Every person has different motivations for working. The
reasons for working are as individual as the person. But, we all work because
we obtain something that we need from work. The something we obtain from work
impacts our morale and motivation and the quality of our lives. Here is the
most recent thinking about motivation, what people want from work.
Work IS About the Money
people work for love; others work for personal fulfillment. Others like to
accomplish goals and feel as if they are contributing to something larger than
themselves, something important. Some people have personal missions they
accomplish through meaningful work. Others truly love what they do or the
clients they serve. Some like the camaraderie and interaction with customers
and coworkers. Other people like to fill their time with activity. Some workers
like change, challenge, and diverse problems to solve. Motivation is individual
your personal reasons for working, the bottom line, however, is that almost
everyone works for money. Whatever you call it: compensation, salary, bonuses,
benefits or remuneration, money pays the bills. Money provides housing, gives
children clothing and food, sends teens to college, and allows leisure
activities, and eventually, retirement. To underplay the importance of money
and benefits as motivation for people who work is a mistake.
benefits and pay are the cornerstone of a successful company that recruits and
retains committed workers. If you provide a living wage for your employees, you
can then work on additional motivation issues. Without the fair, living wage, however,
you risk losing your best people to a better-paying employer.
fact, recent research from Watson Wyatt Worldwide in The Human Capital Edge:
21 People Management Practices Your Company Must Implement (or Avoid) to
Maximize Shareholder Value, recommends, that to attract the best employees,
you need to pay more than your average-paying counterparts in the marketplace.
Money provides basic motivation.
Got Money? What’s Next for Motivation?
read the surveys and studies dating back to the early 1980s that demonstrate
people want more from work than money. An early study of thousands of workers
and managers by the American Psychological Association clearly demonstrated this.
While managers predicted the most important motivational aspect of work for
people would be money, personal time and attention from the supervisor was
cited by workers as most rewarding and motivational for them at work.
recent Workforce article, “The Ten Ironies of Motivation,”
reward and recognition guru, Bob Nelson, says, “More than anything else,
employees want to be valued for a job well done by those they hold in high
esteem.” He adds that people want to be treated as if they are adult human
what people want from work is situational, depending on the person, his needs
and the rewards that are meaningful to him, giving people what they want from
work is really quite straight forward. People want:
of their work inspires motivation:
including such components as the ability to impact decisions; setting clear and
measurable goals; clear responsibility for a complete, or at least defined,
task; job enrichment; tasks performed in the work itself; and recognition for
belong to the in-crowd creates motivation: including items such as receiving timely information and
communication; understanding management’s formulas for decision making; team
and meeting participation opportunities; and visual documentation and posting
of work progress and accomplishments.
opportunity for growth and development is motivational: and includes education and training; career paths; team
participation; succession p[planning; cross-training; and field trips to
is key in motivation.
People want clear expectations that provide a picture of the outcomes desired
with goal setting and feedback and an appropriate structure or framework.
Recognition for Performance Creates Motivation
Human Capital Edge, authors Bruce Pfau and Ira Kay say that people want
recognition for their individual performance with pay tied to their
performance. Employees want people who don’t perform fired; in fact, failure to
discipline and fire non-performers is one of the most demotivating actions an
organization can take - or fail to take. It ranks on the top of the list next
to paying poor performers the same wage as non-performers in deflating motivation.
the authors found that a disconnect continues to exist between what employers
think people want at work and what people say they want for motivation.
“Employers far underrate the importance to employees of such things as
flexible work schedules or opportunities for advancement in their decision to
join or leave a company.
means that many companies are working very hard (and using scarce resources) on
the wrong tools,” say Pfau and Kay. (p. 32) People want employers to pay
them above market rates. They seek flexible work schedules. They want stock
options, a chance to learn, and the increased sharing of rationale behind
management decisions and direction.
What You Can Do for Motivation and Positive Morale
You have much information about what people want from
work. Key to creating a work environment that fosters motivation are the wants
and needs of the individual. I recommend that you ask your employees what they
want from work and whether they are getting it. With this information in hand,
I predict you’ll be surprised at how many simple and inexpensive opportunities
you have to create a motivational, desirable work environment. Pay attention to
what is important to the people you employ for high motivation and positive
morale. You’ll achieve awesome business success.
Susan M. Heathfield
Presents a model of employee attendance in work organizations based on a review of 104 empirical studies. It is suggested, based on the literature, that attendance is directly influenced by 2 primary factors: (a) attendance motivation and (b) ability to come to work. Attendance motivation, in turn, is largely influenced by satisfaction with the job situation and various internal and external pressures to attend. The model attempts to account for both voluntary and involuntary absenteeism. Moreover, the model argues against earlier assertions that absenteeism is principally caused by job dissatisfaction and that absenteeism and turnover share common roots. Available literature is largely consistent with the model but not sufficient to validate it. (3 p ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
many senior people overburdened by time-consuming and often conflicting roles.
- Business unit
- Geographic markets or offices
- Division or department
- Product line/service offering
- Industry group
- Key account team
- Committees (recruitment, training)
- Task force or project team (service innovation, new offerings)
Each of these organizational groupings can, and does, intersect with
duplicated missions, overlapping membership, and common resource pools to draw
upon.We frequently hear comments like this from members of management:“It’s not at all clear what each of these groupings should be responsible for
and how their activities should be coordinated and evaluated. If you are a key
player in this organization, you can spend an inordinate amount of time in
meetings. There has got to be a better way to organize for effective
operations!”There is a better way, but the way professional businesses organize
and manage has not kept up with their increasing complexity. Eventually — we
think sooner rather than later — this will significantly impede their continuing
success.Not only do modern companies have more “types” of organizational groupings
than in the past, but these groups now have broader responsibilities than the
simple “generate and serve clients” goals of the past. To survive and flourish,
individual groups within today’s organizations must be accountable for client
loyalty, knowledge transfer, development of their people (junior and senior),
and many other “balanced scorecard” items.To make it all worse, many of these groups are composed of people who,
because of geographic dispersion, do not see each other regularly face-to-face.
They have to operate as members of a “virtual” organization. Many would not even
recognize some of the people in their own operating groups, with whom they have
to interact regularly.As Marcel Goldstein, of the global public relations firm Ogilvy, wrote to
us:“The modern-day professional business lacks much formal structure, at least
when compared with manufacturers, government agencies, and other organizations.
This is a great asset, as it allows the flexibility, creativity, and autonomy
necessary to adapt to client needs. It can have a darker side though:
inefficiency, confusion, and process breakdowns.“In many professions, clients are demanding cross-practice cooperation. But
do we have the right structures and personal skill sets to successfully manage
the integration of specialty expertise?“The highly matrixed professional business turns downright chaotic during
times of great change: acquisitions/mergers; technology disruptions; and
transitions to integrated, cross-functional service delivery.“Many professional businesses engage in acquisitions of great fanfare, only
to have their value left unrealized by political undermining. In my experience,
traditional manufacturers with structured, hierarchical management execute
acquisitions with far less confusion and resulting paralysis.“We need structures that don’t squash flexibility and creativity but minimize
inefficiency and confusion. We need help building the personal skill sets needed
to manage ourselves and each other in these environments, especially during
times of great change.”We certainly would not profess to have answers to all these complex issues.
