Engaged WorkforcePerformance Management & Rewards

HRO’s Performance Enhancer

Faced with lagging adoption rates for money-saving employee-participation programs such as wellness solutions, smart HR leaders are using a performance-enhancer of their own. Yet unlike the banned substances used in baseball, the Tour de France, and the Olympics, this accelerator is legal in all states and Canada.

by Jay Whitehead

What’s the secret for speeding employee uptake on a cost-saving workforce wellness plan? If you ask bike racers, baseball players, or sprinters their game-day speed secret, they might whisper the name of their favorite pharmacy-grade amphetamine (and a way to avoid getting caught). If you ask an impatient Bavarian brewer, he might admit to speeding fermentation with heat (under German law, that’s verboten). And HR veterans, after a couple frothy mugs of that heat-fermented brew, will confess their pet employee response-booster: a well-designed employee recognition and incentive program (which is totally legal).

Ever-more expensive employee healthcare—a conundrum designed by frustration’s mythical poster boy Sisyphus— remains HR’s single-most vexing cost challenge. Consider these numbers: Atop the fast-growing $300 billion U.S. employers spend on health insurance, each smoker runs $3,856 in additional costs, obesity pumps up health bills by nine percent, health-related absenteeism costs an average $660 per employee annually, and the average Family Medical Leave Act (FMLA) lawsuit costs $78,000. Yikes.

While employee health management interventions—smoking cessation, weight reduction, disease screening, stress management—can lower costs dramatically, HR and benefits executives tell HRO Today that without a catalyst, the wellness offerings often go underused or, even worse, are completely ignored. With usage rates low, employees’ unhealthy habits continue, and health costs keep up their nasty climb.

While a health management program’s two basic parts are identifying risks and specifying interventions, more HR leaders are now tacking on another element, incentive partnerships, to inspire employee behavioral change. “Incentives are often the last piece added to a health and welfare program,” said Zachary Meyer, leader of LifeWorks, a unit of HR services giant Ceridian, a long-time public company that was taken private early this year. “But as benefits leaders get more experience, they see that savings are quicker and more reliable with a well-designed recognition and incentive program. As a result, (incentive programs) are moving up rapidly in importance and volume, especially now when costs are so important.”

Hal Burlingame, who served as AT&T’s HR leader for over a decade, said it best: “Inspiring employees to change personal behaviors is one of the most challenging accomplishments for an HR leader. It requires a strong motivator.”

So what motivator works best for HR and benefits leaders? Dr. Harold Gardner, MD, chairman of the Health as Human Capital Foundation, says that in changing employee habits—whether to improve employee health or cut costs or boost sales, “valuing the achievements of the person is the best medicine.” Enter HR’s newest employee performance-enhancer: a web-enabled, points-based employee recognition and incentive program.

The Need for Partnership
For his Global 1000 clients, Rideau Recognition CEO Peter Hart is known for delivering results in tough situations. Whether it’s H&R Block (which needs to recruit, re-hire, and train 120,000 people each year in advance of tax season) or Boeing, CA, and Oracle (whose corporate lives depend on retaining high-tech workforces amid a brutal war for talent) or global financial services giants RBC, CIBC, and BMO (who need to reward top performers while tightly managing costs), they all depend on Hart’s employee recognition and incentive programs to drive performance. And after seeing Rideau’s work over the years, Ceridian LifeWorks partnered with the Quebec-based recognition leader to boost employee adoption rates in its health management programs.

While Ceridian’s Meyer tells HRO Today that individual client participation statistics are considered a trade secret, composite results illustrate the value of partnering a health management plan with an incentive program to catalyze employee adoption. Without incentives, typical returns on investment with LifeWorks healthcare cost savings programs start at $3 for every $1 invested. But add an incentive partnership and the ROI can go as high as $17 for each $1 invested. Meyer noted that the two behavioral changes with the biggest medical cost savings payoffs but require the strongest incentives are smoking cessation and weight management.

“For example, by helping people lose weight enough to avoid that increasingly popular bariatric surgical procedure,” Meyer said, “we can save up to $25,000 per avoided procedure. But getting employees to actually lose weight requires very well-executed incentives and interventions.”

