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Optimizing Rewards for Business Results �and Greater Employee Engagement

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This presentation provides insights into how the financial crisis has shifted the primary drivers of attraction, retention and engagement in the health care industry. It also explores a model for the employment relationship that takes into account not just big-ticket items like pay and benefits, but also relational rewards like career development and special assignments.
  • 1.Optimizing Rewards for Business Results and Greater Employee Engagement Lois Grubb, Vice President, Human Resources Elmhurst Memorial Hospital Eric Parmenter, Principal Towers Perrin August 4, 2009 2009 Towers Perrin

2. Presenters: Lois Grubb Lois Grubb is Vice President, Human Resources for a 400+ bedcommunity hospital with more than 500 physicians and 3,000employees. She reports to the CEO and manages a group of17 HR professionalsPrior to that, Lois was Senior Vice President, Human Resourcesfor a $1.2 billion wholly owned subsidiary of AmerisourceBergen,a Fortune 24 pharmaceutical supply chain management company.Previously, she held HR leadership roles at Gundersen LutheranMedical Center in La Crosse, WI; CNA Insurance; GD Searleand Co; and Mohr DevelopmentLois has an M.A. in psychology from Temple University, a B.A.in psychology from Immaculate College and is an award recipientfrom the Academy of Women Achievers, YWCA, City of New York.Other credentials include the Executive Education Program inFinance, Wharton School of the University of Pennsylvania, andExecutive Education in Strategy and Marketing, Tuck School ofBusiness, Dartmouth 2009 Towers Perrin2 3. Presenters: Eric Parmenter Eric Parmenter is a Principal in Towers Perrins Health and Welfarepractice. Located in the firms Chicago office, he has over 23 yearsexperience helping employers develop innovative total rewardstrategies that align with their business objectivesEric is a recognized national leader in health care benefit design anddelivery. He is a frequent moderator of panel discussions and speakerat seminars across the country. Eric is also an award-winning authorof articles on human resource and employee benefit topicsPrior to joining Towers Perrin, Eric was Midwest practice leader forcompensation and benefit consulting at Grant Thornton LLP. He alsoowned his own benefit consulting, outsourcing and administration firmEric holds a bachelor of arts degree in psychology from the Universityof Illinois, as well as multiple professional designations in underwriting,finance and human resources. Eric also holds an M.B.A. degree fromthe University of Chicagos Graduate School of Business 2009 Towers Perrin 3 4. Todays discussionSetting the Stage Managing Talent inChallenging Economic TimesAddressing ElmhurstMemorials Issues:Total Rewards Optimization Key Learnings 2009 Towers Perrin4 5. Signs that the global downturn is abating U.S. Consumer Confidence Index improved in March and April and rose to an eight-month high in MayAlthough unemployment reached 9.4% in the U.S. in May,the rate of job losses decreased relative to prior monthsDJIA and S&P 500 have advanced significantly since early MarchJanuary February losses were nearly offsetHousing sales were up 11% in June 2009 Towers Perrin5 6. havent eased corporate concerns and caution Most U.S. organizations in a recent Towers Perrin surveyproject 2009 revenue declines52% expect decreases of more than 5%33% anticipate a drop of 11% or moreA Q1 Business Roundtable survey of 100 CEOs revealed pessimism67% expect sales to decline in the next six months66% plan to shrink capital spending71% expect more job lossesHealth care providers are concerned about the economyand the implications of health reform both as an employerand as a provider Source: Towers Perrin Cost-Cutting Strategies in the Downturn, May 2009; Business Roundtables Q1 2009 CEO Economic Outlook Survey 2009 Towers Perrin 6 7. Rising costs in a sinking economy mean employers and employees take a double hitEmployees/Retirees FaceEmployers Face Shrinking income and purchasing power Unbudgeted cost increases due to Trade-offs between health care andincreased utilization of medical other necessities and disability plans increasing numbers of covered Job stressdependents due to widespread layoffs Unemploymentincreased COBRA exposure Capital lossespostponed retirementsDelayed retirementLower employee engagement Lower productivity New concerns about health reform 2009 Towers Perrin 7 8. As a result of the economic crisis, employers are accelerating reward changes and/or moving in new directions 53% are trying or considering benefit strategies they wouldnot have considered otherwise47% have closed their DB plans to new participantsAlthough less than 10% have suspended their 401(k) match,another 20% are considering it52% are increasing employees share of health care program costs62% are tightening prescription drug coverage38% of organizations are focusing more on cost reductionthan talent managementMost are holding the line on salaries by cutting merit budgets,freezing salaries or delaying planned merit increases (in that order) Source: Towers Perrin Compensation in Crisis