However, we believe that there are five perspectives that must guide any review
of a firm’s or company’s structure.
Imperative 1: Examine Structure, Process, and PeopleThe solution for an individual firm must always address three perspectives in
any organizational review:
- structure (how we are formally organized);
- processes (how different types of decisions are to be made
and how conflicts and trade-offs are to be resolved);
- and people (appointing the right individuals to play the
complex roles that will make it all work).No one dimension will solve the problem: all three must be examined. However,
we suspect that the importance of these three elements in the solution may be
first, people; then processes; then structure.
Imperative 2: Choose the Right Group LeadersMany organizations believe, as we do, that selecting the right leaders (and
having enough of them) is more important than structure or process.Peter Kalis, managing partner of law firm Kirkpatrick & Lockhart, states
the view forcefully:“Structure and process — while as essential to a law firm as a skeleton and a
nervous system are to a human — are prone to ossification and thus are
fundamentally at war with the dynamism of the marketplace. People, on the other
hand, are not. We try to elevate the empowerment of our people over the
organizational niceties of structure and process except to the extent that those
structural and process features work to empower our people.”Choosing the right people for leadership positions was always important, but
is even more critical in complex organizations. Consider just some of the (newly
important?) skills that today’s group leader probably must have:
- The ability (and interest) to motivate and influence people they never see
- The ability to delegate and trust others to manage important relationships
- The ability to play a “linking-pin” role, simultaneously thinking about the
overall good of the firm while taking care of the needs of the units they are
- The ability (and interest) to motivate and influence people they never see
- The ability to manage people who have core disciplines other than the one in
which the leader was specifically trainedIt has always been true that effective management required a complex mix of
social, interpersonal, psychological, political, and emotional skills on top of
the high intelligence and technical skills necessary to rise to the top. We
believe that as organizations become more complex, possession (and development)
of these so-called soft skills must play an ever-more-important role in
influencing who is selected to perform managerial or leadership roles.Unfortunately, such considerations do not always play a dominant role in
selecting group leaders. It is a common syndrome that all initiatives (client
team, industry, geographic, functional, etc.) are seen as important, so the same
senior people always end up on all the committees, often based on considerations
other than managerial aptitude or even orientation.As a result, it is somewhat hit-and-miss as to whether the right people get
selected for these roles, their mandate is clear, their performance as leaders
gets discussed and evaluated, and whether they receive any assistance or
guidance in learning how to perform their roles.Not only does this hurt the organization by (possibly) leading to less
effective team leadership, but it’s not clear that it is wise to consume the
limited time of valuable people by asking them to manage and/or get involved in
everything. This is simple economics — a valuable resource should always be
focused on its highest and best use.
Imperative 3: Establish Mandates for Each GroupEven if you have an ideal structure, there will always be problems with
coordinating cross-boundary resources and dealing with conflicting priorities.
You cannot make all cross-boundary issues go away by simply redesigning the
boundaries.Beyond structure, companies must ensure that each group has a clear mission
(or mandate) that is understood by those inside and outside the group.In our experience, many firms launch new business units, various committees,
or project teams with ambiguous charters and then leave it to powerful (or
not-so-powerful) group leaders to determine through negotiations over time
precisely how the groups will interact.The case for doing this rests on the idea that internal competition
is the inevitable result of shifting external market forces influencing each of
the organization’s groups differently and that a flexible approach to the
responsibilities and interactions of groups is an efficient way of responding to
these external market forces.However, we believe that failing to discuss and resolve the issues of group
responsibilities (and how groups will interact and resolve conflicts and
trade-offs) rarely results in optimal outcomes.Under such an approach, power rather than principle determines group goals
and how groups will interact, and this leads to lesser performance. Resolution
of conflicting goals and clear, agreed-upon guidelines for decision making over
trade-off situations must be determined in advance.We also believe that organizations must stop treating all groups alike, which
many unfortunately do, for administrative convenience. It is possible to use
different types of groups for different things: lots of little teams for
client-level relationships or one large central group for financial and
administrative services.A large, growing, and complex firm doesn’t have to be (in fact, can’t be)
made up of units that have similar roles, look alike, have the same targets, and
are managed in the same way. We discussed specific procedures for setting group
goals and mandates in our book First Among
Equals (Free Press, 2002).In making all this work, it is almost better to stop thinking of permanent or
semi-permanent “departments” and to begin to use the language of “teams.” There
is a great deal of evidence that organizations work better when people feel that
they are volunteers self-selected to small mission-oriented teams.This is not just a matter of making people “feel good.” It has always been
true that winning professional service firms succeed most by designing their
organizations from the bottom up — through the voluntary enthusiasm of
individuals. You’ll be better off with a messy set of teams filled with
enthusiasts than you will with a logically correct set of groups filled with
good citizens.As Ben Johnson of law firm Alston & Bird remarked:“One problem is that too many ‘leaders’ are afraid to create more energy than
they can control. I tell people I’d rather have created more energy than I could
control than not created any energy at all. Here’s to structural complexity!
Here’s to dispersed leadership!”On the other hand, it is also important that firms clarify the roles and
responsibilities of group leaders and avoid the balkanization of the
organization that can come from letting group leaders think that they are
responsible only for their groups.Peter Friedes, the former CEO of human-resources consulting firm Hewitt
Associates, had this to say:“I had 15 or so managers reporting to me. So I needed them to not be pulling
the firm in different directions. One practice I had was to remind all those who
reported to me that part of their role was to have my CEO perspective in
managing their group. They were not to just be an advocate for their group or
their people. They had to have a ‘whole entity’ view.”
Imperative 4: Clarify Agreements Within the GroupsWhether you are managing a division, a key client team, or a limited-scope
task force, every group needs to have a very clear understanding of what “team
membership” implies. As a matter of practicality (although not, alas, reality in
some firms) there also needs to be a limit on the number of teams one person can
join (and the number of roles one person can play).For teams to work, there need to be clear, explicit guidelines (even rules of
engagement) that team members have agreed to observe. Clarifying team members’
rights and obligations can go a long way toward becoming more efficient and
effective. (Even as simple a rule as “You must do what you said you were going
to do” would transform some organizations and save a lot of wasted meeting and
planning time.)The need for such agreements, while always wise, has become ever more
critical in a virtual world. As Harry Truehart, chairman of law firm Nixon
Peabody, observed, “Getting people and procedures that facilitate effective
‘management at a distance’ is the biggest challenge in making groups work.”We believe that if far-flung groups made up of many autonomous individuals
are to make cohesive decisions over time, then it is necessary that the group
members agree in advance the principles on which they will base their decisions
— the guidelines the group members agree to follow. Only with such an agreement
in place can a decentralized organization make consistent decisions.Part of the solution, may involve thinking of (and formalizing) different
levels of team membership. For example, levels of “team membership” might
include (i) full decision rights — possible called Team Leadership, or (ii)
right to be consulted — called team membership or (iii) right to be kept
informed — called team affiliation. (These are examples only.)
