Have you ever squeezed a balloon and watched the air bulge out the other side? This metaphor explains how many companies manage employee benefit risks, says Gus Georgiadis, area president of Gallagher Benefit Services at Arthur J. Gallagher. But a new approach can help your organization be a more attractive place to work.
“Employers that are in that top tier of being able to attract and retain talent, and in earning the right to say that they are an employer of choice, they are the ones that are managing their risks across the entire organization,” Georgiadis says.
Smart Business spoke with Georgiadis about how to minimize benefit risk with a horizontal approach.
What do you mean by managing risks across the organization?
You need to focus on your total employee rewards. Employees benefit from various types of non-wage compensation, beyond direct compensation, and an employer will incur expenses as a result of these. You need to manage the risk side of these expenses, whether it’s a leave policy, long- or short-term disability policies, paid time off, absence management, injury protection or workers’ compensation programs.
Top employers manage the risks of these programs to ensure that they are 1) competitive and 2) cost affordable. Because as program costs rise and talent becomes more competitive, organizations have to think holistically about the total rewards, in order to attract and retain top talent.
Why do employers often fall back into vertical management?
Historically companies have been organized within their management teams around vertical components. Human resources manages health benefits, the CFO suite has responsibility for elements of risk management, and yet another person from production oversees safety and workers’ compensation. Even smaller organizations, where people wear multiple hats, must shift their thinking.
There isn’t enough cross-pollination to see if a policy in one area can help another, or if a trend might indicate a larger problem. For example, an employer might focus solely on medical costs and shift first dollar responsibilities to employees with a qualified health plan. But management also has to consider how that could affect diabetics. Employees might not do what’s necessary to manage their diabetes with higher out-of-pocket costs. This in turn can affect their ability to come to work and be productive.
Another example is opioid use. In an ideal setting it’s intended for pain management and to get people back to work, but there are issues of dependency or having medicated employees at work, which could lead to workplace safety or productivity issues. You can’t tackle a problem in isolation, because there’s a cause and effect across the organization.
What best practices can business owners use to collectively manage these risks?
The forward-thinking companies, regardless of how they are organized, come together to evaluate data and consider trends and strategies to ensure that they’re not missing opportunities. Organizations should bring together the key decisions-makers and stakeholders to think through these issues in a collaborative way.
The data analytics has to be populated not just with medical and pharmacy, but also with long and short-term disability, absence and workers’ compensation data. Musculoskeletal claims, for instance, might impact absence management or disability, while also suggesting a workplace issue with the production line.
Larger organizations have access to more data analytics, but common sense can provide the same conclusions. Consider the use of vendor summits, where you periodically bring your vendors together, in order to identify commonalities and pull the thread on issues across those vendors. It allows the organization to have dialog and consider ways to tackle problems.
If you seek out help from expert risk managers to rethink your approach, it can help the entire spectrum of risk. You will begin to understand the true implications of each decision, and in turn ensure your programs are more viable, cost effective and geared toward being a place where people want to work.
Insights Insurance/Risk Management is brought to you by Arthur J. Gallagher & Co.
