Lincolnshire, Illinois-based Hewitt Associates LLC, only 4% of employers offered prepaid legal plans—but 10% planned to add them in the next three years. And why not? As employers snip and clip so many other areas of employee assistance, here’s one that seems an HR dream: a low-cost, high-value benefit that employees will rave over. With a little bit of background information, a little bit of data-gathering and a few words of caution, you can install this benefit at your company. You’ll gain a goodwill advantage and a bottom-line boost with limited investment on your part.
How they work.
You know how an HMO works? Then you’re very close to understanding how prepaid legal services work. In these plans, employees pay a flat fee—generally $10 to $20 a month depending on the extent of coverage—in return for access to a network of lawyers that will handle a variety of legal issues. Enrollment can be voluntary, for which employees must sign up themselves—often as part of a flexible benefits program—with the premium deducted from their paychecks. However, enrollment also can be automatic, whereby a company covers all its employees, or refers them to legal services as part of an Employee Assistance Program (EAP) component.
Not surprisingly, the vast majority of employers go the voluntary route—their only cost is the time setting up the system and the small administrative expense of payroll deduction. The average cost to employees is $120 per year, according to Chicago-based American Prepaid Legal Services Institute (APLSI).
You know how an employee covered by group medical insurance receives better price-per-service than a patient off the street? So too do employees under prepaid legal services get a break because they’re part of a group. In fact, many major legal-service providers won’t even consider taking on firms with less than 500 eligible employees. If, for instance, a client firm had only 10 employees enroll, one or two costly legal actions would wipe out any profit the legal-services company was expecting.
Just as insurance firms offer different levels of coverage, so do legal-services companies. To begin with, the most basic of group plans isn’t a true prepaid plan at all (prepaid meaning the service is funded in advance). At this level, a referral-and-discount plan points employees to an attorney who will provide free or inexpensive consulting according to a certain fee schedule.
On the next level, an access plan is prepaid and provides members with unlimited legal consultation over the phone in addition to reviewing papers and preparing simple legal documents, such as wills or cease-and-desist letters. More complex situations are handed over to an attorney who provides these extra services at a discount. The member generally pays for these expenses in addition to the monthly premium payment.
Finally, comprehensive plans provide all the services of an access plan in addition to in-office and trial work. This level is designed to cover 80% to 90% of an average person’s legal needs in a given year. Most group prepaid plans fall under this category.
Once a company enrolls in a plan, its members gain access to a group of attorneys—a panel. Where do the panel lawyers come from? “Most are privately licensed, general practitioners,” says Alec Schwartz, executive director of American Prepaid Legal Services Institute. “Many times the plans will have certain criteria with regard to experience, office location, telephone [accessibility] and malpractice insurance before a lawyer can be accepted as being a participating provider.”
There are three types of panels. The most restrictive but easiest to administrate are closed panels, according to Brookfield, Wisconsin-based International Foundation of Employee Benefit Plans. Closed panels require the employee to choose from preselected attorneys. On the other end of the spectrum—in an open panel—an employee may choose any licensed attorney, and the plan then reimburses the employee or pays the attorney. Most employers try for a happy medium with a modified panel, in which employees are guided toward prepaid panel attorneys who provide most services at no cost. However, employees are also free to use their own attorneys, after which they’re reimbursed partially or fully according to the type of work performed.
Why they’re growing in popularity.
Prepaid legal services first gained Corporate America’s attention in the late ’70s, because of the favorable tax treatment they provided. In 1992 these tax benefits were axed, but by then the idea had caught on. (There are, in fact, several proposals in both houses of Congress to reinstate a tax break.) In 1995, 18.5 million Americans were enrolled in prepaid legal plans, according to the American Bar Association. The number includes spouses and children—common to most plans.
So why is this benefit booming now, after its tax incentive has been removed? For one thing, the workplace atmosphere is ripe. Thanks to HMOs and flexible benefits, employees are now accustomed to paying for services on their own under company-chaperoned plans. That’s exactly how Sharon Bohlman, vice president benefits and employee services at McLean, Virginia-based PRC Inc., came across the idea for prepaid legal. PRC’s flex-benefits program serves as an umbrella for myriad employee offerings, including prepaid legal from Cleveland-based Hyatt Legal Plans Inc. “We work very hard to offer our employees work/ family benefits and try to take care of their needs,” she says. “Legal is one of those.” It was well-received. Typical enrollment in an employee-paid plan hovers at 10%. The first year for the legal program at PRC saw a 21% enrollment, and continues to grow.
Colleen Carr-Blaxill, supervisor of employee benefits for New York City-based Salomon Brothers Inc., began offering employees legal services from Des Moines, Iowa-based Midwest Legal Services for much the same reason. “Our whole approach to benefits is to offer employees a multitude of plans to help them with different phases of their lives,” she says. “We heard about legal services and thought that was an inexpensive plan to offer; and for employees going through certain phases in their lives, it can be really beneficial.”
As odd as it may sound at first, legal benefits can find a nice niche under the work/life rubric. Consider, for instance, the employee who is having landlord woes. What if, instead of worrying about it on the job, she could pick up a phone and have her answer? If she were a Sears, Roebuck and Co. employee she could. Since 1995, 5,000 of the firm’s employees have solved their legal problems through the company’s alliance with Prudential LegalCare, a Louisville, Kentucky-based service that has seen a 75% growth rate since 1993. Both full-time and 1,000-hour part-timers are eligible, making a potential enrollment of 160,000 employees. “These are the kinds of issues that our associates would be standing around on the sales floor talking about, worrying about, making phone calls to handle,” says Renee Tehi, manager of benefits planning and administration (Tehi has since left the company). “We think we offer them a way to deal with those issues so they don’t have to worry about them all day on the job.”
