Employee Fun Factor and the Bottom Line

This first Monday in September finds millions of Americans and Canadians celebrating Labor Day 2016 with a day off from work or school. For some it marks the end of summer and a return to "no play" for awhile. Smart employers know otherwise and are implementing policies to encourage playtime at the office or plant as a way to boost productivity, encourage innovation and lower healthcare costs.

According to business executive Paul Harris, implementing play at work policies can be challenging, in part due to gender and age differences. Drawing from recent survey results, he explains that "While 51% of 16-24 year olds would like allocated 'fun time' at work, this drops to just 19% for 55-60 year olds." The good news is that certain activities such as shared birthday celebrations or board games appeal to broad groups and ought not to be overlooked by employers. Read "Why it pays to play: workplace fun breeds employee wellbeing and productivity" (HR Magazine, April 12, 2016).

Snack Nation, a commercial delivery service, has a snappy visual on its blog entitled "11 Shocking Employee Happiness Statistics That Will Blow Your Mind." Citing research from organizations such as Gallup, they reference greater sales, employee engagement and fewer sick days as some of the positives associated with workplace improvements. NPR extols the virtues of adult recess and Today Money highlights why big companies, "not just startups" are focused on fun at work. The National Institute for Play consults with business leaders who want "to more effectively access innovation in their operations," asserting that "science already provides data to show that playful ways of work lead to more creative, adaptable workers and teams."

Mark Schiff, a dentist friend of mine, credits his success as an award-winning painter in part to an ability and willingness to embrace his inner child and freely express himself. My husband, one of the hardest working people I know, regularly takes time to play. (He's a keen competitor in Scrabble.) I've attended lots of business development workshops that include seemingly silly exercises designed to encourage adults to think outside the box as a way to advance goals.

I love these words from Thomas A. Edison, inventor extraordinaire. I hope you do too: "I never did a day's work in my life. It was all fun."

De-Risking, HR Strategy and the Bottom Line

In case you missed our December 10, 2013 presentation about pension de-risking, sponsored by Continuing Legal Education ("CLE") provider, Strafford Publications, click to download slides for "Pension De-Risking for Employee Benefit Sponsors." It was a lively and informative discussion about the reasons to consider some type of pension risk management, considerations for doing a deal and the role of the independent fiduciary. The transaction and governance commentary was then followed with a detailed look at ERISA litigation that involves questions about Liability Driven Investing ("LDI"), lump sum distributions and annuity purchases.

Some of the issues I mentioned that are encouraging sponsors to quit their defined benefit plans in some way include, but are not limited to, the following:

  • Equity performance "catch up" from the credit crisis years and the related impact on funding levels, leading some plans to report a deficit;
  • Need for cash to make required contributions;
  • Low interest rates which, for some firms, has ballooned their IOUs;
  • Increased regulation;
  • Higher PBGC premiums;
  • Rise in ERISA fiduciary breach lawsuits;
  • Desire to avoid a failed merger, acquisition, spin-off, carve-out, security issuance or other type of corporate finance deal that, if not achieved, could lessen available cash that is needed to finance growth; and
  • Difficulty in fully managing longevity risk that is pushing benefit costs upward as people live longer.

While true that numerous executives have fiduciary fatigue and want to spend their time and energies on something other than benefits management, it is not always a given that restructuring or extinguishing a defined benefit plan is the right way to go. Indeed, some sponsors have reinstated their pension offerings in order to retain and attract talented individuals who select employers on the basis of what benefits are offered.

Given what some predict as a worrisome shortage of talented and skilled workers, the links among HR strategy, employee satisfaction and the bottom line cannot be ignored. For those companies that depend on highly trained employees to design, produce, market and distribute products, the potential costs of losing clients to better staffed competitors is a real problem. According to the "2013 Talent Shortage Survey," conducted by the Manpower Group, "Business performance is most likely to be impacted by talent shortages in terms of reduced client service capability and reduced competitiveness..." A report about the findings states that "Of the 38,618 employers who participated in the 2013 survey, more than one in three reported difficulty filling positions as a result of a lack of suitable candidates; the 35% who report shortages represents the highest proportion since 2007, just prior to the global recession."

As relates to the well-documented shift by companies and governments to a defined contribution plan(s), I recently spoke to a senior ERISA attorney who suggested a possible re-thinking of the DB-DC array, based on discussions with his clients. The conclusion is that a 401(k) plan is sometimes much more expensive to offer than anticipated. For employees who lost money in 2008 and beyond and cannot afford to retire, they will keep working. The longer they stay with their respective employer, the more money that employer has to pay in the form of administration, matching contributions, etc.

A plan sponsor has a lot to consider when deciding what benefits to offer, keep, substitute or augment. Dollars spent on benefits could reap rewards in the form of a productive and complete labor force. With full attribution to the seven fellas in Disney Studio's Snow White, will your employees be singing "Heigh-ho, heigh-ho, it's off to work we go" or will they instead bemoan their stingy boss and search for a new work home, with better economic lollipops, thereby leaving a business deprived of precious human capital?