6. Rising Compensation Costs
1.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
7.
8.
9. 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
12. 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
13. Employer Responses
Focus on changing employee behaviors
Wellness programs
Smoking cessation efforts
Education of employees on health care options
and associated costs
14. Employer Responses
Some employers have been holding their health care
costs to a 1% increase.
They're 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
15. 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
16. 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
17. 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
18. 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”
19. 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
20. 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
21. 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
22. Rising Compensation Costs
2. Competitive pressure on increasing
employee wages
Linking pay to organizational goals,
employee productivity, and labor market
norms
Pay-for-Performance Programs
Performance Management
23. 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 input
24. 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
25. 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 responsibility
26. 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 Resources
27. 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.
28. 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
29. 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
30. 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
31. 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."
32. Behavior-Based Approaches
Behavioral frequency scale
Desired behaviors are described and the staff member
is evaluated on how often those behaviors occur
33. 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
34. 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
35. Other Approaches to Measuring Performance
Results-Focused Approaches
Management by Objectives (MBO) and
Accountabilities and Measures
36. 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 climate
37. 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 again
38. 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 performance
39. 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.
40. 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
41. Current Trends
Developing Human Capital
1. 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
42. Developing Human Capital
2. 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.
43. Developing Human Capital
3. Higher ethical standards
Greater focus on trust and integrity at all levels
Regulatory compliance issues (i.e., Sarbanes-
Oxley Act)
44. Current Trends
• Harnessing New Technology
1. Use of technology to communicate with
employees
Company intranets
E-Newsletters
Company emails
45. Harnessing New Technology
2. A move toward single software platforms
Integrated HRIS
PeopleSoft
SAP
Oracle
47. 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
48. Harnessing New Technology
3. 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
49. 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 processing
50. Current Trends
Managing the Changing Workforce
1. 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
51. Managing the Changing Workforce
2. 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
technology
52. 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”
53. Managing the Changing Workforce
3. 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.
54. Conclusions
Exciting time for HR professionals
More emphasis on cost containment and control
Focus on employee responsibility and
involvement at work
Greater use of technology in communication with
employees
More flexible patterns of work