Imperative 5: Recognize Shifting Priorities in Structural DesignStructural changes alone will not resolve conflicting priorities and
competing demands for resources, but structure does nevertheless matter. The
evolution of professional-service firms over time suggests that some structural
approaches do work better than others. Most successful global firms, in a broad
array of professions, have tilted the importance of their different
organizational “axes.”For some time, there has been a general trend to make the target client
industry the most important (and organizationally powerful) grouping. This has
been driven by clients repeatedly telling their vendors and providers that they
had better get to know and understand the client’s business.Next in authority and emphasis comes the specifically targeted client (or key
account) team. Well-orchestrated client teams are the only answer to making
seamless service across geography and product/service offerings a reality. Don
Lents of law firm Bryan, Cave notes, “It is my sense that there is a growing
focus on client teams and the need for such teams to be front and center in the
thinking of firms.”Third, and with increasingly less power and responsibility inside most
organizations, are the traditional product or service-line groups built around a
focused technical specialty or discipline. Companies need to have highly focused
and skilled technical people, but few are still primarily organized that way.Finally (and this is a huge revolution from the past), the trend has been to
make geography the least important and powerful dimension of the complex matrix.In the past, the office head (or country head in mega firms) was the source
of all resources and the arbiter of last resort. Today, in many organizations, a
geographic head may preside over a location whose people all belong to groups
headed and “controlled” by a powerful leader located elsewhere.This is not meant to denigrate the role of the geographic leader. As Bob Dell
of law firm Latham & Watkins points out:“Having the right leader in an office can be extremely effective in
facilitating the success of all the other groups therein. There seems to be
something about physical presence combined with a leader who is perceived as
less biased toward any group that can be very powerful in resolving competing
Moving ForwardWe believe that there is a distinct process that firms need to go through to
find their own customized solutions to managing a complex organization.The steps are these:First, assess the perception of “pain and difficulties” felt by the current
organization, to determine people’s appetite for considering changes. This will
usually require a process of interviewing key players across the firm. No change
can be made unless there is a keenly felt sense of either pressure or
opportunity.Next, it will be necessary to collect and assess the evidence as to how well
the organization and its components are currently performing and interacting. In
a recent issue of The McKinsey Quarterly (2006, number 3), Cross,
Martin, and Weiss described a detailed and powerful methodology for “mapping the
value of … collaboration.”Even if the approach is not this thorough, there will need to be an
investigation of current organizational functioning, including not only an
in-depth view of financials, analyzed according to numerous perspectives, but
also an analysis of external evidence (including, perhaps, input from selected
clients) and internal structural frustrations and performance inhibitors.It will be necessary to examine whether reward systems are in line with
organizational objectives and whether profit-center accounting systems are
contributing to a balkanization of the organization.At the other extreme, it would be worth examining whether the organization is
currently being held together and energized by sharing in what is sometimes
referred to as an “overarching purpose” or shared values. This is an approach to
organization that is often fervently preached but rarely achieved.Next, in any organizational review, would be the need to design and implement
a process to generate commitment to re-examine organizational structures and
processes and explore the major alternatives (including possibly re-constituting
key groups). Any redesign, must, of course, ensure continuity of strategy
formulation and implementation through the organization.Finally, it will be necessary to examine, consider, and implement methods for
the development of special managerial skills and competencies as well as new
metrics that may give better indications of the organization’s functioning and
response to external forces or internal pressures.It may also be necessary to design a process to get the organization to
recommit to a clarified sense of purpose, values, and “rules of membership”: —
the principles and practices that people must follow to remain members in good
standing of the organization.Of course, to make any of this work, there is a need for key players to be
willing to let other people decide some things even when they’re not there — a
situation which does not exist in many companies and firms!We do not mean this to be a throwaway line. To effect real change,
organizations must not try to establish “theoretically correct” structures and
processes but must have honest discussions among powerful players about the
types and nature of the firm’s group processes that would, in fact, be
honored.We have seen too many firms go through the motions of putting in place what
appear to be sensible organizations, when everyone knows that certain key
players will not adhere to the policies that have been adopted.We’re not idealists here — we recognize the realities of the need to
accommodate personalities and special situations. But we also do not believe
that progress is made by pretending or obtaining “false consent.” That is why
organizational solutions must be custom-designed for each firm and need to be
the result of a comprehensive review, not, as is so frequently the case, the net
result of an accumulation of a series of incremental changes driven by short-run
In order to effectively manage risk and prioritize decision and resource making decisions, it is vitally important that planners determine the value of the asset first. In this article we are going to look at the issue of accurately valuing human capital. This process will include measuring key elements such as remuneration, contribution, revenue attraction, benefits and travel value.
By the end of this article you will know how to accurately value one of the most valuable but likely least understood asset classes, your people or human capital. This improved approach will reduce your asset vulnerability, enhance safety and increase productivity through reduced wastage and inaccurate planning.
Why is it that almost all other asset classes have a specific value and investment/insurance calculation but human capital does not?
If you own a building, a car or even your home contents you have to declare a value to your insurance provider and then based on your overall percentage of contribution you determine if the value of insurance, as one of many means of protecting that asset, is worth the investment for full or partial loss in the event of an incident. Why do companies not do this for human capital? Does your company know the exact cost of each human capital unit on a temporary or permanent loss basis? If not, how are you basing your risk management and resources allocation decisions?
The following will address the key elements for inclusion to accurately value your unit cost per human capital element to make a more informed investment decision as to appropriate risk management options for your human capital.
Remuneration and Benefits
Many human resource (HR) departments have graduated scales or processes for measuring the position of an individual within a company such as E1, F3, B9 and so on. However, these are often exclusively only derived from salary/remuneration and benefits calculations which in reality constitute only a small percentage of the overall “value” associated to any one person.
While you can harvest this information or compile your own from scratch, remember it is only part of the final assessment.
The final number should include salary, benefits, holidays, cost of living allowances, fringe benefits, perks, shares and any other basic payments made on a regular basis as per their position and function within the company.
Final money paid to the individual is one matter but a more compelling and vital calculation is just how vital is their contribution to the company or product/service?
Contribution and Utility
Each department is different but in essence they can be viewed as a cost center or profit center. The question is which one? The unit valuation of any one person is also inclusive of their contribution to the company based on role and expertise.
Your critical processes may include production, billing and executive management therefore they have a higher priority within your business continuity planning and attract a greater weighting on the contribution scale.
On the other hand, back office activity such as cleaning, administration and marketing may not be as high a priority in a critical situation therefore attract a lower overall contribution value.
The cumulative score for both salary and contribution is compiled and added to the next component, replacement and recruitment.
Replace and Recruit
You know how much it costs to recruit, train and even replace a senior executive and other high yield human capital. Some forecasts for a failed international assignment put this in the vicinity of USD$150,000 per executive position. To accurately calculation the loss and value of your human capital as an asset class you need to include replacement and recruitment.
The reason this is necessary is that if your processes are inadequate and your protection of your human capital assets are poor you can expect too loose (injury, strike, absence, avoidance and even death) some of your people or at best reduce their availability (sickness, absence, recovery) at various times or in single catastrophic events.
The replacement and recruitment value is then added to the proceeding categories before moving to the next area, revenue attraction.
Revenue Attraction Specific To Human Capital
Revenue attraction is a very important, and none-the-less ignored, component for your human capital calculation because it can be sizable in number and catastrophic in lost earnings if the person/s in question are not available for any period of time.
If you have a sales team whereby your entire revenue figure is derived from just 1 or 2 people then the value attributed to those people is much, much higher than others in the same department or even in the entire company.
