Managing employee benefits in organizational practice

¶ … diverse workforce, the question of employee benefits has become increasingly complex. While salaries themselves remain important, other benefits have become increasingly so as workers seek to balance family work responsibilities in ways that -- when most families had two parents, one of whom stayed at home full time -- had not been dreamed of a generation or two ago. The current still-shaky state of the economy joined with recent corporate scandals have made more and more workers interested in the kind of guarantees about pension plans, 401ks or other retirement that companies are willing to give that are distinct from the company's own stock options. The rising cost of health care has made many employees especially concerned with the kinds of medical benefits that a company may offer. And the desire of many younger employees to have flexible hours so that they can continue their education, be able to contribute their time and expertise to charitable causes, or work from home has also increased the complexity of the issue of managing employee benefits. This paper examines how one company, a large daily newspaper, has tried to strike a benefits system that is simple enough to manage and yet flexible enough to meet the needs of its employees.

Statement of the Problem

In developing an employee benefits system, each company must consider the specific nature of its workforce (including both internal characteristics of that workforce as well as external factors such as the competitive situation in the industry involved). As benefits packages -- aside from strict salary amounts -- become more and more important to workers (and previous research suggests that this is generally the case), companies have been forced to offer increasingly complex and attractive benefits packages. Such packages cost companies money not only in direct terms -- such as matching contributions to 401k programs -- but also indirectly in terms of staff time required to manage these increasingly and varied permutations of benefits programs. However, a good benefits package can certainly pay off in terms of increased retention and loyalty and even increased productivity. This paper examines the effects of a shift in employee benefits at a large newspaper after it was taken over several years ago by an even larger media corporation, embedding the findings about this particular company within the body of recent research conducting across different industries in this field.

Results of Research

The pay or salary that a job offers has for centuries been the most important benefit offered to employees. The reason for this is in part historical: In the 19th century a salary was in most cases the only benefit that was offered. Moreover, salaries are clear-cut: They are easy for the worker to calculate and to compare whereas other benefits -- such as a promise of promotion if a position opens up -- are far less tangible and far harder to calculate the worth of. Finally, it is important to acknowledge that the relationship that exists between any employer and his or her worker is at the most fundamental level an economic one. While an employee may get any number of rewards from a job, the reason that one takes a job is an economic one: If one did not need the money one would undertake the same work as a volunteer or as a hobbyist. And because money lies at the heart of the relationship between worker and employer the question of salary must be central as well.

This having been said, in today's workplace there are a number of other forms of benefits that are important to workers today. If one sets aside salary, medical (including dental) benefits tend to top the list. This is hardly surprising given the cost of medical care today and the assumption made by many that it is only likely to increase in the future. This recent survey of high-tech workers underscores that point. When asked the order of importance of benefits when choosing to accept or reject a job offer, they listed the following benefits in this order:

Medical/dental benefits

8.6

Training/tuition reimbursement

7.6

Additional vacation/personal days

7.4

Retirement/pension program

7.3

Flex-time

7.2

Regular bonuses/reward programs

7.2

Life/disability insurance

6.9

Telecommuting

6.5

Stock options

6.2

Casual dress

6.2

Employee assistance program

5.5

On-site concierge services/employee discount programs

4.1

Child-care/daycare reimbursements

3.5

Note: Responses based on a scale of one to 10 with 10 being most important.

(http://home.techies.com/Common/Content/2001/09/17sb_benetelecom.html).

Such a survey would find at least slightly different results when done with members of different professions; for example, teachers would in all likelihood not stress the importance of training and tuition reimbursement (despite the fact that they are in the education field) because their skills are more likely to stay current than are those of a high-tech worker, who may well depend on being able to get continuous training if she or he is to remain employable. However, two important aspects of managing employee relations are unlikely to change regardless of the particular field one is surveying. The first of these is the fact that medical coverage is going to be important to most workers (especially since with so many of millions of American who are uninsured in today's workplace the need for other members of the household to be insured becomes all the more important). The second of these is that the overall package of benefits is likely to be extremely important in determining employee satisfaction and loyalty (both of which are linked to productivity).

