On October 23rd, 2014, we updated our
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Personal Finance Employee Education Foundation
“ Helps top management
— one at a time—
use company data to understand the bottom- line wisdom of workplace financial programs.”
Both Gain …When Employers Provide Employees With Quality Financial Programs
So, Prove It
Prove the financial program works.
Prove the employer’s return on investment (ROI).
Benefits of financial programs become evident when the employer benchmarks the levels of employee financial well-being before and after implementing a financial program. Employee Employer
Benchmark Employee Personal Financial Well-Being
Survey employees using the Personal Financial Well-Being (PFW) scale.
PFW is 8-item questionnaire that measures financial distress and financial well-being.
PFW is a valid and reliable measure.
Usage of PFW is free with permission.
How to Benchmark and Project the Employer’s ROI
Survey Personal Financial Well-Being (PFW) of employees, and array scores into 5 groups (20% in each) .
Compare group mean scores of highest 20% with lowest 20% on last year’s job outcomes. What are the differences?
Assign cost values to each job outcome.
Conservatively estimate projected impacts of financial program on job outcomes.
Add up projected savings .
Add up projected financial program costs .
Calculate projected ROI .
ABC Company Projected 1-Year Changes
1. Projected 1-year changes in work outcomes:
12% will improve job performance rating
16% fewer garnishments
16% will have reduced absenteeism
5% less turnover compared to average
10% will spend less work-time spent on personal finances
8% less short-term disability
9% lower health care costs
21% will contribute to 125-plans
5% fewer accidents/workplace violence
5% fewer thefts
10% fewer workers’ compensation claims
14% increase in contributors to 401(k) plan
2. Next assign costs to each factor and estimate increases in work outcomes.
Summary of Projected 2.8 ROI for ABC Company*
Program offered to 28,000 employees
Program impacts 30% of employees, 8,400, in varying degrees of effectiveness resulting in improved financial behaviors and job outcomes for some
Total value of projected improved job outcomes $4,499,000
Projected cost of financial program = $1,600,000
Projected ROI 2.8/1 ($4,499,000/$1,600,000)
* These calculations are reasonable estimates, not guarantees. Some numbers are very low estimates and ABC Company’s Human Resources Department has the most accurate cost data. Decreases in accidents, workplace violence, and theft, and reduced fiduciary liability are additional ROI values, and they are not part of this ROI calculation, although they should be included.
Mount Quality Financial Program
Deliver to all employees and focus on impacting those with low financial well-being.
Emphasize the basics of personal finance:
Spending and Saving
How to Calculate the Real ROI (One Year Later)
Review changes in job outcomes.
Add up the savings.
Add up financial program costs.
Calculate real ROI.
30% of USA employees are dissatisfied with their personal financial situations (scores of 1-4 that are less than middle [5-6]).
(What’s the percentage at your workplace?)
Employer uses PFW to survey employee financial well-being to establish baseline information.
Checks company data to project return on investment for improving employee financial well-being.
Hires the best provider to improve employees’ financial decision making.
Surveys PFW one year later to prove the real bottom-line results.
Conclusions on Retirement and Poor Personal Finances
1. Financially illiterate adults do not manage their personal finances very well and they do not save and invest enough for a financially successful retirement.
2. It is in the employer’s best interest—more profits—to provide employees easy access to quality financial programs.
I leave you with the immortal words of the great baseball player, Yogi Berra, of the New York Yankees, who often fractured the English language with his truisms like:
“ If you don’t know where you are going, you will end up somewhere else.”
Dr. E. Thomas Garman
Professor Emeritus and Fellow, Virginia Tech University
President, Personal Finance Employee Education Foundation
9402 SE 174 th Loop, Summerfield, FL 34491 USA
To examine the PFW scale and read research articles about its use, see http://www.afcpe.org/pages/journal_abstract.cfm?journal_id=290&top_id=21 http://www.afcpe.org/pages/journal_abstract.cfm?journal_id=303&top_id=21
For permission to use the PFW scale, contact Dr. Garman
a Based on reduced absenteeism and less work time dealing with personal financial concerns. See research and press releases at www.PersonalFinanceFoundation.org
b Conservative estimate; research underway
c $1,200 contribution to health reimbursement plan ($1,200 X 0.0765)
d $5,000 contribution to dependent care reimbursement plan ($5,000 X 0.0765)
e Employee stays in high-cost health plan instead of choosing less expensive CDHC policy (consumer driven health care)
Appendix: Detail on Projected 2.8 ROI for ABC Company*
Program offered to 28,000 employees
Program impacts 30% of employees, 8,400, in varying degrees of effectiveness resulting in improved financial behaviors and job outcomes:
Garnishments (2,484 X 0.30 = 745 X $600) $ 447,000
Absenteeism (56,000 X 0.30 X 0.10 = 1,680 X $100) 168,000
Short-term disability (1,259 X 0.30 X $100) 37,000
Turnover (28,000 X 0.0025% = 140 X $6,000) 840,000
Health care costs (28,000 X 0.30 X 0.10 = 840 X $400) 336,000
Workers’ compensation claims ($32M X 0.005) 1,600,000
Health care spending plan (1,353 X 1 X $1,000 X 0.0765) 10,000 (cash)
Dependent care spending plan (259 X 1 X 1,000 X 0.0765) 19,000 (cash)
Job performance rating (28,000 X 0.30 X 0.05 = 420 X $2,100) 882,000
Work-time on finances (28,000 X 0.30 X 0.05 = 420 X $167) 70,000
Total value of projected improved job outcomes $4,409,000
Cost of financial program = $1,600,000
ROI 2.8/1 ($4,409,000/$1,600,000)
* These calculations are reasonable estimates, not guarantees. Some numbers are very low estimates and ABC Company’s Human Resources Department has the most accurate data. Additional ROI values from decreases in accidents, workplace violence, and theft, and reduced fiduciary liability are not included in this ROI calculation.