Here’s an idea: take wages away from good workers for a benefit most won’t use. Entry 14 - 2009

Congress is considering a bill that would mandate all employers provide seven days of paid sick leave for employees to care for themselves or a family member (1). There is no provision for workers to cash-in unused sick leave or convert to vacation days if unneeded (2), so the only way to get value from this mandated benefit will be to have seven days of illness in one’s family each year. However, the bill does allow employers to require a doctor’s written excuse for illness absences that last three days or longer.

Like all such mandates, the bill sponsors believe it will protect workers from unfair treatment; one should not be punished when illness strikes oneself or one’s child. Related media stories focus on single mothers being threatened with termination because their children become seriously ill. Inevitably, listeners sympathize and support kinder policies by companies.

Well-intended or not, it will hurt more than help.

It’s important to understand who actually pays for benefits: employees. The drafters of this bill may assume that companies will just add this expense to their existing employee costs, but this is not true. Economic research on the topic confirms that benefits are paid in lieu of higher wages (3). Because this mandate creates costs that fall into the larger category of labor costs, i.e., total compensation, it dictates a trade-off in how workers get paid. In this case, we will all be paid more in the form of sick leave, and less in the form of direct pay.

In other words, you will be paid less for the days you do work to cover the expense of paying you while you’re gone. It all comes from the same compensation pie. Seven days is 2.7% of all work days (260). If we simply add these days to time off already offered, the employer now has 2.7% of compensation no longer available as wages or bonuses. If these seven days are substituted for vacation, workers now get seven fewer days to use as they wish, and must actually be sick (or fake an illness AND provide a doctor’s note for up to seven days) to get the same total compensation they are earning today.

Mandated paid time-off doesn’t help employees, companies, or national healthcare costs.

Doesn’t help Employees: Looking at it objectively, it is already bizarre that employees let employers decide on their behalf exactly how many days they should work and not work. Across the country, employers tend to allot all employees the same amount of leave, and in ‘use it or lose it’ circumstances, punish those who don’t take enough time off. In reality, there is no perfect amount of time off that fits everyone. Needs for time off vary across people, life stages, and circumstances; only each person can decide what he needs.

Doesn’t help Companies: By its very definition, paid time-off means that companies are paying rewards to employees who are not working. This expense returns little to no value, because the company pays the cost of wages, but forfeits the productivity that would have been produced by those wages. Instead of paying wages that produce output, the company applies the same wage for no output.

Doesn’t help manage national healthcare costs: Because the mandate requires people to take time off for illness (or alleged illness) without option to cash-in unused sick time, we create a situation where it’s in the employee’s best interest to be sick AND to file extra healthcare claims to justify our paid time off. Doctor’s don’t mind writing notes for these circumstances, because they can charge for the visit. Now we’re billing the healthcare system even MORE for costs that may not have required a doctor’s care to begin with.

An additional side effect is the likelihood of additional testing and prescriptions that result from added doctor visits. Because doctors will make efforts to diagnose and treat what might be wrong, excess utilization will result.

So how many people today use seven days of sick leave?
I estimated (4) (using a modeling tool available to the public, check it out on the web if you wish) how many days of sick leave or disability workers are expected to have when sick leave is available. I used a population with an average age of 40, an average annual salary of $50,000, distributed around the country. As you see, 85% of people are expected to have five days or fewer, and our experience is that most will have two or fewer. (Click on the graph to make it bigger and clearer.)

What this means is that if employers are required to provide seven days of sick leave, 85% or more of employees will NOT use all seven days, but WILL forfeit the wages used to pay for the benefit. Sadly, those 85% of workers who do NOT use seven sick days are most likely the ones businesses want to reward.

What alternative fits the Health as Human Capital paradigm?

Two possible alternatives:

1) Give employees an option for seven days off (although don’t require them to be sick), and allow them to cash-in any unused days at the regular rate of pay.

2) If we wanted to give workers an option to take more time off, why not give them the money up front and allow each to decide? Define the full amount available for compensation, and what each day is worth if you work every day. Allow workers to “purchase” as many days as they want for that daily value (up to a max given business requirements).

An example: Let’s take a worker who earns $50,000 in salary. Average time-off benefits (assuming a typical 25 days off in combined sick and vacation leave) amounts to an additional $4,800 per year. Instead of mandating that the employee be gone to receive full value, pay the employee $54,800 in wages, and let the person take AS MANY unpaid leave days as they want, minus $211 in wages per day-off taken ($54,800 divided by 260 weekdays = $211). No matter the personal choice, the company gets full productivity value for wages paid, and the employee can take as many days as he wants depending on his needs without the risk of having the employer reduce wages to cover the cost of the mandated sick leave benefit.

This way,

• The worker can meet his or her own needs.


• Healthy workers are not forced to choose between forfeiting compensation value, or lying about illness.


• Employers are not encouraging extra use of healthcare to verify appropriate absences.


• Employers and government stop applying a one-size-fits-all rule to what constitutes the “right” amount, and type of time off.


• Employers align compensation with health and attendance.


• The absurd role of third-parties (deciding what is best for others) goes away.

Think twice before you mandate protection for everyone; you might just harm the healthy majority while you subsidize the few.

Why this matters: Everything is a tradeoff. Giving more of something—like sick leave—means there will be less of something else. Seven days of sick leave means hiring one fewer worker out of 50 workers…or paying lower wages…or less training…or less vacation…or lower bonuses. The most efficient way to meet individual needs is through individual choice, not by top-down requirements that may do more harm than good.

