The business case for work-family programs.

Businesses that don't have policies and programs to help employees manage their home and work roles probably aren't keeping up with their competitors--and they could be losing money and productivity. So-called family-friendly programs now are an integral part of human resources conferences, and most major newspapers, including the Wall Street Journal, have assigned reporters to cover work--family issues--not just on the "living" page but also in the business section.

The heightened interest in an employer work--family agenda (see exhibit 1 on page 55) is fueled by changing workforce demographics as well as by a growing understanding of the bottom-line benefits to employers for acknowledging and supporting people's personal lives. This article will examine two questions:

* What are the costs to businesses that do not take steps to address work--family issues?

* What are the meassurable business benefits of supporting people's personal lives?

Exhibit 1: Components of a Work--Family Agenda

While work--family issues once were defined primarily in terms of dependent care, today they are multifaceted. Some initiatives apply mainly to large organizations, but many that focus on changing firms' attitudes and practices are just as practical for smaller businesses. Managers' attitudes and the general work environment have been shown to be even more important than specific policies in helping staff balance work and personal responsibilities.

Managerial initiatives and organizational development

* Audit of company culture and work environment.

* Training for managers on work--family issues.

* Assigning work--family program coordination duties.

* Handbooks for employees and managers on family-supportive policies.

* Statement acknowledging importance of family and personal life.

Flexible work arrangements

* Part-time work.

* Job sharing.

* Telecommuting or flexplace.

* Flextime.

* Compressed work week.

* Seasonal schedule.

Dependent care supports

* Childcare information and referral.

* Elder care information and referral.

* Emergency or back-up childcare (when regular arrangements fall through).

* Provision of or payment for childcare during business travel or extended work hours.

* On- or near-site childcare center.

* School-age programs (after school, during school holidays).

* Caregiver fairs.

* Childcare discounts or vouchers.

* Dependent care development fund (to improve quantity or quality of community services).

* Training for care providers.

Leaves and time off

* Family and medical leave (beyond that required by law).

* Personal leave of absence.

* Sabbatical.

* Paid-time-off banks (combining all paid-time-off categories--vacation, sick days, personal--to allow staff flexibility in how to use it).

* Leave bank/leave sharing.

* Respite leave (to provide vacation or respite to people with intense, demanding care-giving responsibilities).

Work--family stress management

* Employee assistance programs.

* Health promotion.

* Work--family seminars or newsletters.

* Work--family resource center.

* Work--family support groups.

* Courses on life balancing, time management.

DETERMINING THE COSTS OF WORK--FAMILY CONFLICT

From numerous recent studies, several salient conclusions emerge:

* Problems with dependent care arrangements affect productivity and job effectiveness for both men and women. Workplace needs assessments have shown that more than 33% of mothers with children under 12 had a sick child in the last month; 51% missed work to care for the child but, equally important, 49% went to work and worried about the child. Of staff with children under 12 years old, one-quarter experienced childcare breakdowns two to five times in a three-month period. These breakdowns were linked to higher absenteeism and tardiness, lower concentration on the job and less marital and parental satisfaction. (Elder care problems had similar effects.) And while dependent care issues once were considered women's domain, the rapid growth of two-income families (now the predominant family type in the U.S. workforce) means men increasingly are affected.

* Family and personal issues are a widespread source of stress in every workplace. The Families and Work Institute's 1993 National Study of the Changing Workforce found that 87% of the U.S. workforce had some day-to-day family responsibility. In professional service firms, well over half the employees can be expected to experience some kind of work--family stress in a three-month period.

* Conflicts between work and personal life affect productivity and general wellbeing. A 1992 study by the St. Paul Companies found that staff who believed work was causing problems in their personal lives were much more likely to make mistakes than those who had few job-related personal problems (30% compared with 19%).