While the number may fluctuate over the course of the year, it needs to be an annual figure (consistent with all the other calculations) but must also be reviewed/amended annually also.
Revenue attraction is typically a single element if fixed earnings are known in a static location but you may need to include an additional factor for those that travel to close or generate business as this figure can also be sizable if forgotten or overlooked.
Many senior executives and revenue all-stars travel regularly. This travel element therefore warrants inclusion or calculating too.
If for example, a new business opportunity presents in the vicinity of $10 million and a team/single person is dispatched to close on this opportunity then this occasional business figure needs inclusion as it is underpinned once again by key human capital exposure.
Rarely do companies consistently value such business travel activities but it is both lucrative for the company and costly should it fail or loss of human capital access is experienced.
Travel value is the final and optional component to a baseline evaluation of human capital within an organization. Companies vary wildly as to their human capital distribution but this final number is far from an even bell curve result either.
Now you have your final number you can determine your time loss component on an hourly, daily, weekly and even annual basis. You can now appreciate why generic “one policy fits all” approaches don’t work. This is largely due to the fact that your policy is aimed at 100% of the workplace population but 80% of your human capital value comes quite possibly from less than 10% of your overall employees/staff. ￼
This time loss calculation (sometimes used in single and annual loss expectancy planning) now becomes the foundation of your decision making process or your risk based decision planning. Use it, at a group and individual level to truly determine the value of the task and asset and plan accordingly.
If you have a situation where you have millions at risk and you’re economizing on a few dollars, re-evaluate your strategy. Alternatively, if you have a relatively small asset exposed and your expending millions based more along the lines of fear, uncertainty and doubt, then go back to the start of this article and do your calculations and question your sensibility in this latter approach.
Now you can appreciate the necessity for a more consistent methodology for valuing your human capital. They’re an asset, treat them as such. Use this consistent and effective approach to remove the emotional or abstract processes that are likely to be plaguing your organization.
You now have the various elements such as remuneration, contribution, revenue attraction, benefits, replacement, time loss and travel value to make a much more accurate assessment as to the true nature and value of your asset. Compare this to your other asset classes such as buildings, product, information and you may get a very rude shock as you have been apportioning your attention and concerns in totally the wrong area.
Make risk based decision on understanding all the factors, inclusive of the true value of the asset at risk. Overcome historical avoidance or HR dominant processes to value the asset and most importantly the true cost of permanent or temporary access denial of such asset/s.
WELLNESS PROGRAM CHECKLIST
Use the following questions to help determine whether the plan offers a program of health promotion or disease prevention that is required to comply with the Department’s final wellness program regulations and, if so, whether the program is in compliance with the regulations.
A. Insert the first day of the current plan year: _______________________________.
Is the date after July 1, 2007? …………………………………………………………… Yes No
The wellness program final rules are applicable for plan years beginning on or after July 1, 2007.
B. Does the plan have a wellness program? …………………………………………… Yes No
A wide range of wellness programs exist to promote health and prevent disease. However, these programs are not always labeled “wellness programs.” Examples include: a program that reduces individual’s cost-sharing for complying with a preventive care plan; a diagnostic testing program for health problems; and rewards for attending educational classes, following healthy lifestyle recommendations, or meeting certain biometric targets (such as weight, cholesterol, nicotine use, or blood pressure targets).
TIP: Ignore the labels – wellness programs can be called many things. Other common names include: disease management programs, smoking cessation programs, and case management programs.
C. Is the wellness program part of a group health plan?………………………… Yes No
The wellness program is only subject to Part 7 of ERISA if it is part of a group health plan. If the employer operates the wellness program as an employment policy separate from the group health plan, the program may be covered by other laws, but it is not subject to the group health plan rules discussed here.
Example: An employer institutes a policy that any employee who smokes will be fired. Here, the plan is not acting, so the wellness program rules do not apply. (But see 29 CFR 2590.702, which clarifies that compliance with the HIPAA nondiscrimination rules, including the wellness program rules, is not determinative of compliance with any other provision of ERISA or any other State or Federal law, such as the Americans with Disabilities Act.)
D. Does the program discriminate based on a health factor?………………….. Yes No
A plan discriminates based on a health factor if it requires an individual to meet a standard related to a health factor in order to obtain a reward. A reward can be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism (such as deductibles, copayments, or coinsurance), the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan.
Example 1: Plan participants who have a cholesterol level under 200 will receive a premium reduction of 20%. In this Example 1, the plan requires individuals to meet a standard related to a health factor in order to obtain a reward.
Example 2: A plan requires all eligible employees to complete a health risk assessment to enroll in the plan. Employee answers are fed into a computer that identifies risk factors and sends educational information to the employee’s home address. In this Example 2, the requirement to complete the assessment does not, itself, discriminate based on a health factor. However, if the plan used individuals’ specific health information to discriminate in individual eligibility, benefits, or premiums, there would be discrimination based on a health factor.
If you answered “No” to ANY of the above questions, STOP. The plan does not maintain a program subject to the group health plan wellness program rules.
E. If the program discriminates based on a health factor, is the program saved by the benign discrimination provisions?…………………………………………………….. Yes No
The Department’s regulations at 29 CFR 2590.702(g) permit discrimination in favor of an individual based on a health factor.
Example: Plan grants participants who have diabetes a waiver of the plan’s annual deductible if they enroll in a disease management program that consists of attending educational classes and following their doctor’s recommendations regarding exercise and medication. This is benign discrimination because the program is offering a reward to individuals based on an adverse health factor.
TIP: The benign discrimination exception is NOT available if the plan asks diabetics to meet a standard related to a health factor (such as maintaining a certain BMI) in order to get a reward. In this case, an intervening discrimination is introduced and the plan cannot rely solely on the benign discrimination exception.
If you answered “Yes” to the previous question, STOP. There are no violations of the wellness program rules.
If you answered “No” to the previous question, the wellness program must meet the following 5 criteria.
F. Compliance Criteria
(1) Is the amount of the reward offered under the plan limited to 20% of the applicable cost of coverage? (29 CFR 2590.702(f)(2)(i))…………… Yes No
Keep in mind these considerations when analyzing the reward amount:
Who is eligible to participate in the wellness program?
If only employees are eligible to participate, the amount of the reward must not exceed 20% of the cost of employee-only coverage under the plan. If employees and any class of dependents are eligible to participate, the reward must not exceed 20% of the cost of coverage in which an employee and any dependents are enrolled.
Does the plan have more than one wellness program?
The 20% limitation on the amount of the reward applies to all of a plan’s wellness programs that require individuals to meet a standard related to a health factor.
Example: If the plan has two wellness programs with standards related to a health factor, a 20% reward for meeting a body mass index target and a 10% reward for meeting a cholesterol target, it must decrease the total reward available from 30% to 20%. However, if instead, the program offered a 10% reward for meeting a body mass index target, a 10% reward for meeting a cholesterol target, and a 10% reward for completing a health risk assessment (regardless of any individual’s specific health information), the rewards do not need to be adjusted because the 10% reward for completing the health risk assessment does not require individuals to meet a standard related to a health factor.