It’s true that most employees, particularly those in the middle to lower levels, have had little experience with the legal system and are intimidated by it. If they think they can handle a problem themselves, they will. By the time they figure out what they’re up against, their procrastination may have allowed a small legal nuisance to swell into a big legal nightmare. According to a Hyatt survey, more than 60% of Americans have legal needs that go ignored because they’re wary or unsure of how to access the legal system. “There’s still somewhat of a reluctance for people to consult a lawyer,” admits Schwartz of APLSI. “I mean, you only consult lawyers if you’re a weak person, an evil person or not able to take care of your own stuff. But having the employer sponsor [a service], and having legal advice accessible by the phone—that goes a long way to help people get over the idea that they don’t use lawyers except in dire circumstances.”
In fact, the majority of problems are simple ones that truly can be handled by phone. In a survey by APLSI, for 80% of respondents a phone call alone solved the problem. Just as important, for 78% the consultation “reduced stress that otherwise might have affected performance or resulted in time off work.”
Bohlman also emphasizes the helpfulness of unlimited phone advice. “Every time you have what might look like a legal situation, you can pick up the phone and be assured that it either will or won’t be,” she says. “If it will, you can rest that much easier by talking to a lawyer, which typically you wouldn’t do for two reasons. One: It’s very costly. Two: Most of us can’t pick up the phone and call an attorney because we don’t know an attorney.” Bohlman used the service herself last year when a person she sold a car to wanted to return it, claiming the state had a three-day “buyers’ remorse” right to return. Bohlman didn’t know if that was true, but a quick call to a lawyer assured her it wasn’t. He offered to explain the situation in writing to the mistaken buyer. “It was just so nice not to have to worry about it,” she says.
Aside from employees focused on work instead of legal conundrums, employers gain a lot of simple goodwill for very little expense. Most employees are more than happy to fork over their $120 to $200 a year just for the peace of mind. But if, for instance, they access the service even twice in a year, they’ve generally saved money on the deal. “If you’re in a legal plan that covers the advice for the purchase or sale of your home, and then you [write] a will later that year, you’d get a few years of your annual enrollment right there,” says Joel Hyatt, president and CEO of Hyatt Legal Plans, whose business is growing annually by 20%.
Bohlman tells the story of one PRC employee, a single mother who’d been struggling for years to buy her own house. While pulling together the last of her resources, she got socked with a lawyer’s estimate of $750 to help with the legalities of real-estate purchasing. Fortunately, she’d enrolled in the legal plan, and Bohlman promptly referred her to the program. Under PRC’s coverage, the real-estate service was free. “To her it was just the icing on the cake,” says Bohlman. “She was so thrilled. It was like a gift—it made her house even better. We’ve actually had a number of really dear stories like that, and a lot of wonderful experiences.”
Is a prepaid legal service for your company?
Before you start comparison shopping for prepaid legal services, a few words of caution. To begin with, again, there’s company size. If your company is a smaller one, consider this statistic before deciding. According to APLSI’s Schwartz, anywhere from 5% to 25% of employees will enroll in a prepaid legal plan. If you’re a company of 100 with 15 employees who sign up, do the math for your return on investment after setting up the service and administrating it. It may not be worth the expense. (Check into this before giving up, though. Some plans’ major selling points are that they handle all the administration themselves.)
Next, you should know that some critics of prepaid legal services claim that plan-sponsored lawyers may not be the best-qualified—or may even try to steer naive employees into costly legal work not covered by the plan. Hyatt called the idea “uninformed criticism. I’d say the proof is in the pudding. You couldn’t keep an account unless employees were being very well-served and very well-satisfied. You couldn’t build this concept unless you were really delivering on it.” The companies Personnel Journal spoke with also scoffed at the idea. They basically had nothing but praise for their plans—and boasted approving employee surveys to back that up.
Finally, an HR professional considering legal plans may worry the service will come back to haunt the company. Will the employer be liable for legal advice gone astray? Will employees generate more lawsuits against their employer if they have round-the-clock access to free legal advice? Unlikely, on both counts. That’s because every good plan contains a hold-harmless agreement, in which employers are completely removed from liability. Plans should also have a condition barring any action against employers. But, warns Schwartz, the actual advice and consulting aspect can’t be regulated. An employee can ask any employment-related question and receive any kind of legal advice. Again, however, the companies Personnel Journal spoke with had neither any problems nor worries on this front.
So, if you’re still interested, where should you go from there?
Find a plan that fits your company.
When beginning the hunt for a service, the first thing to decide is how big the network of lawyers in the plan needs to be. If your company is nationwide, you’ll need a network of attorneys across the nation. “We have associates in 2,000 units across the country,” says Tehi of Sears, based in Hoffman Estates, Illinois. “We have associates in every zip code. So for us it was real important how many attorneys [a service] had.” That’s one of the reasons Sears went with Prudential LegalCare—it has legal offices in each state, with an attorney’s office in individual states contracted to handle all phone advice.
Once you’ve found a service that’s the right size for your company, the next most crucial issue is accessibility and user-friendliness. The plan should be very customer-service oriented. Again, we’re dealing with employees who are a little jittery about the legal system, so if the service is convoluted, confusing or difficult to navigate, it will be of no use.
