Tip of the Day: 3 tips on tech for the price of 1

Today only, I'm giving you the recession-special deal of three tips for the price of one (free)!

According to Watson Wyatt, reviewing your tech footprint and ID'ing ways to trim inefficiencies from your IT processes can cut costs and bood productivity -- two things everyone is going for these days.

“HR technology is ripe for review,” says Steve Hitzeman, senior leader in Watson Wyatt’s tech and administration solutions practice. “The goal is not only to find near-term efficiencies but also to ensure the organization is positioned for growth when economic conditions improve.”

Here are WW's three tips to recession-proofing your tech ops:

1. Optimize HR operational and service delivery effectiveness.
WW finds 61% of companies are looking to optimize their delivery model and vendors. Conducting a review of the current HR service delivery model — which includes a mix of HR technology, call centers and vendors — can result in dramatic cost savings.

Although many HR departments have adopted models to reduce administrative costs -- enabling HR to take on more strategic work -- the effort HR spends on administration has not changed significantly because most HR departments didn't follow through to effectively integrate different technologies.

2. Review and benchmark outsourced vendor contracts.
Many companies are not seeing the full effect of process efficiencies, cost savings or improved service they expected from their human resources outsourcing and related technology and service vendor contracts -- often have a patchwork of applications and service providers that aren’t fully integrated or optimized. WW estimates you can save between 10% and 20% once you reassess all of your vendor relationships.

3. Leverage Web 2.0 technologies to create a “consumer-grade” experience.
Leveraging Web 2.0 technologies — such as blogs, podcasts, wikis and shared teamsites — is key to managing today’s information overload and engaging employees. The generation currently entering the workforce has learned to communicate and collaborate using these tools and expects the same “consumer-grade” experience at work.

This can be achieved with corporate tools similar to Facebook, Twitter and YouTube available internally, significantly improving connectivity and employees’ experience of the company intranet.

“HR can take a page from the Internet playbook and benefit from the same tools that have driven the unexpected explosion in online productivity and innovation globally,” says Michael Rudnick, Watson Wyatt’s global intranet and portal leader.

Overheard @: Employer confidence in future of health benefits slips

Amid rising health care costs and other economic worries, a majority of large U.S. employers remain confident they will continue to offer health care benefits to workers 10 years from now. However, the level of confidence has slipped from last year due to economic concerns and uncertainty over the implications of potential health care reform, according to a new survey by Watson Wyatt and the National Business Group on Health, an association of more than 300 mostly large employers.

Conducted in January, the survey of 489 large U.S. employers finds 62% are very confident they will continue to offer health care benefits 10 years from now, down from 73% last year. The survey also found that, due to today’s economic uncertainty, roughly 59% have either revamped their current health care strategy or expect to do so this year.

"This is the first time in the 14 years that we have conducted this survey that employer confidence has declined, and it is not related to an increase in cost trends,” says Ted Nussbaum, North America director of group and health care consulting at Watson Wyatt. “This clearly reflects the uncertainty among large employers over the impact that the fragile economy is having on their ability to stay competitive in the face of health care costs that persistently rise at double the rate of general inflation.”

Tip of the Day: Effective communication through layoffs in three stages

Although survey results show employers forecast that “the pace of layoffs may be slowing from the staggering highs of the last few months, ... there will certainly be more to come,” admits Kathryn Yates, global director of communication consulting at Watson Wyatt. “While employers continue to make difficult cost-cutting decisions, they can still take important steps to keep remaining workers engaged and productive on the job.”

Watson Wyatt suggests three stages of communications efforts for employers before, during and following layoffs:

Before
Prepare leaders early. Leaders should initially deliver key messages about business conditions and actions, and frontline managers should personalize and reinforce them.

During
Clearly communicate the rationale for layoffs, and don’t shy away from tough questions. Transparency is critical to maintaining trust. Employees leaving the organization will want to know what support the company will provide them and hear that their service has been valued. Employees remaining will want to know whether their own jobs are secure. Messages to both groups should remain consistent.

After
Engage remaining employees by communicating a vision for the future. Highly engaged employees are more resilient during times of change and will drive performance in critical times. Deliver messages about the organization’s long-term vision, clarify how employees can contribute to it and set up realistic expectations for sharing information and offering support going forward.

EBN recently spent "Five Minutes With ..." Yates for our podcast series. Download the audio here.

