An Era of Evaluation

The benefits industry is unprepared to meet future client demands to show return on investment. The latest Employee Benefits research has once again shown the need for proof of bottom line impact amongst our clients, but we have yet to provide the evidence.

Instead of repeatedly ignoring this urgent need, benefits providers should be setting the benchmark for benefits evaluation to enable the industry to justify the value of our work. As individuals jump into evaluating benefits schemes without guidance, the wrong success factors are likely to be measured.

Worryingly the trend for this is already beginning. The Employee Benefits research states that in the last year, and over the next 12 months, employers are looking to get a cheaper or better deal from their benefits providers.

By focusing solely on costs, employers are failing to make the distinction between cost and understand the value of some benefits packages. But as we know, the cheapest option isn’t necessarily the most beneficial one.

It’s more than just a numbers issue

Currently most employers are measuring their benefits packages based on supplier costs or cost per head. However, measuring costs alone will not take into account employee perceptions.

The cost evaluation method ignores employee engagement and motivation levels. A good example of this is luncheon vouchers – a very simple benefit that may not be considered one of the most important offerings.

However, for an employee who is over loaded with work and in need of taking regular lunch breaks away from their desk the value of these vouchers cannot be monetised.

Also, an employer may see an increase in a particular aspect of a benefits package and assume this is the right area to invest in.

But, how do we know if an increase in benefits take up is in fact the right type of increase? Are staff buying more holidays because they need them or because they are feeling demotivated and stressed?

The bigger issue then is how we measure these intangible costs.

The next dimension

I am by no means saying this will be an easy process or that there will be a ‘one-size-fits-all’ solution. Benefits needs will vary from one employer to another, what is missing is the bench marking framework which would enable clients to tie everything together into one package.

Employers will need to cut costs and will scrutinise benefits packages with or without the help of benefits providers. It is the responsibility of benefits experts to move beyond acknowledging the problems with evaluation and guide the industry down the right route.

Although this will be a lot of work for benefits providers to implement, I don’t see it as an impossible task. Where I think we will struggle will be in changing the mindset of employers who are already looking at reducing costs over actual value.

I can’t help but speculate that without any involvement from the benefits industry, costs will be driven down so much that eventually it will become the norm to compromise on quality. The industry will struggle to recover if we let ourselves get to this stage.