References
1. Greenhouse S. Bill Would Guarantee Up to 7 Paid Sick Days . New York Times. May 15, 2009:(Health: Money & Policy). Accessed July 3, 2009.

2. U.S. Congress. Senate. Healthy Families Act, S.910, 110th Cong., 1st sess. March 15, 2007; Accessed July 3, 2009.

3. U.S. Department of Labor, Bureau of Labor Statistics. Table 5. Private industry, by major occupational group and bargaining status. May 10, 2009; Accessed July 5, 2009.

4. American College of Occupational and Environmental Medicine. Blueprint for Health. 2009. Accessed July 3, 2009.

When you recover from the economic storm, will your top performers still be there? Entry 13 – 2009.

As companies look for ways to cut back in a tough economy, many are freezing salaries and limiting bonus eligibility. While this may seem prudent and logical, performance rewards are the last thing to limit if you intend to retain top performers.

With the exception of sales positions, senior executives, hedge-fund managers, and the top dogs at AIG, top performers are already notoriously under-rewarded in U.S. businesses. Compared to base salaries, most companies allocate few resources toward rewards for individual performance. Because companies do a poor job of rewarding performance, those producing exceptional value for a company, paradoxically, will be penalized most by a lack of pay-for-performance. This is partly because it is hard to measure some aspects of performance, and partly because many companies choose an egalitarian approach to rewards; e.g., “it’s really a team effort.”

So, who will notice (and possibly resent) a lack of bonus and salary increase the most? The best performers, that’s who. It’s worth revisiting an example where 100% of top performers left an organization within four years if their financial rewards did not reflect their superior performance (1). On the contrary, 90% stayed, if their pay reflected their performance. Promotions (with no pay increase) did not cause them to stay. On the contrary, middle and low performers were not as sensitive to having financial or other recognition.

Now, a study comes from Clemson University showing that top performers have high engagement, but engagement is NOT the same as corporate loyalty (2). What this study implies is that top workers are highly engaged in the work they do, not necessarily committed to the company for whom they do it. The author points out that top performers need recognition as well as adequate resources to do their jobs well. The article suggests that top workers want an environment that enables their natural drive to succeed. It could also be that engaged workers have a better sense of their own value, and will be more likely to seek alternatives when undercompensated.

If companies want to emerge from the current downturn with optimal strength, their focus needs to be on encouraging and retaining high performers.

Who has the highest job mobility?
Let’s look at the data: when a company offers a voluntary separation package, who leaves? Is it the low performers, who know their time and opportunities are limited anyway? Or is it the top performers who have the most employment options? I have heard both arguments.

The answer: both. If you rank performance from 1 to 10, our data show that in cases of voluntary separation, the ones, twos, nines and tens accept departure from the firm in the first few months, leaving those ranked from four – seven most likely to stay with the company. From a human capital perspective, those who have the best skills and highest motivation will have the most options…which includes leaving their current positions for better opportunities elsewhere.

So, where should companies save money?
Instead of paring back rewards for performance, this is the time to share more responsibility for company expenses unrelated to job functionality (benefits and so-called perks). While I have heard benefits professionals say that this equates to “kicking employees when they are down,” we respectfully disagree.


The most productive workers – not coincidentally – use fewer benefits than other workers on average. Think of it this way: people who enjoy their work do everything they can to get back to work after a health episode. And, in keeping with a health as human capital paradigm, research shows that people who feel rewarded and successful at work do more to protect their health (3).


As such, high performers are least likely to use extensive time off, least likely to worry that disability coverage is only 80% of salary rather than 100% of salary, and most likely to appreciate the ability to trade in unused time off for some extra cash. Top performers like their work, and probably selected their job based on the career opportunities – rather than for the benefits package.


Plus, funds can be realigned into areas that reward both good performance and encourage stewardship of benefits resources.

• Increase health plan deductibles and place any premium savings into health savings accounts.


• Offer bonuses back to employees as a group for reduced workers' compensation payments.


• Offer performance bonuses in the form of gain-sharing on greater-than-expected revenue (which will only be paid when and if such revenue arrives).


• Offer cash-back on unused paid time-off, so employees have an option of working more and earning more.

All of these examples are trade-offs instead of take-aways. They reflect an effort to share responsibilities as well as rewards. Those most likely to gain from the trade-offs are the ones who take care of themselves, work effectively, and spend resources carefully. And, isn’t that the way it should be?

Why this matters: There are many ways for businesses to spend less. However, each choice will have consequences. While it is tempting to pay people less while maintaining rich benefits, this approach will disproportionately affect those a company most wants to retain: top performers. Instead, organizations should consider ways to keep – or creatively invent – new mechanisms for rewards. If cutting back is unavoidable, look for tradeoffs on benefits unrelated to work performance.

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References

1. HHCFoundation.org. A study of what makes high performers stay. Entry 10 – 2006. Accessed June 21, 2009.

2. Clemson University Newsroom. Engaged employees are good, but don’t count on commitment. Posted May 13, 2009. Accessed June 21, 2009.

3. Schaneman, JL. The Relationship between Benefit Spending, Health Protection, and Variable Compensation. American Occupational Health Conference, San Diego, CA. April 28, 2009.

