Are Employee Attachment Levels Up?

Friday, September 30, 2011

Employee attachment levels, in other words, employee engagement, are they increasing in these economic times? Increased levels of employee engagement are seen as indicators of higher levels of employee retention, product and service production, increased customer service, and lowered production costs. Randstad, the global staffing organization, recently reported that “employee attachment levels” have risen during the first two quarters of 2011. The Randstad Employee Attachment Index reported a 5 percentage point rise in employee attachment between March and June of 2011. The survey of both employees and employers attempts to measure “… employees’ sentiments, potential actions and attitudes … indicators to reduce potential employee volatility.” By attempting to measure the differences in the perceptions of employees and employers, the survey attempts to identify the “gap” between those two groups.

So what did the survey tell us, is the glass half full or half empty?

Half Full:

• A 5 percentage point increase from the initial study in March and the follow-up in June 2011.

• Employee volatility: how likely employees were to seek alternative employment declined about 4 percentage points.

• 66% of all employees are likely to stay with their current employers over the next 6 months.

• 50% of highly engaged employees are likely to stay with their current employers.

Half Empty:

• Retention by engagement: a measure of the correlation between an employee’s engagement and the likelihood they will leave. 29% of the highest engaged employees report they “are somewhat to very likely to seek” a new job within the following six months.

• Employer – employee disconnect: a series of metrics of the “gab” between the perceptions of employers and employees. Significant disconnect appears in the areas of employee recognition and “Enjoying going to work every day”.

• Reasons for seeking alternative employment:

    • 38% -- Inadequate pay 

    • 24% -- High stress level

    • 23% -- Lack of opportunity for advancement

• Commitment in question: when questioned about their perception that employers are “committed”, employees responding to the survey graded their employers between 2.2 and 2.6 on a 5 point scale.

• Employers vs. employees on motivation: a 14 percentage point gap was reported between Employers (88%) and employees (64%) on employee motivation levels. Similar gaps were found in “training” and job “commitment”.

• Employee retention: over 50% of employers reporting struggling with retention and over 70% have difficulty in recruiting the “right” employees.

• Employer confidence dips: employer’s confidence around their own organization’s ability to succeed fell from the mid 80’s to about the mid 70’s.

• Optimism about the future: employers vs. employees, as with motivation, the survey found highly significant gaps between employers and employees and their perception of the future of their organizations. The greatest gap between employers (83%) and employees (57%) is whether the organization is hiring the “right” management employees.

Many of the gaps reported by Randstad’s Employee Attachment Index are well documented by the large human resources consulting and management firms. The gaps noted in the survey between employer and employee perceptions are, to some extent, to be expected, and also well documented. While in and of itself, the survey may provide little in the way of new insight into the employer-employee relationship, nevertheless, it does reinforce that employee engagement is one of several key factors vital to the current and future success of every organization.

Job Design and Motivation

Friday, September 23, 2011

If motivation is to be found within the job and if motivation is linked to some hierarchy of needs, how can we design those concepts into a “job” and still serve the needs of all four constituencies: the organization, stakeholders, customers, and finally employees themselves?

The first that we must do is to understand the knowledge, skills, and abilities required of someone who is going to perform the role within the organization. When all is said and done, the duties of the position must be accomplished if we are to meet the needs of all of our constituencies. Next we must understand what motivates the incumbent employee.

Herzberg identified 5 “true motivators”, achievement, recognition, work itself, responsibility, and advancement, notice salary is missing. When asked about the role of money and motivation, Herzberg stated, “Viewed within the context of the sequences of events, salary as a factor belongs more in the group that defines the job situation and is primarily a dissatisfier."

Maslow found that as individuals achieved each successive level within his hierarchy of needs, that level ceased to be a motivator. Maslow divided the hierarchy into 5 levels ranging from the most basic needs (e.g., food) to the highest (e.g., Wisdom): 1. Physiological, 2. Safety, 3. Social, 4. Esteem, and 5. Self-Actualization. For Maslow, Financial reserves (i.e., money) would be found at the “Safety” level, along with “Living in a safe area”, “Medical insurance”, “Job security”

First, when and where must the work be done? Must it be done in a factory office? There may be little flexibility if the work is done in a factory; however, many of today’s offices offer opportunities for work to be done remotely and within a certain degree of starting and stopping time. This flexibility is often seen in the form of “core” work hours in which all employees must be in the office and variable starting and stopping times built around that core. Flexibility is often available in the days of the week the work is performed. Variable schedules such as 3-12’s, 4-10’s and other arrangement may allow for the work to be complete while allowing the employee a high degree of flexible scheduling.

