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Benefits: Adult Education

By helping employees make the most of the benefits companies offer, employers help themselves as well.
Josh Hyatt, CFO Magazine
October 1, 2008

If you want to offer employees an inexpensive benefit that will foster loyalty and boost productivity, consider a navigation system. No, not a GPS, but a tool that will guide them in making a host of decisions about everything from tuition-reimbursement programs to 401(k) strategies to consumer-directed health plans. By offering more and better education around benefits, companies not only help employees make the most of their perquisites, but also gain from increased retention, higher productivity, and related forms of goodwill.

"Benefits are probably the largest untapped potential retention tool that organizations have," says Steve Miranda, chief of human resources at the Society for Human Resource Management in Alexandria, Virginia. But all too often, he says, "they turn into nonperforming assets because they aren't being used to create 'stickiness.'" In other words, to tap the full benefit of benefits, companies should package them with more-useful instructions. "People are clamoring for more communication," says Miranda.

This won't come as news to most companies, of course. Ever since 401(k) plans began to replace traditional pension plans more than 25 years ago, companies have found themselves in the uncomfortable role of trying to educate workers about how (and how much) to save for their retirements. Entire industries have grown up around this single mission, yet few companies would say they handle this task well. Some pass out brochures touting the wonders of compounding and expect employees to take it from there. Most, however, err in the opposite direction. "More and more, we find that companies back up a truckload of information and everyone's eyes immediately glaze over," says Nenette Kress, senior vice president and national practice leader for communications at The Segal Co., an HR consultancy. "There's so much information that they can't take it in. They are overwhelmed."

Inertia is a problem even under the best of circumstances; information overload only makes it worse. And if maximizing their participation in 401(k) plans seems daunting, imagine what may be at stake in the emerging realm of consumer-directed health plans. CDHPs offer lower premiums but higher deductibles and require employees to make a series of critical decisions about their own health care. HMO or PPO? Brand-name pharmaceuticals or generics? Does an aching back merit a doctor's visit, or a hot bath? "Benefits now require employees to make very important decisions that are fraught with long-term implications," says Kress. "They need help understanding it all." With so much at stake, the self-service approach to benefits, which has dominated for a decade, is now giving way to a desire on the part of companies to extend a helping hand.

Retention Junkies
Why should employers — most of whom have shaken free from any previous pretensions of paternalism — take on the extra tutoring duties? Simple: because both current and potential workers put a premium on their benefits packages. Last year the Emerging Workforce Study, a survey commissioned by recruiting giant Spherion Corp. and conducted by Harris Interactive, found that benefits actually outranked compensation as the key factor in employees staying put. Out of 3,152 employees, 78 percent named benefits (including health care) as a critical retention tool, slightly ahead of compensation (cited by 75 percent). Moreover, workers see plenty of room for improvement in their plans; only 34 percent expressed satisfaction with their health benefits.

This data arrives just as employers seem to be all ears in the matter of retention. Recent surveys have found that employee retention is a top — sometimes the top — corporate priority, and an overwhelming majority of companies expect competition for the best workers to remain just as strong or even intensify in 2009.

Even companies that provide exemplary benefits keep reminding their employees what a good deal they've got. At software giant SAS Institute, where the lavish benefits are hard to miss — there's a 66,000-square-foot fitness center, plus athletic fields and multiple child-care centers — management still makes sure that employees remember to appreciate it all. "Our whole benefits package is about giving our employees a place where they can excel. If people are less stressed and happier, they'll work harder for you," says Don Parker, CFO of the $2 billion company.

SAS also uses its intranet, newsletters, RSS feeds, internal blogs, posters, and benefits fairs to "make sure employees are aware of the full range of offerings," as Parker puts it. And the company relies on an annual survey to ensure that its benefits match employee needs and wishes, allowing Parker to say with confidence, "We know what matters to them."

Communicating with employees strategically — soliciting their questions and concerns and addressing them directly — requires creative thinking and more than a touch of corporate self-awareness (for more, see "Telling Details" at the end of this article). Before they offer help to employees on how to maximize benefits, companies often find it useful to let employees know exactly what they are getting in terms of benefits. Personalized statements that aggregate the hidden value of an employee's noncash benefits, from paid vacation to company-sponsored life insurance, are useful for boosting morale and cultivating loyalty. Yet a recent survey by Aon Consulting found that fewer than half of companies believe that it is important to communicate such total compensation data to employees.


Benefits statements are often printed booklets, although they are increasingly moving to the Web, where they can be continually updated and become logical extensions of Web-based HR services such as retirement- and health-plan enrollment. The Web is becoming a more meaningful communications medium, pushing out customized information, interactive worksheets, and a host of corporate messages on everything from new and innovative benefits (such as flex-time plans) to answers to common questions about traditional benefits.

But even a great Website won't be enough to meet all the benefits needs of all employees. "There's more and more demand out there for individualized education," says Jeff Levy, who manages the retirement practice at HR consulting firm Cammack LaRhette. "People want answers to their specific questions, which could range from 'Should I change my asset allocation?' to 'What is a mutual fund?'"

To usefully address such questions, companies have learned to dole out data in small bursts — using E-mail blasts and podcasts, monthly intranet postings, or even animated characters online. (Ceridian, an HR services company, actually created online commercials featuring a superhero named Flexman, who saves people from financial binds by explaining the virtues of flexible-spending accounts.) They hold confabs for specific demographic groups, such as hour-long lunch-and-learn sessions about retirement planning for those who are within a decade of the blessed event. Companies can also target mailings to different groups — reminding the fixed-income addicts to diversify, or nudging nonsavers to enroll. "If you narrow the focus, it's a better way to reach people," advises Segal's Kress. "Something gets your attention if it is, in fact, about you."

