Financial Education – Stress = Improved Productivity

Making employees more money-savvy has a measurable return on investment.

By Joanne Sammer Jun 1, 2012
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June CoverWhen employees are stressed-out about their finances, their work can suffer. At Mansfield, Ohio, manufacturer Therm-O-Disc, executives have found that employees who do not focus on their job duties make more errors, increase scrap expense and prevent workgroups from meeting production goals. These employees may even cause work-related injuries. Add to that the fact that stress can be directly linked to physical illness and absenteeism, and it's not surprising that the company launched a financial education program.

In about 18 months, 20 percent of Therm-O-Disc's 4,000 workers have taken advantage of the program. During the 13-week course, the average class has collectively paid off $10,000 in debt and the participating individuals have saved an average of $1,000 in an emergency fund. Moreover, attendees' positive reviews have generated a waiting list for classes. "We have had a good mix of individuals participating, both hourly and salaried employees," says coordinator Julie Buzzard. "Experienced participants have been able to encourage those who are having a lot of financial difficulties, which helps to build teamwork across lines and departments that normally do not cross."

Therm-O-Disc is not alone in wanting employees to be financially stable. At least half of the nation's employers demonstrate concern about the impact employees' overall well-being has on productivity, health care costs and a host of other metrics. Taking a page from wellness programs, they are seeking ways to improve employees' financial wellness and thereby reduce their financial stress.

Lasting Results

Fifty-two percent of U.S. employers now offer financial education to their employees, according to a January survey by the Society for Human Resource Management (SHRM), down from 64 percent that offered such programs in 2009 during the height of the recession.

The SHRM researchers did not explore why some employers stopped offering this benefit. Among employers that continue to offer financial education, however, other researchers find plenty of evidence showing the positive impact the programs can have on employees and the workplace.

Research conducted by the Federal Reserve Bank of Kansas City indicates that employer-sponsored financial education improves personal financial outcomes and work outcomes. For example, researchers found that employees who participate in financial education:

  • Make fewer requests for pay advances and 401(k) plan loans.
  • Are more likely to particpate in and contribute to 401(k) plans.
  • Experience a decrease in financial stress.

Helping employees improve their finances can boost productivity, reduce absenteeism and build employee engagement. Some companies are even tying financial wellness to health care costs by measuring health care costs before and after individuals complete a financial education course and receive individual advice and coaching on how to improve their financial positions. The rationale: Financial problems lead to stress and stress-related diseases and illnesses. Reduce stress, and you will reduce the cost of health care for that person.

There are plenty of intangible benefits, too. "When our employees are not happy with a salary action in a given year, some of that is legitimate but some of it can be a disguised cry of desperation because they have balance-sheet problems at home," says Doug Dean, SPHR, chief human resource officer of Children's of Alabama, a health system in Birmingham. "Employees with a strong financial plan and who are living within their means will not be looking for the company's compensation system to lift them out of financial difficulties."

Getting Started

When technology company Rackspace Hosting was preparing to expand its financial education program last year, HR professionals asked interested employees to take a financial wellness assessment.

In addition to providing a base line for measuring progress, this type of assessment can help employers "understand employees' key financial issues, priorities and challenges," says Liz Davidson, chief executive officer of Financial Finesse, a financial education provider in San Francisco. "This often differs by employee group based on age, income and other factors."

Thirty percent of San Antonio-based Rackspace Hosting's 4,000 employees took the assessment, and the results will be the base line. "We plan to conduct these assessments annually in the same way that we conduct biometric screening to measure progress in our health care program," says Phil White, a director in the compensation and benefits group and leader of the financial education program. Business leaders want to see higher productivity, retention and engagement scores among employees who take the financial education courses offered, and will also be looking at health care costs.

The revamped Rackspace program launched last year and has three elements. First, the company provides financial seminars, webinars and online training videos. Then, employees have access to one-on-one sessions with a financial advisor. "This provides guidance and coaching starting with a 30-minute session during which employees can discuss their specific situations," White says. Finally, employees can call on a network of pre-screened providers, such as credit counselors, for help in dealing with problems. Although the company does not cover the services of these providers, it does offer discounts. 

So far, demand far exceeds open slots in the program, even though Rackspace hasn't implemented any marketing or communications initiatives beyond word-of-mouth referrals.

Measuring Results

Once a program has been running for a while, HR professionals can take a closer look at its impact. Florence, S.C.-based McLeod Health launched a financial education program in 2008, just as the economy started to sink into recession.