News You Can Use: Employers offer good news, bad news on the recession

The bad news is, employers see the current recession lasting a while. The good news is, they also seem to think the worst of layoff and other cuts is past.

New survey data from Watson Wyatt shows 61% of employers expect the current downturn to last at least until the end of 2009. However, the firm reports that most companies already have made most of the sweeping changes they intend to.

“Companies have come to terms with the fact that this recession is going to last and that they can’t slash their way out of it,” says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “With over half of companies reporting they have already made layoffs, they are now focusing on smaller, more sustainable cost-cutting actions.”

According to the survey of 245 large U.S. employers conducted in February, 52% have made layoffs, up from 39% two months ago. Additionally, 56% now have a hiring freeze in effect, an increase from 47% in December’s survey.

However, the number of companies planning layoffs has fallen from 23% to 13%. “This may be good news," notes Laurie Bienstock, Watson senior compensation consultant, "as companies move more towards cost-cutting efforts other than workforce reductions in an effort to hold on to the workers they will need when recovery eventually comes.”

Workers won't be untouched by those other cost-cutting efforts, though. Among them are:
* Salary freezes, 42% (up from 13%).
* Reductions in 401(k) matches, 12% (up from 3%).
* A shortened workweek, 13% (up from 2%).
* Travel restrictions, 69% (up from 48%).

What do you think? In terms of layoffs, is the worst over? What alternative cost-cutting measures are you considering in lieu of/in addition to salary reductions? Comment and let me know.

Tip of the Day: DB sponsors, go to Plan B

Okay, so maybe most pension plan sponsors are already on Plan Q in terms of how to stop the blood-letting in their plans due to the economic crisis, but a recent report by Associate Editor Lydell Bridgeford on BenefitNews.com highlights analysis from Watson Wyatt sponsors may want to consider. Although it's far from ideal, Alan Glickstein, senior retirement consultant at Watson Wyatt, says employers may need to rob Peter to pay Paul, so to speak.

"Changes in funded status are wreaking havoc with the projections companies have made," says Glickstein. "Large and unexpected pension contributions will require companies to divert funds they had earmarked for other business activities into their pension plans precisely when they can least afford it."

Meanwhile, 75% of U.S. pension plan sponsors report that their organizations have already transferred assets out of equities and into bonds or alternatives, according to a survey by SEI's Institutional Group, an asset management firm. The survey questioned 157 American and international pension executives who oversee pensions ranging from $30 million to more than $5 billion in assets.

News You Can Use: Pension funding remains low

As another cringe-worthy sign of the times, a new Mercer data on Fortune 1500 companies show pension plan funded status at the end of Jan was unchanged from Dec., indicating funded status of plans sponsored by the largest U.S. companies remained at 75%.

Don’t hold your breath; it gets worse.

The value of both pension assets and liabilities declined in Jan, reducing the dollar amount of the estimated aggregate deficit to $380 billion from $409 billion at the end of Dec.

A Watson Wyatt survey also released today examined the pension problem over the course of 2008, finding that pension plan funding at the largest U.S. companies had reached historical lows at the end of the year.

Watson Wyatt measured the aggregate data of 450 Fortune 1000 companies, forecasting an average decline of 32% (106% in 2007 to 74% in 2008). This translates to a $445 billion total loss, annihilating a $78 billion surplus in 2007 and leaving these companies with $366 billion deficit to clean up.

Perhaps the only good news is for DC plan sponsors, and only in a misery-loves-company kind of way. --Kathleen Koster

News You Can Use: HR pay data revealed

Hopefully in time for HR professionals to negotiate their annual bonuses and pay increases, Watson Wyatt Data Services recently released the "2008/2009 Survey Report on Human Resources Personnel Compensation," now in its 14th edition.

The report, based on responses from 2,075 U.S. organizations in 5,100 locations, covers salary information for HR/benefits professionals in 198 geographic areas - including 136 metropolitan areas - and 165 industries. Click here to read EBN's coverage of the report.

You can use it as a benchmark in your own career, or for the planning of HR future compensation levels in your own organization.

News You Can Use: Even with pension relief, plan sponsors come up short

U.S. employers will be required to contribute more than $108 billion into their defined benefit plans this year, according to an analysis by Watson Wyatt. Although that’s roughly $16 billion less than employers would have had to contribute without the passage of a new pension funding relief law late last year, Watson Wyatt pension experts say employers will still need additional relief.

