As you consider your investment in employee health benefits for 2008 – 2009, some facts and approaches may be helpful.

Health Benefits Costs Present Management Challenges

When you choose to provide health benefits to your employees, your company must balance two conflicting objectives – maximizing the incentive value of healthcare to your employees, and controlling the cost of this investment.  TriNet’s 2008 – 2009 health benefits program help strike the right balance.

Health insurance premium costs continue to increase across all insurance types, providers and regions. Between 2001- 2007, health insurance premium costs rose 80%—nearly four times faster than wage cost growth in the same period. This trend continues with no sign of abatement.

Costs of TriNet-offered plans reflect national trends. Many plans (including High Deductibles, HMO’s and some others) have very low, or no increase, due to favorable claims experience and low risk. Low-deductible plans which expose insurers to near “first-dollar” claim costs generally have higher percentage increases. But across plan types, options and regions, the median annual increase for TriNet-sponsored plans in 2008 – 2009 is well below national averages.  The TriNet total picture is continued wide choice among excellent plans, with measured increases based on the cost of providing insurance.

Incenting Employees Through Plan Choice and Quality

TriNet’s plans place your company at the leading edge of employee health benefit choice and plan quality.  Within the 59% of companies with fewer than 200 employees offering healthcare at all, only 11% offer more than 1 plan, and only 1% offer three or more (as TriNet companies do). 

But high-performing employees demand choice.  A recent Watson-Wyatt study concluded that most employees want broad choice among health plan types and are willing to pay higher premiums in return.  This study is supported by research from Hewitt, which finds that two-thirds of employees consider the range and quality of health plans as a primary factor in staying with or choosing their employer.  The same Hewitt study found that 85 – 90% of employees prefer 3 or more plan choices.

Health plans offered through TriNet place your company within the top 1% of small employers in your ability to meet employee demand for plan choice. TriNet’s plans maximize employee choice because they include the full range of health insurance options – from low-premium, high-deductible plans through higher-premium, low deductible PPO plans from top-tier providers.

TriNet adds value to broad plan choice by maintaining the highest quality plan providers and plan administration features. TriNet’s 2008 – 2009 plan offerings do not require medical underwriting and contain no exclusions for pre-existing conditions. TriNet-served employees can select and manage their insurance choices in privacy and with instant access to information through HRPassport, and get answers through the Employee Solution Center. 

TriNet ‘s 2008 – 2009 plans meet employees’ needs for quality and choice, making companies more competitive for top talent.

Managing Cost of …

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Recent news about the national employment market has been consistent with broader concerns about recession in 2008.  Last week’s BLS report indicated that payroll employment declined by 232,000 in the January-March quarter, and that the unemployment rate rose to 5.1 percent in March. 

TriNet sees a different picture among high-wage technology and non-banking professional services employers with 400 or fewer employees. These companies continued to hire and grow at about the same pace as in 2006 and 2007.  Employment growth seems to be moderating, and small companies continue to experience rising health-care costs, but small, high-wage companies expanded their workforces in Q1 2008. 

Here’s how we see it:

Study Population: High-Wage Small Technology and Services Companies

TriNet studied hiring and compensation patterns from 2006 – 2008 at more than 600 companies averaging about 26 employees in 39 states, with median salary around $75,000. More than 90% of the companies are professional services, technology or non-bank financial service businesses.  All companies in the study were TriNet clients for the entire period (2006 – present).

Continued Hiring in Q1 2008: Fewer Companies Hiring More New Employees

While the number of companies hiring decreased slightly from 2006 – 2008, the pace of hiring actually accelerated, with just over 1900 new hires in the population in Q1 2008 vs. about 1800 in Q1 2006.  Average company size increased from 19.5 employees to 26.7 employees at the end of Q1 2008. 

Some Indications Of Moderating Growth

Total employment in the study companies grew by 21% from 2006 – 2007, but growth slowed to 13% from 2007 – 2008.  80% of the companies increased employment between Q1 2006 and Q1 2007, but only 70% of companies grew between Q1 2007 and Q1 2008.  Median salary remained flat at $75,000. 