A “Culture of Health” – It’s more than a checklist. Entry 12 - 2009.

Every year, a new catch phrase becomes THE focus of corporate health. This year that phrase seems to be the “Culture of Health.” At almost every conference and corporate benefit presentation, a ‘culture of health’ is the gold standard all employers must strive to achieve. And why wouldn’t everyone want to?

But by what measure?
Disappointingly, more often than not, ‘culture of health’ is a term used to justify existing programs or sell new health-related activities. This thinking implies that how many health-focused activities a company sponsors, or how many health-conducive facilities they have determines whether there is a “culture of health.” I saw one presentation that defined it as a list of programs and facilities (everything from a fitness center, to healthy options in a cafeteria, to well-lighted stairwells, to weight-loss counseling), without mention of participation rates, results, or return on investment. This company is regarded as an industry leader, which means if other employers want to keep up, they’re going to need more checks on their list of health programs and activities.

Two things bother me about this year’s catch phrase: One, we’ve reduced the concept of culture to a single dimension (and coincidentally, only the dimension a company can buy). Two, it is a distraction from the real goal: productive employees and company success.

While external environment and supportive resources play roles in health promotion, can we really equate activities and facilities with culture? A definition of the term from Webster’s Dictionary:

Culture: The set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group; and that members use to cope with their world and with one another.

Scholars who study culture point out that culture itself is not observable, and can only be studied indirectly. It’s not simply WHAT people do, but WHY they do it, and what they BELIEVE about it. It’s not the items they own, but what those items signify. Culture is much more about the meaning of what we do, than about doing.

A “culture” that truly values human capital is one that rewards work achievement, shares savings when efficiencies are achieved, and provides significant opportunity for employee advancement. It values all human capital assets and encourages growth through aligned incentives. Employers can make SKILLS, MOTIVATION and HEALTH all more valuable by making sure that employees receive clear rewards for good work and clear savings from protecting their human capital, and never purchase a single health program!

It is a mistake to isolate health—as if it operates separately from skills and motivation—or to make it the end, instead of a means for a successful career and life. (There is a wonderful World Health Organization statement that describes health as: “a resource for everyday life, not the objective of living.”(1))

When we reduce discussions about adopting a ‘culture of health’ to a checklist, we miss the point. In fact, companies cannot buy culture with things and programs. Can we buy a “culture of learning” simply by building more schools and offering more classes? Can we buy a “culture of economic responsibility” by training everyone to understand interest rates and budgets? Of course not. These activities provide tools and opportunity, but they do not MAKE culture.

No, culture comes from continuous reinforcement, encouragement, acceptance, and rewards that confirm what is (or should be) of collective value to the individual and the organization. Interestingly, the same company that presented the extensive list of health programs and activities also has overarching policies that discourage wellness, such as:

Extensive pressures on leisure time of employees. Leisure time is a significant predictor of participation in healthy behaviors. Severe infringement on personal time—or implying that a defined work day shows a lack of dedication—while asking people to prepare healthy foods and exercise, is not a culture of health.

Limited opportunity and dead-end jobs. Motivation in one’s job carries over into life. Without optimism for a better future, self-improvement has less meaning. Under-investing in skills and capacity, while asking employees to improve their management of disease, is somewhat incongruous.

Keeping instead of sharing savings. Employees understand that health improvement efforts are often driven by a company’s desire to save money. Will employees share in any of those savings? If there is no shared economic return—bigger bonuses or bigger health savings account deposits—is this a culture of health? Or is it simply a thinly-disguised cost-saving effort benefiting only the firm’s owners and management?

Do we send mixed messages?
Too often, I see executive support for health expressed in an unrealistic way. A CEO will say, “We care about you and want you to take care of yourself,” while also reminding workers that he works at least 80 hours per week and STILL does a five-mile run every day. He does not mention that he has hired assistance at home to do his shopping, fix healthy meals, care for his children, and keep his household running smoothly. He also has ultimate flexibility in his schedule.

Today more than ever, the currency of healthy living may be time. And the best encouragement may be an obvious, regular practice of healthy behaviors by leadership. Having convenient tools, facilities, and resources will not add another hour to a person’s day. Nor will it change unwritten rules about getting in early or staying late.

Which brings me to concern number two. Distractions from the end-game: productive employees and a successful business.

The usual goal of a business is to deliver quality products and services and make money doing it. Companies hire workers to help accomplish this goal. Ideally, those hired are maximally productive and able to generate more value than they are paid (a requirement to make a profit).
The primary purpose of business is NOT to keep employees healthy. Sure, it’s a means to an end, but really, when you think about why businesses are created—to make and serve tasty meals, to deliver landscaping services, to design graphic artwork, whatever—we shouldn’t expect that worker health improvement is the reason for being in business. Secondarily, as a part of a human capital-building environment, employers want employees to grow their skills and abilities not because it is employees’ duty or mission, but because human capital assets contribute to business success.

Before you jump on the “Culture of Health” bandwagon, ask the following:

• Can employees earn significantly more for high achievement?
• When health care and work absence spending go down, do employees share the savings?
• Do employees have proven and visible opportunities for significant career advancement?
• Is there significant investment in training?
• Is the work day clearly defined to allow schedule flexibility and leisure time for healthy activity?

THESE elements reflect a true culture of well-being and respect for human capital, not whether a company has a program for every disease or risk factor an employee might experience.
If workers don’t gain from better performance and lower costs, why should they believe the company truly values their well-being (as opposed to simply wanting to make more money by cost cutting)?

