Announcing our new book: Who Survives? How Benefit Costs are Killing Your Company. Entry 2 – 2011


Who Survives? How Benefit Costs are Killing your CompanyWhich companies will survive the current economic climate?  Every day brings new headlines: city and state governments facing deficits and cutbacks; politicians fighting unions; companies cutting benefits. Must businesses and workers operate as adversaries, or can they succeed together? Our evidence tells us they can.

The past two years have taken their toll on employers and workers alike. Even as the economy improves, most employers—private business, non-profit, as well as local, state and federal government agencies—still face tight budgets or deficits that will require tough choices and cutbacks.  One significant trend that should concern all workers and employers is this one:  the percent of overall compensation that employees receive in the form of wages and bonuses (money they can spend today) continues to decline. [1]

Workers receive less compensation in the form or wages than they did 20 years ago.

In and of itself, the trend would not be problematic if a) the additional money allocated to benefits represented additional value and b) employees appreciated the additional value more than wages.

We believe and research supports that neither is true. Instead, the growing portion of compensation allocated to cover benefit costs (the greatest increase is in healthcare coverage) probably provides less value that it did ten years ago.

The only viable solution to escalating costs that add limited value is to restructure pay and benefits in ways that put workers and employers on the same team:  align incentives such that staying healthy, using healthcare wisely, showing up to work, and working effectively bring tangible rewards to everyone.  What it takes is a well-designed work contract that results in a win-win.

Regular readers of this blog know we have touched on almost every aspect of benefits design, from health plans to bonuses, and sick leave to workers’ compensation. We have also shared our research observations about how all policies regarding benefits and compensation affect each other to create a combined environment of incentives: some that work for and some that work against the company.

Last year, we decided we had enough pieces of the puzzle to summarize an alignment strategy that employers can use to survive and thrive as the economy recovers.  The result is our new book, Who Survives?  How Benefit Costs are Killing Your Company.  In it, we cover a structure for human capital investments which, if adopted, we guarantee will improve productivity, lower healthcare costs, decrease avoidable absence, and reduce turnover in a company’s top workers.  It is not a complex solution, but it does require sharing tangible rewards and responsibilities with workers.

The difference in this “business book” is our evidence.  We have tested these relationships empirically, and modeled the relative impact of different policies and plan designs on cost and business performance.  We have used advanced statistics to convince ourselves that what we see is not coincidence or situation-specific.  Don’t worry, we don’t overpower you with numbers or equations; we have translated our work into direct language and kept the text short and to-the-point.  Finally, we have our full set of recommendations about benefits in one place.

We hope business leaders will learn as much reading the book as we learned in our investigations and writing.

Below is an outline the book’s contents.  Of interest are a few items we have not covered before in this blog-space.  One is a new metric that measures daily added value per worker-day, called Net Diem, as a way of illustrating how elements of compensation and benefits do or do not contribute to the success of the individual or the organization.  Another is a summary of expected improvements in desirable outcomes (e.g., higher productivity or lower absence rates) that result from changes in benefits or bonuses.

The book is available (print and Kindle versions) from Amazon.


Preface: Why read this book? Because Benefit Costs Are Killing Your Business!

Introduction: How I got here

Part 1—What Is Killing Your Business? A Work Contract That Doesn’t Work

Chapter 1: What Is the Work Contract?

Part 2— Saving Your Company

Chapter 2: Aligning Incentives in an Effective Work Contract

Chapter 3: Currents: A Metaphor for Incentives

Chapter 4: The Alignment Matrix

Chapter 5: Aligned Incentives Improve Performance and Reduce Modifiable Costs

Part 3—A Step-By-Step Method to Fix the Work Contract

Chapter 6: Measuring Work Value

Chapter 7: Steps to Becoming Aligned

Chapter 8: Health Protection and Other Side-Effects of Alignment

Chapter 9: Misaligned Currents Haven’t Affected You Yet? Just Wait.

Chapter 10: One Last Thought.

[1] Bureau of Labor Statistics. Employer Costs for Employee Compensation Archived News Releases, 1990-2010, March tables. Sep 10, 2010;  (accessed Feb 8, 2011).


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