Rising Compensation Costs• Rising cost of benefits, especially health care Great News: 2008 Health care costs for most employers is expected to be around 7%, a moderate increase compared to previous years
Employer Responses Aggressive health care initiatives, such as higher deductibles, co-pays, and employee contribution levels.• 88% of employees are required to pay some of the insurance premium out of their own pockets.• The employee share rose from 14.0% in 1992 to 22.1% in 2005. Source: Economic Policy Institute, 2008
Employer Responses Changes or elimination of employee health care coverage Statistic: Employer coverage has declined from 61.5% in 1989 to 58.9% in 2000 and down to 55.9% in 2004 (the latest aggregate data available)Source: Economic Policy Institute, 2008
Employer Responses Focus on changing employee behaviors Wellness programs Smoking cessation efforts Education of employees on health care options and associated costs
Employer Responses Some employers have been holding their health care costs to a 1% increase. Theyre doing it by taking a multipronged approach, with programs to prod employees to take more responsibility for their health and to make more informed health care decisions.Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Successful employers are aggressively pushing consumer directed health plans (CDHPs) Combines a high deductible insurance policy with a tax advantaged health savings account Firms are setting the premiums at 30% below traditional plans to encourage participation Participation hit 15% this year, up from 10% in 2007 and likely to hit 20% in 2008 Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Saving money by providing free drugs and supplies for chronic diseases (e.g., asthma, diabetes) that are known to lead to costly complications. Goal is to get patients to stick to their treatment schedules; often tied to classes or coaching Upcoming survey from Hewitt Associates indicates nearly 20% of firms do this now, and 47% are considering doing so in the future Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Paying the full amount of common preventive services can also help reduce costs These include annual physicals, mammograms, prostate screenings, flu shots, colonoscopies and prenatal office visits Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Sending the sickest employees to the best doctors is gaining as a strategy Dubbed by some as a 20-20 approach - employers and their health plans use data to identify physicians rated in the top 20% for effective treatments and match them with the 20% of employees who most need care. Employers provide financial incentives, (e.g., lower copayments) as incentives to use the top providers. Eventually, firms will try predictive modeling to identify the sickest 20% of employees so steps can be taken today to "get ahead of the curve”Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Increasing financial penalties for employees that poorly manage their health Many companies continue to reward workers who take health risk assessments and participate in health management programs, while punishing those who do not Employers may deny a worker access to higher-benefit plans if worker declines participation in wellness programs Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses On-site medical clinics are growing in popularity Large companies staff clinics with own employees while smaller firms contract out to nearby clinics Help provide primary care to workers at low or no cost On-site clinics lessen time employees spend away from work. On-site clinics expanding to include rehab services, dentistry, X-ray and lab work Forms inviting specialists to come on-site and offer their services. Clinics moving into more active management of workers health conditions Source: Watson Wyatt Worldwide and the National Business Group on Health
Employer Responses Putting health care into employee’s hands As health insurance costs continue to rise, employers are adopting a controversial new approach: ending group coverage and giving employees $50 to $200 or so a month to help buy their own health care Source: USA Today, March 26, 2008
Rising Compensation Costs1. Competitive pressure on increasing employee wages Linking pay to organizational goals, employee productivity, and labor market norms Pay-for-Performance Programs Performance Management
Success of Programs• Pay for Performance Works When: It is measurable and objective There are clear expectations There is commitment to training and support Flexibility for inputSource: workforce.com 5/05
Failure of Programs• Pay for Performance Falls Short When: It pits employees against each other It pushes one outcome to the detriment of the others It is so subjective it opens the organization and managers to allegations of bias Source: workforce.com 5/05
Key Drivers of Success Better communication of performance standards with all levels of the organization Clearly Specify Incentive Measures Organizational measures: • service quality • teamwork • income growth • cost savings Individual measures: • based on established performance goals within individual areas of responsibilitySource: JE Rocco. http://danenet.wicip.org/snpo/
Challenges in Implementing Performance-Based Pay• Pervading Attitude of Equality• Custom of Cost of Living Approach• Challenge of Performance Measurement• Discomfort with Judging Performance• Weaknesses in Data Collection• Inadequacy of Funding ResourcesSource: Performance-Based Pay Plans Family Services of Western Pennsylvania; Marc Andrews Kathy Yarzebinski; Catherine Greeno;Christopher Gjesfjeld; 2006
Employee Productivity and Performance Management Phase 1• Business strategy—including its mission, vision and objectives, and specific outcomes required to achieve the overall strategy—are defined. Goals and plans for how to measure achievement must be identified. Outputs and measures are defined Data collection and analysis processes and procedures are developed and implemented Most importantly—employees come to understand their individual roles and responsibilities with respect to performance measurement Employees are given the fundamental information, resources, competencies, and motivation to ensure their successful execution.
