The importance of measuring the success of benefits

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• Identifying measurables of success can be tricky, but there are a number of advantages for employers in measuring the success of their benefits package.
• Statistics that can be used to determine the success of a package include: benefits take-up, engagement, absence levels and the national insurance savings made through a salary sacrifice scheme.
• Data can be obtained from providers, existing schemes such as flex, staff surveys and conjoint analysis.
• Data can also provide an insight into employee demographics.

A surprising number of employers do not try to measure the success of their benefits, but the data they could obtain has many uses, says Sam Barrett

Putting together a benefits package that delivers a return to the organisation as well as keeping employees happy and motivated is the goal of every reward professional. But although there is plenty of deliberation about what makes up such a package, once it is in place, not every employer will measure whether it is achieving its aims.

To illustrate this, in the Employee Benefits/Towers Watson Flexible Benefits Research 2010, 62% of respondents said they actively measured the success of their scheme. A year earlier, this figure was only slightly higher at 64%, despite the fact that economic conditions were much more benign.

One reason why organisations shy away from measuring benefits success is it can be difficult to decide what needs to be measured. Robin Hames, head of technical, marketing and research at Bluefin Corporate Consulting, says: “Employers have to identify what success means. For instance, is it 100% take-up of the pension? It might be to HR, but not necessarily to the finance director. Just getting agreement between HR and finance about what should be measured can be difficult.”

As well as determining what needs to be measured, the act of measuring can also be problematic. Half an hour with a calculator will show the financial return on a salary sacrifice scheme, but fixed benefit schemes produce less data. Mark Carman, marketing communications director at Motivano, says: “It can be very difficult to see a return, especially with benefits such as income protection, where claims are few and far between.”

Employers might think there is a greater need to justify spend during a recession, but Matt Waller, chief executive of Benefex, believes the economic backdrop is the very reason why employers are not totting up the figures.

“Because of the recession, the focus is on the hygiene factors rather than measuring the success of the package,” he says. “It is bizarre really, especially after working hard to justify the package in the first place.”

Why measure benefits’ success?

But whatever the economic climate, there are several reasons why employers should be measuring the success of their benefits package. To start with, it can help fine-tune the package they offer. For example, if a large number of employees are taking out private medical insurance or health cash plans through a flexible benefits scheme, employers could introduce benefits such as health assessments and gym membership to tap into their appetite for health-related benefits.

The data employers collect can also indicate where they could improve the way benefits are communicated. As part of a staff survey, employers could provide a list of benefits and ask staff which are offered to them and which new perks they would like to receive. “This will often throw up some anomalies, with staff unaware of all the benefits they receive, either not picking them in the first exercise or asking [for] a benefit you already offer,” says Hames.

This information can help employers target communications and make their benefits package more successful, but it can also be a valuable communications tool in its own right, reminding staff about their package.

There is also a more fundamental reason why employers need to measure the success of benefits. Aaron Ross, chief executive of FirstCare, says: “Without data, employers cannot show whether benefits are effective. The biggest cost to most businesses is employees and the thought of not knowing what this spend is achieving is madness.”

All manner of statistics can be used to help determine the success of a benefits package. These can include benefits take-up, employee engagement, absence levels and the national insurance savings made through a salary sacrifice scheme. Also, this data can be broken down by criteria such as age, sex, location and department to really find out what is going on in an organisation.

How to collect data

How this data is collected will vary. Martha How, reward principal at Hewitt Associates, says: “A flex scheme can provide plenty of data really easily on areas such as take-up and benefits selection. Employers might also want to consider running surveys or focus groups to find out more about what employees think of their benefits package.This can be particularly useful for any benefits that are not in the flex scheme.”

When it comes to surveys, How is an advocate of conjoint analysis. This is conducted online and by giving staff choices to make, such as would they rather have extra holiday or extra pension contributions, it builds up a rich set of data on what is valued in the workplace. This can then be used as the basis of a cost value analysis. “It is not cheap, but it is a sophisticated way of producing data that could drive benefits decisions,” she says.

However employers obtain it, it is always important to understand the nature of the data collected. For example, How says take-up data must be judged in context. “Do not judge a benefit on take-up alone,” she explains. “Bikes are very popular and feature in a lot of flex schemes, but although they are highly valued by the employees that take them, employers will only get between 2% and 5% take-up. Instead, ask employees that bought bikes what they think of the scheme.”

Benchmark data is useful

It can also be useful to have some initial or benchmark data. For instance, if employers are introducing a new benefit, ‘before and after’ data will show how successful it is. If this is not possible, it may be possible to obtain this data from a benefits provider. For instance, FirstCare can provide trend information to show employers how they compare with their peers.

As well as revealing more about an organisation’s benefits package and employees’ attitude to what they are offered, the data collected can be used in other ways. The results of employee surveys can be particularly telling, for example.