Work--family conflict is by no means exclusive to women. Studies by the Fatherhood Project at the Families and Work Institute suggest such conflict among men may be underreported because they are more inhibited than women in raising personal issues at work. The National Study of the Changing Workforce found virtually identical proportions of men and women reported work--family conflict and that both sexes placed equal value on dependent care benefits.

* Work--family conflict contributes to turnover and its related costs. Workplace research finds repeated evidence of the link between perceived ability to balance work and family issues and staff intentions to stay at a firm. Employees who experience work--family conflict are three times as likely to think about quitting their jobs as those who do not (43% compared with 14%). When worklife issues lead to turnover, the resulting costs consist of not only the visible expenses of recruiting and training a replacement but also the hidden inefficiencies of delays, suboptimal performance of new staff and ripple effects on co-workers. Researchers concur that turnover costs between 93% and 150% of a departing employee's salary--and up to 200% of salary for a highly skilled or senior person (see exhibit 2 on page 55). If even a small percentage of those who experience work--family conflict leave because of it, the cost becomes very high.

Exhibit 2: Calculating Turnover Cost--Two Approaches for a $50,000

Position

Calculation 1
Inefficiency of incoming employee
  (average time to full efficiency: 13.5
  months)                                                  $24,000
Inefficiency of co-workers closely
associated with incoming employee                           15,000
Inefficiency of departing employee                           3,000
Inefficiency of co-workers closely
associated with departing employee                           1,000
Inefficiency of position being filled
while vacant                                                24,500
Out-of-pocket processing costs                               3,000
Human resources department processing
costs                                                        1,000
Other employee processing costs                              3,500
Total cost of turnover                                     $75,000
Ratio of turnover costs to salary            $75,000/$50,000 = 1.5
Calculation 2
Cost of recruiting (33% of salary)                         $16,500
Cost of training (10% of salary)                             5,000
Cost of the learning curve (50% of salary)                  25,000
Total cost of turnover                                     $46,500
Ratio of turnover costs to salary            $46,500/$50,000 = .93

Sources: J. Douglas Phillips and Barbara Reisman, "Turnover and Return on Investment Models for Family Leave," Parental Leave and Productivity, Families and Work Institute; and Lyle M. Spencer, in Training, July 1984.

MEASURING THE BENEFITS

Some of the benefits of work--family programs--employee loyalty, improved morale and public relations image--are difficult to quantify, but a number of company and national studies document tangible and measurable results.

* Dependent care assistance increases staff availability. The surge in company-supported short-term and back-up childcare (up from 5% of surveyed employers in 1993 to 12% in 1994) is due to the direct payback these programs offer in reducing absenteeism. In a cost--benefit analysis of its sickchild-care programs, Honeywell determined that it saved $45,000 over and above the cost of the programs in the first nine months of operation. Similarly, the 38-person CPA firm of Brown, Armstrong, Randall & Reyes in Kern County, California, estimates that by providing seasonal on-site childcare, the firm netted an additional $25,000 annual income through increased staff availability. Work/Family Directions, a consulting firm that offers work--family services to employers, calculates that, on average, childcare information and referral services save employees 15 to 17 hours annually, which can produce a benefit of more focused workers.

* Work--family programs affect employee retention. Johnson & Johnson found that policies on time and leave were very significant in employees' decisions to stay, even if they personally had not used them. This is not atypical; in one group of employers with family-supportive programs, 78% reported that the program helped their company retain valuable employees. At NationsBank, two-thirds of employees on flexible schedules said they would have left without these policies.

AEtna Life & Casualty dramatically demonstrated the effect employer policies can have on retention. Before 1988 AEtna had a 23% turnover rate among those who took family leave, especially among high-potential professional women. By modifying company policy to allow part-time return after family leave, the company cut attrition by more than 50%--resulting in an 88% to 91% retention rate of leave-takers over the past five years. AEtna calculated that reduction in turnover represents more than $1 million in annual savings.

