People profitability: healthy, wealthy and wise

As well as benchmarking employee benefits, the survey we conducted in the first half of 2007 sought to assess the challenges to, and the contribution made by, HR teams working within the legal sector.
The outcome of this latter assessment produced some expected and some rather surprising results. We were not surprised to find that talent management and absence management featured very prominently. HR teams were quick to acknowledge that these were key areas of responsibility and represented the most significant challenges over the next few years.
Over half of firms confirmed that an HR team’s effectiveness at dealing with these challenges was a key measurement of their contribution to the firm.
Interestingly, however, according to survey responses, over a quarter of firms did not measure the contribution made by their HR department. Whether this was by inclination or capability is not clear. Given the cost of running such a team and, indeed, the ongoing debate on outsourcing, this was a surprising admission. It would suggest that a significant number of firms will struggle to assess the relative advantages and disadvantages of maintaining all their HR functions in-house.

Engaging people
Essentially, the two major HR challenges of absence and talent management are different aspects of the same conundrum: engaging employees and partners, and maximising their productivity for the firm.
One element of any talent programme must lie with good compensation and benefits planning. Remuneration will always be a benchmark and, as discussed in my previous article, technology has allowed for huge advances in benefits choice, diversity and communication. There can be little doubt that these can be effective attraction and retention tools for firms in the ‘war for talent’.
However, it is clear from our employee attitude surveys and work with HR professionals in relation to exit interviews, that pay and benefits tend to only buy a certain level of loyalty and are not universally effective across all employees.
This is particularly true within professional-services organisations. Two other key areas highlighted by associates are the quality of client work to which they are exposed and the degree of compatibility between the firm’s stated culture and its actual environment. Many law firms have invested considerably in developing and differentiating their brand; whether for prospective client consumption, graduate recruitment or lateral hiring.
The younger and more cynical generations quickly recognise any mismatches between rhetoric and reality. It is not uncommon for disgruntled individuals to highlight the absence of collegial behaviour, for instance, or to draw parallels between the firm’s stated corporate-social-responsibility profile and its perceived treatment of its own people: such negative perceptions impact on both talent and absence management.
By contrast, where a firm can embed a nurturing environment that reinforces its cultural aspirations, the opposite is true.
Promoting such an environment has elements of both carrot and stick: the evolution of a working culture must also be accompanied by a clear definition of employer expectations if the implicit contract is to be valid for both parties.
Motivated and engaged employees will undoubtedly lead to improved productivity, as will effective management of the de-motivated and disengaged.

The cost of absence
The Chartered Institute of Personnel and Development (CIPD) conducts surveys on absence and absence management each year. After a brief hiatus, absence levels are once again on the rise, according to the latest information. Stress-related absence, in particular, is rising steadily as a cause of absence in corporate UK.
The CIPD advises that the annual average cost of absence to an organisation now stands at £659 per employee. Considering that the average headcount of our survey respondents stood at 543, it is unsurprising that absence management is such an important issue. The statistics would suggest an average absence cost in excess of £350,000 for the respondent firms.
Averages, though, while undoubtedly fascinating for some, are irrelevant: the only statistics that matter are those that relate specifically to your firm. However, according to the survey, over half of employers were unable to accurately measure employee absenteeism and its financial impact.

Recording absence
Recording absence has always been a challenge for employers and generally relies on line managers following a series of internal processes and understanding the importance of the bigger picture.
Long-term absence has a high profile but it is often tempting for managers to think that an employee taking the odd day off sick here and there is relatively unimportant. It is the cumulative effect of these days, however, which often has the most significant impact over the course of a year.
In practice, particularly if the absence recording process seems laborious, short-term absences are often overlooked, leaving firms with a distorted picture of their true position.