Tehi demanded unlimited phone advice with easy employee access. So before committing to any service, she phoned up all finalists’ toll-free numbers. “I wanted to see how each feels,” she says. “Do I really get through to an attorney or do I get a customer-service person who gives me the run around? If [my situation] is something that can be handled over the phone, do I immediately get connected to an attorney’s office? If I need an office visit, am I sent a list of attorneys and a claim form?” Tehi says one service she nixed early on had a panel of attorneys, but the toll-free number was managed by a completely different organization. “I knew right away that wasn’t going to look seamless to our associates,” she says.
In this vein, Hyatt suggests checking the usage rate of each service: “You want to look at usage rates very carefully, because they’re a good indicator as to how easy the program is to use.” Most old-hands also recommend ensuring that a firm gives constant feedback on the user rate of your own employee population.
Finally, you must decide how extensive a service you want, because they come in all cost ranges. Sears employees pay $8 a month singly, $11.75 for the family. PRC’s program is $10 a month, single or family. Salomon Brothers’ plan costs approximately $15.50 a month for an employee, $19.50 to include the family. The question to consider is how much disposable income your employees have. If your company has a lot of employees who are in lower-paid categories, then you don’t want to develop a plan that costs $16 a month, because the people you really want in the program, and who would benefit the most, essentially can’t afford it.
Remember, it’s your plan. So your final screening should be to ensure the legal service is willing to take its plan out of the cookie cutter and work with you to mold it to your company. “Can the provider come in and include services and exclude services based on our need?” says Tehi. “We had a vendor who just said, ‘Here’s the benefit, take it or leave it.’ That wouldn’t work for Sears.”
Consider coverage options.
Before you decide what you want to cover in your plan, you should probably decide what you absolutely don’t want covered. Besides the universal exclusion of actions against the employer, there are several areas you may want to consider. For instance, most companies opt to exclude criminal cases. First of all, they’re extremely expensive; secondly, they carry a definite stigma. Sears took a bit of a twist on this one: Although the company won’t cover criminal cases for its employees, it will cover criminal charges against juveniles. “With a juvenile, it generally can be handled more expeditiously, not as expensively,” says Tehi. “And it helps the parent who’s going to worry about it on the job. The parent didn’t commit the crime, but he or she is the one who has to deal with it.”
Another controversial area is divorce. Again, like, criminal cases, it can be very expensive. Only 2% of employees undergo divorce proceedings each year, but they may add as much as 50% to the plan’s cost. Also, for some companies, they can carry a stigma. Says PRC’s Bohlman: “We don’t cover divorce, DUI, anything we thought had a little bit of morality attached to it. We didn’t want to issue a program that supported things we didn’t think encompassed family values.”
Sears, on the other hand, chose to include divorce up to certain dollar amounts, as well as post-divorce issues such as custody negotiations or harassment. This reflects Sears’ own company values—it has a large single-employee and single-parent population. However, like PRC, Sears maintains an exclusion that supports its philosophy: Because Sears is deeply involved in the credit business, its plan refuses coverage for credit problems. The final word from all companies: It’s your plan, so design it to fit your company—in size, cost, construction and values.
So now you know what you need to know. Legal services are less expensive than medical benefits and many other employment staples—yet they’re just as likely to be used. And they’ll be all the more appreciated because they’re not your average-Joe benefit. “I really just would encourage everyone to not be afraid of it,” says Bohlman. “It’s just a really easy benefit, and one that’s so well-received by the employees.” When you and your employees have a 50/50 chance of needing legal assistance this year, legal services sound like a pretty good investment.
Personnel Journal, October 1996, Vol. 75, No. 10, pp. 48-56.
Over the last few years, Joe Da Via has heard the reengineering mantra repeated more times than he’d care to recall. It’s in the literature, it’s at conferences, and it’s part of the collective psyche of the corporate bean counters. So about a year ago, when the human resources manager began exploring ways to engineer greater efficiency into operations at W.H. Brady Co., a Milwaukee-based manufacturer of identification products such as signs, labels, tapes and software, he saw himself staring down the barrel of a fully loaded project that was going to cost hundreds of thousands of dollars and provide only marginal benefits.
That’s until he discovered the fastest route to HR reengineering was through employee self-service. By deploying interactive voice response (IVR), kiosk and PC-based systems that would allow workers to retrieve and update their own records, choose benefits and make changes to their 401(k) plans, he realized he could crumple many of the inefficiencies of telephones, paper and pencils. As a result, the company, which racked up $315 million in sales in 1995 and has 2,400 employees worldwide, could slash a couple hundred thousand dollars a year from its HR budget alone. More importantly, “It puts the responsibility for data where it should reside, in the employee’s hands. And that allows human resources to become much more of a strategic player in the organization,” he explains.
End the paper trail.
Employee self-service is more than a trend. It’s one of the most significant changes sweeping through the corporate world. And few departments are as big a beneficiary as human resources. Although the idea of employee self-service has existed for more than a decade—interactive voice-response systems and kiosks have allowed employees to take ownership of their own data—the technology now is ushering in a wide range of self-service applications, including open enrollment and benefits plan selection, internal job placement and skills inventories. Sophisticated client/ server computing systems and the emergence of corporate intranets are further automating workflow and driving fundamental changes within human resources departments. They’re eliminating the need to print material and field an endless stream of phone calls.