Overall, TriNet sees moderating but continued employment growth over the past two years.

Increasing Health Care Costs

Small high-wage companies are choosing to pay significant shares of employee health insurance costs to attract and retain productive employees.  Over the 2-year period, companies in the study population increased their average annual health care investment per employee by more than 30%, to about $6600 per employee.

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TriNet recognizes that the employment practices and challenges of high-wage technology, financial services and professional services companies are different from those of the general US business population. Your Human Capital Consultant would be glad to set up a time to share more of our findings about how these companies are making the most of their investment in people

In case you just visit this blog but not TriNet’s main corporate site, I wanted to point your attention to the fact that we’ve just launched a pretty major overhaul of TriNet.com.

Of particular interest to new and curious onlookers in the HR outsourcing industry may be our series of short flash videos.  We think they go a long way towards making the point that outsourcing human resources isn’t difficult, and it isn’t complicated. It’s actually really, really easy.  One of the most common things we hear from customers is that they outsourced their HR because of “simplicity.” That’s not to say that there are complicated aspects to human resources—it’s just that our customers don’t have to worry about them.  We do.

Check out the videos here.

We’ve also added some additional content that you may enjoy. For example, we have a series of very short podcasts, hosted by TriNet’s Human Capital Consultants, covering a variety of human capital issues and trends that pertain to business owners. We’ll be adding many more, and you can also look for the series on iTunes.

Check out the podcasts here.

Since I’m the marketing guy, it’s also worth noting that we’ve renamed our service lines. TriNet is probably best known for our ability to serve small business with a Professional Employer Organization (or PEO) model, and we’re now calling that service line TriNet Focus.  That’s because we believe that smaller companies use TriNet because they want to outsource their HR and retain a laser-like focus on their core business.

We’ve also introduced a new service line for larger companies, generally 150 employees and over.  That service line is called TriNet Vision. At a larger stage of a company’s development, an in-house HR executive or CEO will want to realize the full vision of their company’s HR potential by regaining the ability to be strategic, while outsourcing the payroll and benefits administration to a single platform and a single provider.  (The previously mentioned flash demos explain more about these offerings.)

We hope you enjoy the new site and the new content that it has to offer. Do let us know what you think.

In a previous post I discussed the results of a study that TriNet undertook in regards to Human Capital Management practices. The goal was to build some actual data sets around both HCM practices and outcomes in small high performing companies nationwide, including what worked and didn’t work to maximize their corporate performance. There were 700 companies in the study population with an average wage of $102,000, and an average workforce size of 18.1 employees.

I’ve already shared the results we found in regards to Talent Acquisition practices in these companies, but now I’d like to focus on what we discovered in terms of Performance Management practices.

The short list for performance management success calls for keeping focused on just three things:
1. Set and align goals from top to bottom
2. Link performance reviews to compensation
3. Touch base on goals throughout the year

We found that very few companies in the small and medium-sized market set concrete goals for their employees, and those that did failed to specifically link compensation to the completion of those goals throughout the year. Rather, promotions and salary increases—or lack thereof—became a matter of the manager’s “gut” instinct, and employees had no clear path to understand how they might grow and advance in the organization since there were no standardized processes for linking performance and compensation.

Even for the companies that did set goals, we noted a lack of willingness to adapt to changing conditions. New business issues may have arisen throughout the year, but there wasn’t sufficient discussion in the company itself that lead to revising the originally defined goals.

None of this is surprising. It is not uncommon for early-stage management teams to believe that sound human capital practices are a luxury—great in principle, but simply not practical given the pressures of the moment. But the hard fact is that every company makes the most critical long-term decisions about people, culture and structure early in its history, and concrete practices in human capital management are ones that can make a difference in a company’s success or failure as it continues to grow.

