What Is Work-Life Worth
As managers, however, we’re not so sure. We intuitively believe that thingslike flextime and telecommuting and on-site day-care centers make for happier,more productive employees. And given the difficulty of finding and retainingpersonnel in today’s tight labor market, we think that certainly must countfor something. Our colleagues seem to think so. In Hewitt Associates’ 1999survey of U.S. employers, a full 90 percent reported that they offer some kindof child-care assistance; 47 percent offer elder-care programs; 74 percent offerflexible scheduling arrangements (including flextime, job sharing,telecommuting, and compressed workweeks); and 52 percent offer on-siteconveniences such as banking services, travel services, and dry cleaners.
The trouble is, beyond a visceral sense that these initiatives and programs-- loosely grouped under the umbrella "work/life benefits" -- arepopular with the vast majority of our employees, most of us really don’t knowif they’re making a difference where it counts: on the bottom line.
And we’re not alone. Scan the literature. Talk to the experts. There’sample evidence that employees like these programs and that the nation’s mostadmired companies are embracing them, but when it comes to calculating thereturn on a company’s investment, the numbers simply can’t be found.
Why, then, are these programs so popular? Jon Van Cleve, a work/lifeconsultant for Hewitt Associates, believes that many of his clients offerwork/life programs because they don’t want to be left in the dust.
"We try to point to competition as a big factor," says Van Cleve."We bring in a lot of prevalence data and show what their competitors aredoing. Today, because work/life is really exploding, we try to present the casethat your competitor down the street has all these things -- flexibility, peopleworking at home, reduced schedules, compressed workweeks, things like that --and you don’t. Therefore, your employees may be migrating to them because theyhave those opportunities."
It’s a compelling argument, perhaps, but it does call to mind every mother’sfavorite question: "If all of your friends jumped off a cliff, would you doit, too?"
Marc Spaulding, president of Change Management Associates in Derry, NewHampshire, believes this question is every bit as valid in business as it is onthe playground. "No organization
can afford to change just because it might feel good to change. The changeshave to be driven by the competitive situation as well as the needs of thecustomer."
Before you begin any work/life initiative, then, you should make sure thatyou have a problem in the first place. And if you find that a problem exists,measure its dimensions in terms that you can quantify -- before you try to fixit. You must have adequate measures in place, warns Spaulding. Otherwise, you’llnever know if you actually fixed the problem, or if you were simply jumping offthe cliff with a self-satisfied grin on your face.
Its value lies in recruitment and retention
It isn’t as if the measures don’t exist. You can go right to youremployees and conduct surveys to determine job satisfaction, or you can measurethese things indirectly by looking at turnover, absenteeism, and levels ofcustomer satisfaction. Productivity can be measured in a number of ways. And inthe end, there are bottom-line measures like profitability and economic valueadded. The key to making this work is determining a set of useful baselinemeasurements.
Unfortunately, companies these days tend to implement first and then askquestions later.
"Clearly, starting with knowing what you want to accomplish and why thatis important for the business makes for a much more strategic approach,"says Arlene A. Johnson, a senior consultant for Boston-based WFD, a consultingfirm that specializes in work/life issues. "We always say that we want towork with our clients to create a business-based strategy. It’s like withmarketing or any business-based activity, you want to know what you’re tryingto accomplish and why you’re trying to do that. Some kind of diagnostic andstrategic focus always makes for greater effectiveness. Then you know what you’veachieved or you know if you haven’t achieved it."
Looking at the Families and Work Institute’s 1998 Business Work-LifeSurvey, one gets the impression that it is a lot easier to institute a work/lifepolicy than it is to calculate any sort of return on the investment. Forty-ninepercent of the companies surveyed, for example, allow employees to take time offto care for ill children without using vacation days or losing pay. What is theROI associated with this policy?
"Very few companies have actually evaluated return on investments intheir family leave policies," notes the report. In fact, whether you’relooking at flexible work-arrangement policies, child-care benefits, orelder-care assistance, the answer is always the same: "Very few companieshave actually evaluated return on investments in their [fill in the work/lifepolicy of your choice]."
This is not to say, however, that some companies aren’t trying. In 1995,DuPont conducted a companywide study that analyzed the effects of a 10-yeareffort to help employees balance work and family responsibilities. While thestudy did not attach numbers to changes in productivity or turnover, it did findthat employees who took advantage of DuPont’s work/life programs were "45percent more likely to strongly agree that they [would] ‘go the extra mile’to assure DuPont succeeds than those [who didn’t] use such services."Eighty-nine percent of all respondents indicated that they would "workextra hours to help DuPont succeed."
The survey findings prompted then-president John A. Krol to declare,"The results of the study clearly indicate that work/life programs are apowerful tool to motivate people and encourage commitment to achieve businessobjectives."
A 1997 study conducted by Hoechst Celanese came up with similar results. AtHoechst, employees who were aware of the work/life programs and policies were"39 percent more likely to expect to stay with the company for the nextthree years" than other employees, and they were "20 percent morelikely to agree with the survey statement, ‘I am willing to go the extra mileto meet business needs.’"
Encouraging as these numbers are, however, they still fail to quantify theultimate impact of work/life programs on the bottom line. To get a more rigorousaccounting of this impact, one must turn -- perhaps not surprisingly -- to thebanking industry.
Leave it to the number crunchers to figure it out
In 1997, First Tennessee Bank of Memphis earned Business Week’s top rankingin the magazine’s list of American companies rated for work and familystrategies. Appearing on such lists, in and of itself, can have a powerfuleffect on recruiting efforts. But while it may be difficult to calculate adollar value for the effect on recruiting, when you start to talk about thepeople you didn’t have to hire, it’s possible to come up with somemeaningful numbers.
