An absence management road map

By Annmarie Geddes Lipold

You can set your own pace and learn a lot from employers who've already taken the plunge.

There is no one-size-fits-all approach to absence management. "Each client has unique issues," emphasizes Ed Quinlan, president of Quinlan Disability Consulting in Danville, Calif. "Everybody loves best practice," he notes, but "people don't understand that a best practice in Intel may not be best practice for Ford Motors." Sometimes, Quinlan continues, the same approach won't even work throughout a single company: "We have clients with multiple plants that manufacture the same product, but experience 150 percent differences in disability claim incidence and duration. So in reality, disability may be a local issue."

Thankfully, though, experts have mapped out a path that accommodates unique circumstances and goals, allowing companies to design and implement a program that will satisfy both employees and management.

To begin with, "You need buy-in at the corporate level," says William Molmen, general counsel of the Integrated Benefits Institute. Someone within an organization needs to champion the concept of absence management to pry open the corporate coffers, he says, and the business case for a program is easier to make when the cost of absence and its impact on productivity can be demonstrated. (See "Selling the CFO".)

Hard numbers are an ideal, admits Richard Babcock, program director for The Hartford's absence management initiative. "The fact is," he says, "many employers have difficulty capturing the cost of absences." In situations like that, some managers have been able to launch programs by selling the CEO on other advantages, such as ease of benefit administration and increased employee satisfaction.

Once top decision makers are sold on the concept, consider the corporation's structure, advises Molmen. Integrating benefits is much easier when the programs are managed by the same department, he says. Since most firms are not set up that way, a corporate culture that encourages cooperation among organizational units is a necessity. Even when the lines of communication between corporate departments are tenuous, however, an absence management initiative can succeed when top management encourages cooperation, says Molmen.

Company culture is also a determining factor in the success of an absence management program, observes Kimberly Stattner, national practice leader for disability consulting at Hewitt Associates, the Lincolnshire, Ill.-based human resources consulting firm. An absence management program will more likely be successful in an employee-empowered culture, she says, explaining that "if employees feel they are valued contributors [and] they can positively affect results, they are going to be more engaged and committed to the operation."

If a company's structure and culture are able to support this new approach, Babcock suggests setting up a task force of departmental representatives who will help develop the absence management plan. By getting the key players involved, everyone starts out working toward a common goal.

Take stock of current benefits

One task force goal should be to evaluate current benefits and their administration. Employers "need to understand internally what they are doing now," says Peg Haennicke, senior vice president of Kemper National Services, and head of the company's absence management program.

Typically, workers' compensation, short- and long-term disability, Family and Medical Leave Act administration and other programs are run by different departments or outside vendors, she observes, and insurers vary as well.

Managers often find that departments within the same company have trouble communicating because of incompatible computer systems, which result in inconsistent claims administration and poor record keeping, says Haennicke. "Double-dipping" in workers' comp and short-term disability is a frequent consequence, Haennicke says, particularly when the work-relatedness of the disability is at issue.

The Hartford's Babcock says the task force should survey employees to find out what they think of current benefits and identify other benefits that might interest them, such as work/life programs.

He cautions that employees may worry about the scope and intent of absence management: "It's important to strike the right balance, managing programs to make sure people are at work and being productive, but not pushing them so hard that they decide to quit and go work for a competitor."

Identifying the reasons for employee absence is another important step that will determine the makeup of the program, but most companies do not track absences in a way that makes analysis easy. "Simply helping employers get a better handle on what's going on among their own workers is a valuable step towards understanding why workers are out," says Babcock.

Finally, says Haennicke, consider the programs being offered. FMLA administration, workers' comp and short and long-term disability address the needs of employees who are already away from work. Comprehensive absence management should add programs that prevent absence, such as wellness and occupational safety programs, she contends.

Moving forward

With that information gathered, managers can begin to develop an implementation plan. Babcock says it's a good idea to walk through the entire workflow process. Who needs to know when someone will be out unexpectedly? You'll need to be very clear about whom an employee is to contact when phoning in an absence, what information will be captured on the computer system and the appropriate method of follow-up.

Don't forget line managers, who can make or break a program, Stattner cautions: "There is always concern about the current workloads of managers and how a change could have an adverse impact on managers and their day-to-day responsibilities."