Re-think the checklist.
If you look, you will see that those advocating most loudly for a ‘culture of health’ are those trying to sell more services. You will also see that the ever-lengthening checklists focus on more programs and services rather than on taking a hard look at how workers are rewarded, trained or treated.

Human capital growth, rewards for achievement, shared savings, respect for individual needs, and recognition for accomplishment are all proven to produce both improved health, and business results too…without a checklist.

Why this matters: Not every well-intended trend is a worthwhile investment. Remember, every dollar spent adding programs (health-focused or otherwise) is a dollar NOT spent on salary, bonus, or training. Make sure it is a dollar that truly encourages and rewards achievement and capacity growth, for the benefit of company and worker alike.

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References
1. World Health Organization, Regional Office for Europe. Ottowa Charter for Health Promotion, 1986. Last updated April 1, 2006. Accessed June 5, 2009.

Twenty years later…let me explain the ROI of better information. Entry 11-2009

The first time I suggested to an employer that they put all their data in one common database was in 1989. I was a university professor focused on research then, and was advising managers in HR and benefits about healthcare costs. I drew a hub and spokes, showing how we could take a variety of data sources from around the company and put them all in one central place. This way everyone could better understand what was going on in the workforce.

Their reaction could best be described as a blank stare. “Why would we do that?” they asked.

Little did I know that over the next two decades, I would hear the same question, literally hundreds of times. It comes in many forms:

Q: What is the guaranteed value of integrated information?

Q: How do you KNOW ahead of time that resources spent on data integration (and the resulting ability to see things in new ways) will produce something that is worth more than the cost of the investment in such integration?

Q: Can you show me exactly what we will gain?

Since I continue even today to get “the ROI question,” it is obvious that I have been less than successful in convincing people of the value of better information. Very often, organizations skip or delay “the data integration project.” No fewer than thirty times have I watched organizations decide instead to invest in ACTIONS (programs, facilities, surveys, or tangible items) that others can see. They choose doing over knowing; more action over more information; more visible over less obvious. And usually, it is an investment that costs much more than the data integration would have cost.

Being a data-oriented, research-minded person, I admit I was initially stunned by questions about the value of integrated information. To me, asking whether a company should invest in integrated information is like asking:

• Should we invest in a map before we leave on our trip, even though we think we know the way?
• Should parents invest in education for their kids when they aren’t exactly sure of their children’s future careers?
• Should we install a gas gauge in the car even though we have a pretty good idea about when we last filled our tank?

In all of these cases, we cannot state ahead of time EXACTLY how we will get value from these investments, but we will almost surely be better off, and may actually save ourselves from significant hardship.

I have never given this answer out loud before: Yes, I am absolutely, 100%, positively certain that having useable information in an integrated, person-centric database will provide more value than it costs. (Certainly, there are basic caveats around a reasonably-priced data solution and your company staying in business for the next 12 months, etc.). Further, AFTER you have integrated data, you will realize 100 more reasons it adds value than you could think of before hand.

What do I mean by integrated data? I mean regularly-updated information—combined at the level of each worker—regarding each job (how much workers accomplish, how much and in what ways they are paid, when they start and quit, who they report to, what training they receive, etc.) and regarding their use of employer–sponsored services (health insurance, time off, workers’ compensation, disability insurance, health interventions, etc.). This level of data allows us to extract meaningful outcomes that impact business performance.

Sure, some people simply dismiss my enthusiasm because I a) chose research as a career path, b) like numbers, c) had scientists as parents, and d) have almost always worked in companies where data analysis was an aspect of business. All true, but these aren’t the reasons I believe successful organizations require integrated information.

Because people rarely inquire about my enthusiasm for the power of information, here’s my chance to answer the question no one seems to ask: “What is it about information that’s so valuable to any organization?”

 Seeing the bigger picture adds value as much from what a company does not do, as what it does do. Face it, business leaders (all of us!) often have hunches about the problems they face and the solutions they hope will fix them. As often as we confirm the presumed cause of a problem, we uncover a completely different one. Every time this happens, the company chooses a more appropriate action than it would have taken. When a company puts all the information, both investments and performance, in one place, it’s clear that all investments are not equal. Some yield a return, some do not. Data-driven decisions remove the need for and use of expensive assumptions. This saves money and time spent on ineffective investments.

 Learning what you DON’T know has incredible value. Almost every discovery reported in this blog comes from seeing a pattern in the data that we did not expect. Why is this group so expensive? Why does that division have higher turnover? What happened in the last quarter that caused such a spike in absence? Deciphering the unexpected has led to new, different, more targeted solutions in each case that corrects a problem the company did not even know about.

 The most efficient solutions appear when we take information out of compartments to see how things interrelate. As regular readers know, all parts of a business affect each other. Decisions regarding compensation and paid time-off will influence what happens to healthcare utilization. For example, in the 3-6 months before workers quit, they have a tendency to use more benefits. Another example: workers’ compensation costs differ depending on whether the employees are in an HMO or a PPO. Benefits managers solely in charge of healthcare may interpret a sudden rise in costs as a health-driven problem, rather than a response to other factors. Integrated information allows them to consider all potential causes. That saves money and avoids an ineffective, compartmentalized response to a systemic problem.

