Scott MacStravic, PhD
The concept of employee benefits enjoyed a major boost during World War II, when the government froze wages, but permitted employers to use benefits to promote recruitment, morale and retention. Since then, the costs of benefits, particularly health benefits, have risen exponentially, while their value has largely remained unexamined. This is changing, as two developments converge: 1) “Value-Based Benefit Design”: and 2) "Integrated Benefits Management.”
Jack Mahoney and David Hom, at Pitney Bowes, have made the case for both in two books: Total Value/Total Return 2006 and BeneFIT Design 2007, both published by GlaxoSmithKline. They cited the fact that employers spend millions, even tens and hundreds of millions on employee benefits, yet normally fail to do even elementary analyses of their value and return on investment (ROI). While their focus in both books is mainly on health benefits, what is true for health is generally the case for the total benefit packages that employers offer, as well.
The first question that arises in considering and evaluating benefits as investments is where to look for returns. The breadth of possible benefits is suggested by the authors when they wrote: “Healthy people have higher productivity and are happier on the job, and this shines through to the way they deal with customers and fellow employees.” (fourth page of “Foreword” in Total Value/Total Return).
As the authors describe it: “Your people create your competitive advantage. All your products and services are a reflection of their creativity and execution. When our people lose effectiveness, we lose customers.” (p. 1 of Total Value/Total Return) When any one employee is ill, for example, this can have widespread negative impact on teams, units, departments, and the entire organization. The total benefit package, including retirement, vacation/holidays, tuition aid and other career development/job training efforts, add to the value of work to employees, and the value of their performance and retention to employers.
Within the organization, it is often unclear whose job responsibility/accountability it is to continuously improve workforce performance. Unless the organization measures employee performance, it cannot even know if it has problems and opportunities therein, much less manage it.
Healthcare organizations (HCOs) have a special reason to measure and manage employee performance, since they increasingly gain added revenue if their performance is good enough to qualify for “pay-for-performance” (P4P) bonuses offered by third-party payers. Moreover, as HCO performance is increasingly published or made available for online access by consumers when choosing a provider for care, HCOs have even another reason to measure and manage their performance.
The starting point is clearly to measure employee performance, at whatever combination of individual, team, unit or departments is both feasible and useful. Then, determining the impact that employee unhealth has on performance as a problem, and employee health investments have as a solution is at least possible. And once performance measures are available and used, examining the entire benefits investment to determine its ROI becomes at least possible.
There is a rapidly growing body of literature, from both the “scientific/academic” community and the “practical/business” community, describing what has already been accomplished through health and benefits management. HCOs should ideally be adding to, as well as gaining from the body of proven results and returns that are being achieved throughout the business world. The two Mahoney/Hom books are a good place to start.
Remember Me