At W.H. Brady, for example, there’s no longer a need to hire entry-level HR personnel to handle administrative and clerical duties. Computers eliminate virtually all the paperwork. When the department does hire new employees, says Da Via, they’re mid-career professionals who can provide analytical and consulting expertise—”people who are better equipped to find solutions and create greater efficiencies.” The net result? An HR department that’s shrinking by five to 10 employees a year, while playing a growing role in corporate affairs.
The story is much the same at thousands of other companies. “A lot of organizations suddenly are realizing that employee self-service can pay huge dividends, and that it’s a higher priority than outsourcing, reengineering or installing new HRMS systems,” says Joel Lapointe, Chairman and founder of ESSENSE Systems Inc. of Peabody, Massachusetts, a pioneer and leading vendor in the self-service arena. The reason is simple: “Self-service technology can automatically drive changes in these other areas and directly lead to improvements,” he says.
The popularity of self-service isn’t difficult to understand. Because employees control approximately 70% of HR data—names, addresses, dependents, benefits selections and 401(k) selections, to name a few—it clearly makes sense to shift the responsibility for maintaining accurate records to them. After all, who knows better than an employee how to spell a child’s name or enter a new address? Self-service also is valuable for handling basic queries, often referred to as FAQs (frequently asked questions). But these days with so many choices, choosing the right mix of technologies is no simple task. “The system must be accessible to employees, be easy to use, and it has to work as advertised. Without the proper hardware, software and implementation, the entire system can become cumbersome and frustrating to use. It can create problems instead of eliminating them,” says Debby Love-Sudduth, a Santa Clara, California-based consultant for the Hunter Group, which helps companies sort through the maze of self-service technologies.
Employees make their own choices.
The upsurge of this self-service movement can be traced to the mid-1980s. That’s when the first generation of IVRs hit the business world. By pushing buttons on a touch-tone phone, an employee could suddenly make choices about how to invest in a company’s stock-ownership plan or choose insurance benefits. The same employee could find out how many vacation or sick days were available. Over the years, IVRs have become increasingly popular… and sophisticated. In some cases, corporations now link employees directly to an HMO or mutual-fund provider. In such instances, it’s possible to shift money between funds and change the contribution percentage by punching numbers on the telephone keypad. It’s instant, there’s no human intervention, and such a system usually is available nights and weekends.
But IVRs have a couple of glaring drawbacks. First, they’re slow—a user must listen to a variety of menu options before making a single choice. Second, it’s excruciatingly difficult to spell words and input alpha data on a telephone keypad—a problem that’s magnified for those using rotary dial phones.
One alternative to IVR is the kiosk, a networked PC that frequently offers touch-screen capabilities. It can be placed in a lobby, warehouse or factory floor. Using specialized software or a Web browser, it allows users to see the information they’re inputting, and even view reports and print them out. A change of name or address is easy—especially if a keyboard metaphor is provided. And reviewing benefit selections, payment information, a company handbook and even companywide job openings is simple. “If it’s a well-designed system, it requires no training on the part of users. They simply walk up and begin using it to make changes or check on information,” says Deb Edlund, brand manager for human resources at Lawson Software, a Minneapolis company that markets self-service applications.
Leapfrog to intranets.
Because they’re easy to use, kiosks have skyrocketed in popularity in recent years. Nevertheless, many companies have recently opted to leapfrog kiosks altogether or supplement them with direct PC access. In some cases, that translates into electronic forms and e-mail self-service through programs like Lotus Notes and Microsoft Mail . However, many are now turning to intranet solutions that use Web browsers such as Netscape Navigator or Microsoft Internet Explorer . That makes navigation graphical and simple.
The big advantage to a corporate intranet is that it’s easy to use, yet powerful. Since the Web browser is platform independent—it can run on PCs or UNIX or Macintosh operating systems—there’s no problem sharing data across networks, including the Internet. Desktop access also provides access to records and data, any time and from almost anywhere—assuming that a company offers dial-up access. In fact, some vendors are beginning to offer links to third-party insurance and mutual-fund providers.
The emergence of corporate networks and intranets also is fueling new ideas about what types of self-service options to offer. Skadden, Arps, a New York City-based law firm with 3,500 employees worldwide, isn’t only offering employees the ability to check personalized benefits information and update their records, it’s venturing into the world of online directories and handbooks, applicant tracking and electronic pay stubs for direct deposits. More than 90% of the firm’s employees, mostly attorneys, have access to the company’s intranet through desktop PCs. Others can tap various HR functions through dedicated workstations in common areas. “We’re concentrating on improving the workflow and using staff to counsel and audit,” says Angie Sorscher, the company’s payroll manager.
At Eli Lilly and Company, an Indianapolis producer of pharmaceutical products, the self-service concept includes an internal staffing component. Using IVR and the company’s computer networks—including Internet access—employees can surf through available jobs before they’re offered to the outside world. According to Paul Johnson, the company’s executive director of human resources, the immediate access offers a number of distinct advantages. Not only can employees locate open positions more quickly and efficiently, they’re able to see what skills they need to move up in the organization. By reading online job descriptions and maintaining their own online resumes, they can focus their efforts on specific jobs or categories.
For the company, the system is reducing costs associated with hiring new employees, and helping Lilly fill open positions with more highly qualified personnel than ever before. “It makes it easier to find the right person for the right job,” says Johnson. “From an employer’s perspective, it generates a far more diverse candidate pool and ensures that managers aren’t overlooking the best person for the job.”
Zero in on the right mix of technologies and solutions.