Texas Health Resources, for example, was mindful of supervisors when developing its absence management program. "We believe the manager is going to be our lifeline to employees," says Michelle Kirby, vice president of human resources for the 15,000-employee, Arlington, Texas-based health care system, because it's the manager who knows when employees are absent and what kind of work a disabled employee can do.

Similarly, a survey of over 100 employers conducted by Watson Wyatt Worldwide underlined the importance of supervisors. Companies that implemented disability case management, involved line supervisors in absence management and designated an internal absence manager have an average absence rate of 1.4 percent, compared with 5.3 percent at companies that used none of these strategies, according to Wyatt's Staying@Work: Improving Workforce Productivity.

Once the outline of a program emerges, select vendors to partner the program, says Kirby. Haennicke advises employers to allow four to six months from the time a vendor is chosen to the launch of a program.

During the preimplementation period, Babcock says, consider very carefully how and when you'll communicate details of the new program to employees, because anytime you make a change, there is a risk of employee dissatisfaction. (See "Start Spreading the News".)

Babcock also thinks the pace of change is important: "It's certainly possible to implement a full-blown absence management program, but some companies will find an incremental approach to be the wiser course."

Integrating short-term disability and workers' comp may seem like a comparatively small step toward absence management, for instance, but it can be a difficult one.

When Marriott International Inc. made that initial move, systems hurdles delayed implementation by a full year, recalls Robert Steggert, vice president of casualty claims for the hospitality giant. "The major challenge," he explains, "was getting the claims administration software to interface with our payroll system in order to properly (and in a timely manner) calculate benefits and determine accurate tax withholdings."

The 160,000-employee company, which posted $20 billion in sales for fiscal 2000, began managing workers' comp and short-term disability at the beginning of 2000. Marriott also integrated management of automobile and general liability claims—which is unique, says Steggert—and multiline casualty adjusters work with the short-term disability claims staff when necessary, which helps subrogation recovery.

The big day arrives

Once implementation day arrives, make sure that extra staff is on hand to manage the large volume of phone calls and inquiries, Kemper's Haennicke advises, because concerned employees will have questions. From the outset, she says, it is very important to get feedback at the close of each case to find out what employees liked and didn't like, because "their perception of the program is critical, and their ideas are very important." She adds that supervisors should be queried as well.

A year after implementation, Haennicke advises, make sure the program is achieving its goals and be ready to make adjustments. Some employers might need a union liaison, for instance, or to add nurses.

After completing the integration process, says Molmen of IBI, employers often find they've surpassed their original goals for cutting direct and indirect lost-time costs, controlling disability costs and enhancing productivity: "Their expectations were more than met."

Marriott has had a good experience with its integrated program thus far, says Steggert. Disabled employees receive their benefits faster and are more satisfied with the process, he reports, and employees also like "one-stop shopping" for the disability claims process, which has also become less adversarial.

Having integrated workers' comp and short-term disability, Marriott is evaluating its next step. Steggert says the company has to reconsider self-insurance and other administrative issues before adding long-term disability or other benefits.

That doesn't surprise consultant Ed Quinlan, who's adamant about the ongoing nature of the process: "We try to show employers where they're at today and what they can do each day that gets them closer to that utopia of absence management. Pitney Bowes was first on the bandwagon. they're still learning stuff today, and they've been doing this for 10 years."

A freelance writer based in Arlington, Va., Annmarie Geddes Lipold has been reporting on workers' compensation, disability and employee health issues for the past decade. She is a contributing editor to Business & Health.

Selling the CFO

Absence management sounds good in theory, but the theory alone won't get the CFO to back the concept. To garner that critical support of top management, experts recommend demonstrating how employee absence affects the bottom line.

Examples from other companies are one way to show CFOs how the approach will make a difference, suggests George Faulkner, a principal with William M. Mercer. He adds that plant or unit managers can also provide testimonials explaining how they compensate for absence, such as increasing overtime pay, hiring temporary help or reducing output, all of which can be expensive strategies.

