Competing Through Sustainability
Google Keeps Employees’ Stomachs Happy, But Fit Too, Using Data Analytics
Google provides good food options for employees right in the office. They claim that their
employees are never more than “150 feet from food”… The problem is, employees liked it – and
gained unwanted pounds. Using data to analyze the problem, Google changed the ordering of
food in the line (they found people load up in the first things they see, so they put healthier
options first). They also started communicating more information concerning nutrition
information about the food and drinks, and changed how various types of food were made
available (for example, changed M&M dispensers from clearly visible gravity-feed dispensers to
opaque containers) and displayed (moved water to eye level in coolers and soft drinks to the
bottom). All of these things resulted in decreases in consumption of the less healthy choices.
Discussion Question
1. Why is weight gain by employees a concern for Google?
2. How would you evaluate the effectiveness of Google’s approach to addressing this
concern? Is there anything you would have done differently?
Student responses will almost certainly vary here. It appears from the information ion the
Competing Through Globalization
Helping Employees Cope with ‘Airpocalypse’n in China
Beijin suffered a winter of serious air pollution which may result in an exodus of expatriates
form the city. According to the World Health Organization (WHO), particulate matter such as
that in Beijing affects more people than any other pollutant. It contains sulfate, nitrates,
ammonia, sodium chloride, carbon, mineral dust and water and is composed of a mix of solid
and liquid particles. Levels of pollution in Beijing reached approximately 30 times higher than
the levels recommended by the WHO, which according to one study resulted in 1.2 million
premature deaths each year in China. These issues have lead to human resource problems for
companies with local executives posted in this region to include expatriates requesting
reassignment and potential job candidates withdrawing applications. HR departments have tried
purchasing air purifiers, face masks, and increasing hardship allowances to combat these issues,
but these are costly measures that aren’t fully effective.
Discussion Question
1. Would air quality concerns keep you from accepting an expatriate assignment in China?
2. Why hasn’t more been done to address air pollution concerns in China?
Evidence-Based HR
Companies have much more data about their employees available to them today than in the past.
Used properly, this data can aid in improving company performance. Obstacles, such as
changing company culture concerning using data-based decision making rather than intuition
remain. Using this data at Caesar’s Entertainment is highlighter in this vignette.
Exercise
1. Are there are other health care costs that can be identified and controlled?
Students will likely identify a range of other costs, but two areas that can potentially be
identified that were not mentioned in the vignette are lost time due to illness and losses in
productivity.
2. What data would you like to have to identify and evaluate such alternatives?
Answers to this question will be based on responses to question 1 above.
3. Can quality of care be maintained?
It would seem logical that the quality of care would not only be maintained using
data-driven decision making, but would potentially improve as well by decreasing the
overall costs of waste.
1. Staffing Responses to Control Benefit Cost Growth
a. Because benefit costs are fixed, the benefits cost per hour can be
reduced by having employees work more hours.
b. Organizations may try to have their employees classified as
exempt, since they can then reduce their benefit costs per hour
without having to pay overtime.
c. Employers may be more likely to classify workers as independent
contractors rather than employees, which eliminates the employer’s
obligation to provide legally required benefits.
A. Nature of the Work Force—Demographics will have consequences for the
benefits that employees want; however, it may be misleading to make decisions
on demographics alone (see Table 13.5). Methods such as personal or group
interviews, focus groups, or questionnaires can be used to find out what benefits
are important to employees. Organizations must be willing to act on the basis of
this information. Organizations need to think about the signals their benefits
packages send and the implications of these signals for workforce composition.
B. Communicating with employees is critical if employers are to realize sufficient
returns on their benefits investments. Research is clear that employees and job
applicants often have a very poor idea of what benefits provisions are already in
place and the cost or market value of those benefits. Table 13.8 shows that
employees significantly underestimated both the cost and market value of their
medical benefits.
1. Although college graduates and M.B.A. students felt that benefits were not
very important in evaluating a job offer, it may be because most
companies are perceived to offer similar benefits. A company that offers
poor benefits will be very noncompetitive.
2. Studies indicate that employees’ awareness of benefits information was
significantly increased through several media, including memoranda,
question-and-answer meetings, and detailed brochures.
3. Awareness of and satisfaction with benefits can be increased by
multimedia presentations. Table 13.9 indicates alternate means of
communication, since 27 million employees in the United States are
illiterate.
4. Flex-plans, or Cafeteria-Style—These plans permit employees to choose
the types and amount of benefits that they want. Plans vary as to whether
certain minimum levels (e.g., of health insurance) are required and
whether employees can get money back for spending less than the allotted
amount or pay more if they want more benefits.
a. The advantages are that employees can be more aware and
appreciative of their benefits package; there is a better match
between the package and the employee’s needs, which should
improve satisfaction and retention; and cost reductions are often
achieved.
b. One drawback is administrative cost, especially in design and
start-up. However, software and standardized flex-plans available
from consultants help. Another problem is adverse selection, since
employees are most likely to choose benefits that they will need
most (such as expensive dental care). This will make it difficult to
estimate costs in small businesses. Adverse selection can be
controlled by placing limits on coverage amounts, pricing benefits
with such problems higher, or using a limited set of options.
5. Flexible Spending Accounts—These accounts permit pretax contributions
to an employee account that can be drawn on to pay for uncovered health
care expenses. Another account up to $2,500 can be used for dependent
care expenses. Funds must be spent during the year or they revert to the
employer (employees should therefore have predictable expenses). The
major advantage is that take-home pay increases.
1 General Regulatory Issues
A. Affordable Care Act – The Affordable Care Act, signed into law in 2010, has
several provisions that will have a major impact on employers as they are
implemented through the year 2018. Table 13.10 summarizes key issues for
employers.