Despite its advanced capabilities, an intranet can’t help those who work on a shop floor or drive a truck and have no access to a PC. A kiosk is essentially useless for those working in remote locations or retirees who no longer frequent the premises. And an IVR is too slow and cumbersome for many applications. Even if a company installs a system, it’s no guarantee that employees are going to use it. “There’s no single technology that suits all employees. It’s important to find the right mix,” says Jonathan D. Miller, chief operating officer at Interactive Corporate Communications Inc., an intranet software vendor headquartered in White Plains, New York. Adds ESSENSE System’s Lapointe: “Each media has its strengths and weaknesses. You also have to deal with varying levels of computer literacy.”
At present, the Hunter Group estimates that approximately 5% of companies use kiosks, 15% rely on interactive voice-response systems, 20% have turned to intranets and 50% use their own e-mail or electronic forms. However, Love-Sudduth notes the use of intranets is increasing while e-mail and electronic forms systems are losing favor, partly because of compatibility problems that can clog workflow and produce greater redundancy. “You want 100% assurance that data is going to get to where it’s directed. Frequently, if you have duplicate names or nonstandard e-mail addresses and formats, you can wind up with problems.” What’s more, she argues that an intranet is far more intuitive—a fact that usually translates to lower training and administrative costs.
In fact, advancements in intranet/Internet technology—including tighter security—are making it a more attractive option all the time. Whether employees view data off a kiosk or a Web browser, new plug-ins that integrate seamlessly with Netscape Navigator and Microsoft Internet Explore rare opening the door to a universe of new capabilities. ICC’s Miller notes that programs like Quicktime and Real Audio allow users to access video and audio on demand. And the use of Jav programming language on client PCs brings greater intelligence to the entire process. For example, a program can instantly inform a user when he or she makes an error while filling out an electronic form. And once a particular type of medical insurance is requested, the form will automatically offer only the relevant information and ask the appropriate questions. “It’s becoming far more sophisticated and automated,” says Miller.
Whatever approach an HR department takes, Love-Sudduth believes that one of the keys to success is to ensure that a solid workflow application is installed on the front end—so that data is routed efficiently. That means establishing a standard set of business rules that are stored in a central repository. “Employees don’t care what’s on the back end and how the information is pulled out of databases,” she notes. “The whole idea is to make it so simple to use that people get the information they need, and that data is getting routed back to the proper database with little or no intervention on the part of the human resources department.”
However, automating processes doesn’t necessarily translate to cost and time savings—even if it’s under the banner of self-service. Says Lapointe: “If you use electronic forms but fail to take work out of the flow, you’ve only muddled the process. If you develop a correction and approval loop, then you haven’t reengineered any work. In fact, you may have actually added work to the entire process. Self-service is about streamlining and eliminating inefficiencies. When that takes place, everyone prospers.”
Self-service pays dividends.
Not surprisingly, the cost of installing the hardware and software for employee self-service can vary wildly, depending on the scope and complexity of a company’s needs. Interactive voice-response systems are available for $50,000, although third-party providers increasingly are offering IVR services at no additional cost. And many companies are able to purchase integrated solutions or build a self-service component atop existing HRMS systems at minimal expense. A packaged solution can typically run anywhere from $10 to $100 per employee—or in the neighborhood of $150,000 for a complete package. Custom solutions easily can double the tab. Kiosks generally cost $3,000 to $10,000 each. And, for companies that opt for an intranet, the cost of licensing Web browsers can range from free to $30 a copy. Of course, many companies already have PCs and browsers on every desktop and can add intranet capabilities at virtually no additional cost.
The payback for self-service can be startlingly fast. W.H. Brady has recovered the cost of its system in less than a year. At the current clip, the HR department will slash more than $1 million in labor, printing and telephone costs over the next five years. At Advanced Network & Services Inc., an Armonk, New York, not-for-profit company that promotes education through high performance computer networks, CFO Bob Harris estimates it will take about two years to fully recover the cost of the organization’s investment in hardware and software. But he points out that Advanced Network’s intranet—accessible inside the company and as a dial-up from outside—offers many intangibles that are difficult to measure in dollars and cents. “Employees know they can get information quickly and easily. The intranet also frees up HR to get involved in issues and problems that are crucial for the growth of the organization,” he says.
Experts caution that employee self-service isn’t a replacement for all human contact. Although employee acceptance of the self-service concept has exceeded all expectations, Lapointe notes that few things irk users more than not being able to reach a customer-service or HR representative when necessary. He also argues it’s essential to promote new programs and raise awareness through constant marketing.
Concerns notwithstanding, it’s clear that employee self-service is changing the face of human resources. Nearly all Fortune 1000 companies already have installed self-service systems or plan to in the months ahead. “The future,” says Miller, “is linking more and more types of information and putting data ownership in the hands of those who ultimately are responsible for it. There’s no reason why human resources must serve as a middleman. Employee self-service gets HR out of the administrative shuffle.”
Personnel Journal, October 1996, Vol. 75, No. 10, pp. 84-89.
Forget the high-priced consultants, the so-called pundits and the nasty back-and-forth finger pointing by physicians, HMOs and insurance companies. To really find out the state of corporate health-care benefits, ask an employee like Bill Keeley, a 43-year-old manager at a Fortune 200 company who suffered a stroke on March 13.
Like a teacher monitoring various stages of a term paper, Keeley graded each step of his four-week treatment and recovery process. The letters on his medical report card range from an “A-” for hospital admission and precertification to a “D-” for disability case management. A former 16-year HR veteran, Keeley sums up his ordeal this way: “Although we’ve come a long way in the management of medical benefits, we clearly have more room for improvement.”