(2) Is the plan reasonably designed to promote health or prevent disease? (29 CFR 2590.702(f)(2)(ii)) …………………………………………………….. Yes No
The program must be reasonably designed to promote health or prevent disease. The program should have a reasonable chance of improving the health of or preventing disease in participating individuals, not be overly burdensome, not be a subterfuge for discriminating based on a health factor, and not be highly suspect in the method chosen to promote health or prevent disease.
(3) Are individuals who are eligible to participate given a chance to qualify at least once per year? (29 CFR 2590.702(f)(2)(iii)) …………………….. Yes No
(4) Is the reward available to all similarly situated individuals? Does the program offer a reasonable alternative standard? (29 CFR 2590.702(f)(2)(iv)) ……………………………. Yes No
The wellness program rules require that the reward be available to all similarly situated individuals. A component of meeting this criterion is that the program must have a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom, for that period:
o It is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard; OR
o It is medically inadvisable to attempt to satisfy the otherwise applicable standard.
It is permissible for the plan or issuer to seek verification, such as a statement from the individual’s physician, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard.
(5) Does the plan disclose the availability of a reasonable alternative in all plan materials describing the program? (29 CFR 2590.702(f)(2)(v)) …………………………… Yes No
The plan or issuer must disclose the availability of a reasonable alternative standard in all plan materials describing the program. If plan materials merely mention that the program is available, without describing its terms, this disclosure is not required.
TIP: The disclosure does not have to say what the reasonable alternative standard is in advance. The plan can individually tailor the standard for each individual, on a case-by-case basis.
The following sample language can be used to satisfy this requirement: “If it is unreasonably difficult due to a medical condition for you to achieve the standards for the reward under this program, call us at [insert telephone number] and we will work with you to develop another way to qualify for the reward.”
If you answered “Yes” to ALL of the 5 questions on wellness program criteria, there are no violations of the HIPAA wellness program rules.
If you answered “No” to any of the 5 questions on wellness program criteria, the plan has a wellness program compliance issue. Specifically,
Violation of the general benefit discrimination rule (29 CFR 2590.702(b)(2)(i)) – If the wellness program varies benefits, including cost-sharing mechanisms (such as deductible, copayment, or coinsurance) based on whether an individual meets a standard related to a health factor and the program does not satisfy the requirements of 29 CFR 2590.702(f), the plan is impermissibly discriminating in benefits based on a health factor. The wellness program exception at 29 CFR 2590.702(b)(2)(ii) is not satisfied and the plan is in violation of 29 CFR 2590.702(b)(2)(i).
Violation of general premium discrimination rule (29 CFR 2590.702(c)(1)) – If the wellness program varies the amount of premium or contribution it requires similarly situated individuals to pay based on whether an individual meets a standard related to a health factor and the program does not satisfy the requirements of 29 CFR 2590.702(f), the plan is impermissibly discriminating in premiums based on a health factor. The wellness program exception at 29 CFR 2590.702(c)(3) is not satisfied and the plan is in violation of 29 CFR 2590.702(c)(1).
Additional compliance information regarding the other provisions in Part 7 of ERISA, including the HIPAA portability provisions and the rest of the HIPAA nondiscrimination provisions, is available on the Department’s website at: http://www.dol.gov/ebsa/pdf/CAGAppA.pdf.
Questions concerning the information contained in this Bulletin may be directed to the Office of Health Plan Standards and Compliance Assistance at 202-693-8335.
Employee Health, Wellness– No Longer Optional Benefit, but Strategic Imperative
When you develop and implement work+life flexibility strategies that help businesses operate and individuals manage their work+life fit, you run into many often baffling false beliefs. Since the start of the recession, two of these off-base convictions have stood out as managers and employees struggle to do more with less:
- Individuals think their health and wellness are “optional” parts of their work+life fit, and
- Line business leaders don’t connect how employee health and well being directly impact the optimal, effective functioning of their workplace, and they don’t understand (or don’t want to deal with) the role that they play to ensure employees are as healthy as possible.
Families and Work Institute (FWI) just released The State of Health in the American Workforce study. The numbers are not only disturbing, but they are a real call to action for both individuals and employers. The research shines a light on the paradox that working harder, faster, longer does more harm than good not only to our personal health and well being, but to business. In the new work+life flex normal, employee health and wellness are not an “option,” they’re a strategic imperative.
Here are some highlights (to read the full report which is “the only study of its kind to provide 30+ year comparisons of life on and off the job,” go to the Families and Work Institute website):
Employee Health and Wellness Are Suffering:
- Less than one third of employees (28%) today say their overall health is “excellent”—a significant decline of 6% from 2002.
- 41% of employees report experiencing three or more indicators of stress sometimes, often or very often, which is a significant increase from 2002.
- Work-life conflict increasing, especially for men.
- One in three employees experiences one or more symptoms of clinical depression.
- 49% of employees have not engaged in regular physical exercise in the last 30 days.
- One in four smokes.
- While little changed since 2002, 27% of employees still experience some kind of sleep problem that affected their job performance within the last month at least sometimes.
- Nearly two out of three employed individuals (62%) are overweight or obese.
- 8% of employees have no health insurance from any source, with low-wage/low-income employees less likely to have access and least likely to use even if they do have access.
Why Does it Matter? Direct Impact on Business
There are two employees, A and B. Employee A reports low levels of personal overall health and wellness, and B reports high levels. Common sense would say that a manager gets more from employee B in terms of extra effort, satisfaction and commitment. But the FWI research shows how significant this correlation between health and business impact really is: “Employees’ physical and mental health, stress levels, sleep quality and energy levels all significantly impact important work outcomes of interest to employers, such as engagement, turnover intent and job satisfaction.” Here’s my best attempt to present the study findings visually:
In other words, employee health and wellness isn’t just a nice perk, or program to offer when times are good. Employee health and wellness are mission critical to an organization’s operating success, especially in this difficult time when everyone needs to bring the best of themselves to the table everyday.
A couple of specific findings to note:
- Hopefully, this research will be another nail in the coffin that work+life fit is a “women’s issue” only. It is an “everyone” issue. Work-life conflict increased more significantly for men than women from 2002 to 2008. You might be surprised, but men said they are more positively affected by having economic security in their jobs and a good fit between their work and personal lives. Whereas, women are more positively affected by being challenged in their jobs and by having autonomy.
- FWI joins WLF in using the term work-life “fit” in their research. Hopefully, this affirmation of the concept of work-life “fit” will move us away from the limiting and inaccurate concept of “balance” to describe optimizing the unique way an individual’s work and life fit together. Also noteworthy is the fact that work+life fit is the workplace effectiveness factor that directly affects the most aspects of employee health and wellness in the FWI study.
What Can Managers/Employers Do?
How should a manager or employer respond to the findings especially in turbulent times when resources are tight, and there’s constant pressure to perform financially? Too often when business leaders think of “health and wellness,” they go immediately to perks like an on-site gym and EAP. But, as outlined in the visual model of the findings above, the interventions that lead to “excellent employee health and wellness,” and, in turn engagement, retention and satisfaction, are broader. Some are benefits like health insurance, paid vacation and sick days that cost money, and others are behaviors and ways of operating the business that cost nothing. Regardless, any money or effort expended is an investment that will have a return.