As organizations work to recruit and retain employees, human resources professionals and their employers need to take steps to determine which factors most influence employee motivation and job satisfaction. Employee satisfaction contributes directly to organizational growth and ultimately to the bottom line, the survey said (http://money.cnn.com/2003/12/03/news/economy/jobsurvey/).

Larger Firms Hold the Advantage

The companies that are most able to and most likely to be able to offer the kinds of varied benefits that keep a workforce happy are the largest companies. This should not be surprising, although it does highlight one of the key challenges faced by smaller firms. While larger companies may be more anonymous and less likely to offer certain kinds of personal satisfaction to workers (who may feel that they have less autonomy and that their specific contributions are not acknowledged as they would be at a smaller firm), those larger companies can offer both better salaries and better benefits packages: While the survey cited above found that 74% of those who worked at large companies (defined as having 500 or more employees) were satisfied with their benefits, compared with only 60% of those at medium-sized companies (with between 101 and 499 employees) and only 47% of those at small companies (with fewer than 100 workers). Moreover, nearly nine out of ten employees who said that they were happy with their benefits package said that they were happy overall with their jobs (http://money.cnn.com/2003/12/03/news/economy/jobsurvey/).

Employee satisfaction contributes directly to organizational growth and ultimately to the bottom line, the survey said.

"This survey clearly indicates that it is critically important for small organizations to design comprehensive employee benefits packages," Ken Jautz, the executive vice president for CNN News Group's business news operations, said in a press release.

"Small businesses are the backbone of the U.S. economy, yet they face serious financial and creative challenges associated with providing employee benefits packages" (http://money.cnn.com/2003/12/03/news/economy/jobsurvey/).

Many Companies Still Lag Behind

It is because of worker sentiments like this that companies in ever increasing number of fields are giving greater consideration to the kinds of non-monetary benefits that they offer, understanding that it is the make-up of the entire package of compensation that will or will not keep employees happy. (And a happy worker is one who will not jump ship for a slightly higher salary). And yet, despite the fact that many companies are today doing an excellent job of providing a smorgasbord of benefits that employees can choose among to fit their specific needs, other companies lag behind, either because they do not have sufficient resources to offer the kinds of benefits that they might like to (and that their employees are almost certain to want) or because the management philosophy of the firm has not yet shifted to an understanding of how important benefits (vis-a-vis salary alone) are to so many workers. This was one of the findings in a undertaken in 2001 by the American Institute of Certified Public Accountants, a professional organization that includes a majority of CPAs in the country (http://www.aicpa.org/pubs/cpaltr/apr2001/supps/small8.htm).

One of the key findings of this survey was the fact that while employers are likely to offer more (and more different kinds) of benefits than they did twenty years ago, they are still unlikely to offer a number of benefits that would greatly increase employee satisfaction (and therefore loyalty and productivity) even when these benefits cost the employer little if anything. It is almost as if benefits managers, having added 401ks and a few other benefits to their offerings, are unable to be any more flexible. In other cases, the benefits program officers may have done an excellent job in creating a diverse benefit package but other divisions of a company (including its top management) may be sabotaging the efforts of the benefits program. This is the case, for example, when flextime or telecommuting are offered as benefits but workers are actively discouraged from taking it by managers who let the workers know that they will not be considered to be team players if they fail to put in ten hours at the office everyday.

This essential conservatism reflects the fact that many of those who are heading corporations as we jog forward into the 21st century are carrying with them a very much mid-20th century perspective, perhaps the one that was pervasive when they themselves first entered the corporate world. Ancona etal (in the Sloan School of Management paper "What Do We Really Want?") argue that companies have been surprisingly resistant to changing the workplace, including the arena of benefits, to fit the realities of the late 20th and now 21st century. However, to create work structures that are fashioned as if all employees were men whose wives take care not only of the children but of the men as well (cooking them dinners, dropping off their dry-cleaning, sending flowers to their secretaries) is not only sexist and anachronistic but counterproductive as well. When companies are inflexible -- about working hours, or who can be covered on health insurance, or vacation time -- they are likely to lose good workers to other firms that are more amenable to allowing workers a greater measure of autonomy as one of the benefits of their job.

