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Absence Makes Companies Grow Tougher

March 15, 2009
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
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In Thomas Parry’s experience, companies typically underestimate the impact of employee absences. Organizations with paid-time-off programs often take a "We don’t want to know" attitude about why employees miss work. As a consequence, they remain in the dark when it comes to assessing lost productivity and other absence-related costs.

Harsh business conditions are forcing companies to take a more penetrating look at absenteeism and its underlying causes, says Parry, president of the nonprofit Integrated Benefits Institute, a trade group in San Francisco.

"Employers realize that margins are tight, and know they need a fully engaged and productive workforce. The economy is becoming a real motivator for employers to start paying attention to absenteeism in a way they never really did before," at least not with the same level of intensity, Parry says.

There is no time like the present for companies to make strides in absence management. Fully 75 percent of organizations concede they do a poor job of administering leave-of-absence programs, with only 26 percent following their policies consistently, according to a recent survey by Hewitt Associates, a human resources consulting firm in Lincolnshire, Illinois.

To cope, 42 percent are centralizing administration of leave-of-absence programs, while 30 percent are turning to outsourcing providers, according to Hewitt’s survey of 225 large and midsize organizations. Hewitt last year acquired Disability Management Alternatives as part of its plan to expand its absence-management practice.

Kim Stattner, a leader in Hewitt’s absence management practice, says companies have at least two ready-made, yet underused, sources of information to measure the impact of absenteeism. The first is data associated with family medical-leave requests, as well as the application of benefits under short-term disability plans.

"We’ve heard for years that 20 percent of the [employee] population drives 80 percent of the costs of health care. The reality is that those 20 percent exist largely within disability programs," Stattner says.

Diagnosing disability data, in aggregate, provides a snapshot of health conditions that are most prevalent among a company’s workforce. Even after excluding leave requests covered under the federal Family and Medical Leave Act, human resources directors should be able to use the data to shape effective wellness strategies, Stattner says.

Engagement surveys provide a second metric for employee absences. They measure employees’ attitudes toward their jobs, their overall morale, and their relationships with co-workers and managers. Engagement scores aren’t usually tied directly to employee absence, even though there appear to be direct causal links between how engaged an employee is and how often they miss work.

"When we conduct engagement surveys and see high levels of engagement, we also see lower levels of absenteeism. Correspondingly, high levels of absenteeism usually reflect poor levels of engagement," Stattner says.

Steve Cyboran, a vice president and consulting actuary with Sibson Consulting in Chicago, describes chronic absenteeism as "withdrawal behavior" that manifests itself in three ways: People stop coming to work, leave the company to take a different job or exhibit increased levels of "presenteeism"—meaning they are physically present at work but aren’t being productive.

Many companies have purchased expensive data-warehousing systems but aren’t getting optimum value for their money, Cyboran says. The reason: Companies rarely examine health data in context, making it nearly impossible to drive behavioral changes.

"They’re using the data for general reporting and for assessing costs, as opposed to really using it as a workforce management tool," Cyboran says.

For example, a company could examine medical-claims data and develop metrics on the overall health status of its workforce. A company may also wish to create a "workforce readiness metric" that pinpoints whether people are showing up to be full and productive, with no health or training issues.

"There are literally hundreds of interventions you could make that affect the health and productivity of your workforce," Cyboran says. "You can’t do everything, but [should do] things that will have the greatest impact on your organization."

There are plenty of legitimate health reasons for people to miss work, including FMLA-covered events. It’s the unscheduled and, in many cases, preventable absences that slice into productivity, says Ophelia Galindo, a Los Angeles-based absence management expert with Buck Consultants.

Organizations seldom mine payroll information to analyze employee behavior patterns, even though this can be a powerful weapon to fight absenteeism. Galindo relates the case of a call center that noticed a high percentage of its employees were calling in sick on Mondays and Fridays. The company’s initial response was to purposefully overstaff on those days, which only worsened the problem.

To reverse the trend, the company began weighting its employee bonuses to work performed on Mondays and Fridays, which changed the importance of those days in the minds of employees.

"The first step is figuring out whether you have a group problem or an individual problem," Galindo says.

Human resources professionals mistakenly assume they can’t inquire about an employee’s health reasons for being off duty. Although there are legal restrictions on employers, they are permitted to ask individuals to justify chronic absences, Galindo says. Sometimes these discussions reveal health conditions that make an employee eligible for FMLA benefits. But it also has a "sentinel effect" by keeping employees honest.

Although not a true metric, self-reporting software may be primed for greater adoption as companies strive to curtail lost time. The tools require employees to report all time they miss from work including both scheduled and unscheduled absences.

Parry’s organization, the Integrated Benefits Institute, is developing new self-reporting software in conjunction with researchers at Harvard Medical School. Slated for release in 2009, it aims to provide "a different view in the workplace, from the employee’s perspective," Parry says.

Stattner at Hewitt Associates says organizations ought to re-evaluate their sick-leave and time-off policies at least every two to three years. The purpose should be to focus on eliminating programs and policies that drive undesirable behaviors.

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