“This new law is a positive first step,” says Alan Glickstein, a senior retirement consultant with Watson Wyatt. “However, we urge lawmakers to pass additional temporary funding relief as companies transition to new, more restrictive funding requirements while battling declining pension asset values and a weakened economy.”

Watson Wyatt estimates that even with the enactment of the Worker, Retiree and Employer Recovery Act of 2008, both the required contribution levels in 2009 ($108.7 billion) and 2010 ($102.8 billion) will mark a significant jump from 2008 ($38 billion). Additionally, some employers that fail to meet the minimum 80 percent funded threshold may contribute an additional $3.2 billion. Otherwise, the payment of lump-sum benefits would be restricted under the Pension Protection Act.

“PPA will eventually lead to better and smoother funding,” says Mark Warshawsky, director of retirement research at Watson Wyatt. “But its implementation could not have happened at a worse time. Now, as contributions jump, employers may be forced to make tough choices to cut costs. We hope that with more temporary funding assistance, employers will still be able to provide defined benefits plans and their employees will continue to enjoy retirement security.”

News You Can Use: Recession to affect workers more deeply

The ongoing recession already has affected employees, as the number of employers implementing layoffs and hiring and salary freezes has risen sharply in the last two months, according to a new survey from Watson Wyatt, and the cuts likely will continue into next year, the consulting firm finds.

Watson Wyatt reports that 23% of employers plan to make layoffs in the next 12 months, and an additional 18% are planning a hiring freeze over the same period.

“As the economic downturn has both broadened and deepened, companies in almost every industry can no longer stay the course,” says Laura Sejen, global director of strategic rewards consulting at Watson Wyatt. “The need to contain costs has resulted in stronger measures that are ultimately affecting more workers.”

Among the other cost-cutting measures employers have planned over the next 12 months to survive the recession:
* Organization-wide restructuring 21%
* Eliminate/reduce training 18%
* Raise employee contribution to health care premiums 17%
* HR function restructuring 21%
* Salary freeze 19%
* Reduce/eliminate other employee programs 12%
* Salary reductions 6%
* Reduce employer 401(k)/403(b) match 7%

Findings show that almost two-thirds of companies have already taken five or more of the actions above.

“All indications are that 2009 will be a difficult year for both companies and ultimately employees,” said Sejen. “It will be up to employers to find an effective way to manage this challenge by balancing their financial situations with the likely impact on employee engagement.”

News You Can Use: Employers put skilled talent on holiday wish lists

In a recent Watson Wyatt Workforce Planning Survey, almost two thirds (71%) of employers cite scarcity of talent as the biggest challenge impeding their business strategy. Other major concerns include restructuring (42%) and layoffs or hiring freezes (20%).

For employers who are most worried about bringing in new talent, 50% plan to continue replacing talent in all positions, while 33% will scale-back talent replacement across the organization and 21% will hire replacements only for critical jobs. Three percent of employers will not be replacing talent in the near future.

On the other side of the spectrum, attracting talent is equally difficult as 77% of employers report challenges in enticing critical-skill employees and 60% named top performers as a hard commodity to obtain. In terms of retaining their employees, less than half (49%) were having trouble keeping critical-skill employees within the company and 34% had the same problem retaining top performers.

Watson Wyatt’s Workforce Planning Survey was conducted in October 2008 and compiles responses from 129 North America-based employers across a variety of industries.
--Kathleen Koster

News You Can Use: Open Enrollment Trends

We know that one of two things are probably on your mind at all times (three, if you live in DC like we do) .... open enrollment, the economy and the election.

But since you're likely too busy to see the forest for the trees, we're continually blogging during your busiest times, bringing you short news bites to be easily digested on coffee breaks.

Today, check out what Watson Wyatt predicts will be the hottest trends in Open Enrollment for 2009:

• Increased emphasis on improving personal health.
• Value-based prescription drug benefits and a shift to co-insurance.
• Greater access to onsite clinics, retail clinics and health coaches.
• Health savings accounts linked to high-deductible health plans.
• Full coverage or low copayments for preventive screenings and tests.
• Greater use of new media to communicate benefit information.
• Spousal surcharges.

Don't miss our NOVEMBER feature on improving your benefit communication know-how.