And while medical cost savings in LifeWorks programs are significant—typically $12 per employee annually per health condition—these only count the medical costs, not the productivity gains. Incentive-enhanced LifeWorks programs, Meyer stated, are delivering 34-percent, 12-month smoking quit rates. Productivity-wise, that means no more smoking breaks—which according to the American Cancer Society can average 190 hours per year or nearly 10 percent of time on the job—and no more smoking-related time off—which the State of Illinois reported ran as high as four percent of the work year in 2006. “With nearly all big city office buildings now nonsmoking,”

Meyers said, “sometimes smokers have to walk a block to take a smoke.” As a result, productivity gains from wellness plans can quadruple or quintuple the medical cost savings.

Roy Saunderson, executive director of the Recognition Management Institute, or RMI, offers a simple formula for employers. “If you want to predict employee behaviors, show me the recognition you’re giving the employee to perform and the design of the incentives to support the recognition,” Saunderson said. “Bottom line is, you get the results for which you recognize employees.”

Meyer concurred, stating that wellness programs need to be more proactive.

“Education alone does not succeed,” he observed, “or obesity and smoking would have been solved long ago. It takes deliberately applied incentives to actually compel people to act differently.”

The big trend in incentive design is multipoint solutions that pull employees through a complete results life cycle. Simply offering a $200 gift certificate to complete a health risk assessment (HRA) is a recipe for failure. A far-superior multipoint program starts with completing an HRA that offers escalating rewards for multiple points along the results path. For example, you get successively more points for going to a gym, signing on a dedicated health coach, losing 10 pounds, or quitting smoking, with the biggest rewards later in the process for higher-value benchmarks.

Rideau’s Peter Hart pointed out another incentive design point often missed by HR executives less knowledgeable in incentive design and implementation. “In incenting specific behaviors, cash is not king. In fact, cash rewards can often make problems worse,” Hart said. “In a smoking cessation program, cash rewards can be a bonus to buy more cigarettes. In a weight management program, cash is currency for a cheeseburger or donuts. But a gift certificate for a gym or athletic equipment reinforces weight change. Behavior-specific awards are superior in delivering the desired behavior-based results.”

Meyer said he believes that partnerships are a necessity in today’s business environment. “That is, you can’t afford to do everything yourself; and customers want integrated services and best-in-class quality. The problem always comes in integration, which Rideau excels at,” he said. “Their technology team is large and fast, they offer a large awards catalog, web fulfillment, and points-based administrative capability to track and exercise accumulated points for awards.”

He cited the partnership with Rideau as a contributor to the recent rapid rise in wellness programs. In MetLife’s recent sixth annual employee benefits trend study, wellness plan participation is now at 31 percent among employees. This rate total nears the 36-percent participation level of employee assistance plans (EAPs) and actually exceeds FSA/HSA programs in popularity.

Former Minnesota Governor Arne Carlson helped forge the initial partnership between Rideau and Minneapolis-based Ceridian more than three years ago. Since then, Rideau’s revenues have risen more than 40 percent, and the company has become a market leader in large-company recognition programs. A member of the Rideau board of directors, Carlson emphasized the role of trust in helping both parties partner up. Meyer recalled Carlson advising both Ceridian and Rideau to avoid overpromising to the customer and to each other. “Unreasonably set expectations are what I often see in partnerships that don’t work,” said Carlson. (For more partnership tips, see “Carlson’s Eight Secrets for Successful Partnerships.”)

With the promise of a 17:1 healthcare cost ROI and five times that amount on productivity improvements, wellness programs and recognition-driven incentive programs are both on the rise. Rideau’s Hart observed that the market for recognition-driven incentive partnerships is growing rapidly as HR leaders further grasp the results-acceleration effect of these solutions.

“Today’s HR customer is held accountable for performance and will support any type of partnership that helps deliver results, whether cost savings, retention, or sales increases,” he commented. “Saving money by making employees healthier is a simple business idea. But delivering that result is complex, because we’re dealing with human behaviors. The ultimate sound-bite from this story is the same as for many HR programs. The missing link between the HR idea and actual results is an expertly designed employee recognition and incentive program.”

Tags: Engaged Workforce, Performance Management & Rewards

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