* Work--family initiatives reduce associated stress. In a study of companies with and without work--family programs, Northwestern Mutual Life found employees in companies that didn't have supportive policies were twice as likely to report burnout and stress. Employer programs do not erase the difficulties of balancing responsibilities, but they do provide resources for employees to manage and solve their own problems.

It is notable that good communication policies and work environment correlate to reduced work--family stress. It is not just policies but the environment in which they are implemented that makes the biggest difference for employees. The evaluation of Johnson & Johnson's work--family programs found that while employees appreciated and made use of the company's array of progressive policies, the factors most often associated with people's ability to balance work and family roles were a supportive supervisor and workplace culture.

* Workplace supports for personal life are associated with good work performance. In addition to lowering absenteeism and improving retention and output, work--family initiatives also have demonstrated effects on factors critical to client service, such as discretionary effort and commitment. A University of Chicago study found that the more employees used family-supportive benefits, the more they exhibited initiative, teamwork, flexibility and openness to employee involvement programs, such as total quality efforts. The J&J study found a similar correlation between work--family programs and employee commitment and loyalty.

Perhaps because so many employees have responsibilities in both work and family spheres, worklife balance is an increasingly important factor in employee commitment. When asked what factors were very important in taking a job, 60% of respondents in a national study cited "effect on personal/family life." Research with younger workers suggests that the ability to have a personal life is taking on more importance for U.S. workers and that, increasingly, employers are going to be rated on whether they acknowledge the need for worklife balance.

THREE CAVEATS WHEN MAKING THE BUSINESS CASE

* No one set of facts and figures will make the case for all firms. A firm at the beginning stages of implementation may consider the costs of work--family conflict, while another will focus on the relative benefits of different programs. The impact on recruiting and public image will be decisive factors for one firm while the potential for stanching turnover will appeal to another. Making the business case depends on customizing the rationale to a firm's priorities.

* Don't rely on factoids to make the business case. Taken alone, any of the studies or facts cited above, while attention getting, is only a piece of the picture. A dynamic understanding of the importance of the relationship between work and personal life requires focusing on overall firm culture and values, not just on programs or statistics. Often a combination of qualitative and quantitative information is effective. Employees' experiences, in their own words, bring statistics and studies to life.

* Don't place work--family initiatives under an unreasonable burden of proof. If skepticism persists even after facts and costs have been marshalled, the issue may not be the cost-effectiveness of work--family programs but more deep-rooted attitudes. There may be a fear that addressing personal concerns will erode client service or that people will take unfair advantage of these benefits. Constructing a credible business case means addressing attitudes and values as well as assembling research.

CONSIDER COSTS AND BENEFITS

There has always been a strong intuitive and anecdotal argument for the reciprocal relationship between work and personal life, but now it is documented by an expanding body of research data and employer experience. When a firm calculates the bottom-line benefits of addressing work--family concerns, it must consider the costs of problems left unaddressed as well as the benefits of any initiatives.

Exhibit 3, above, is a worksheet CPAs can use to measure potential costs and benefits in their own firms and companies. Some elements of the cost--benefit equation are quantitative and documented by research; others are qualitative, but nevertheless real. The strongest case is one that is linked to the firm's business objectives, includes both qualitative and quantitative factors and takes into account the values and culture that underlie a firm's practices.

Exhibit 3: Sample Financial Analysis Model

Much of the data for this model must be estimated. Use very conservative estimates in completing the model to avoid overestimates and to increase the credibility of the results. For example, to calculate the cost benefit of employee retention, assume that work--family programs help retain just 1/2 of 1% of program users. The cost savings would then be calculated by finding the following information: 1. Number of cases (program users) = 2. Number of employees retained (.005 x number of cases) = 3. Average cost of turnover (.75 x average direct salary) = 4. Dollar savings (number retained x turnover cost) =

Quantitative factors                               Savings
1. Employee time saved                             $
2. Additional output due to
increased focus and motivation
3. Employee retention
4. Health care cost prevention
5. Reduced absenteeism
Quantitative factors total                         $
Savings represented by quantitative factors minus
programs' costs to achieve savings equals          $
Dollars saved                                      $
Qualitative factors
1. Improved morale and loyalty                     $
2. Enhanced quality efforts
3. Positive public and community relations
4. Enhanced recruitment
Qualitative factors total                          $
Savings from quantitative factors plus
estimated value of qualitative factors equals      $
Total savings/value                                $

Copyright 1993, Work/Family Directions, Inc.

