Prove it! The Relevance Revolution in Employee Benefits

23 June 2015

When we ask ourselves the question: “Why do we offer benefits?” the reply is usually one or more of the following: Retention, Engagement and Values. But it does not end there – not anymore. The next question is inevitably ‘How do we achieve that?’ or if you are claiming to be achieving it, the question becomes “How can you prove to me that you are achieving it?”

The above questions represent a significant change in the air – CFO’s, CEO’s, CHRO’s and benefits directors are increasingly asking very fundamental questions about benefits. They want to know the ROI on benefits. They want proof of ROI, they want new benefit strategies and they want hard evidence to justify those strategic changes before they enact them. They want the business case for employee benefits and are starting to refuse to take them for granted.

Why the Benefits Related Navel Gazing all of a Sudden?

When somebody asks the “Why do we offer benefits?” question,  it usually means they have been snapped out of their routine and are thinking hard about the fundamentals of employee benefits. It’s a very healthy question to ask and I am seeing this question being asked more and more in recent months. Why is that?

I think there is definitely a trend towards justifying costs as the costs of benefits only ever seem to go up and with no end in sight. This is fuelling demands for hard evidence that benefits are earning their keep and achieving what we think they are achieving in terms of engagement and retention.

For example, for each benefit offered to employees, there needs to be a clear articulation of why it’s being offered together with appropriate supporting evidence. Is it being offered to retain/attract employees? If so, what evidence is there that this is case?  Are there alternatives that can better achieve those goals?  Are employees even taking the benefits up? Would less be more or is a more sophisticated offering that better reflects the company strategy and the nature of the workforce needed?  Alternatively, a benefit may be offered because it’s consistent with the company values. That is a perfectly valid reason to offer a benefit but is the benefit being offered the right one for those values and is the level of benefit appropriate? Are employees even aware of those values and how the benefit represents those values?

The change is that employers want to see a business case for each benefit offered and for the overall benefit strategy. The days of offering benefits because of tradition (industry or otherwise) or offering them because ‘that’s what’s always been done’ are coming to a close. Those arguments are no longer good enough. Budget holders and decision makers want proof they are getting their money’s worth and that employees are responding to their benefits with the engagement and loyalty in the way intended.

The Rise of Evidence Based Decision Making in Employee Benefits

Proving that benefits deliver is all about using available information to better inform decision making. You need to be able to show that changes in benefits are leading to increased take up and that that take up translates into increased engagement and retention if that is what you are claiming to achieve.

Increasingly, decision makers and budget holders want to see evidence before investing in changes to benefits, let alone to justify the current offering. But how does one provide evidence for the potential success of a benefit offering change before one makes the change?

For starters, it can be easily demonstrated with UK wide employee data that benefit take up rates reflect employee demographics. Therefore, by examining one’s own employee demographics and identifying the major or key demographic groups that constitute the employee base, you can derive an optimal benefit strategy that focusses on maximising take up rates, cost constraints and company values. The key is that the take up rate component of the benefit design is based on hard data and measurements taken on the company’s employees as well as behavioural trends in the general UK working population. Moreover, costs, strategy and values can be systematically incorporated into the benefit offering design. The business case then becomes less judgemental and more data driven and evidential – a much easier sale to budget holders.

Are Data Led Approaches a Panacea in this New Environment?

The demand for data driven approaches to benefit management and design is growing at an accelerating pace.  Ongoing management of benefits is much more objective and demonstrable when data driven metrics such as engagement measures, attrition, absenteeism and employee surveys are monitored together with benefit take up rates over time so the impact of benefits can be monitored and benefit spend justified. Moreover, most companies have the data needed in their HR and benefit systems and appropriate benchmark data for benefit take up can be purchased. The data is there and the technology and skills to exploit it are well established.

However, a fear sometimes expressed is the danger of making blind data driven decisions. But reality is that data driven decisions in the benefit space are always combined with company values, strategy and the experience of benefits professionals. Data and data driven evidence are critical inputs to the decision making process but are not the whole process.

The Relevance Revolution

Remember that the aim of benefits is generally along the lines of engagement, retention and values. The aim of benefit strategy is to get that for the ‘right’ price – not necessarily the lowest price – and in a way consistent with company strategy. In order to achieve this, benefits need to be relevant to employees. This applies to value driven benefits as well. There is no point in offering a benefit based on company values if your employees don’t want it in the first place!

But how do we construct benefit offerings that are relevant – offerings that people actually want and will engage with? The key to this is to recognise that benefit preferences are driven by where people are in life, their relationships, age, income; their demographics.

The young want gadget loans and discount cards, things relevant to them being young and single. Parents want insurance to protect their families and to have the flexibility to be both professionals and mothers or fathers to their children. Its horses for courses and the data you need to objectively work out who in your employee base wants what is well within your grasp.

The Relevance Revolution is all about delivering directly to those needs in an objective and evidential way. If you can get a good measure of where your employees are in life and how their demographics impact their benefits choices, creating and managing benefit offerings that are relevant, engaging and consistent with your values and budget constraints is much simpler and straight forward. A successful benefit strategy is built upon a solid understanding of one’s employees and what they need in life.  When you deliver to that, you earn your employee’s engagement and loyalty.

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