“If staff are surveyed about benefits, what they say often relates to other areas of the business as well,” says Hames. “If they say benefits are not communicated well, the chances are they are saying their employer does not communicate well.”

Data can also give an insight into employees themselves. For example, if there is a high demand for childcare vouchers, employers may want to consider introducing a workplace nursery or parental support groups to help employees who have family responsibilities.

Absence data is catalyst for change

Absence data can also be revealing, and Ross says it can be used to make changes throughout an organisation.

“With one of our clients, a rail company, we noticed there was a high level of absence due to back problems among drivers on one particular route,” he says. “It turned out this was caused by the chairs in the cabin. These were changed to reduce the problem.”

Another example relates to the increase in ‘sickies’ taken during major sporting events. Ross suggests beating the trend by holding a party in the workplace and allowing staff to watch the event at work. “This stops the sickies, and can also be hugely positive at improving morale in the workplace,” he adds.

But although employee benefits data can be very insightful, sometimes the cost of collecting it can outweigh its value. Producing questionnaires, running focus groups and crunching the figures is not cheap.

So Hames says it is essential for employers to think about why they are measuring something before investing in data collection and analysis. “Think about what you want to achieve,” he explains. “If organisations are looking to revamp a benefits package, they will need to consider collecting more data than if they are simply refreshing a communications programme.”

Meanwhile, some data is fairly pointless. For instance, data on age might be worth collecting if employers want to know when employees find their pensions a more important part of their benefits package, but is pointless on a product such as dental insurance, where age is largely immaterial. Carman adds: “It is no good measuring for measuring’s sake. The pig does not get fatter if you just keep weighing it.”

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Case study: Subsea 7 tests depth of benefits popularity

Oil and gas company Subsea 7 employs 1,800 people in the UK. Of these, 1,000 are based onshore, with the rest on offshore projects around the world. Jackie Mann, senior HR manager, says: “Competition for talent is fierce in this industry, so in 2006 we enhanced our benefits. We wanted state-of-the-art benefits to help us attract and retain the best people.”

Working with benefits consultancy Bluefin, the company first introduced tax-efficient perks offered via salary sacrifice arrangements, then built on this with a total reward statement and a flex scheme.

To ensure the package is understood and appreciated by staff, it tracks a variety of measurements, including the number who have enrolled on the benefits website, the choices they make, how often they visit the site, and the take-up of different benefits.

Subsea 7 also runs an online employee survey every two years, tracks the number of staff who attend benefit clinics, and includes questions about its benefits package in exit interviews. “Together, this data gives us a good picture of how the benefits package is running,” says Mann. “This enables us to see what staff like and value in their package, but also where communications are effective.”

For example, the company saw the number of people making pension contributions, and the size of these, rise when it targeted communications around its pension scheme.

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RETURN ON INVESTMENT

• Calculating the return on investment is the best way to convince a finance director that the benefits spend is justified. But translating the statistics into a meaningful financial return is not always straightforward.
• Elements that are easier to quantify, include tax-efficient benefits offered via salary sacrifice, where an employer can calculate any national insurance savings against the cost of providing the benefit.
• Absence data can be converted into hard cash terms. Mark Carman, marketing communications director at Motivano, says: “Employers can put a cost on absence in terms of the salary and, where this is the case, the cost of bringing in replacement staff to cover absence.”
• Data could be used to justify benefits such as private medical insurance, where employers could show that by going private, an employee returned to work so many days sooner than if they had waited for NHS treatment.
• Other data is more tricky to turn into financial figures. Martha How, reward principal at Hewitt Associates, says: “Some of the long-standing flexible benefits schemes are developing ways to measure the financial impact of engagement by correlating employee engagement findings with flex take-up statistics. A few percentage points increase in engagement does translate onto the bottom line.”

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STAFF†SURVEYS

• Surveys can be conducted online, which is the cheaper option, or on paper, but the way the questions are put together will help employers get the most from it. Robin Hames, head of technical, marketing and research at Bluefin Corporate Consulting, explains: “Have an end goal, such as finding out whether there is the need to improve communications or how a new benefit would be received [by staff].”
• The type of questions asked is important and will affect the richness of the data. For instance, to get a snapshot of staff perception of benefits, employers should give them questions that can be answered by selecting from a scale of one to five.
• Do not have lots of open questions, instead try to use multiple choice tickboxes. “[Open questions] can reduce the response rate and [employers] might prefer to research this more qualitative data through employee focus groups,” says Hames.
• Employers must also consider whether they want to make the survey anonymous, which could mean responses are more truthful, or include employees names and contact details to enable follow-up or even an incentive for completing it, which will push up the response rate.
• Finally, do not make surveys too long. An online survey should have a maximum completion time of 20 minutes, advises Martha How, reward principal at Hewitt Associates. Any longer and the response rate may drop off.

Measure return on investment on benefits