Employee Productivity and Performance Management Phase 2 Data that informs areas of success and challenge for the organization are collected and analyzed Specific elements and factors that contribute to successes or challenges along with new and/or modified information needs and lessons learned are identified
Employee Productivity and Performance Management Phase 3 Solutions to address identified challenges are developed and implemented, along with mechanisms to ensure the continuation of program or organizational successes Performance measurement systems and processes may be modified as needed to ensure that information collected through the performance measurement process is timely, relevant, and sufficient—steps that cycle back to performance planning According to the U.S. Government Accountability Office (GAO), federal managers reported having more performance measures in 2003 than in 1997, but they also reported that use of performance data for program management activities has essentially remained unchanged
Employee Productivity and Performance Management Phase 4• Several commonly used methodologies for performance measurement Behavior-Based Approaches - These approaches tend to use specific performance factors to evaluate staff. 1. Quantitative -- use of numbers or frequencies of specific behaviors observed or reported 2. Qualitative -- use of subjective impressions of raters
Behavior-Based Approaches Behaviorally anchored scales Broad categories of practice are identified, ideally through collaborations between supervisors and staff. Specific job behaviors are then linked to the categories. Measures of staff member behavior are rated on a scale in relation to specific behavior items, such as "understands department functions."
Behavior-Based Approaches Behavioral frequency scale Desired behaviors are described and the staff member is evaluated on how often those behaviors occur
Behavior-Based Approaches Weighted checklist - method provides a list of performance related statements that are weighted Staff members are judged on a scale indicating the degree to which the statement accurately describes performance
Behavior-Based Approaches Forced-choice method - list of performance related statements about job performance are evaluated on how well they discriminate among staff and how important they are to unit or institutional performance
Other Approaches to Measuring Performance Results-Focused Approaches Management by Objectives (MBO) and Accountabilities and MeasuresSource: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.
Core Elements in MBO Formation of trusting and open communication throughout the organization Mutual problem solving and negotiations in the establishment of objectives Creation of win-win relationships Organizational rewards and punishments based on job-related performance and achievement Minimal uses of political games, forces, and fear Development of a positive, proactive, and challenging organizational climateSource: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.
Steps in MBO Process Formulate long-range goals and strategic plans Develop overall organizational objectives Establish derivative objectives for major operating units Set realistic and challenging objectives and standards of performance for members of the organization Formulate action plans for achieving the stated objectives Implement the action plans and take corrective action when required to ensure the attainment of objectives Periodically review performance against established goals and objectives Appraise overall performance, reinforce behavior, and strengthen motivation. Begin the cycle againSource: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.
Team Performance Measurements Team appraisal matrix - team members are listed on a vertical dimension, and specific tasks on the horizontal• Such an arrangement reflects individual performance, and collectively reflects the overall team performanceSource: Creamer, D.G., & Janosik, S. M. Performance appraisal: Accountability that leads to professional development. In S. M. Janosik, D. G. Creamer, J. B. Hirt, R. B. Winston, Jr., S. Saunders, & D. Cooper (Eds.), Supervising new professionals in student affairs. New York: Brunner- Rutledge.