After all, end-of-year performance reviews shouldn’t be a mystery. Rather, they should be prepared for throughout the year so there are no surprises. What’s not measured is what’s not being managed. 

Here’s an article that Greg Morton, TriNet’s VP of Marketing, just wrote for the PEO Insider.

Branding a PEO isn’t a matter of harnessing a million dollar advertising budget and blasting commercials on American Idol.  Branding is a matter of corporate reputation, in which every positive action that the company makes establishes trust, credibility, and support among its customers. Those customers talk to other customers, and those customers talk to other customers, and—all of a sudden—word-of-mouth has created your company’s brand.

Conversely, if your corporate reputation gains momentum while being based on bad product and poor customer service…well, you also get a brand. It’s just not the one you want.

So how do you begin to spread your corporate reputation?  Typical marketing activities certainly play a role, as does the overall strength and quality of the HR services that you deliver. But you also have another indispensable asset: your own employees. Building a corporate reputation—and therefore a powerful brand identification in the marketplace—begins right at home.

Spread the Message
You might take it for granted that each and every employee at your company understands the PEO value proposition. The sales person, the benefits specialist, the workers compensation maven, and the front desk person all play an important role in the company’s operations and understand the value of its services. Or do they? If you really ask each of them to give the company’s “elevator pitch,” how alike do their responses sound?  And if their responses are substantially different from one another, does that mean that their messages to a prospect or a customer may be different as well?

And even if they do deliver the right message, it’s also no small matter that they understand the company’s larger picture. Can they discuss your company’s biggest competitors intelligently? Do they understand the strengths and weaknesses that differentiate your company in the industry?  Do they understand your vision for the company’s future?

Having everyone aligned in terms of your company’s message isn’t a matter of subjecting your staff to “Clockwork Orange”-style brainwashing, but it is crucially important for building the framework of a solid brand.  Your employees interact with customers, and talk to their family about their company, and spread the word among their personal and professional networks.  And let’s face it—as a PEO organization grows, its internal complexity grows as well.  Such complexity can lead to relative isolation among departments, further confusing issues such as the company’s value proposition, its competitive difference, and its marketplace perception.

Each and every one of your employees is as much a “brand evangelist” as your press releases or your corporate web site. What happens if they end up singing from different hymn books?

Feed and Nurture Your Intranet
One of the ways you can ensure that your employees are in sync is to maintain a robust, frequently published, and widely used Intranet.  It’s great to …

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We recently announced extensive new product offerings that give our customers a critical business advantage as they compete for in-demand new talent as well as successfully manage and support their existing employees.

In high-end industries such as technology and financial services, small business executives often seek ways to gain access to affordable enterprise-level tools and resources, because doing so can help position themselves as an attractive career destination and gain the competitive edge needed to catch the eye of prospective job candidates. The flexibility and scalability of TriNet’s suite of web-based human capital management services — resources previously only available to big companies with big budgets — equip smaller company executives with additional “large company” resources and enable them to fully maximize their most important competitive asset: their people.

As a leader in the high-growth human resource outsourcing industry since 1988, TriNet has provided payroll, benefits, and HR services through its secure online portal since 1995. In recognition of our rapid customer base growth and in anticipation of expanding our business offerings to bring aboard larger scale organizations, we have added even more efficiencies to our existing platform in the form of new strategic business intelligence and reporting tools, compensation planning and analysis, and innovative learning and developmental opportunities via an online university.

New additions to TriNet’s extensive human capital management product offerings now include:

Strategic Business Intelligence Tools
Through TriNet’s online portal, HR Passport™, customers can now utilize a comprehensive suite of reports, analytics, and dashboards to assist with their strategic organizational planning. The Accounting Dashboard offers a detailed view of company payroll by month or quarter, and can be segmented by company, department, or down to the individual employee level. The Human Capital Management Dashboard allows customers to view and sort information related to headcount, employee tenure, average salary, and hires/terminations. The Reports Builder tool gives senior management the ability to customize, adjust, and modify high-impact reports such as census data, cost center data, and leave accruals.

