Debbie McGrath Debbie McGrath

Benefits and the Butterfly Effect

July 1, 2014

Posted to by Chris Bruce, Thomsons Online Benefits

Last week I had an interesting discussion with a colleague about The Butterfly Effect and what it could mean from the organizational and HR perspective. The Butterfly Effect, which originates from Chaos Theory, is based on the notion that everything is part of a larger system—small changes in one part of a system can result in larger changes to other parts of the system.

To understand how the Butterfly Effect can influence a workforce, consider the Hawthorne Effect, named for a study conducted to gauge the effects of physical conditions on productivity. The Hawthorne Works factory of Western Electric commissioned the study to see if changes in light levels would cause their workforce to become more or less productive. Researchers ultimately found that neither higher nor lower levels of light affected workers productivity. Instead, productivity improved simply as a result of the company showing interest in employees’ wellbeing.

Organizations are very complex systems, and each employee is an essential part of that system. That’s why it’s important for HR teams to understand that even small changes can make a big difference to workforce engagement.

Streamlined Benefits Administration

Imagine this scenario: Due to the manual processing of employee benefits management, an employee’s life insurance isn’t set up above the free coverage level. That employee passes a unexpectedly, and, in addition to that tragedy in itself, the company has to pay out the money to cover the error.

Implementing a cloud-based benefits-management system can create automated links with benefit providers and HR and payroll systems, and enable more speedy data provision. It also can facilitate benefits management, either locally or via shared services centers. This frees up HR teams from employee queries and manual reporting, which frees up time for value-adding tasks like employee-engagement initiatives. It also ensures that there is less room for human error, which could go a long in preventing a scenario like the one above.

As demonstrated with the Hawthorne Effect, an engaged workforce can have a major positive impact on productivity. And, vice versa. According to research company Gallup, more than 70 percent of workers consider themselves either “not engaged” or “actively disengaged,” costing businesses more than $370 billion annually.

Now consider this example:

Imagine that you have an employee who is bright, ambitious and extremely talented, but is not particularly happy at work, but neither is he unhappy. He feels no bond to his employer. This employee takes time off work to get married. Upon returning to work, he gets an e-mail from LinkedIn telling him that a company is really interested in recruiting him, and that they have heard about his great talent. In reality, it is a standard e-mail sent to many people, but technology makes it feel personalized. As he has just been married, he decides to learn more about this opportunity, goes for an interview and ends up leaving your company. He ends up becoming CEO of that company, which happens to be a competitor.

Many of our clients have found that using benefits-management software can make a measurable difference in increasing employee engagement, by personalizing communications and putting them at the center of their reward experience. For example, Cisco sought to implement a program designed to reduce the number of staff on long-term sick leave, tackle underlying causes of ill health such as poor sleep, and nip underlying health issues in the bud before they led to absence. Since implementing the software, 40-percent fewer employees have taken long-term sick leave, saving Cisco more than $800,000.

Controlling Costs

Whether managed directly with a provider, through a broker or provisioned inhouse, the continual challenge of cost control impacts every business function. However, HR teams often lack the ability to challenge benefits vendors on how much they are charging, due to lack of efficient data management.

Efficiency is easily achieved using a global benefits-administration platform, giving employers the confidence that the right employees are covered at the right point in time. Beyond internal savings, for many providers there are savings in using an automated administration solution, which means that in turn, preferential rates are received. With instant access to benefits data reports, you are empowered to challenge brokers and providers, which leads to better return on investment for your benefits spend.

Reduce Risk

Employee-benefits data in most businesses resides in multiple locations, from HRIS to payroll, to provider systems to spreadsheets on an HR coordinator’s desktop. Imagine that a new hire’s life-insurance coverage relies on someone in HR e-mailing the broker who then e-mails the insurer, while the employee fills out one or more forms—plenty of points where the process can fail.

By automating the process through software, we eliminate steps that require human intervention and leave room for human error. We have previously recorded clients’ instances of compensation, payouts and premiums payable by the employer to or on behalf of the employee, where they failed to correctly cover an individual or group of individuals. And, we have seen cases where an employee incorrectly covered for healthcare cost a company as much as $13,500 in funding unapproved treatment.

By creating a centralised, encrypted data hub, records of all employees’ benefits transactions can be accessed instantly, allowing automatic generation of a full audit trail of all benefits transactions. This can set off a chain reaction of risk reduction.

Implementing benefits management software can reduce the risk of unnecessary time spent on auditing benefits to check that people are on the correct levels of coverage; the risk of liability for an insurance payout because an employee wasn’t on the correct level of coverage; and the risk of a data breach because sensitive information was sent to the wrong person on an unencrypted spreadsheet. MF
Industry-Related Terms: Center, E-Mail, Gauge, Point
View Glossary of Metalforming Terms

Technologies: Management


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