Thomas Parry, PhD, president of the Integrated Benefits Institute, advises employers to consider benchmarking absence in two ways. First, measure the frequency that employees are absent per benefit program, including workers' compensation, short-term disability, FMLA and other incidental absence. Second, measure the average duration of absence for each benefit program.

This will produce a conservative estimate, says Parry, noting that "IBI research shows the cost of absence goes far beyond [those measures]." High absence rates can reduce revenues, he explains, because employees are not at work making the companies' goods and delivering its services.

In its report Staying@Work: Improving Workforce Productivity Through Integrated Disability Management, Watson Wyatt Worldwide proposes that the total cost of employee absence equals revenue capacity plus wage replacement.

Wyatt defines revenue capacity as the contribution an employee makes to company income, and suggests that it must equal 150 percent of daily compensation for an organization to be profitable. Watson adds to this lost capacity wage the replacement benefits that companies pay, such as disability payments.

For instance, assume the cost per individual hour worked is $20. Using the formula and assumptions, the cost of one hour of employee absence is ($20 x 1.50) + $15, or $45.

IBI research has shown productivity loss, measured as the opportunity costs of employees being absent from work, to be as much as 10 times direct benefit costs.

Morale should also be considered. "There is a high correlation between [low] morale and people being off work," Parry says. "It is a driver of economic conditions that impacts the employer."

Back to text

Start spreading the news

A solid communications plan was critical to rolling out absence management at Avery Dennison Corp., says Helen C. Chaves, director of health services and disability management: "You can do so much work making sure you have the best program in the world, but if you don't have a way to communicate to all levels, the program can fall to pieces."

The Pasadena, Calif., company, which makes self-adhesive materials, office products, labels, tags and retail systems, has 17,000 employees and posted $3.8 billion in sales in 2001. In January, the company implemented an absence management program. The intent, Chaves says, was to improve employee satisfaction and enhance benefit delivery.

Employees call one phone number operated by a single vendor to report any kind of absence. Avery Dennison's employee absence program manages personal time off, FMLA, workers' comp, and long and short-term disability. Each call triggers notification to the employee's supervisor as well as to any other managers who might have a role to play, such as human resources, benefits administration or payroll.

Employees gave the company's absence program a positive reception, says Chaves, thanks in large part to an effective communication plan.

Communicating from the beginning

To ensure that the right message got out, Avery Dennison included its communications staff with its risk management, benefits, human resources, safety and legal departments on a task force charged with developing the program.

Task force responsibilities included keeping all levels of management in the loop about progress and conducting employee focus groups to identify areas in need of improvement. The latter revealed dissatisfaction with the administrative hassle of claims filing.

Moreover, the company's decentralized management structure led to inconsistent benefit administration. "We learned that we had a lot of variation, and variation causes a lot of complexity," Chaves recalls. Employees and the company's benefits professionals alike were spending a lot of time on benefit matters. "They wanted one place to call as opposed to multiple numbers, so that fit into our plans," Chaves says. Employees also wanted a higher short-term disability benefit, and the company obliged.

Preparing for the change

The first major employee communication effort came during open enrollment, when the company offered benefits training at every location and explained what Chaves calls the "new and better way to file for disability benefits."

If nothing else, she says, employees needed to know they could call a toll-free number with questions and concerns, and "for a lot of our facilities, this was a huge cultural change." Chaves adds that the training sessions also pointed out how absence management addressed each benefit concern raised during the focus groups.

Follow-up brochures were distributed at the worksite, says Chaves, and mailed to employees' homes. The latter effort was aimed at employees who missed the training as well as spouses who manage the family's health insurance.

Effectively communicating to employees took much planning and consideration, Chaves admits, and the biggest challenge was presenting the material in an easy-to-understand format. In the end, Avery Dennison's absence management program has been well received, and employees appreciate the ease of having one phone number to call, less paperwork to fill out, a nurse case manager to answer questions, prompt disability payments and the privacy provided by a third-party vendor.

Back to text

Resource Links:

The Hartfordwww.thehartford.com

The Integrated Benefits Institutewww.ibiweb.org

The Washington Business Group on Healthwww.wbgh.org

 

Annmarie Geddes Lipold. An Absence Management Road Map. Business and Health Time is Money: The Mechanics of Absence Management;21.