Employee Benefits and Strategic Workforce Planning

When assessing the provision by large corporations of employee benefits, and comparing them to the hidden costs of employee turnover we discovered vast potential for improvement.  The need for multiple team co-ordination and the difficulty in tracking and/or measuring the actual turnover costs makes it hard for companies to properly assess and tackle them.

However, a simple tweak to your company’s currently tracked key performance indicators (KPIs) would enable true internal collaboration between HR and Risk Management (RM). It would also reveal major opportunities for using Employee Benefit programs to improve your employees’ performance and retention rates.

Where to start – The difficulties of a “first date”

In the past, the design and provision of benefits was the role of HR. However, today many Risk managers and HR teams understand how working together and combining their experience unlocks true value in their organizations.

When HR and RM, previously working in isolation from one another, decide to collaborate, their first challenge is identifying where to start. I have seen this in many companies we have worked with, and we have been able to help. So what are the main early challenges?

• HR and RM do not speak the same language; they have different targets, measures and tools.
• Both have difficulties in calculating the return of employee benefits on investment.

Normally the mistake is to over-simplify priorities, and I have seen examples where a global employee benefits programme simply starts in the largest geographical location. This however is not necessarily the right answer, as it rapidly fails to demonstrate the program’s benefits since the company’s hot spots are not being addressed.

How to achieve success? – Turnover and Absenteeism analysis as a first step

The starting point should be the laying down of a structured plan, with teams agreeing the objectives up front. No surprises there, but it never fails to amaze me when there is no formalised plan and objectives are unclear. The inception of the work must involve Risk and HR managers agreeing the following:

• Shared objectives and KPIs.
• Analysis of the issues, risks and problems with staff.  
• Quantifying the issues, investment required and potential benefits.

In doing this, most companies would find common ground with employee Turnover and Absenteeism assessment, since virtually all organizations usually measure these, and it can be a simple tool to quickly highlight an organization’s “hot-spots”.

A Turnover and Absenteeism total cost estimate formula could look like this:

A simple tweak in the company’s existing KPIs enables HR and RM to bridge their gaps and:

• align around a prioritization of their combined efforts.
• monetize the objectives they jointly set.

With such a unified approach to risks, they will need to analyse:

• the straightforward Direct costs such as HR admin to do with leaving and replacement, training and induction and wages of absentees.
• the more difficult to measure Indirect costs, such as loss of productivity and business, low morale, expertise loss, managers’ time wasted in troubleshooting, and safety issues.

Once prioritization is complete, teams can analyse their existing policies, including basic pay, employee benefits and flexible workplace arrangements. It is here where Insurance Brokers can offer support as well and adding true additional value.

The expertise of Risk Managers in mitigation, and the tools and processes they use to guard against and cope with unwanted risks (from professional insurance buying to captive management) will now come into play, enabling HR to offer a wider range of Employee Benefits at a reduced cost.

Furthermore, there is a cost to doing nothing and continuing as before. Hiring and training 1000 employees each year, for example, can be enormously expensive. Moreover, companies are less efficient during the induction and training phase of employment, losing productivity and therefore income.

The way forward - Creating a ‘Strategic Workforce Planning Process’

The biggest failure in setting objectives is to focus solely on backward-looking KPIs (lag indicators) then fail to implement metrics, which enable forecasting. The goal should be to have a strategic workforce plan that also includes forward looking KPIs (lead indicators).

For example, if a country has a strong economic growth forecast then unemployment will fall, there will be demand for favourable terms, and wages will increase. However, if your company already has absenteeism and turnover problems, these will worsen.

The combination of lag and lead indicators and their correlations (not looking at them as if they are entirely independent of one another) completes the modelling. Once done, your company can begin to plan for workforce / talent shortages, designing strategies that could include appealing benefits to attract and retain employees.

I know that this change in approach can transform employee benefits and improve corporate performance. If you would like to learn more about how this can be achieved then please contact me directly.