The FWI report offers insightful implications for businesses,especially around the difficult task of addressing economic security in these tough times, but I would add:
- Make work+life flexibility, or flexibility in how, when and where work is done and life is managed, part of the way your organization operates and not just a program, perk or benefit. It will go a long way to achieve many of the behaviors and workplace effectiveness factors outlined in the report that affect health and wellness.
- It’s not enough to offer stress management or weight loss classes, reimburse gym memberships and provide information about healthy eating. You need to give and encourage time for people to use the gym, shop for healthy food and go to weight loss class without feeling badly. (Check out Cindy Goodman’s excellent post on the FWI research and how one Florida business owner make weight loss and health a mission in her company).
- Be a role model and clarify expectations. People are very, very scared right now. They are terrified to do anything that jeopardizes their job. Managers must role model the desired behavior if employees are to feel comfortable– take vacation, and sick days, talk about going to the gym, eating healthfully and getting rest. Things you should be doing anyway, and might have let fall to the wayside over the past few months.
What Can You as an Employee Do?
Much more than you think. Yes, many of us are scared but really that is no excuse. Doing as much as you can to be healthy and able to contribute extra effort and commitment on the job is no longer optional. In fact, it’s imperative for your job security. Again, paradoxically, you may think working harder, faster and longer will reduce the risk of losing your job. But the research shows that if that overwork make you unhealthy it’s having the opposite impact. You aren’t as engaged, committed or satisfied, which could make you more vulnerable when employment decisions are made.
Where to begin? When I run my corporate work+life fit seminars we always end with an exercise called “One Small Thing.” Small changes in your work+life are very powerful especially as they relate to health and wellness. Here are common examples of small health and wellness changes employees have committed to making over the years:
- Go to bed an hour earlier and get up earlier to work out two days a week.
- Put my gym clothes in my car and go right to the gym before going home.
- Make a list of meals for the week and shop over the weekend so there is food in the house.
- Turn off the TV an hour before a go to bed and wind down.
- Start meditating for 30 minutes every morning.
- Keep a journal every night before I go to bed.
- Make a date with my best friend to go to the movies once a month.
Your employer can do its part to create a culture and workplace that supports employee health and wellness, but in the end, it’s you doing it. This is particularly true when it comes to financial security, one of the workplace effectiveness factors influencing health and well being. While not part of the study, I wonder how much of this increased stress relates to the fact that “three out of five workers” live paycheck to paycheck according to a recent CareerBuilder survey. Better personal financial choices could mitigate some of the stress related uncertainty in employment and earnings.
Finally, during the call to announce the research results, FWI President, Ellen Galinsky, summed it up by saying, “In the U.S. we see work as a sprinting marathon. Instead we need to think about it more in terms of weightlifting. In between periods of exertion, there’s rest and recovery. This gives you the strength to exert your best effort the next time.” I agree. Hopefully this research will challenge the false beliefs that employee health and wellness are “optional” and break us out of our sprinting marathon that is no longer working—if it ever really did.
Thanks to Cali Williams Yost
Best Practices: Wellness, Four Ways Companies Can Lower Their Medical Costs
Obamacare has created enormous uncertainty for business owners. Business owners are unclear about what Obamacare’s mandates will cost them in 2011, 2012, 2013, or 2014 or what additional benefits will have to be provided. All they know is that these things will cost them more — probably a lot more — and that they’re going to be spending a significant amount of time and money in the foreseeable future. Tax accountants and consultants will be challenged with calculating insurance options or fines.
The most immediate strategy at this time and any time are to controls costs and maximize profitability so that businesses can weather unforeseen storms, such as Obamacare. The ROI (Return on Investment) advantages of Wellness Programs must be harnessed.
There is huge hidden expense in companies often not measured or discussed; the cost of absence, disability and the cost of lost productivity. Personal illness accounts for 34 percent of unscheduled absences often resulting in lost productivity and the need for higher headcounts. The higher headcounts result in increased costs for additional healthcare. It’s a vicious cycle. The cost of absence, disability and lost productivity alone might make the difference between a company being profitable or not profitable.
Companies, large and small lose enormous revenue when they operate their business with ineffective absence-management business processes and wellness program management. It is imperative that companies focus and place emphasis on the employees and their being fully healthy and productive as part and parcel of their planned profit models.
When employees come to work sick or not feeling well and are unable to perform at 100%, they are considered to be present on the job, but absent in the context of being productive referred to as presenteeism. Employees, more than ever, feel increased pressure to be at work today. They present a health or safety hazard to themselves and fellow workers and pose a health risk to others by potentially spreading their illnesses. This further exasperates productivity.
Best Practices: Four Ways Companies Can Lower Their Medical Costs
1. Wellness Consultant/Wellness Committees
Consult an on-sight business provider of health and wellness programs. Consultants provide a proactive approach and focus on improved health for the individual while minimizing costs for the corporation. Typical responsibilities of a wellness consultant might include the following:
o Review the current wellness strategy, offerings and procedures that are available to employees via a Wellness Audit or Wellness Gap Analysis
o Survey preferences and specific wellness needs
o Develop a health promotion operating plan, including a vision statement, goals, and objectives that utilize wellness as a business imperative
o Assisting in implementing, monitoring and measuring the effectiveness of the business health plan initiative
2. Tobacco-Free Company Initiative in the Workplace
An American Productivity Audit found that tobacco use was a leading cause of worker lost production time — more than alcohol abuse or family emergencies. The North Carolina Prevention Partners. Quit Now NC!: Tobacco Use & Quitting Facts, study showed that the #1 reason why people quit smoking is that their worksite has gone smoke-free. There is much opportunity for business leaders to help educate and motivate employees to adopt a smoke free life.
3. Workplace Obesity Prevention Program
Workplace obesity prevention programs can be an effective way for business owners to reduce obesity and lower their healthcare costs, eliminate presenteeism, lower absenteeism and increase employee productivity.
Many companies have come to realize that changes in the workplace can easily encourage the adoption of healthy behaviors through changes in everyday work activities. Such interventions might include the installation of bike racks on company property, facilitating physical activity through the use of company walks, use of staircases and marked company walk trails. Still other companies are offering healthier food choices in cafeterias and vending machines and beginning to change company culture by establishing health improvement goals that align with the organization’s overall Wellness Program Mission Statement.
4. Health Screenings/Health Risk Assessments
With the country buzzing about Obamacare many companies are offering health screenings and or assessments to their employees. Companies hope it would motivate the workforce to change some unhealthy behaviors and stay front-minded about their health. Blood tests offered as part of the health assessment often turn up many opportunities for better living.
Health screenings allow workers to learn about their current health status, and determine risk for common diseases including diabetes, heart disease, asthma and other medical conditions. Workers can review the results of the screening and follow up to do further tests, or request a treatment plan or wellness program based on immediate needs.
Companies that are fully committed to a Comprehensive Employee Wellness Program will often include:
o Flu Shots
o Health Fairs
o Health Coaching
o On-site Seminars
o Biometric Screenings
o Wellness Challenges with Incentives
Companies have come to realize that healthy employees boost a company’s bottom line. Experience has shown that companies will experience less sick time; take fewer disability days resulting in higher productivity.
ROI of Wellness
$1 investment in wellness programs saves $3 in health care costs, according to the Wellness Council of America and according to the Centers for Disease Control. More than 75% of employers’ healthcare costs and productivity losses are related to employee lifestyle choices.