Although Keeley is just one person in one company evaluating one medical incident, his comments accurately reflect the overall state of corporate health-care benefits. We’re ahead in cost controls. But, despite what you hear-medical costs are still rising at nearly four times the inflation rate. We need to do more. Fortunately, HR managers at America’s larger employers are leading a market-based reform effort that’s attacking the health-care system in four ways-by:
These efforts will likely result in better, cheaper care for all employees.
Competitive pressure and coalitions fight spiraling costs.
You’re probably thinking that companies already have a handle on rising costs, especially considering a three-year trend of moderate medical cost increases. For the year ending in June, health-care costs for businesses rose only 0.01%, the lowest medical inflation rate in 13 years of tracking, according to the U.S. Department of Labor. This sounds like cause for celebration, but note the wording: cost of health care for businesses.
Here’s what’s happening: Costs to employers have leveled out largely because they’ve been shifting vast numbers of employees into less-expensive managed-care plans. In 1995, almost 73% of all covered employees were in some form of managed care, up from 63% a year earlier. This increase corresponds with a sharp decline in the availability of more-expensive indemnity plans, from 90% of employers offering them in 1990 to only 59% in 1995. Corporate costs have also steadied, because companies are asking employees to pay more in deductibles and monthly premiums. By sharing the costs with the medical users, companies save money.
But just because a company saves money through managed-care plans and cost shifting doesn’t mean the excess expenses have been wrung out of the system. In Southern California, which caught onto the managed-care trend early, employees are feeling the crunch-even if their employers aren’t-and experts predict workers will face increasing costs over the next five years, according to a Los Angeles Times report. In the nation overall, the report continues, employees’ health-care costs increased at least $5.5 billion in the past seven years, as employers passed many costs on to them.
And a study by Sedgwick Noble Lowndes, an international employee-benefits consulting firm based in Memphis, Tennessee, shows that the average projected cost increase of medical plans in 1996 is close to 11% for everything from HMOs to traditional indemnity plans. So, while employer costs have evened out, plan costs are still rising.
Although this increase was lower than expected, it’s still the kind of double-digit shock many employers thought they’d ended. Costs continue to rise because the drivers of medical inflation are the same as they’ve always been: increasing use of sophisticated technology, an aging population, excessive or unnecessary usage and cost shifting from the government to the private sector.
“Employers should not be lulled into a false sense of security by the news that the projected rate of increase for most health plans has dropped for the third year in a row,” explains Jack Doerr, national group benefits practice leader for Sedgwick Noble Lowndes. “These rates are still as much as four times the general rate of inflation.” The crucial point: While managed-care plans and cost shifting do reduce employer costs, the decrease is likely to be short-lived unless the plans themselves become more efficient.
Large employers have become savvy to this and are using competitive pressure to force medical plans to keep costs down. Xerox Corp., for example, which offers several health plans to workers, encourages them to choose the most cost-effective plan by subsidizing these plans at a higher rate. The less the company pays, the less employees pay in co-insurance.
By letting employees choose among competing health plans, Xerox and other large companies are keeping the pressure on plans to lower costs. When a plan gets too expensive, employees avoid it and the company eventually drops it. “Because we don’t have any more money to give them, they have to find ways to do more with less,” explains Helen Darling, manager of health-care strategy and programs at the Stamford, Connecticut-based company.
Another way companies are forcing plans and providers to become more cost-efficient is by joining together in purchasing coalitions that use their size to leverage volume discounts. One such coalition is the Minnesota Business Health Care Action Group, an alliance of 24 self-funded employers that represents about 250,000 employees and their dependents. By working together and negotiating fees directly with HMOs, hospitals and physicians, the alliance has held local health-care providers accountable for costs as well as practices.
Until recently, purchasing alliances like the one in Minnesota have been regional in nature. But employers now are banding together in national coalitions that can exert even more pressure on providers. An example is the two-year-old National HMO Purchasing Cooperative that comprises 10 large employers, including American Express Co., Merrill Lynch and Company, IBM, ITT Corp., Marriott International and Sears. Currently, the coalition is evaluating and soliciting bids from approximately 200 HMOs, which together will provide an estimated $1 billion worth of health services to 600,000 employees at approximately 27 U.S. worksites.
The focus of these coalitions isn’t just cost, however. It’s also quality. After years of cost cutting, cost shifting and cost sharing, employers have finally realized the only way to achieve long-term cost reductions is by improving the efficiency and quality of care. As the new mantra of health-benefits planners goes: Better medicine is cheaper medicine.
Quality measures help gauge a plan’s success.
The epiphany-that it’s OK to rate providers as they would any other vendor-has come just in time for many companies. Employees have become skeptical-if not downright fearful-of managed care, believing that some managed-care companies withhold necessary treatment to save money. “Because of vastly different levels of plan performance, the employees’ fear is not unjustified,” explains Tom Beauregard, a principal with Hewitt Associates in Rowayton, Connecticut. The best way to allay that fear and improve the quality of medical care overall is by pressuring providers to improve their own effectiveness. After all, you can’t impact what you can’t measure.
Dr. David Friend, global director of Watson Wyatt’s health-care consulting practice, agrees. “Too many employers still look only at the three Cs: costs, controls and clerks,” he says. “They need to move from comparing costs to assessing value; from controlling patient access to measuring patient outcomes; and from focusing on the amount of clerical services to evaluating the quality of clinical services.”