 Organizations are living, changing organisms, with both systemic and localized issues that vary over time. Rarely is a “problem” (a source of medical costs, or a pattern of absence) or an “opportunity” (a policy improvement or infusion of resources) uniform across an organization, or across time. Choosing a solution, AND applying it when and where it is most needed, adds a level of efficiency. That saves money and improves effectiveness.

 Monitoring what’s working and what’s changing allows companies to be proactive rather than reactive. Too often, businesses implement new tactics and then wait 12 months (when the next report comes out) for results. Then, it may take another 12 months to choose a new direction and change course. With today’s information technology, companies can and should be watching key metrics monthly, discussing what constitutes a successful or problematic change in that metric, and responding in business time—not vendor-imposed calendar-year time. This saves time, money, and improves the business relevance of all decisions.

 Having integrated information enables integrated planning and execution. When information comes from multiple data sources (medical, pharmacy, disability, workers’ compensation, human resources and other sources), discussions about implications and solutions are necessarily more integrated. With integrated information, for instance, a corporate medical director, VP of benefits and VP of operations can see factors that may be influencing disability—including health- and non-health-related drivers—and can formulate effective solutions. This improves efficiency and avoids redundancy.

 And finally, data for data’s sake is not valuable; actionable information is. It’s not simply about having MORE data—we are overwhelmed as it is—it’s about being able to get answers to questions about how the business works. An ability to use and apply integrated data to make informed business decisions is crucial. Making spending decisions without clear information regarding what is needed, where it is most needed, and an ability to assess what happens afterward borders on business malpractice.

So, yes, I believe that every organization saves time and money many times over its initial investment in integrated data. How exactly? That’s a question only your data can answer.

What happened to the organizations that chose ACTION instead of data integration? Ironically, many of them spoke with me 12 or 24 months later, asking if I could help them evaluate whether their ACTION was valuable. And I was forced to swallow hard and say:

“…well I could, if I had the data.”


Why this matters: (see above)

When a problem goes beyond illness, the solution must go beyond medicine. Entry 10 – 2009

Trivia Question: The following three questions are part of a screening that is more than 80% accurate at predicting what? (Clue—this is not about life satisfaction or stress).

1) Would you describe your work as monotonous?
2) How satisfied are you with your job?
3) How tense or anxious have you been in the past week?

.....Stay tuned for the answer below.

Ask your mother--context is everything.
We all know that circumstances affect our reactions to specific events. Depending on what “else” is happening at the time, we respond differently to the same challenge. On some days big obstacles are manageable, while on other days a tiny hassle seems insurmountable. Most kids know that having a tummy ache is a good way to avoid difficult circumstances, such as a quiz they aren’t ready for, or a bully at recess.

Sometimes it takes a mother’s intuition to tell whether the ailment is caused by eating too much licorice and pickles or mostly from the dread of facing something at school. But the reality is that the tummy ache and the desire to stay home are both very real. And the “cause” is multifaceted: a combination of health (upset stomach), skill (not knowing how to work through challenges or disagreements), and motivation (natural desire to avoid discomfort).

We can label it a stomach problem, but moms know that the medical solution (i.e., Pepto Bismol) may not completely address the problem. Moms also know that tummy aches rarely happen on the same day as the school field trip to the zoo. Context matters.

Human capital issues in the workplace also have a context.
Each of us has human capital that consists of three assets: skills, motivation and health—each operating within the context of the other two. These assets are personal, owned by the individual, and change throughout one’s lifetime. The currency of human capital—how we SPEND it—consists of time, energy, and attention. A person applies his or her human capital by devoting time, energy, and attention to the activities and challenges in life and work. We apply skills, motivation, and health (in combination) in every waking minute of every day. In the workplace, we ask workers to spend their human capital in ways that add value to the organization.

Although we often identify each asset separately, they are almost never independent. When our motivation is low, it’s harder to apply the usual level of wisdom and skill. When our bodies are sick or injured, we don’t just lose physical functionality, but often enthusiasm and endurance as well. With very few exceptions, we cannot isolate a single asset (only skill, or only health) as the cause of better or worse performance, because they are so interrelated.

None of this is surprising, so why would anyone disagree that medical costs and illness-related absences are functionally related to and intertwined with skill and motivation factors?

Recently I listened to a group of corporate health professionals planning expansion of their programs to cover more chronic diseases and more risk factors. Their ultimate goal was to reduce medical and absence costs. My opinion was that until their company fixed its context—rewarding and appreciating skills, aligning incentives for higher motivation—spending more money on efforts to “fix” health problems would be largely ineffective.

But they insisted that the problem causing high healthcare costs was all medical—ignoring the complete human capital context. In their paradigm, what employees needed was calls at home and reminders to take their medications and get the right tests. They were missing the point.

Which brings me to an unusual treatment protocol: that includes context!
Remember the questions above?
1) Would you describe you work as monotonous?
2) How satisfied are you with your job?
3) How tense or anxious have you been in the past week?

These questions are part of a back-pain assessment tool used by providers in New Zealand to predict who will be out of work for 30 days or more (1, p. 39). The assessment (which has 24 questions in total) produces a score that is 83% accurate in identifying people who will be away from work more than 30 days and 75% accurate in identifying individuals who will need no more follow-up after their initial assessment.