New Default Zones
The less intimidating benefits seem, the more likely it is that employees will fully participate in them — and involvement, in turn, raises retention. A recent Cammack LaRhette survey concluded that annual turnover among employees who didn't join company-sponsored retirement plans, for example, was 20 percent, while only 9 percent of participating employees exited. "Their participation is a sign that they are engaged with the organization," says Levy. "And those who feel that connection are more likely to stay."

The Pension Protection Act of 2006 made it easier for employees to partake in their employers' retirement plan by doing…nothing. Employers can automatically enroll new hires and even invest their funds on their behalf. Employees can opt out, but the same inertia that often caused them to fail to join now works in reverse, tending to keep them in. Some programs will even step up an employee's deferral automatically — starting at 3 percent a year, say, and then increasing the rate by 1 percent a year for the next three years. That same law also helps companies confront what has long been a huge stumbling block in 401(k) help: the fine line between education (allowed) and advice (prohibited).

Now companies have the green light to give 401(k) participants access to investment advisers, and that one-on-one experience may become the norm for other aspects of benefits counseling as well. "There's no substitute for the human connection," as Kress puts it. Maryella Gockel, flexibility strategy leader at Ernst & Young, says she is intrigued by the possibility of providing individual "college coaches" to guide employees' kids. "We're always interested in what might be the next hot thing," says Gockel. Such as? A decade ago, 23 percent of companies provided workers access to information about services that could help them deal with the needs of elderly family members; that figure has grown to 39 percent, according to the 2008 National Study of Employers from the Families and Work Institute.

Embedding Benefits
That group also uncovered what is becoming a major trend in benefits: flexible working arrangements. An earlier study by the Families and Work Institute found that 73 percent of workers with "high access to flexibility" are committed to staying at their jobs; the number shrinks to 54 percent when employees have little freedom to flex. "The more autonomy people have, the more satisfied they are with their careers," says Christian M. Ellis, senior vice president at Sibson Consulting.

A decade ago, when the Institute asked about flexibility, it distinguished between 8 different kinds. In this year's National Study of Employers, there are 20 iterations, ranging from flex-careers to flex-place to sabbaticals. This year's study found that 79 percent of companies allow some employees to periodically change their starting and quitting times — as compared with 68 percent 10 years back. (How else have benefits changed in the past decade? See "For Benefits, a Decisive Decade" at the end of this article.) "In the past," says Ellen Galinsky, president and co-founder of the Families and Work Institute, "any kind of flexibility was seen as a favor. Not anymore." There are several reasons for this, ranging from a desire to reduce real-estate costs to the availability of supporting technologies. But a big impetus may come from the expectations and experiences of younger workers. "The younger generation grew up as 'digital natives,' IM-ing each other in math class," Galinsky says. It can be hard to convince them that being tethered to a desk is their only option.


Other employees may need a different message altogether: that flex-time arrangements won't harm their careers. Surveys have shown that many employees maintain a traditional 9-to-5, office-based work life because they believe that taking advantage of flexible arrangements will limit their growth potential. "You have to create a culture where workers feel comfortable with such options," Gockel says.

Ernst & Young uses its internal newsletter to profile teams that accommodate different members' schedules, and when it announces a promotion to partner it also describes any "reduced time" arrangements that apply, to stress that flex-types aren't second-class citizens. Nontraditional schedules take time to catch on; companies that offer them should be prepared to communicate the details clearly but expect some lag time before employees embrace their new options.

All in all, companies would do well to think of benefits as a second paycheck badly in need of a stub. A solid communications plan can meet that need, and persuade valued employees to stick around.

Josh Hyatt is a contributing editor of CFO.


For Benefits, a Decisive Decade
Percentage of employers who…

Provide pension plans:
1998: 48%
2008: 29%

Offer wellness programs:
1998: 51%
2008: 60%

Contribute to retirement plans:
1998: 91%
2008: 81%

Permit some flexibility in hours:
1998: 68%
2008: 79%

Source: National Study of Employers (2008), Families and Work Institute


78: Percentage of employees who named benefits as a critical retention tool
75: Percentage of employees who named compensation as a critical retention tool

Source: Emerging Workforce Study, Spherion Corp. and Harris Interactive


Telling Details

To effectively communicate with employees about their company benefits, treat them like customers. That means grouping based on specific needs, then tailoring a message for each niche. "You've got to have a value proposition, even if it's just that 'We're all here to make money,'" says Christian M. Ellis, senior vice president at Sibson Consulting. Some factors to consider:

What are your workers' demographics? Younger workers are likely to be interested in building a healthy foundation — both fiscally and physically. They want to know why they should put aside even small sums of money for retirement, and their health concerns run more toward fitness rooms than seminars. Older workers may need counseling on how to plan for retirement, and their health needs may be more focused on disease-management programs.

What form of communication will reach them? Putting information on a Website or intranet may be effective for reaching those who are under 40, but older workers will still be attached to paper. Even so, test different delivery options: Do payroll-stuffers grab them, or would they rather receive information at home, where they can talk it over with their spouses?

When do they want to hear from you? Quarterly communication is probably enough. "You don't want to become an employer version of 'helicopter' parents," says Steve Miranda, of the Society for Human Resource Management. "They want to know you care, but they don't want to feel smothered." — J.H.




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