But what does quality care look like? How do companies assess the quality of the plans they purchase? Although the quality movement is still in its infancy, companies are starting to get answers. One way to ensure health plans meet basic quality standards is by checking to see if plans are accredited by the National Committee for Quality Assurance (NCQA), a Washington, D.C.-based nonprofit organization. The NCQA evaluates health plans on 60 measures, including things such as whether an HMO’s physicians are board-certified, whether women in the plan are allowed routine Pap smears and how efficient the medical-records process is. Although it’s a rough assessment focused more on procedures than results, more companies are requiring NCQA accreditation from HMOs seeking their business.
Some companies take it a step further by looking at the actual criteria used by the NCQA to evaluate health plans. Instead of simply relying on the organization’s stamp of approval, HR professionals look at individual performance measures reported by the plans to see if they meet the needs of their employee population. Currently, approximately 59% of employers with 10,000 or more employees use these criteria when choosing plans.
Recognizing the vast employer demand for quality data, the NCQA is updating and expanding its performance measures. When complete, the new measures-known as HEDIS, for Health-plan Employer Data and Information Set-will give companies specific information in eight areas:
“We expect more employers to use these tools as they become better understood,” says Dr. Mary Jane England, president of the Washington Business Group on Health (WBGH).
According to a study conducted by WBGH and Watson Wyatt Worldwide, an international management consulting firm in Washington, D.C., more companies plan to adopt value-based measures. For instance, 82% of the largest employers expect to use disease-specific outcomes measures in the next two years, in addition to the 19% of employers already doing so.
Comparing quality with cost determines total plan value.
As valuable as the NCQA measures are, they currently don’t encompass the relationship between health-plan performance and cost. When added together, quality and cost are what really determine a plan’s value. To aid comparison, consulting companies like Hewitt Associates and New York City-based Towers Perrin are working with employers to compile quality and cost information that can be shared with employees to allow smarter, value-based purchasing decisions (see “Looking for Quality Information?”; left).
Take Rohm and Haas Co., for example. The Philadelphia-based chemical manufacturer battled 20% annual increases in medical costs for several years. Recognizing that HMOs were the “best buy around,” 95% of its 8,000 employees (representing 20,000 covered lives) have been shifted into some form of managed-care plan-up from 5% just six years ago. Although the strategy was successful in cutting costs, benefits managers at the company started to question whether cheaper care was really better care.
“It began to bother us that [most] employees were in plans that restricted access,” explains Pat Coyle, director of benefits and workforce strategies. “This, combined with the fact that we were seeing a lot in the press about how HMOs don’t provide the same level of quality [as indemnity plans] got us wondering about how we could assess the overall delivery of care.”
Two years ago, Rohm and Haas, working with Hewitt Associates LLC, a Lincolnshire, Illinois-based consulting firm, embarked on a comprehensive research effort designed to uncover those plans with the highest value. The first step was to survey employees to determine how they felt about their HMOs. They were asked: How long did you have to wait for an appointment? How clean was the office? Were the providers responsive to your needs? “We took a look at the things employees notice,” Coyle says. Believing that recommendations from co-workers can do a lot to allay fears about managed care and improve the perceived value, Rohm and Haas shares all results with employees during the open enrollment process. The first year it shared these numbers with employees, enrollment in high-quality plans jumped 30%. And, enrollment in HMOs overall has increased 13% since the survey ended.
The second step was to analyze the cost, demographics, geography and design of each of the company’s 30 managed-care plans to see if they were paying rates commensurate with the needs of the workforce. If a plan charged the company a community rate, for example, but Rohm and Haas employees at a particular location were younger, with a less-rich plan and in a less-costly geographic area, the company negotiated discounts. “We essentially used the same data used by underwriters to challenge the cost structure,” Coyle explains. Instead of relying on the plan to accurately quote a rate, Hewitt Associates compared the price charged with the services needed to determine actual value. During the first year, the company saved $500,000 in plan costs by renegotiating prices. “This was easily enough to justify the cost of Hewitt doing the work,” she adds.
Rohm and Haas is now at work on the third phase of its research effort: compiling a Quality of Clinical Care Index. Using the NCQA’s HEDIS measures, the company is analyzing carefully the performance of each health plan to determine where there might be room for quality improvements. If women don’t get mammograms at the expected rate, for example, or if childhood immunizations are lower than average, the company shares that information with the HMOs and asks for improvements. “We’ll give each plan an opportunity to improve its performance,” Coyle says, “and then we’ll share results with employees. If [the plan doesn’t] come through, we’ll drop it.”
Like Rohm and Haas, White Plains, New York-based NYNEX Corp. compares cost with quality and reports findings to employees. NYNEX takes a health-plan “scorecard” that measures health-plan quality, overlays it with results from an employee-satisfaction survey, and then compares those data with evaluations of economic efficiency. The composite results reveal which plans have the highest financial value, quality and satisfaction. By sharing this information with employees, the company can steer employees into “best practice” plans that not only save the company money, but also satisfy employees.
Companies like NYNEX and Rohm and Haas can gauge quality thanks to better technology and tracking systems. But don’t be misled: Measuring quality is still in the formative stages. Health care remains difficult to measure and analyze, and outcomes analysis remains relatively primitive. Furthermore, employer efforts to measure quality are hamstrung by the fact that the government, which pays for 30% to 40% of all health care in the United States, does little to promote value.
“Still, we’re light years ahead of where we were two years ago,” Doerr says. Given that health care operates in a competitive marketplace, what employers end up with in terms of quality will depend largely upon what they demand.