Compensation Planner
TriNet’s new Compensation Planner tool provides customers with the critical ability to benchmark their compensation and benefits packages against other companies within targeted industries and/or locations. This crucial information enables small business owners to develop, refine, adjust and fully leverage their compensation strategies in order to compete more effectively with larger or more well-known companies in today’s exceedingly tight job market.

Delivered via HR Passport, the tool provides accurate, reliable compensation detail based on specific metrics such as job title, region, and experience level, along with an immediate and precise snapshot of the job market, and crucial insights for making the right hiring and promotion decisions.

TriNet University
With the launch of TriNet University™, customers gain access to a wide-range of training and development programs, making it easy and highly cost effective to give employee access to the critical learning and developmental tools they often expect from employers. Course …

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As the equity markets gyrate, and financial services, manufacturing and housing industries contract, high-growth companies may confront new challenges in 2008.  Because the economic growth picture has blurred, now is the time to take a fresh look at the human capital practices and policies that drive business outcomes. 

Management can apply human capital practices to adapt to changing business conditions by thinking through four dimensions of these practices. The four dimensions are talent acquisition, performance management, compensation practices, and employment risk management.  I will cover the first two in this entry and the last two in a future entry:

Talent Acquisition: Financial services companies, builders and suppliers are already cutting employees. Layoffs of more than 50 employees increased 11 % in 2007 over 2006, and the trend is upward.  Management teams often turn to employee reductions as a fast way to reduce costs as demand slows.

But layoffs can be the wrong answer for small, high-growth companies. Because these companies tend to operate with lean overhead, layoffs can cripple sales growth or product development.  If a downturn is affecting competitors with higher cost positions, then a recession may actually present opportunities to expand into new markets or win business from competitors by taking the calculated risk of hiring new sales, development or production resources.

Solid talent management linked to the business strategy is vitally important in a downturn.  Management teams should be talking now about two talent-related questions:
• As the economy slows, which initiatives should the company scale back – and which should be accelerated? For example, offshoring, automation or productivity improvement initiatives may need to be accelerated – potentially requiring reallocation of talent into these initiatives. 
• Does the company have the right talent, in the right places, to adapt effectively to changed business conditions?  A talent plan reflecting changed management priorities may include reassignment, reductions in areas of lower priority, and targeted new hiring to boost high-priority capabilities.

Answers to both questions depend on sound analysis of how the changing economic environment is likely to affect the business – not simply a near-term cost-reduction target. Layoffs are a useful management tool when used as part of a broader strategy of talent acquisition, focused on the long-term value creation strategy of the company.

Performance Management: When companies are growing rapidly, management teams often discount the importance of disciplined performance management practices, including goal-setting, performance assessment and pay-for-performance practices. During a downturn, sound performance management can help keep the company focused on strategic priorities, fix performance issues, and target incentive comp on achieving business results.

As economic conditions evolve, two performance management questions can guide effective performance management practices:
• Has the company established measurable performance goals for every employee, and linked these goals to the core elements of the company strategy?  Management teams facing economic downturn need to be certain that every employee understands what has to be …

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So, I hear that this year’s U.S. health expenditures will total 2.2 trillion dollars. Um, yeah, trillion.As in nearly 20% of our own GDP. As in over $7,000 for every U.S. citizen. I remember reading somewhere that the U.S. spends more on Mother’s Day cards and gifts than the entire GDP of Chad--which came in at $6.5 billion in 2006--and probably more than a few other nations. In fact, 63 nations come in behind Chad, fully a third of all the countries ranked by the World Bank and the IMF. So, by comparison to that venerable institution of Mother’s Day, how does health care rank? Sad but true, Mom and apple pie do not hold a candle to health care. If our health expenditures were a country in their own right, they would tie with France for the sixth-largest GDP in the world. I don’t know about you, but somehow I don’t feel like I am getting that great a bang for that huge a buck.