"When people make bad financial decisions, those problems very much impact the workforce," says Tim Hess, PHR, senior vice president of human resources and training. Business-case modeling on the front end "showed a clear return on our investment."

McLeod Health's program has been studied by researchers from the Personal Finance Employee Education Foundation. They found the return on investment to be $6.60 for each $1 invested, based on the 470 employees who had completed the program to that point. The total return of $569,133 included:

  • Turnover ($244,688).
  • Job performance ($246,488).
  • Work time lost ($13,533).
  • Absenteeism ($24,192).
  • Other ($40,232).

The program began with 12 weeks of two-hour evening classes that met once a week during the workweek. Since then, the organization has added other formats, such as classroom meetings every other Saturday to accommodate more employees' schedules and to allow participants to bring spouses, partners and other family members.

A third format—a blended learning approach—features an online video portion that can be done at home along with a weekly lunchtime class of 45 to 60 minutes for 12 weeks. "This is better for people who don't have time for a two-hour class," Hess says.

"We pay for the program if the employee completes the program and attends all 12 sessions," Hess says. "If an employee does not complete the program, then he or she gets charged through a payroll deduction." When employees sign up, they must sign a form that allows the deduction if they don't complete the program.

Front-line leaders are most likely to see when employees struggle with personal finances.

When the program was first rolled out, demand was greater than expected. Instead of one class, organizers ended up holding three classes with 40 students each. Now that the program has been in place for some time, the demand has leveled off and so has class size. Today, classes are offered on a regular basis with about 12 people attending on average. Since the program's inception, Hess estimates that more than 650 of the organization's 5,100 employees have participated.

Target the Neediest

One of the best ways to promote a financial education program is to get managers and supervisors involved. After all, front-line leaders are most likely to see when employees are struggling with personal finance. If the manager or supervisor knows about the employer's financial education offerings, he or she can find ways to let the employee know about them. This approach is even more effective if the manager or supervisor has personally participated in the program and can share his or her experience.

Recognizing the power of testimonials, McLeod Health gives managers the first chance to sign up for its financial education program. And now that the program has been in place for some time, front-line managers continue to be a strong source of information and referrals to employees.

Leaders in other organizations reach out to employees with suspected financial difficulties. "We look for events and moments when employees might be more receptive," says Dean of Children's of Alabama. "Then, we try to remove any speed bumps to their participation by making sure there is no cost."

For example, when an employee requests a hardship withdrawal or a loan from a retirement plan, the vendor representative reads from a custom script that alerts the employee to the free financial education offered at Children's, and explains how to get involved with that program.

Managers also share information about the program with employees. "We have an open culture where employees tend to be open to discussing personal matters with managers, like a financially draining divorce," Dean says. "We try to arm our supervisors with knowledge and resources so that when those kinds of issues arise in the natural course of things, they are able to tell the employee about the program."

How far companies take this outreach depends on culture. Some business leaders prefer to simply let employees know about the financial education available, say, through an employee assistance program. Although it is up to supervisors and other leaders to let employees know about these services, Christine Taylor, PHR, HR manager for United Grinding Technologies Inc. in Miamisburg, Ohio, treads carefully when it comes to approaching a specific employee showing signs of financial difficulties. "That is getting into employee privacy," she says.

As a result, managers at the 130-employee company generally focus on letting people know that individuals facing urgent and crisis-level financial issues can seek financial counseling through the employee assistance program, leaving it up to the individual to take action.

Other ways to promote financial education include:

  • Placing sign-up booths in the workplace when classes are enrolling.
  • Highlighting success stories in employee publications and communications.
  • Encouraging class alumni to share the impact the class has had on their lives.

At McLeod Health, "We challenge graduates to pay it forward by telling friends and colleagues about the program," Hess says.

In some cases, financial education develops organically. United Grinding Technologies, for example, provides retirement plan participants with one-on-one investment advice. Many employees have developed a bond with the advisor. Over time, the advisor has spent time at the company discussing a range of financial issues at no additional charge. "He comes in for half a day at certain times, and employees can make appointments to discuss any type of financial issue," Taylor says.

No matter what form it takes, financial education can be a competitive advantage. "There are six or eight things we do that are difficult but not impossible for our competition to match overnight," Dean says. "Certain benefits have become commodities that everybody has and that are not differentiated anymore. Financial education makes you stand out."

The author is a New Jersey-based business and financial writer.

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