For example, how would companies operate differently if there were widely available measures of how well they created "good" jobs for people who would not otherwise have them or of how well they prepared their workers for better jobs in the future? Or what if organizations designed work processes by considering from the beginning how employees could best integrate their work lives and their family lives instead of designing work process first, and then trying to balance family needs afterwards (Ancona etal, http://ccs.mit.edu/papers/pdf/wp032manifesto21C.pdf.)

In addition to the fact that conservative tendencies limit the number and type of benefits that many firms offer, it is also sometimes that case that aspects of a job that employees see as benefits but that benefits officers see as an intrinsic part of the job are excluded from benefits packages. Workers may believe that the chance to get additional training or to be considered for promotions a form of benefit that should be explicitly included while benefits managers are inclined to see such issues as a question for other departments. However, given the importance of training (for example) to employees (as found in this survey as well as in the survey of high-tech workers cited above), such issues should in all likelihood be explicitly included in benefits packages to reassure workers that training and the opportunity to polish old skills and learn new ones will be a part of the job:

Money isn't everything, or at least that's what many employers are hoping as they engage in the high stakes game of finding and retaining talent. According to a new survey, companies are emphasizing non-monetary rewards much more than they did just a year ago. The three most common alternatives to cash are advancement opportunities (76%, up from 60% in 1999), flexible work schedules (73%, up from 64%) and opportunities to learn new skills (68%, up from 62%), according to the fifth annual Watson Wyatt Strategic Rewards survey (http://www.aicpa.org/pubs/cpaltr/apr2001/supps/small8.htm).

A final note about the increasing range of benefits may be in order. While managers may tend to limit benefits because they are expensive or simply because of the headaches involved in administering complex benefits packages. But these complexities are, well, complex for workers as well. It's easy to compare the dollar figure of one salary to another, but it's far more difficult for a worker to assess (for example) the relative value of casual dress (something that might be immediately appealing) with the value of on-site childcare (something that might or might not be extremely valuable to the worker in a few years when he or she has children). Employees, when they are looking for a job, have to consider the value of benefits to both their present and their future needs and then try to assess how committed the company is to maintaining those benefits over the long-term -- given that while salaries tend to continue to rise for a worker after she or he has joined a company, benefits may come and go depending on management philosophy rather than the needs of any particular worker. This requires workers to be their own -- careful -- advocates in assessing benefits packages.

It's not hard to look at the averages and see how your employer or your job offer measures up. What complicates matters is the increasing use of bonuses, perks and incentives by employers to recruit and retain employees. Look at the companies rated the best places to work and you'll discover most offer health club memberships, flexible schedules, day care, tuition reimbursement, on-site dry cleaning, and, of course, stock options.

Surveys by Ceridian Employer Services have found 65% of employers believe that perks help to attract employees. The average number of perks offered by companies range from 3.38 perks at the smallest employers to 5.20 perks at firms with over 5000 employees. A sure sign that employers are paying attention to the importance of added benefits is the fact that the most frequently offered perks mirror the most frequently desired perks - casual dress and flexible work hours. Some companies even offer a few options that I wasn't aware of on the list including bringing your pet to work, concierge services and take home meals (http://jobsearch.about.com/library/weekly/aa032600a.htm).

Bigger in This Case Was Better

Ten workers were contacted at the newspaper company that was surveyed for this research. Each one was surveyed about the quality of the benefits before and after the takeover through email. Employees from different divisions and of different lengths of tenure at the company were surveyed so that a representative sampling of opinions on benefits could be assembled. Each one had worked for the company (which was already large) before its recent relatively friendly takeover by an even larger media company, and each one of the ten said that benefits have improved since the takeover. This seems to reflect both the general capability of larger companies to provide more varied and better benefits packages as well as the fact that the quality of benefits reflects not only size but also the basic philosophy of the company. The following editor summarized the improvement in benefits from his perspective:

When we were getting bought out I had friends call me and ask if we were going to get raises or stock options. But -- and I'm being perfectly honest with you on this -- I really didn't care about that. I mean, I was being paid enough money and I would have been pretty pissed off if my salary had been dramatically cut. But we had a really lousy health plan before. My daughter has diabetes so we use our health plan a lot and it was so limited and so bad that I was sending out resumes just so that I could go to a company with decent health insurance. After the merger we got much better coverage, and so I decided to stay.