Not to get too predictable, but let’s trot out a couple of stats. Among developed nations, the United States has the second-worst newborn mortality rate, bested (worsted?) only by that powerhouse Latvia, and in the good company of Poland, Hungary, Malta, and Slovakia. I don’t know about you, but I am just brimming with pride. On the other end of that scale, although Americans are living longer, we are not doing as well as 41 other nations. Something is not quite right when the richest, most powerful nation on earth cannot get a better ROI for its health care dollar.

There is no question that there is phenomenal care and technology available in this country. But something is mucked up in the delivery. According to a California 2004 study, 51% of each dollar goes to physician and hospital services, with 10% going to prescriptions, and a surprisingly small 7% to administration. So, why aren’t we healthier? And why do we have so many uninsured?

I don’t have the answers to those questions, but I do know that our experience here at TriNet demonstrates why it is better to have more people in the insurance pool. Our business model requires health care coverage, and there is no question that this sort of “universality” produces more stable rates, less benefit erosion, and far greater choices.

Is the healthcare crisis beginning to ebb?  Not according to business executives at fast-growth companies who responded to a recent PricewaterhouseCoopers survey.

According to the most recent Private Company Services’ Trendsetter Barometer, most fast-growth private businesses (57%) claim to have suffered an impact from increased healthcare costs over the past 12 months, and/or expect to suffer wage/hiring impacts over the next year. Specifically, higher costs contributed to slower profit-growth (43%), while 38% foresee additional wage or hiring impacts in the next year. Anticipated hardships include lower wage increases for current employees (34%), slower hiring (10%), and/or hiring of more part-time versus full time workers (10%).

The full story can be found on the PWC web site.

As customers continue to request services that offer more value than simply HR administrative relief, we’re spending more time at TriNet these days evaluating--and stepping up our capabilities to deliver --strategic human capital management (HCM).

To help us understand more of what actually matters to operating managers, we undertook a study of HCM practices in small, high-performing companies in key growth sectors such as technology, financial services, and professional services. The goal was to build some actual data sets around both HCM practices and outcomes in small high performing companies nationwide, including what worked and didn’t work to maximize their corporate performance. There were 700 companies in the study population with an average wage of $102,000, and an average workforce size of 18.1 employees.

The results? We found that several relatively easy-to-implement human capital best practices are often not being followed—and they’re precisely the ones that can make a significant impact on a company’s performance, even at an early stage of growth and development. These practices fall under the categories of Risk Management, Talent Acquisition, Performance Management, and Compensation and Benefits.

It goes without saying that each of these areas merits its own discussion. But for now, let’s look closely at Talent Acquisition.

It should come as no surprise that hiring practices can create or destroy value. A single bad hire can cost between $60-120,000, and 10-15% of the employee base (of the companies in our study) turned due to avoidable hiring errors. That’s two employees a year in a 20 employee company. Not exactly the kind of track record you want if you’re a nimble firm intent on developing a product and getting to market in record time.

On the flip side, a great hire is worth 3-7 times a mediocre one in terms of efficiency, productivity, and ROI brought back to the company.

But when we looked at our research data, we realized that key executives often didn’t change their tactics even when the bad numbers started rolling in. Rather than implement a consistent hiring process based on proven best practices, they appeared to be chalking up their problems to current market conditions.

Conversely, the companies with successful hiring practices did, in fact, have both a hiring strategy and a process in place. They spent more time defining the job description in advance, considered a broader range of recruitment options to source candidates, and gave their hiring managers more training than average.

The bottom line? Process matters. It can make a substantial impact upon your hiring costs, and have an even bigger impact by increasing the overall quality of people coming into the organization. Here, then, are the three effective hiring strategies small and medium-sized businesses can implement right now:

1. Take the time to define a position’s requirements carefully before recruiting
2. Use a broad based sourcing strategy to identify candidates across multiple sources
3. …

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