B. Nondiscrimination Rules and Qualified Plans—All benefits packages must meet
certain rules to be qualified plans. These tax advantages include immediate tax
deductions for employers for their contributions to retirement plans, no tax
liability for the employee at the time of the employer deduction, and tax-free
investment returns on the retirement funds. Each benefit has different rules to
obtain qualified status. In general, plans must meet nondiscrimination rules; that
is, a benefit cannot discriminate in favor of highly compensated employees.
These rules discourage owners or top management from developing plans that
benefit only themselves.
Integrity in Action
The Affordable Care Act: How Will Employers Respond?
This vignette overviews Darden Restaurant’s attempts at plans to use more part-time employees
to avoid having some workers covered by the new “Affordable Care Act” (commonly referred to
as “Obamacare”). After receiving negative feedback on their Facebook page, web page and in
person at restaurants, Darden decided not to bump any more employees down to part-time. They
have also found that their restaurants do better when they have full-time employees working.
Discussion Question
1. How do you feel about a large corporation like Darden looking at the option of cutting
employee hours in order to avoid coverage by the Affordable Care Act?
2. Is it good for the company? Is it good for employees?
The data would initially seem to indicate that it is a good move for the company, but due
C. Sex, Age, and Disability
1. Ensuring equal treatment for men and women in areas besides pregnancy,
has to do with pensions. It is illegal for companies to require that women
contribute more to a pension plan than men, although women, on the
average, live longer.
2. Under the Age Discrimination in Employment Act (ADEA) and later
amendments, employers cannot discriminate against employees over the
age of 40 in terms of pay or benefits. For example, retirement benefits
cannot stop accruing and employees cannot be forced to retire. In
addition, early retirement incentives need to meet the following standards
to avoid legal liability: (1) the employee is not coerced to accept the
incentive and retire, (2) accurate information is provided regarding
options, (3) the employee is given adequate time (is not pressured) to
make a decision.
3. The Americans with Disabilities Act (ADA) went into effect in 1992. It
specifies that employees with disabilities have equal access to the same
health insurance coverage as other employees.
D. Monitoring Future Benefits Obligations—The Financial Accounting Statement
(FAS) 106 issued by the Financial Accounting Standards Board went into effect in
1993. This rule that any benefits (excluding pensions) provided after retirement,
such as health care, cannot be funded on a pay-as-you-go basis. Rather, they must
be paid on an accrual basis and entered as future-cost obligations on financial
statements. The initial impact on large corporations, such as AT&T and GM, has
been significant declines in net income. Attempts to control costs have been made
(e.g., GM announced that it would require white-collar employees and retirees to
pay insurance premiums).
1.1.1.1.1 A Look Back
We have seen that many organizations have become less paternalistic in their employee
benefits strategies. Employees now have more responsibility and sometimes, more risk,
regarding their benefits choices.
1.1.2
1.1.3 1. Why do employers offer benefits? Is it because the law requires it, because it
makes good business sense, or because it is the right thing to do? How much
responsibility should employers have for the health and well-being of their employees?
Take the perspective of both shareholder and an employee in answering the question.
Benefits are offered to employees to attract and retain a talented workforce. Some
companies will take this a step forward and assume more responsibility for their
employees well-being by offering programs that will increase their employees health and
work-life balance. From the perspective of shareholders, benefits could be viewed as an
unnecessary burden to the company or a way to ensure that their workforce is healthy and
motivated. From an employee’s perspective, benefits are a mandatory since the costs of
individual plans are expense and the company will need you to be healthy in order to
perform at your best.
2. If you were advising a new company on how to design its health care plan, what would
you recommend?
Student answers may vary. It is important to note that the health care plan must match
the strategy of the organization and be competitive in the industry to attract and retain top
talent.
1.1.4 Chapter Vocabulary
These terms are defined in the “Extended Chapter Outline” section.
Marginal tax rate
Consolidated omnibus budget reconciliation act (COBRA)
Pension benefit guaranty corporation (PBGC)
Employee retirement income security act (ERISA) of 1974
Cash balance plan
Summary plan description (SPD)
Family and medical leave act
Health maintenance organizations (HMO)
Preferred provider organizations (PPO)
Financial accounting statement (FAS) 106
Discussion Questions
1.1.5
1. The chapter opening story described how employers and employees are are shifting more
employee health care costs to employees. What are the likely consequences of this
change? Where does the social responsibility of employers end, and where does the
need to operate more efficiently begin?
Student answers may vary. Some students will believe that the changing relationships
An employer can only offer an employee so much and have to look at its financial
1.1.6
2. Your company, like many others, is experiencing double-digit percentage increases in
health-care costs. What suggestions can you offer that may help reduce the rate of cost
increases?
Table 13.7 in the text provides a list of suggestions, such as cost shifting to employees,
use of alternative providers such as HMOs and PPOs, claims review, attempts to decrease
3. Why is communication so important in the employee benefits area? What sorts of programs
can a company use to communicate more effectively? What are the potential positive
consequences of more effective benefits communication?
Communication is critical since a great deal of money is spent on benefits, yet often
employees neither understand the benefits nor their cost. Most communication programs
4. What are the potential advantages of flexible benefits and flexible spending accounts? Are
there any potential drawbacks?
Advantages are an increased understanding and appreciation of benefits (since so much
5. Although benefits account for a large share of employee compensation, many feel there is
little evidence on whether an employer receives an adequate return on the benefits
investment. One suggestion has been to link benefits to individual, group, or
organization performance. Explain why you would or would not recommend this
strategy to an organization.
Students should discuss this question. It is likely that most of them, like any other
portion of the U.S. population, view benefits as an entitlement and would be strongly
Self-Assessment Exercise
Refer to the text for the self-assessment exercise.