While the effects of Obamacare remain uncertain, we do know that providing employees with the information and tools to adopt healthy behaviors will have huge payoffs. It is a good investment to keep the American workforce healthy and businesses profitable.
Although lean thinking is typically applied to manufacturing lean techniques and focus are applicable anywhere there are processes to improve, including the entire supply chain. A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed.
The underlying theme in lean thinking is to produce more or do more with fewer resources while giving the end customer exactly what he or she needs. This means focusing on each product and its value stream. To do this, organizations must be ready to ask and understand which activities truly create value and which ones are wasteful. The most important thing to remember is that lean is not simply about eliminating waste—it is about eliminating waste and enhancing value.
The Concepts of Value and Waste
Value, in the context of lean, is defined as something that the customer is willing to pay for. Value-adding activities transform materials and information into something a customer wants. Non-value-adding activities consume resources and do not directly contribute to the end result desired by the customer. Waste, therefore, is defined as anything that does not add value from the customer’s perspective. Examples of process wastes are defective products, overproduction, inventories, excess motion, processing steps, transportation, and waiting.
Consider the non-manufacturing example of a flight to the Bahamas. The value-adding part of that process is the actual flight itself. The non-value-added parts of that process are driving to the airport, parking at the airport, walking to the terminal and then to check-in, waiting in line at check-in, walking to the security check, and so on. Many times the non-value-added time far exceeds the value-added time in this type of process. Where should our improvement efforts be focused—on the non value-added steps or on making the plane fly faster?
Understanding the difference between value and waste and value-added and non-value-added processes is critical to understanding lean. Sometimes it is not easy to discern the difference when looking at an entire supply chain. The best way is to look at the components of the supply chain and apply lean thinking to each one and determine how to link the processes to reduce waste.
· Creating Value
· Lean principles focus on creating value by:
· Specifying value from the perspective of the end customer
· Determining a value system by:
· Identifying all of the steps required to create value
· Mapping the value stream
· Challenging every step by asking why five times
· Lining up value, creating steps so they occur in rapid sequence
· Creating flow with capable, available, and adequate processes
· Pulling materials, parts, products, and information from customers
· Continuously improving to reduce and eliminate waste
The value stream consists of the value-adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers. To develop a value stream map for a product, you select a product family and collect process information. Then, you map the steps in sequence and by information flows; this is called a current-state map. The current-state map provides a clear picture of the processing steps and information flow for the process as it exists today. Next, you search the map for improvement opportunities using the concepts of lean, and create a future-state map. This will portray a vision of the future for the process or supply chain you are creating. This future-state map helps you to visualize the roadmap to get from the current state to the future state.
Mapping the value stream for the supply chain is a similar process. However, the current-state map includes product flow, transportation links, defects and delivery time and steps, and information flow. After creating the current-state map for the supply chain’s value stream, supply chain partners should scrutinize it for bottlenecks, waste, and process improvements. They should use what they discover to create future-state maps for the supply chain. An ideal-state map can also be created that provides a vision of how the supply chain could look if perfect integration of all components were to occur. This is in effect an entitlement map for the supply chain process.
Here’s how it works: A current-state map might indicate that flow within facilities is well defined, but that transportation methods between facilities is creating excess inventory and is not cost effective. The current state map may also show a weakness in the information flow that is not adding value to the process. The future-state map should create flow between facilities, leveling pull within each facility, and eliminating waste. The method for leveling pull might be to install frequent transport runs or milk runs. Information flow could be improved by installing a Web-based process to allow real-time flow of information between all supply chain partners as demand changes. The ideal-state map of this supply chain might have a greatly compressed value system with relocated operations and short transportation deliveries.
The “Waste” reduction process begins with the question “What can we do to improve?” Some answers may include:
· Stop defective products at their source
· Flow processes together or change the physical relationship of components of the process
· Eliminate excess material handling or costly handling steps
· Eliminate or reduce pointless process steps
· Reduce the time spent waiting for parts, orders, other people, or information
In manufacturing environments, these waste reductions create the benefits of reduced manufacturing cycle time, reduced labor expenditures, improved product quality, space savings, reduced inventory, and quicker response to the customer. When waste is reduced or eliminated across the supply chain, overall cycle time is improved, labor and staff costs are reduced, product quality and delivery are improved, inventories are reduced, and customer lead-times are shortened. The net effect is the entire supply chain is more efficient and responsive to customer needs.
Components of the Lean Supply Chain
1. Lean Suppliers
Lean suppliers are able to respond to changes. Their prices are generally lower due to the efficiencies of lean processes, and their quality has improved to the point that incoming inspection at the next link is not needed. Lean suppliers deliver on time and their culture is one of continuous improvement.
To develop lean suppliers, organizations should include suppliers in their value stream. They should encourage suppliers to make the lean transformation and involve them in lean activities. This will help them fix problems and share savings. In turn, they can help their suppliers and set continually declining price targets and increasing quality goals.
2. Lean Procurement
Some lean procurement processes are e-procurement and automated procurement. E-procurement conducts transactions, strategic sourcing, bidding, and reverse auctions using Web-based applications. Automated procurement uses software that removes the human element from multiple procurement functions and integrates with financials.
The key to lean procurement is visibility. Suppliers must be able to “see” into their customers’ operations and customers must be able to “see” into their suppliers’ operations. Organizations should map the current value stream, and together create a future value stream in the procurement process. They should create a flow of information while establishing a pull of information and products.
3. Lean Manufacturing
Lean manufacturing systems produce what the customer wants, in the quantity the customer wants, when the customer wants it, and with minimum resources. Lean efforts typically start in manufacturing because they free up resources for continuous improvement in other areas, and create a pull on the rest of the organization. Applying lean concepts to manufacturing typically presents the greatest opportunity for cost reduction and quality improvement; however, many organizations have received huge benefits from lean concepts in other functions.
4. Lean Warehousing
Lean warehousing means eliminating non-value added steps and waste in product storage processes. Typical warehousing functions are:
Warehousing waste can be found throughout the storage process including:
· Defective products which create returns
· Overproduction or over shipment of products
· Excess inventories which require additional space and reduce warehousing efficiency
· Excess motion and handling
· Inefficiencies and unnecessary processing steps
· Transportation steps and distances
· Waiting for parts, materials and information
· Information processes
Each step in the warehousing process should be examined critically to see where unnecessary, repetitive, and non-value-added activities might be so that they may be eliminated.
5. Lean Transportation
Lean concepts in transportation include:
· Core carrier programs
· Improved transportation administrative processes and automated functions
· Optimized mode selection and pooling orders
· Combined multi-stop truckloads
· Right sizing equipment
· Import/export transportation processes
· Inbound transportation and backhauls
The keys to accomplishing the concepts above include mapping the value stream, creating flow, reducing waste in processes, eliminating non-value-added activities and using pull processes.
6. Lean Customers
Lean customers understand their business needs and therefore can specify meaningful requirements. They value speed and flexibility and expect high levels of delivery performance and quality. Lean customers are interested in establishing effective partnerships—they are always seeking methods of continuous improvement in the total supply chain to reduce costs. Lean customers expect value from the products they purchase and provide value to the consumers who they interact with.