Demand management reins in overutilization.
Another weapon being used in employers’ war against health costs is a strategy called demand management. According to Michael Scofield, chief epidemiologist with Actuarial Sciences Associates Inc., an employee-benefits consulting subsidiary of AT&T based in Somerset, New Jersey, demand management can cut costs by reducing unnecessary use of medical resources. How? By addressing the nonmedical drivers of benefit utilization.
“Demand is driven by more than the objective severity of an illness,” he explains. How people respond to an illness and the resources they use are influenced by the care they receive, their perceptions of how sick they are, how well they cope with pain and stress, how well they adhere to treatment plans, what they gain from being well and what they gain from being sick. A person with lower back pain, for example, who hates his or her job but has good benefits and a good relationship with his or her physician, may be able to get the physician to prescribe an extended period of home recovery.
Demand management seeks to reduce the gap between the health care needed and the health benefits utilized. Contrary to popular belief, it’s not primarily a prevention or wellness strategy. “Wellness programs are more concerned with reducing the incidence of disease by reducing modifiable risk factors,” Scofield says. “However, the severity of a person’s illness is only a modest predictor of the amount of medical and indemnity benefits that are used.” Although demand-management programs may include early detection and patient-education strategies, the overall intent is to reduce utilization, not illness.
Demand management also takes into account the whole picture of health costs, including lost productivity. Companies using demand management must make sure treatment plans are appropriate, that they’re adhered to and that employees are back on the job as soon as possible.
Typically, demand-management programs start out in a focused area like disability management. At Stamford, Connecticut-based Champion International, for example, a total disability management program is being developed. When complete, it will unite all facets of the company’s health benefits, including wellness, workers’ comp, short- and long-term disability, medical benefits, and health and family services into “one seamless delivery system,” explains Victor Paganucci, total disability management project manager.
The intent is for all departments to work together to make sure injured workers receive appropriate care and support so that they’re back on the job as soon as possible. By integrating the health resources, Champion removes communication barriers that allow employees to “fall through the cracks.” For example, an injured employee may be able to work in a limited capacity-but the treating physician, unaware of the onsite physical therapist, might keep that person off the job longer than necessary.
To be successful, Champion must integrate data from each department to track employees through the system and to monitor the overall costs. This way, workers’ comp professionals can’t fool themselves into thinking costs have been reduced just by transferring cases to long-term disability-where an employee may still be under treatment and off work. “By looking at the overall costs, we can find ways to reduce the costs stemming from unnecessary utilization and get people back on the job sooner,” Paganucci says.
Early indicators suggest that Champion can save on the $40 million a year it currently pays in direct disability costs and on the $60 million per year it pays in “soft costs,” such as lost productivity and recruitment of temporary employees.
For companies interested in implementing demand-management programs, Scofield suggests these strategies:
Although demand management is still young, the pioneers’ savings indicate it’s a viable option for companies-indeed, a necessary one for true cost savings.
What to expect in the future.
With employers now focusing on lowering costs, increasing quality and reducing unnecessary demand, what can we expect in the near future? Bruce Taylor, director of health-care management at GTE Corp. in Stamford, Connecticut, believes that although cost control and demand management will remain important, the crucial piece of the cost-saving puzzle will be improving quality-rating providers and pushing for better value.
“We have to keep the pressure on the delivery system to improve the quality of health plans,” he says. GTE does this by maintaining a staff of five health-care specialists who monitor the quality of each of the company’s 135 HMOs. These individuals not only compile employee-satisfaction ratings on each plan, but also regularly review procedures, examine medical records and quiz physicians. By compiling quality data, the 300,000-plus employee company can more easily compare one plan to another. Plans that perform poorly are then pressured to improve. “Our statistics show that plans rated with the highest quality and employee satisfaction actually do have the lowest cost,” Taylor says.
As GTE’s experience suggests, if employers keep up the pressure, medical quality must improve. But if costs don’t drop, they’re at least more likely to remain steady. However, smaller companies have to get on the bandwagon as well. Although companies that aren’t self-insured can’t exert pressure directly on providers, they can ask plans for the same quality information that’s available to larger employers. “This sends a message to insurance companies and managed-care organizations that they must change how they do business,” says Rick Elliott, head of employee-benefit services with Johnson and Higgins, an insurance brokerage and insurance consulting firm based in New York City.
But you must look beyond quality. Because of intense competition, many health plans are merging, hoping their combined size can deliver care more efficiently while capturing more business. From a cost and efficiency standpoint, consolidations may make sense. But from an employee-relations perspective, any change in plans, providers and procedures can be disruptive. Because of this, Beauregard suggests that companies evaluate a plan’s total membership relative to market share, its disenrollment and membership growth rates, and the plan’s medical-loss ratio. This information, which more plans make available thanks to the NCQA, provides a good indication of whether a plan is financially stable or a likely target for takeover.
What all this means is that when it comes to the struggle over health-care benefits, there’s really no end in sight. But, there’s light on the horizon. Competition is finally forcing the health-care system to produce quality care at reasonable costs. Given that we’re talking about medical care, the term “reasonable” is used loosely. But experts agree the days of 20% annual increases are behind us.
As long as employers continue to vigilantly demand proof of higher quality, providers will do their best to provide it. Perhaps someday soon, stroke patients like Bill Keeley will be able to give all phases of the medical delivery system a resounding “A+.” It’s certainly not too much to hope for.
Personnel Journal, October 1996, Vol. 75, No. 10, pp. 36-46.