Pulse Survey, January 2009; Towers Perrin Benefits in Crisis Pulse Survey, March 2009 2009 Towers Perrin 8 9. and reacting to changes in the economy North American employers tell us employees arePostponing retirement (68%)Requesting financial education or retirementplanning (40%)Using employee assistance programs (35%) In the U.S. specifically, employers tell usemployees areMoving to fixed-income investments (55%)Increasing loans and withdrawals fromretirement savings plans (50%) or reducingparticipation in these plans (44%)Source: Towers Perrin Benefits in Crisis Pulse Survey, March 2009 2009 Towers Perrin9 10. The outlook for health care and hospitals Health care and education have been hit less than other U.S.industries with fewer job losses some hospitals are performing well given the economy others hospitals are experiencing flat or decreasing revenuesFewer dollars are being spent on elective proceduresAccounts receivable are growing, with more defaults on outstanding billsPatients skip important screenings and tests due to insurance worriesCharitable care is increasingImpending health care reform legislation creates significantuncertainties for the future 2009 Towers Perrin10 11. Today, hospitals face unprecedented demands and new challenges Employer ChallengesSustainable growth and improved performanceOperating cost and risk pressuresInnovation and quality improvementEmployee engagement and patient satisfactionFlexible, on demand workforce to address talentshortages and gapsPublic relations and network contractingNew competition for labor Market Forces/Financial Pressures Demographic ForcesBallooning accounts receivables Aging workforceReduction in elective care and some needed care Increasingly diverse workforceIntense competition and shrinking reimbursement Changing patterns of retirementGovernance pressures and regulatory oversight Increased job mobilityMounting regulatory pressures and opportunities Talent shortagesTransforming technologies and outsourcing Anticipated dearth of leadershipCollective bargaining activitiesConsumerism payment strategiesTransparency and qualityAging infrastructure and need to replace facilities Employee NeedsFinancial securityInspiring leadershipChallenging workInvolvement and controlInformation and knowledgeWork/life balancePhysician experience and engagement 2009 Towers Perrin11 12. Labor and related costs accounted for 62% of the expense growth for hospitals (from 2001 to 2006)Labor is now the single largest operating cost item typically equal to more than 40% of revenueChange in number ofWages, salaries and employee benefits services provided41% 30% Costs of goods and services purchased 62%Prescription drugs4%Professional fees3%Intensity and other Professional liability insurance2%8%All other12% Source: AHA analysis of 2001-2006 expense growth rates by category 2009 Towers Perrin 12 13. The drivers of attraction, retention and engagement for employees in health care Top Attraction DriversTop Retention DriversTop Engagement Drivers Competitive base pay Satisfaction with the organizations Senior management sincerelybusiness decisions interested in employee well-being Competitive health care benefits Ability to balance my work/personal life Organizations reputation for social responsibility Vacation/paid time off Understand potential career track within Seek opportunities to develop neworganization knowledge/skills Flexible scheduleGood relationship with supervisorOrganization quickly resolves customer concerns Convenient work location Can impact customer satisfaction Organization rewards outstanding customer service Career advancement opportunities Fairly compensated compared to othersInput into decision making in mydoing similar work in my organizationdepartment Reasonable workloadOrganization quickly resolves customer Can impact quality ofconcerns work/product/service Caliber of coworkers Unit has skills needed to succeedImproved my skills and capabilities over the last year Reputation of the organization People in my unit work well together Unit has skills needed to succeed as a good employer as a team Competitive retirement benefitsSenior management acts to ensure Competitive career developmentorganizations long-term success Source: Towers Perrin 2007 2008 Global Workforce Study, U.S. Hospital Cut, October 2007 2009 Towers Perrin 13 14. Todays discussion Setting the Stage Attraction and Retention inChallenging Economic TimesAddressing Elmhurst Memorials Issues: Total Rewards OptimizationKey Learnings 2009 Towers Perrin 14 15. Elmhurst Memorial Healthcare (EMHC): Key issues Community hospital located in western suburbs of ChicagoThree components to our businessacute care not-for-profit hospitalElmhurst Clinichome health/hospiceCompete in a crowded marketplaceChallenge of building a new hospital 2009 Towers Perrin15 16. Begin with an integrated strategy frameworkBusiness ContextStrategicTalentWorkforceManagementEmployee Engagement PlanningMeasuring engagementUnderstanding drivers ofengagement Rewards and RecognitionUnderstanding linkage betweenEnsuring consequences forperformance and behaviorengagement and financial resultsUnderstanding what differentRecruitmentsegments valueSetting

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