The complete assessment starts with a series of questions ruling out severe physical problems (e.g., paralysis), then goes on to ask about psychosocial issues, like how they perceive their success, their functionality, and their pain. Using the structured questionnaire, or by having a dialogue (which also includes questions about financial incentives), the provider can assess a person’s risk of extended absence and work loss.

This comprehensive protocol offers suggested messages to help the patient improve, which also includes guidance about what NOT to do (such as get additional tests, take narcotic pain killers or default to bed rest). The guideline is refreshing because it acknowledges that sometimes presumed medical problems are not appropriately solved with exclusively medical answers. It reminds practitioners that:

• The human body will most often improve on its own within 4-6 weeks.
• Absent specific physical signs and injury history, tests will not help.
• Regular activity is actually therapeutic.
• Psychosocial risks are not the same as malingering.
• Prevention has a CONTEXTUAL component.
• Caregivers can help prevent social and financial consequences as well as physical ones.

In their document, the New Zealand Guideline Group states:

"Long-term disability and work loss are associated with profound suffering and negative effects on patients, their families and society. Once established they are difficult to undo. Current evidence indicates that to be effective, preventive strategies must be initiated at a much earlier stage than was previously thought. Enabling people to keep active in order to maintain work skills and relationships is an important outcome."

This approach shows commitment to caring for all three aspects of human capital while protecting a person from unnecessary loss of valuable assets. By respecting the value of future skills and motivation, health remains in its proper context. Plus, by addressing a person’s real issues and avoiding unnecessary medical care, we have a win-win for everyone involved.

Why this matters: It is easier to define health problems in medical-only terms—where something is broken and can be fixed with a medical treatment. Often, providers, employers, and patients would rather keep it simple because context is messy and more difficult to solve. But unless we are willing to acknowledge that discomfort and misery rarely have single causes, we will continue to spend unnecessarily on ineffective, mechanistic solutions when what we really need is something or someone that values our total human capital and helps us find the right pathway to feeling better about health, as well as life and work.

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References
1. Accident Compensation Corporation. New Zealand Acute Low Back Pain Guide. New Zealand Guidelines Group; 2004. Accessed May 7, 2009.

Ten misaligned financial policies that communicate the wrong message to employees. Entry 9 – 2009

Pay is probably the most powerful communication tool an employer has.

A book on compensation that I read recently explains very clearly how rewards (all pay, benefits and recognition) deliver the clearest message to employees about what is important to the company, and what the company wants from them. The authors remind readers that "few things get the attention of people in a company as well as pay does (1)." This got me thinking that companies “say” many things with money.

Pay—depending on how it is designed—can put employers and employees on the same team, or make them adversaries. It can encourage the top performers, or protect the worst ones. Money talks. In fact, if what company leaders say in words is contradicted by their pay policies, it is more likely that employees will “hear” and respond to the financial message more than the verbal or written one.

Ten Financial Policies that Communicate the Wrong Message to Employees

Because we often talk about mislaigned policies with corporate decision-makers, it occurred to me that many common approaches to pay and benefits deliver the wrong message. As examples, here is a list of ten financial policies and what they actually “say” to employees:

1. Policy: No bonuses, or standard bonuses for all.

Translation: Top performers are not of any higher value to us than those who perform the worst.
Impact: Our data show that performance suffers in environments without performance-based rewards. Also, high performers are more likely to leave jobs when they are not rewarded for performance. When the financial policy ignores performance, the message is: a) we don’t care how well you perform, and b) if you want to be paid for excellence, go somewhere else.

2. Policy: All pay is based on attendance, not output.

Translation: Face time is more important than work output.
Impact: Like Policy #1, when time is used as the proxy for productivity, we see lower production (in the same amount of time), and higher turnover in top workers. Further, team morale and employee quality of life suffer when workers compete to be seen working early or late. If time is what earns pay, workers will focus here first.

3. Policy: Unlimited sick time (yes, this still exists), 100% pay during disability, and use-it-or-lose-it plan designs.

Translation: You are worth as much to us when you’re home sick as you are when you’re working.
Impact: When workers earn the same amount of money whether they work or not, it sends a message (intended or not) that absence and work have equal value. And, when there is no personal loss for lost time (or potential gain for not using lost time—such as cash-back for unused time), workers make sure they use the time. The development of paying people for NOT working (which evolved in the 1940s) delivers a contradictory message about the essence of “a day’s work for a day’s pay.” There should be a shared value to both parties that reflects being at work.

4. Policy: A combination of no performance-pay, with rich medical and absence benefits.

Translation: We pay our sickest people the most.
Impact: When bonuses are sacrificed for health-related benefits, the workers who get the highest total compensation are those who use the most health services. A sick person will get full pay, time away from work, and potentially hundreds of thousands of dollars in medical services. The well person gets their regular base pay—and no more.

5. Policy: Paid vacation.

Translation: You may not be at work, but we’re still paying for your time…you still have obligations to us.
Impact: Many professionals are discovering that “vacations” are no longer protected when it comes to email and conference calls. Time off just becomes work relocation, and employees don’t have the full opportunity they need to recharge. Personal and family resentment toward the company can also result from corporate encroachment on personal time.

6. Policy: Participation incentives for enrolling in problem-focused health programs (without similar incentives rewarding low-risk people).

Translation: We don’t have much for people who take care of themselves, but if you’re unhealthy or high risk, we’ve got tons of resources for you!
Impact: Partly because legal rules prevent companies from designing incentives around ideal weight, low cholesterol and blood pressure, some employers pay for program participation instead of rewarding outcomes and continued health. Meanwhile, the employees who have been, and continue to stay healthy on their own often have access to far fewer resources and rewards.