Adapted with permission from Work/Family Directions. For more information on how to do the calculations for this worksheet, see The Business Case for Work and Family Policies and Programs, Work/Family Directions, Boston, 1994.

RELATED ARTICLE: Turnover costs employers...

* Between 93% and 150% of departing employee's salary

* Up to 200% of highly skilled or senior person's salary

RELATED ARTICLE: EXECUTIVE SUMMARY

* IN THE LAST DECADE, many businesses have created policies and programs to help employees manage their home and work roles. The heightened interest in an employer work--family agenda is fueled by changing workforce demographics as well as by a growing understanding of the bottom-line benefits to employers for acknowledging and supporting people's personal lives.

* IN DETERMINING THE COSTS of a failure to have family-friendly policies, studies have found that problems with dependent care arrangements affected productivity and job effectiveness for both men and women; family and personal issues were a widespread source of stress in every workplace; and work--family conflict contributed to turnover and its related costs.

* THE BENEFITS ARE MEASURABLE: Dependent care assistance has been proven to increase staff availability; work--family programs affect employee retention and reduce related stress; and workplace support for personal life is associated with good work performance.

* EMPLOYERS SHOULD REMEMBER THAT

1. No one set of facts and figures will make the case for all firms. Success depends on customizing the rationale to one's priorities.

2. Statistics alone cannot make the business case. A dynamic understanding of the importance of the relationship between work and personal life requires focusing on overall firm culture and values, not just on programs or statistics.

3. Work--family initiatives shouldn't be placed under an unreasonable burden of proof. If skepticism persists even after facts and costs have been marshalled, it may be necessary to address underlying fears, attitudes and values.

RELATED ARTICLE: CASE STUDY A Money-Saving Accommodation

A small Minneapolis firm has found that offering employees scheduling options helps cut salary expenses without disrupting the work environment. "It's win--win," says Nancy M. Heimer, partner of 10-person Ocel, Heimer & Associates.

The firm, which concentrates on audit, review and accounting services, makes decisions on flexible schedules on a case-by-case basis. It started out allowing one female audit manager to work a three-day week from May 1 to October 1, then a male tax senior worked four days on a temporary basis when he faced daycare problems. Both retained full benefits, but they also made themselves available to take phone calls at home when necessary, came in to work some evenings on their days off and pitched in during emergencies. "It's important to have a commitment from both sides," Heimer says.

She believes good communication with the entire staff is key to succeeding with such programs. "Let the staff know about the reduced schedule option and reassure them that it's available to all," she advises.

RELATED ARTICLE: For Further Information

Highlights of the National Study of the Changing Workforce, Families and Work Institute, 1993.

Linking Work--Family Issues to the Bottom Line, Dana E. Friedman, The Conference Board, 1991.

Strategies for Promoting a Work--Family Agenda, Dana E. Friedman and Arlene A. Johnson, The Conference Board, 1991.

"Work--Family Issues and Their Productivity Effects: A Review of the Research," The Corporate Reference Guide to Work--Family Programs, Ellen Galinsky, Dana E. Friedman and Carol A. Hernandez, Families and Work Institute, 1991.

Work--Family Roundtable: Evaluating Programs, Arlene A. Johnson, The Conference Board, Summer 1993.

Work--Family: Redefining the Business Case (Highlights from a conference sponsored by The Conference Board and the Families and Work Institute), The Conference Board, 1993.

The Business Case for Work and Family Policies and Programs, Work/Family Directions, 1994.