Next, how is the work to be done? Is each step of the job process mapped out to some finite detail with no room for individual interjected their own method or process? In manufacturing, there is often little room for variation from the approved process methods. In fact, deviation from those methods could result in sub optimum product or even safety issues. True, but allowing workers to re-design work processes may lead to improved product and higher production, not to mention employee engagement. Many organizations maintain “process improvement” committees which include floor workers who help re-design long standing and ineffective manufacturing methods.

Lastly, how are employees recognized and rewarded? It has been a routine practice in the military to allow pilots to have their name and the name of their co-pilot printed on the aircraft. The military found that by printing the names of the crew chief on an aircraft improved the maintenance levels on those same aircraft. Some organizations allow the names of their truck drivers to be printed on their trucks. Drivers also compete in “truck rodeos” to demonstrate their skill at finessing 80,000 pounds of truck around a parking lot and loading dock. Utility companies often sponsor “lineman rodeos” for similar purposes. Try to think of it in terms or safety training, skill building, esteem building, recognition, and employee engagement.

2012 Salary Increases Up Slightly

Friday, September 16, 2011

In an August 22, 2011 press release, Towers Watson, a global professional services company which supports organizational performance improvement through human resources, risk and financial management, reported that U.S. companies expect annual salary increase to average 2.8% in 2012.  The survey, “Towers Watson Data Services Salary Budget Survey”, conducted midyear 2011 surveyed some 773 U.S. organizations across a wide section of industries and job classifications.  When the same survey was conducted in 2010, the 1,046 U.S. employers surveyed reported an average projected annual salary increase of 2.7% for 2011, representing a 40 basis point increase from the 2.3% raise workers were expected to receive in 2010.

Employee compensation, even in the best of times, is a challenging endeavor. Over the last several years many organization have significantly altered their reward systems. The commonly held belief is that employees are compensated for two fundamental reasons:

1. Base compensation: pay for the production of the basic products, services, and goods they produce. The daily grid of meeting the needs of the organization and its customers. Simple enough to say the least.

Base compensation can be thought of as that remuneration paid to the incumbent employee for the performance of their routine day-to-day tasks associated with the employee’s position. It excludes premium pay such as: overtime and shift pay, or incentive pay such as commissions, bonus payments, special knowledge/skill pay, standby-by/on-call/waiting pay, etc.

2. Incentive compensation is intended to motivate workers to increase the productivity of the organization’s operations. Not so simple.

Incentive compensation, on the other hand, attempts to change or alter baseline behavior from its current level to a higher or at least a different level. This higher or different level could be higher sales, higher profitable sales, lower rates of product defects, fewer worker accidents, higher customer services performance scores, etc.

The problem is that money is generally not a very good motivator in and of itself. It is highly effective at getting an employee’s initial attention, however after some time the luster of money fades once the worker is satiated. Frederick Herzberg, the pioneer of 'job enrichment', perceived that motivation came from within the job role in the form of “job satisfiers”. Abraham Maslow, who has been tagged the “Father of Modern Management Psychology”, saw motivation in terms of a “hierarchy of needs”.

While compensation surveys certainly help us to understand the trends and the ever changing landscape of employee rewards, they fail to address the underlying factors we need to motivate employees beyond just showing up for work. And while it may seem impossible to develop personalized reward systems designed to motivate thousands or tens of thousands workers, it is apparent that without a “motivated” worker there is little prospect of organizations achieving long-term economic gain.

If Herzberg, is in fact correct, that motivation is to be found within the job, those job satisfiers must be designed into the job. And if Maslow is correct that none of us are truly fulfilled until we are Self-Actualized, how are we to build those features into the job? How do organizations design jobs which meet the needs of all four constituencies: the organization, stakeholders, customers, and finally employees themselves?

Wellness Based Premiums, a Question of Fairness?

Friday, September 09, 2011

Historically, employees within the same covered health care group paid the same premiums as their cohorts for the same plan and same options. The risk of health care was shared equally among all cohorts regardless of their health, life style or the likelihood of them requiring medical care. Early forms for risk sharing, i.e., insurance, dates from the early Chinese, Babylonian, Phoenician, Greek, and Roman civilizations to cover trade and other unforeseen events. More modern concepts of “group” risk sharing dates from the Craft Guilds formed in the Middle Ages which often provided for the “mutual aid” of their members. Among the benefits of being a craft guild member were; care during periods of sickness, burials, and the care of orphaned children. Later, the concept of mutual aid morphed into friendly and benevolent societies, as well as fraternal organizations. These “societies” were often focused on common financial, social, religious or political affiliations; rather than a common skill, craft or profession.