Innovations in absence management
To help employers tackle this issue a number of providers have introduced phone-based systems to help simplify absence recording.
The latest innovation is voice-activated absence recording and reporting via the telephone. There are a number of versions available. The core functionality tends to be very similar: a system that employees can access around the clock, which records absence through a non-judgemental series of questions.
This provides an immediate audit trail for all absence reporting and removes much of the line managers’ burden, while giving real time multimedia notification to the HR department.
Importantly, the programming within these systems can automatically trigger predetermined alerts linked to key indicators such as absence patterns, musculoskeletal medical conditions or psychological issues, maximising the opportunity to implement intervention initiatives.

The financial benefits
There is sufficient anecdotal evidence to suggest that this strategy, alone, can measurably reduce absence. Clearly, where recording has been patchy in the past, a reasonable period will need to elapse before a true comparison can be made. Indeed, the return on such a strategy will tend to bear fruit over the longer term.
However, putting in place effective absence-management measures can provide a more immediate dividend by way of reduced insurance costs. For example, a number of insurers will offer a premium rebate on their Group Income Protection schemes if 80 per cent of absences are reported within four days.
While welcome, these reductions could be just the starting point in an organisation completely repositioning its risk profile.

The cost of health
Effectively recording and dealing with absence represents a reactive means of managing employee costs, but it does not address all of the causes of such absenteeism, nor does it create or engender any positive spirit within a corporate culture. Put crudely, it helps to address the ‘sickie’, not sickness itself.
Minor illnesses (real or convenient) are the major cause of short-term absence, but a myriad of other causes result in short and long-term time off. Back pain, stress, musculoskeletal injuries and home responsibilities are all significant contributors to the level of absences experienced by an employer.
Accordingly, we have seen a growing recognition of the twin values of creating and co-ordinating employee wellbeing programmes. These values can be described as the heart and the head motivators for firms: it is the ‘right thing’ to do for your people and, if done effectively, can ultimately produce profitable dividends.

Generating wellbeing
As is often the case, the US has taken the lead in the field of employee wellness. Doubtless the US healthcare system has greatly influenced the evolution of such programmes: Starbucks apparently decided to act when it was apparent that the company was spending more in the US on employee healthcare than on coffee beans.
There are a wide variety of potential elements to an employee wellbeing strategy including subsidised gym membership, nutritional advice, smoking cessation programmes, on-site medical check-ups, minimum holiday requirements, and so forth.
Indeed the corporate value of employee wellbeing has reached such a level of consensus in the US that the debate has moved to whether wellness programmes can be made mandatory without impinging on employees’ human rights.

The case for wellbeing programmes
Wellbeing programmes are an effective demonstration of employer concern and commitment: it underpins a firm’s culture and brand.
From the corporate perspective, the introduction of a wellbeing policy also helps firms address some significant issues: an ageing workforce in a climate of increased obesity and demanding workloads will impact on healthcare costs and, therefore, insurance premiums.
Studies in the December 2006 Harvard Business Review have highlighted the importance of good health to what it describes as ‘extreme workers’. Studies such as these have been particularly relevant to law firms and, in particular, their star performers. The Review defined extreme workers as individuals whose workweek regularly exceeds 70 hours, dealing with unpredictable workflows and demanding deadlines.
When studying such individuals, a very significant proportion admitted to not getting enough sleep, taking little exercise and having fewer than ten days holiday each year. While such dedication may be admirable, the Review also highlighted the impact on their health. For instance, the study demonstrated that taking regular holidays lowered the risk of death by nearly 20 per cent among men between the ages of 35 and 57; the time at which such individuals tend to be offering the greatest value to firms.

Conclusions
An effective and co-ordinated absence and wellbeing programme complements a firm’s CSR vision: it demonstrates that a firm is genuinely concerned for the health of its people and actively wants to help them. The rather pleasant corollary is the growing evidence that fit and healthy individuals are more productive.
Furthermore, by having in place such HR practices and processes, firms will be able to present a far more attractive risk profile to insurers, resulting in immediate premium savings.

Robin Hames is a consultant at PIFC Consulting. He can be contacted at robin.hames@pifc.com