First Tennessee’s loan operations division, for example, estimated that itwas able to save $3.6 million in salary and benefits annually because it wasable to hold staffing steady at 90 employees over the course of five years.Without the increased productivity that is attributed to the bank’s work/lifeinitiatives, a staff of 212 might have been required to handle the growingvolume of work.
Fleet Financial Group has also attempted to quantify the effects of work/lifepolicies on profitability. In 1996, it launched a pilot project to explore theeffect of work/life innovations at two business units -- a business banking unitin Framingham, Massachusetts, and a portfolio management unit in Providence,Rhode Island. The project, conducted in partnership with the Radcliffe PublicPolicy Institute, is one of the rare instances in which policies have beentailored to address specific work/life issues, and these policies have beensystematically evaluated for their effectiveness.
"The nature of the changes we’re talking about were more complex thanimplementing a single program," says Radcliffe researcher Francoise Carre."A lot of work/life programs entail implementing just one benefit. Theactivities in this project entailed a pretty thorough examination on the part ofthe staff in the site as well as the team of researchers that was working withthem. It was a fairly thorough examination of the work processes, what wasworking and what was not working."
The Radcliffe researchers implemented a number of changes in the two businessunits, including policies that allowed interested employees to take advantage oftelecommuting and flextime. At the Framingham unit, the changes resulted inmeasurable work/life improvements with no adverse effect on productivity. At thesame time, average quarterly turnover for the experimental group fell to 4.5percent, compared to 6.9 percent for the rest of the unit. At Providence, theresults of the program as they pertained to productivity were inconclusive, butaverage quarterly turnover in the experimental group fell to 3.9 percent,compared to 6.6 percent for the rest of the unit.
The researchers ultimately concluded that "quantitative and qualitativemeasures at each site show a positive relationship between improvement inbusiness outcomes and improvement in quality-of-life outcomes."Furthermore, the changes appear to have had a lasting effect.
"We went back a year later and administered the same instruments againand held focus groups," says Carre. "And the results were sustained.They didn’t go back to where they were before in terms of production orsatisfaction or sleeplessness [a common complaint among employees before theprogram began]."
You will note, however, that despite the scientific rigor of the Radcliffeproject, there are no dollar signs.
Mindy Fried is the director and co-principal investigator at The NationalWork/Life Measurement Project, a sweeping piece of research currently beingconducted by the Boston College Center for Work and Family. She is notsurprised, really, that so few of the people who talk about work/lifeinitiatives are willing -- or able -- to quantify the ROI.
"Measuring productivity," she says, "while everybody wishesthey could do it in a clean and easy way, is one of the most complex things todo. Let’s start with the fact that most of the work that we do today isknowledge-based work. It’s very subjective. And even the kind of work thatpeople deem easy to measure -- manufacturing or phone-based work -- even there,people have more ability to gauge or control their output than people mightattribute to them. There’s a value judgment in measuring productivity that Ithink we need to be aware of."
Fried notes that the cost of turnover is nominally quantifiable -- the figuremost often cited is a cost equaling 150 percent of the departing employee’sincome -- but even here accurate measurement is problematic. Most companies,Fried and her colleagues have found, don’t collect data on why people leave.It’s easier, perhaps, to focus on the reasons employees select to stay, butthat requires the will to allocate resources for surveys and focus groups. Ingeneral, companies lack that will. Without the data, notes Fried, it is almostimpossible to draw meaningful conclusions about the effectiveness of theirwork/life initiatives.
The results of Fried’s research are scheduled to be published in June. Forthe moment she ventures no conclusions, other than to say, "The least we’llbe able to say is that flexible work schedules, for example, don’t have anynegative impact on productivity or intention to stay. And I’m hoping, when welook at the final results, that we’ll be able to say they have a positiveimpact."
So what can you do?
That so few companies have actually calculated their ROI on work/lifeinitiatives is, ultimately, somewhat surprising. It may indeed be difficult tocome up with precise numbers, and causal relationships can be difficult toestablish beyond a reasonable doubt. But unless you’re hoping to publish yourfindings in a peer-reviewed journal, a simple and methodical approach will giveyou most of the information you need. Management consultant Marc Spauldingoffers the following guidelines:
- Determine, first of all, if you have a problem or issue to resolve.
- If you do have a problem, work with your employees to determine whether or not a work/life initiative is called for.
- Before beginning the initiative, find an appropriate way to measure the successful resolution of the problem or issue. Whether it’s absenteeism, turnover, productivity, profitability, or job satisfaction, you should already have an instrument in place that measures it.
- Determine the cost of the initiative. An on-site day-care center is easily quantifiable. Telecommuting is less so, but if you supply any equipment for the home office, you have a number to work with. Flextime? If it’s not costing you anything, own up to it.
- Keep an eye out for those pesky hidden costs, such as increased insurance premiums.
- Set a time frame and at the appropriate time, return to the problem. What do your measurements tell you? Is productivity up? Is absenteeism down?
- All things being equal (admittedly a risky assumption in a dynamic economy), you should now be able to calculate what it cost you to achieve the observed changes. You have a rough measure of the return on your investment.
As the experts are quick to acknowledge, measuring the cost of something asintangible as flextime or the value of a happy employee is a rough science atbest. Yet in our hearts, we know that work/life programs make a lot of sense. Ifwe just use our heads, we may be able to prove that our hearts know what they’retalking about.
Workforce, May 2000, Vol. 79, No. 5, pp. 64-71-- Subscribenow!