The Group Concept is a rather straight forward proposition, each member within the group shares in the collective risk of the group by paying a small proportion of the expected loss. However, for the Group Concept to work, it requires groups with hundreds, if not thousands of members, i.e., in the case of health and welfare benefits, a large organization. Since the risk is spread over many individuals, the cost for each individual in the form of premiums is relatively small compared to the risk. Consider the risk illness associated with the common cold, the likelihood of having a cold is maybe 1-2 times per year and the risk of loss is less than $100 per occurrence. However, now consider a major medical procedure such as a Coronary Artery Bypass Graft Surgery. Costs can easy range from $75,000 to over $150,000; most individuals are unable to afford the risk of such a financial loss.

So, is it fair to have one group premium rates for members with healthy life styles vs. other rates for those who are smokers, obese, drink excessively, use illegal drugs, participant in hazardous hobbies or fail to exercise? As organizations and governments struggle with efforts to provide and maintain affordable health care, the concept of rewarding healthy life styles while punishing unhealthy life styles is emerging as a means to modify personal behavior. That reward, outlined in the 2010 Patient Protection and Affordable Care Act (P.L. 111-148) permits employers to offer employees premium discounts of up to 30% of the cost of coverage for participating in a wellness program and/or meeting certain health-related standards. The punishment is in the form of paying the full group premium rates for those members who are unwilling or unable to obtain and/or maintain healthy life styles.

Sounds extremely unfair! However, for those members who are physically unable to participate in a wellness program and/or meet certain health-related standards, there are alternatives available which would allow them to earn the same rewards. Thus, only one group is left, those members who are unwilling to take any action on their part to even modestly improve their own well being. They have elected by their inaction to continue to smoke, eat and drink excessively, use illegal drugs, participant in hazardous hobbies and/or maintain a sedentary life style.

As such, have they not accepted, by their unwillingness to take steps to improve their health, the fact that their lifestyles will incur a greater degree of health care now and possibly in the future?

Health Care Literacy, Who’s Responsible?

Friday, September 02, 2011

As organizations have continued to struggle with health care inflation, many employers have now turned to some form of high deductible health care plan (HDHP), also referred to as “consumer driven health care plan” or more simply “CDHP”. The premise is that if the employee is personally at risk for the first $1,000 to $5,000 of their health care expenses, they will exercise prudent judgment in the consumption of health care services. This prudence extends to a maintaining a healthy lifestyle including preventive health care, smoke cessation, exercise, weight and dietary management. While there are many individuals who are knowledgeable about health care related issues, others lack such information or even access to the basic health and wellness facts. Who should bear the responsibility of raising the health care literacy level of employees and their family members?

The National Action Plan to Improve Health Literacy, published by the U.S. Department of Health and Human Services in 2010, identifies many parties in interest, including health care professionals, public officials, insurance carriers, as well as employers. However, the role of employees, the consumers of health care, is restricted to being more of a passive recipient of health literacy information. While the plan encourages “… employees to take advantage of continuing education …” to raise their level of health literacy, it fails to provide clear incentives to motivate employees to become better consumers of health care. Without some form of financial incentives, employees are unlikely to be motivated to take action either in the consumption of health care or their personal lifestyles.

For many employees, the higher deductibles of consumer driven health care plans are offset by the lower monthly premiums and other features designed to steer employees to CDHP’s. Furthermore, some employers provide seed and matching contributions for employees who enroll in CDHP’s and a companion Healthcare Savings Accounts.

Generally, high deductible consumer driven health care plans have annual deductibles of a minimum of $1,200 for Employee Only coverage, while Employee and Family deductibles will be $2,400. Currently, the maximum annual out-of-pocket expenses are $5,950 and $11,900 for Employee Only and Employee and Family coverage respectively. In addition, the annual contributions for Healthcare Savings Accounts are at $3,050 for an individual and $6,150 for a Family.

With an individual at risk for several thousands of dollars in health care expenses, it becomes imperative that individuals have access to both the cost and quality measures of health care procedures and their outcomes. Unfortunately, the availability of such measures is still highly restrictive thus preventing most from being able to comparison shop within their community. This lack of cost and quality transparency means that many, if not most medical consumers have little or no understanding of what a specific medical procedure costs or the outcome history of their medical provider. Certainly, there are a number of internet sites which allow patients to rate doctors, hospitals, dentists, and other healthcare professionals. Most of these sites available to the general public are not vetted and provide no independent measure of the quality of the outcomes, such as the number of procedures done and the success or failure rate.

The Leapfrog Group runs “a voluntary program aimed at mobilizing employer purchasing power to alert America’s health industry that big leaps in health care safety, quality and customer value will be recognized and rewarded.” Unfortunately, the major shortfall of such organizations is that they are voluntary.

So who bears the responsibility of employee health care literacy?   Why, the employee of course.