Benefits: The Hidden Tool of Strategic Growth

Written by Justine Costigan

One of the odd things about benefits is that they often seem detached from the business itself. Most articles on benefits never mention the industry or strategy or approach to human capital management. One reason for this is that they are seen as a homogenous item - we don't expect companies to differentiate themselves on the kind of PCs they buy, so why should we expect them to differentiate themselves with regard to benefits? A more substantial reason is that most companies do not have a well-defined HR strategy. In the absence of any HR strategy, the ongoing quest to cut costs is usually the driving force, and just enough of a benefit package is offered to control employee grumbling.

However, in the dynamic technology industry, there are two firms that do have well-defined HR strategies: IBM Corp. in Armonk, N.Y., and SAS Institute Inc., in Cary, N.C. If we are going to see a specific benefits strategy anywhere, these are two places to look.

Benefits at SAS

SAS is a classic high-involvement organization that seeks competitive advantage by creating a warm, supportive atmosphere based on the theory that happy employees lead to happy customers.

"Our human capital strategy is to retain our people," says Kristen Vosburgh, senior director of compensation and benefits at SAS. Wanting to retain your people is hardly a novel idea, but SAS gives flesh to the bare-bones claim. The company's central strategy of retaining people drives its benefits policy and yields results. According to Vosburgh, their benefits approach is a big reason why turnover is only 4%, versus the industry norm for software companies, which is about 20%.

A Generous Package

SAS's strategy is to offer more than the industry norm in terms of benefits. SAS offers a long list of attractive benefits that includes three weeks' worth of vacation; a generous range of disability plans; support for alternative therapies like acupuncture; solid retirement plans; and other important incentives.

"We are always benchmarking ourselves and making sure we stay in the top tier of companies in terms of benefits. We always strive to be leading edge," Vosburgh says.

In addition to having a rich benefits package, company extras include gourmet cafeterias, an on-site fitness center with a pool for employees and their families, on-site childcare, a health center for employees and their dependents, and walking trails where employees can go for a stroll.

SAS also has a stand-alone work-life department staffed by six social workers to help employees optimize their quality of life.

"It's easier for us to offer great benefits because we have top-down support. Even where ROI is hard to determine, we get support from the CEO, as long as the benefit makes sense for our employees and the business."

Kristen Vosburgh, Senior Director of Compensation and Benefits, SAS

Managing the Investment

Benefits are a big expense, but the underlying thinking of SAS benefits planners is to offer great benefits and then find a way to do so that is cost effective. Cutting benefits or passing extra costs to employees would counter the HR strategy, Vosburgh says.

SAS controls the cost in two ways: One is by doing a good job negotiating with vendors; the other is by actively promoting a wellness strategy.

Secrets of Success

"The smartest thing we do here is that we have very good relationships with our vendors, " Vosburgh explains," and having worked at other companies in the same capacity, I know that doesn't always exist."

Providing benefits effectively is not a function of the benefits department, but rather a partnership between the department and the many vendors who deliver services to employees. SAS, which in Vosburgh's words aims to "give employees the royal treatment," understands the importance of this partnership, so it invests thought and time to make it work.

One of the first things SAS does is meet with employees of new vendors. It tells the staff what SAS is all about, even shows them a video, so that expectations are set at a high level, and the groundwork for partnership is laid. Then, if problems arise, Vosburgh says SAS can work as a partner to the vendor to find a creative resolution.

The other secret of success for SAS is that it is not a public company - SAS does what the owner thinks is right for the company, rather than working to meet Wall Street's expectations.

"It's easier for us to offer great benefits because we have top-down support," Vosburgh says. "Even where the ROI is hard to determine, we get support from the CEO, as long as the benefit makes sense for our employees and the business."

"The [Corporate Service Corps] builds the leadership skills IBM needs. It also helps people broaden their understanding of the world. Finally, it builds a network between IBM employees in many different countries."

Ron Glover, Vice President, Diversity and Workforce Programs, IBM

Benefits at IBM

IBM describes its strategy as creating a globally integrated enterprise. From an HR point of view, geography shouldn't be an important criterion for who works on a project. IBM simply wants to apply the best talent to the task at hand, irrespective of where that talent is located. IBM believes its strength is in its ability to find great talent anywhere in the world, engage people and enable them to work effectively together around the globe.

The specific type of talent needed is dynamic. An urgent need for programmers may be replaced with a pressing need for expertise in engineering financial processes. This is one reason that IBM doesn't put the same emphasis on retention as SAS; rather, it focuses on having the talent it needs at the moment. More generally, IBM's relationship with employees is less paternalistic than that of other companies. Instead of talking about taking care of employees, IBM is more likely to talk about partnering with them. Like SAS, it is very focused on human capital, but it has a different approach.

Flexibility Creates Efficiency

A surprising 42% of IBM employees do not work at a traditional IBM office. They work either at home or at a client's office.

These flexible working arrangements originally were introduced in the 1980s as a way to retain women who had child or eldercare responsibilities. The option to work at home is no longer seen just as a perk to employees; it can be beneficial to the efficient operation of the entire company. When people are on teams spread across many time zones, it can be tough to schedule calls in the normal working day. Employees who work from home have a more flexible schedule. It's a benefit that helps the company work globally.

Working at home also de-emphasizes local geography. The employees are connected to the people they happen to be working with, rather than being connected to the people with whom they happen to share an office.

Partnership With Employees

Just as working away from a corporate office changes the sense of relationship between employer and employee, so too do other benefits reinforce a non-paternalistic view.

One innovative benefit IBM offers is the personal learning account, in which IBM will match employee spending on education that is not job related. From a corporate point of view, this serves the usual purpose of being attractive to employees; but more than that, it fits with the corporate need to have a highly educated workforce. It also signals that IBM believes employees should be making some of the decisions about what they need to learn, and that IBM will support their choices.

Another learning benefit employees can apply for is the Corporate Service Corps - a kind of corporate Peace Corps, whereby teams of eight to ten people take on socially responsible projects in a developing country. It's an opportunity IBM employees find very appealing: 5,000 people applied for the first 100 spots, and 600 opportunities will be made available over the next three years.

Like flexible working arrangements and personal learning accounts, the Corporate Service Corps fits into IBM's overall HR strategy.

"The program builds the leadership skills IBM needs. It also helps people broaden their understanding of the world. Finally, it builds a network between IBM employees in many different countries," says Ron Glover, vice president of diversity and workforce programs.

Providing benefits effectively is not a function of the benefits department, but rather a partnership between the department and the many vendors who deliver services to employees.

The Advantage of Strategy

SAS focuses on talent, and its benefits strategy seeks to do everything possible to get employees to stay at SAS and feel like a part of the family. IBM focuses on talent, and its benefits strategy seeks to support the creation of a talented and flexible global workforce.

What the companies have in common is that they don't seek to simply match what everyone else is doing. They have a clear human capital strategy, and that's what drives their decisions about benefits. This clarity of purpose is likely to give each of the firms a competitive advantage. Other companies should ask themselves what their strategy is, how it is different from other firms and what that implies for benefits. The more benefits are seen as a way to fulfill a strategic purpose, the less they will be seen as a painful cost.