Benefits of Lean Systems
Speed and Responsiveness to Customers
Lean systems allow a supply chain to not only to be more efficient, but also faster. As the culture of lean takes over the entire supply chain, all links increase their velocity. A culture of rapid response and faster decisions becomes the expectation and the norm. This does not mean that decisions are made without careful thought. It simply means that a “bias for action” becomes the new corporate culture and anything less will not be tolerated. Slow response or no response becomes the exception, rather than the rule.
In the lean paradigm, inventory is considered waste. Many would argue this point, but manufacturing can take place efficiently with little or no raw material, work in process (WIP), or finished goods inventory.
Many companies today produce directly into trailers and maintain no other finished goods inventory. All quality inspections and checks are performed within the process, rather than after production is complete. In this true make-to-order scenario, all goods are shipped directly to the next link in the supply chain when the trailer is full, and overproduction is not possible and cannot be tolerated. No space is designated to store finished goods. The system is not designed to carry them.
Applying one-piece flow and pull systems can reduce WIP dramatically. A visual signal for more goods to be moved forward to the next process can accomplish this procedure. Although the ultimate goal is to eliminate WIP, minimal WIP is normally the result. The elimination of bottlenecks is one goal of a lean supply chain, but a bottleneck will always exist to some degree. As a result, WIP must always exist in front of a bottleneck or the bottleneck operation will be starved and will stop.
Raw material inventory is a different matter. Although the leanest organizations have arranged just in time deliveries to support manufacturing, this approach requires the absolute highest degree of competency and coordination within the supply chain.
Traditional mass production tries to minimize unit costs by increasing total production over the life cycle of the product. High development costs are the result of this model. To recover the enormous development and initial capital costs sunk into the product before it was produced, mass producers forecast and run long production cycles for each SKU. Consumer preferences and variety suffer in this scenario. Costs still need to be minimized, but not at the expense of what more sophisticated consumers now demand.
Improved Customer Satisfaction
Lean promotes minimizing new product development time and expense. This delivers the product to market faster, making it easier to incorporate current requirements into the product. Lean also promotes the use of less capital-intensive machines, tools, and fixtures, which results in more flexibility and less initial cost to recover. As a result, product life cycles may be shorter and product developments incorporated in newer versions of the product more frequently. Profitability does not suffer and brand loyalty is increased, as customers prefer to buy products and services from a perceived innovator.
Supply Chain as a Competitive Weapon
A strong supply chain enables the member companies to align themselves with each other and to coordinate their continuous improvement efforts. This synthesis enables even small firms to participate in the results of lean efforts. Competitive advantage and leadership in the global marketplace can only be gained by applying lean principles to the supply chain. Thought, commitment, planning, collaboration, and a path forward are required.
Path Forward to a Lean Supply Chain
Lean is a cooperative process for survival and for success. Supply chains that want to grow and continue to improve must adopt lean. Lean concepts require an attitude of continuous improvement with a bias for action. The concepts of lean apply to all elements of the supply chain, including support departments such as product development, quality, human resources, marketing, finance, purchasing, and distribution. The challenge is to bring all of these areas out of their traditional silos and make them work together to reduce waste and create flow. Duplication and a lack of appropriate and timely communication run rampant in these traditional organizations. A lean supply chain is proactive and plans for the unexpected by positioning all resources for effectiveness. Downturns in demand can be addressed without layoffs or significant productivity losses.
Leaning “other” areas presents a larger challenge than it does in manufacturing. Supervisors and factory workers embrace change that results in making their lives less complicated and more successful. In the hierarchy of support areas, it is more challenging for the people to understand how lean can benefit them. The answer is simple: What benefits the organization as a whole benefits the supply chain.
Because the Internet provides us with unprecedented opportunities for sharing information and conducting transactions across the supply chain, companies should have a sense of urgency about adopting lean concepts. But all chain partners have to be on the same playing field, and the lean concept is intended to let everyone reach new levels of efficiency and effectiveness. Supply chain leaders should not delay—it’s urgent to act now to implement lean concepts in the supply chain.
Looking for quick tips about how to set a positive example for staff members by taking the impact of your role as “boss” seriously? You’ve found ten tips here.
•Be on time every day. It’s your business. Lead by example.
•Don’t make a habit of leaving early. Your employees will resent you if you walk out the door at three and call them from the gym at five-thirty to check in.
•Don’t go drinking with your assistant. Or swap stories. Again, you’re the adult now. You need to set the example. What you do in your private time away from the office should remain fodder for your peers, not your subordinates. Even when you’re dying to tell someone about last night’s disastrous date, resist the urge.
•Don’t ask them to do anything that is not work-related. It’s rude and fosters resentment. This includes walking your dog, picking up your dry cleaning, and buying your personal holiday presents, unless, of course, the job is personal assistant.
•Don’t let them hear you on personal calls. Again, you are the adult. Not only will they will imitate you for months if they hear you refer to your husband as “Dr. Love,” they will feel entitled to be on their own calls all day.
•You are not their friend. Be a pleasant boss, but never leave the door open to talk about the dating drama. You will want your employee to feel comfortable talking to you about serious personal problems (especially if they will impact her job performance) - a sick mother or child-care problem, for example. But the last thing you can afford is to become a surrogate therapist for employee dating or marital woes.
•Pitch in when you can. If you have assigned what you know to be a tedious task, such as mailing five hundred company brochures, spend at least a few minutes pitching in. This is your team; make it happen together. A little willingness to get your hands dirty will go a long way when you need a really big ditch dug.
•Do not share company financial issues or problems. If your employees suspect things are not going well, they will be looking for another job before you know it. There is a whole philosophy of open-book management that works in big public companies (the law requires it, anyway), but in small companies you don’t need your employees second-guessing your decisions.
•If something goes wrong with a client or customer, you have to take the blame. As the boss, you are responsible for everything running smoothly. If you have a problem employee, you need to monitor her closely, provide more training, or let her go. You cannot make bad employees the scapegoats for mistakes.
•Manage, but don’t smother. Granted this is your business and you’ve got the most to lose, but you’ve got to let your employees take responsibility for their workload. Guide, cajole, pester — don’t suffocate. Caitlin Friedman Kimberly Yorio
Human capital refers to the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. The success of a company depends very heavily on the productivity and work performance of its human capital, its people. The ability to function and perform at a high level consistently is greatly enhanced by Employee Wellness Programs. Wellness Programs focus on the physical well-being of employees, looking after medical requirements and ensuring personal health is a priority and in return higher productivity.
Here are the top five reasons why your company needs an Employee Wellness Program.
1. Improved Work Performance
· Employees who participate in wellness programs have noted a substantial improvement in work performance.
2. Increased Responsibility
· Employees that feel like the company takes in interest in their wellbeing and health will take an added interest in performing their best.
3. Increased Productivity
· Studies show that when an employee is healthy they are more productive. Being healthy increases output, concentration, and energy levels.
4. Decreased Health Care Costs
· Simply put, healthier employees mean less claims resulting in lower premiums.
5. Reduced Absenteeism
· The benefit of a Wellness Program is that absenteeism will be significantly reduced, if not avoided all together. For a company this is the bottom line, reduced absenteeism equals a reduction in costs and an increase in productivity. Happier Employees!