when line managers complain that they cannot keep positions filled or that they cannot get enough people to join as new hires, that is a prime opportunity to elevate the conversation. How? By tying the fully loaded turnover costs among pivotal employees to the ability of the organization to achieve its long- term strategic objectives.
Assuming an organization does offer one or more work-life programs, Figure 2–6 shows that the financial and nonfinancial effects of those pro- grams depend on several factors. These include the range, scope, cost, and quality of the programs, support for the programs from managers and super- visors, and the extent and quality of communications about them to employ- ees. If those conditions are met, it is reasonable to expect improvements in talent management (reductions in withdrawal behaviors and voluntary turn- over, and improvements in the ability to attract top talent); human-capital outcomes (increased satisfaction, commitment, and motivation to perform well); and financial, operational, and business outcomes.
Analytics and Measures: Connecting Work-Life Programs and Outcomes
For purposes of illustration, we will consider the financial effects of only two of the many possible work-life interventions: child care and flexible work arrange- ments. Then we will examine stock-market reactions to work-life initiatives.
Child Care
A study by Circadian Technologies found that employers that provide onsite child care can reduce employee absenteeism and voluntary turnover by more Figure 2–6
The logic of work-life programs.
(Source:
Adapted from Cascio, W. F.,
& Boudreau, J. W. (2008).
Upper Saddle River, NJ:
Pearson Education.
Investing in people:
Finan cial impact of human resource initiatives, p. 154.)
Employer investments in work-life programs (benefits, conditions, flexibility, information, resources)
Communication, training culture, supervisor support
Employees achieve greater work and life balance
Reduced stress, burnout, conflict
Improved satisfaction, commitment and engagement (Chapter 7)
Better recruiting
Improved staffing
Less absence
Reduced absenteeism costs
Lower turnover
Reduced turnover costs
Better work and career behaviors
Increased performance and service
than 20 percent. 35 At the level of the individual firm, Allied Signal compared the number of days missed by parents 12 months prior to the introduction of a child-care center versus 12 months after its introduction. The number of days missed dropped from 259 to 30. 36 In a cost-benefit analysis of its sick child-care programs, Honeywell determined that it saved $68,000 over and above the cost of the programs in the first nine months of operation. Small employers can save money too. A 38-person CPA firm in California found that by providing seasonal onsite child care, the firm netted an additional
$38,000 in annual income through increased availability of staff (all figures in 2007 dollars). 37
A study at a major aerospace firm reported the following savings in the first year of operation of a child-care center. 38
� Reduced absences arising from child-care breakdowns: 5.28 days saved per employee, or $360,146.
� Reduced tardiness due to child-care problems: 8.37 times late or left early per employee (multiplied by 2 hours), or $142,727.
� Reduced work time spent looking for child care: 7 hours per employee, or
$19,094.
The total estimated net savings for this very large employer were $521,969 (in 2007 dollars).
Finally, a study of the return on investment (ROI) of backup child care (i.e., child care used in emergencies or when regular child care is unavailable) at Chase Manhattan Bank (now JPMorgan Chase) revealed the following. Child- care breakdowns were the cause of 6,900 days of potentially missed work by parents. Because backup child care was available, these lost days were not incurred. When multiplied by the average daily salary of the employee in
Company-sponsored child care is a valuable work-life program for many parents.
question (expressed in 2007 dollars), gross savings were $2,254,671. The an- nual cost of the backup child-care center was $1,065,775 for a net savings of
$1,188,895, and an ROI (economic gains divided by program costs) of better than 110 percent. 39
Flexible Work Arrangements
Consider this quote from a recent study of flexible work arrangements in 29 American firms. “Flexibility is frequently viewed by managers and employees as an exception or employee accommodation, rather than as a new and effective way of working to achieve business results. A face time culture, excessive workload, manager skepticism, customer demands, and fear of nega- tive career consequences are among the barriers that prevent employees from taking advantage of policies they might otherwise use—and that prevent compa- nies from realizing the full benefits that flexibility might bestow.” 40
To help inform the debate about flexible work arrangements, consider the financial and nonfinancial effects that have been reported for these key out- comes: talent management (specifically, better recruiting and lower turnover) and human-capital outcomes (increased satisfaction and commitment, decreased stress), which affect cost and performance, leading to financial, operational, and business outcomes. Here are some very brief findings in each of these areas from the same study of 29 American firms.
Talent Management
A recent global work-life survey at IBM demonstrated that flexibility is an important aspect of employees’ decision to stay with the company. Responses from almost 42,000 IBM employees in 79 countries revealed that work-life balance—of which flexibility is a significant component—is the second leading reason for potentially leaving IBM, behind compensation and benefits.
Conversely, employees with higher work-life balance scores (and therefore also higher flexibility scores) reported significantly greater job satisfaction and were much more likely to agree with the statement “I would not leave IBM.”