7. Policy: Employees are charged the same amount regardless of whether they are covering only themselves, a spouse or an entire family.

Translation: People with spouses and families are worth more/receive higher compensation than single people (who subsidize their fellow employees with spouses and families).
Impact: While it is understandable that employers want to be family friendly with their policies, there is an inherent inequity in subsidizing/over-charging single workers and those in non-traditional relationships to afford such policies. As such, there is an inherent value statement about the value of single employees.

8. Policy: Rich medical benefits but limited investment in training and development.

Translation: We’d rather pay for your illness than invest in you and your career.
Impact: The employees who are attracted to the company, and who stay, will be those who place more value on benefits than career growth.

9. Policy: No profit sharing.

Translation: We are not on the same team. Regardless of how the company does, your situation will not change.

Impact: Employees who feel they have little connection to company success are less engaged in being productive and protective of corporate assets. This communicates an us-versus-them mentality.

10. Policy: Avoiding options that give employees decision latitude (e.g.consumer-directed health options, PTO banks, or variable-pay options).

Translation: We don’t trust you to make good choices with your own money.
Impact: We have actually heard employers and policy-makers openly admit distrusting the decision-making capacity of their employees when discussing options such as high-deductibles, bonus-pay options, or reduced pay during disability. This role is more paternal than is fitting for an employer, encouraging a relationship of dependency rather than partnership with employees.

Ten Ways to Re-align Incentives to Encourage Improved Outcomes
How do we “rephrase” our financial messages? Listen to how these new policies get translated when they are aligned with positive business goals.

1. New Policy: Noticeable and clearly understandable performance-based pay.
Translation (Instead of): High performers are of equal value to us as low performers.
(Aligned): Your success is our success, and we share that.

2. New Policy: Performance metrics are tied to results, not time.
Translation (Instead of): Face time is more important than work output.
(Aligned): It’s what you accomplish that matters most.

3. New Policy: Good: A PTO bank. Better: Less than 100% pay during time off.
Translation (Instead of): You are worth as much to us home sick as you are at work.
(Aligned): We share a mutual interest in your staying healthy and getting the care you need.

4. New Policy: Significant performance-based pay that is forfeited when absent. Less than 100% pay during Short-Term Disability.
Translation (Instead of): We like to pay our sickest people the most.
(Aligned): Being at work and productive is what we value most.

5. New Policy: Consider paying a higher rate for time at work, and less or no pay for absence. This draws a clear distinction and puts employees in complete control of their time away.
Translation (Instead of): Officially you are still on the clock, so maybe you should be available on your vacation.
(Aligned): Your time is your time.

6. New Policy: Rather than chasing health risks, provide an allowance for wellness activities for all. Pay attention to mixed messages about work hours (if you expect a 12-15 hour work day, you cannot also expect healthy behaviors, sleep, and stress management).
Translation (Instead of): We don’t have much for people who take care of themselves, but if you’re high risk, we’ve got tons of resources.
(Aligned): Staying healthy is of value to you and to us. (see #3 and #4 above).

7. New Policy: Examine pricing to see if it generates equal value for all.
Translation (Instead of): We use single workers and couples to subsidize services for employee families.
(Aligned): We respect everyone’s life choices and charge employees premiums that directly reflect their status.

8. New Policy: Shave costs off of health care, using a high-deductible plan. Re-invest in meaningful skills training.
Translation (Instead of): Health/illness is more important than career advancement.
(Aligned): We are dedicated to helping you advance your career.

9. New Policy: Practice profit-sharing, with regular updates about company performance.
Translation (Instead of): We are not on the same team. Regardless of how the company does, your situation will not change.
(Aligned): Your work matters. If the company does well, so will you.

10: New Policy: Put more money and more options directly into employee control. Allow employees to make choices about healthcare, time off, and work tasks.
Translation (Instead of): We don’t trust you to make good choices.
(Aligned): We trust you at work, and believe you own your life decisions.

Ask yourself what messages employees really “hear” in the way your organization spends money. And consider whether that is what you meant to say.

Why this matters: Spending indicates priorities. When company leaders say in words that “employees are their great asset,” or that they “value learning,” or that they “value hard work and innovation,” workers want to see employers walk the talk. If a company truly wants to reward and keep its best workers, encourage career advancement, and reinforce good health, spending patterns must confirm the message.

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References
1. Zingheim PK, Schuster JR; Pay People Right! Breakthrough Reward Strategies to Create Great Companies. San Francisco: Jossey-Bass; 2000, p. 4.

Do we have it backwards? Should we invest in health to get productivity? Or reward productivity to get better health? Entry 8 - 2009

An interesting study completed last year should make us all reconsider our typical assumptions about how to improve community health. In short, the study found that communities that experienced a significant influx of jobs and economic opportunity not only had expected improvements in their standard of living, but also increased their practice of healthy behaviors, had improved physical and mental health, less chronic illness, lower reported disability, and felt better.

This unique, natural experiment compared tribal populations before and after they opened casinos, to similar tribes who did not have economic development from casinos (1). Those not opening casinos certainly received attention and programs emphasizing tobacco cessation, eating right, taking care of one’s self, and dealing with mental health. But significantly greater health improvement happened when economics improved.(2)

This conclusion is the reciprocal dimension of what we often hear: “We need to improve health, so people can do better at work.” Instead, the lesson here was: “When people have an opportunity and a reason to succeed in work, they take better care of their health.”