Success Factors in Performance Management Systems Success in obtaining meaningful performance data and using this data to manage, and institutionalizing these practices so that they become ingrained in the organization This depends on several factors: 1. Presence of a culture of accountability within the organization 2. Leadership demonstrates commitment to managing for results. 3. Staff engages and invests in the process, which leads to feelings of empowerment and continuity.
Points to Remember Before implementing a performance measurement or management system, see if other areas of your organization have implemented their own system Anticipate and consider unintended consequences of measuring performance Reinforced behavior will be repeated, so carefully consider what behaviors should be emphasized (e.g., individual achievements versus team achievements) Communication of performance information among relevant stakeholders crucial to the success of any performance measurement or management system
Current Trends Developing Human Capital3. Managing talent – recruitment, development, and retention of the best workers Employers need to find innovative ways to “brand” themselves, setting them apart from competitors and becoming an “employer of choice” As talent becomes scarce, development of current employees for promotional opportunities
Developing Human Capital1. Labor shortage – finding the right talent Statistic: By 2020, gap between available and required skilled workers is projected to be 14 million Use of e-recruiting and non-traditional labor pools Establishing selection system geared to retention: better skills assessment, knowledge, and fit for jobs Source: Kaihla, P. Business 2.0, 4(8), 97-104.
Developing Human Capital1. Higher ethical standards Greater focus on trust and integrity at all levels Regulatory compliance issues (i.e., Sarbanes- Oxley Act)
Current Trends• Harnessing New Technology 1. Use of technology to communicate with employees Company intranets E-Newsletters Company emails
Harnessing New Technology1. A move toward single software platforms Integrated HRIS PeopleSoft SAP Oracle
Harnessing New Technology Perhaps most significant development is the use of organizational intranets An intranet is internal network that makes use of World Wide Web technology (browsers, servers, etc.) to gather and disseminate information within the firm Intranets may be linked to the external Internet, but are secured so that only authorized users can access information on internal components
Harnessing New Technology1. Evolution of new technologies• Employee Self-Service and Data Exchange Capability to maintain personal data View context-specific information Initiate benefits transactions Internet-based tools are quickly becoming the preferred method for employees to execute benefits transactions
Benefits of Automated Benefit Administration• Reducing and eliminating extensive manual efforts formerly needed to: Distribute, collect, and process forms Test programming required to export/import data Administer the periodic data exchanges Reconcile data Resolve employees’ problems resulting from the time lag between data collection and processingSource: Benefits Perspectives: Current Issues in Employee – Winter 2002-2003; Milliman USA
Current Trends Managing the Changing Workforce1. Increased diversity in the workforce Creating workplace that respects and includes differences Recognizing unique contributions individuals with differences can make Creating work environment that maximizes potential of all employees
Managing the Changing Workforce1. Work-life balance Employees experiencing burnout due to overwork and increased stress – in nearly all occupations Rise in workplace violence, increase in levels of absenteeism as well as rising workers’ compensation claims Causes range from personal ambition and the pressure of family obligations to the accelerating pace of technologySource: Center for Work Life Policy
Work-Life Balance According to study by Center for Work-Life Policy, 1.7 million people consider their jobs and work hours excessive 50% of top corporate executives leaving current positions 64% of workers feel work pressures are “self-inflicted”, and taking a toll In the US, 70%, and globally, 81%, say jobs are affecting their health. Between 46% and 59% of workers feel stress is affecting their interpersonal and sexual relationships. Males feel there is stigma associated with saying “I can’t do this”
Managing the Changing Workforce3. Structural shift from the manufacturing to the service sector Growth in part-time employment Rising prominence of women in the workforce Gradual ageing of labor force with fewer young people entering workforce and participation rates among older workers increasing Growing importance of temporary employment and self employment Adoption of flexible working practices, such as job sharing and the increasing opportunity to work from home.
ConclusionsExciting time for HR professionalsMore emphasis on cost containment and controlFocus on employee responsibility and involvement at workGreater use of technology in communication with employeesMore flexible patterns of work