In the Corporate Finance organization, 94 percent of all managers reported positive impacts of flexible work options on the company’s “ability to retain talented professionals.” In light of these findings showing the strong link between flexibility and retention, IBM actively promotes flexibility as a strat- egy for retaining key talent.
Human-Capital Outcomes—Employee Commitment
At Deloitte & Touche, one employee-survey item asked whether employees agreed with the statement “My manager grants me enough flexibility to meet my personal/family responsibilities.” Those who agreed that they have access to flexibility scored 32 percent higher in commitment than those who believed they did not have access to flexibility. Likewise, AstraZeneca found that commitment scores were 28 percent higher for employees who said they had the flexibility they needed, compared to employees who did not have the flexibility they needed.
Financial Performance, Operational and Business Outcomes—Client Service
Concern for quality and continuity of client or customer service is often one of the concerns raised about whether flexibility can work in a customer-focused organization. To be sure that compressed workweeks did not erode tradition- ally high levels of customer service, the Consumer Healthcare Division of GlaxoSmithKline surveyed customers as part of the evaluation of its flexibility pilot program. Fully 89 percent of customers said they had not seen any dis- ruption in service, 98 percent said their inquiries had been answered in a timely manner, and 87 percent said they would not have any issues with the program becoming a permanent work schedule.
Studies such as these make it possible to reframe the discussion and to posi- tion flexibility not as a “perk,” employee-friendly benefit, or advocacy cause, but as a powerful business tool that can enhance talent management, improve impor- tant human capital outcomes, and boost financial and operational performance. 41
Stock Market Reactions to Work-Life Initiatives
A recent study examined stock market effects of 130 announcements among Fortune 500 companies of work-life initiatives in The Wall Street Journal . 42 The study examined changes in share prices the day before, the day of, and the day after such announcements. The average share-price reaction over the three-day window was ⫹0.39 percent, and the average dollar value of such changes was approximately $60 million per firm. Apparently investors anticipate that firms will have access to more resources (e.g., higher-quality talent) following the adoption of a work-life initiative. There is a difference, however, between announcements and actual implementation. Only firms that do what they say are likely to reap the benefits of work-life initiatives.
In another study, researchers used data from 1995 to 2002 to compare the financial and stock market performance of the “100 Best” companies for work- ing mothers, as published each year by Working Mother magazine, to that of benchmark indexes of the performance of U.S. equities, the Standard & Poor’s 500, and the Russell 3000. 43 In terms of financial performance, expressed as revenue productivity (sales per employee) and asset productivity (ROA), the study found no evidence that Working Mother “100 Best” companies were consi- stently more profitable or consistently more productive than their counterparts in S&P 500 companies.
At the same time, however, the total returns on common stock among Work- ing Mother “100 Best” companies consistently outperformed the broader market benchmarks in each of the eight years of the study. Although the researchers found no evidence to indicate that “100 Best” companies are handicapped in the marketplace by offering generous work-life benefits, it may be the case that companies with superior stock returns have a lower cost of capital and there- fore can afford to invest in such benefits. The results reflect associations, not causation, between firms that adopt family-friendly work practices and finan- cial and stock market outcomes.
Nonetheless, the results suggest the possibility that at least some of the association is due to the effects of family-friendly investments on market outcomes.
Cautions in Making the Business Case for Work-Life Programs
While the results of the studies just presented may seem compelling, keep in mind three important considerations:
1. Recognize that no one set of facts and figures will make the case for all
firms. It depends on the strategic priorities of the organization in ques- tion. Figure 2–6 provides a diagnostic logic for conversations about this.
One might start by discussing whether the organization’s likely payoff will be primarily through talent management, human-capital outcomes (improved employee satisfaction, commitment, and engagement), busi- ness operations, or the costs of alternative programs. Start by finding out what your organization and its employees care about right now, what the workforce is going to look like in three to five years, and therefore, what they are going to need to care about in the future. 44
2. Don’t rely on isolated facts to make the business case. Considered by itself,
any single study or fact is only one piece of the total picture. It is important to develop a dynamic understanding of the importance of the relationship between work and personal life. Doing so requires a focus on an organiza- tion’s overall culture and values, not just on programs or statistics. Often a combination of quantitative information along with employees’ experi- ences, in their own words (qualitative information that brings statistics to life), is most effective.
3. Don’t place work-life initiatives under an unreasonable burden of proof.
Decision makers may well be skeptical even after all the facts and costs have been presented to them. That suggests that more deeply rooted atti- tudes and beliefs may underlie the skepticism—such as a belief that addressing personal concerns may erode service to clients or customers or that people will take unfair advantage of the benefits or that work-life issues are just women’s issues. Constructing a credible business case means addressing attitudes and values as well as assembling research. 45