Perhaps these results are not surprising, but they have significant ramifications on health spending today. Not everyone is ready for findings like these, but they play out in our research time and again. People who have a reason to be at work, and who are well-rewarded for their work—on average—take better care of their health than those who do not:

• Workers eligible for larger bonuses report that health is more important to their careers.
• Workers eligible for bonuses and overtime are twice as likely to get a flu shot than those not eligible.
• Larger bonuses are correlated with less smoking or lower BMI, independent of salary.

Why is it so hard to change our understanding about what drives health? Because it might change the way we make our living.

When I was challenged five years ago to think differently about health, it took me a while to let go of my old paradigm. It was uncomfortable to question a deeply-held set of assumptions about health and health behavior. But the evidence grew too compelling for me to ignore. Although I worried that this new approach would threaten my relationships with mentors and colleagues I’d worked with for decades, eventually the fear was outweighed by the discomfort of knowing I was perpetuating a flawed approach.

I could no longer support ever-expanding budgets for services that correct health misbehavior when that same money was being taken away from individual salaries and performance rewards that also positively influence health.

The old (one-direction) paradigm: invest in fixing workers’ health problems, and they will do better at work.
When I used to operate in ‘health management” or “health and productivity” circles, the primary research goal was to demonstrate how illness and health limitations reduced work output. Most research during that part of my career was supported by businesses hoping to prove that A) employee illness creates a business expense (medical, absence, turnover, and eventually, presenteeism) and B) that spending more on interventions (such as medicines or disease management) will reduce that business expense.

In general, advocates of a medically-oriented, disease-threatens-productivity approach are hoping to get more funding for interventions that will extend life, prevent illness, reduce suffering, increase vitality, and perhaps make a living while doing it. All are reasonable purposes.

And so, all kinds of resources in the form of time, money and effort, have been directed toward getting people to make changes that improve health. Or, if people won’t change, we work on helping them get closer to considering a change—hoping they become more ready. Time and time again, we see companies frustrated because “employees won’t do what they should do.” And recently this has started to provoke even more heavy-handed approaches to making people comply.

But where do hope, responsibility, opportunity and self-sufficiency fit into this get-healthier-and-cost-less-so-you-can-be-more-productive equation? In the case of some Native American tribes, where social problems and unemployment prevail, is there a chance that government attempts to encourage people to stop smoking, improve eating habits and manage depression seem disingenuous?

Is it different in the case of corporate America? Do people work in an environment that makes health intervention programs seem similarly contradictory? In a job where people feel under-valued, high performers receive no additional rewards, opportunities for advancement are limited, job training is scarce, and retirement seems farther away than ever, can health improvement programs be expected to outweigh broken systems and lack of motivation? If I don’t believe that company leaders really care about my life success, why would I believe their interest in my health is sincere?

The new paradigm: reward high performance and invest in human capital, and people will have more reasons to protect their health.
In what we call the health as human capital paradigm, the equation gets reversed. The right incentives create an environment encouraging health protection. First: reward performance, invest in skills, and give people hope and opportunity to succeed. Second: share responsibility for health (e.g., savings accounts, paid-time-off banks). Then, get out of their way as employees protect their health as an asset they naturally value more. Health improvement programs cannot substitute for aligned incentives, and will struggle to be effective among misaligned incentives.

Remember, health improvement efforts divert money from workers’ wages to fund the very services that will try and make them change. So, if workers share none of the direct value for improved behaviors, then the company is sharing cost without sharing any benefit. Instead of asking employees to pay for behavior-change programs, imagine a work setting that makes success rewarding and fulfilling. Imagine growth opportunities that improve life-long self-reliance. Make work excellence something from which workers can tangibly gain. Put success in their hands, and put enough risk in their hands that failure matters too. Allow personal responsibility at work and in schedules. Then, give people the flexibility to care for themselves in the way they need to.

The casino study showed that as people saw opportunity, they changed their health habits. When we have something that matters to us, success we can strive for, a reason to get up in the morning, we have more of a reason to care. Maybe the best health promotion tool in that setting was hope for a brighter future.

Why this matters: Health is just one of three human capital assets: skills, motivation and health. They are connected and affect each other. Having opportunity to use one’s human capital to earn rewards gives us greater reason to improve and protect those assets. The standard medical paradigm has excluded the influence of skills and motivation, insisting that health alone will lead to better work performance. In a tough economic time where funds are limited, spending “smarter” is preferable to spending more. The health as human capital paradigm demonstrates that investing in people’s overall wellbeing is the most powerful step to improving health, and that giving people control over their human capital assets isn’t just in their own best interest, but in the interest of employers as well.

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References
1. Wolfe B, Jakubowski J, Haveman R, Goble H, Courey M. Casino revenue and American Indian health: the link between tribal gaming and the health status and behaviors of American Indians. Paper prepared for the 30th General Conference of The International Association for Research in Income and Wealth: Portoroz, Slovenia, August 24-30, 2008. Accessed April 10, 2009. Cited with permission of the author.

Note
(2) Economists call this the “income effect,” where demand for certain things increases as income increases. These are called “superior goods,” and health factors fall within this category.