Category Archives: performance management

Pay for Performance is Given a Poor Grade

Money on hand.

Money on hand.

Employers have long embraced the notion of paying for performance. But are these programs really making a difference? Are they really leading to better employee performance?

If we’re to believe the latest survey of 150 companies coming out of Willis Towers Watson, the impact these efforts are having on organizations leaves something to be desired.

According to the Arlington, Va.-based consultancy, the vast majority of North American employers say their pay-for-performance programs are falling short when it comes to driving individual performance.

Moreover, the survey finds that only one in five companies (20 percent) find merit pay to be effective at driving higher levels of individual performance at their organizations. Further, just under one-third (32 percent) report their merit-pay programs are effective at differentiating pay based on individual performance.

Nor are employers the only ones giving these programs low marks. Only about half of employees say these programs are effective at boosting individual performance levels; and even fewer (47 percent) believe annual incentives effectively differentiate pay based on how well employees perform.

Why the low marks?

Part of the reason is employers are either trapped in a business-as-usual approach or suffering from a me-too mentality when it comes to their programs, according to Laura Sejen, global practice leader for rewards at Willis Towers Watson.

Sejen elaborates …

“Pay-for-performance programs, when designed and implemented effectively, are great tools to drive performance, and recognize and reward employees. However, conventional thinking on pay for performance is no longer appropriate. Companies need to define what performance means for their organization[s] and how managers can ensure they are driving the right performance, and re-evaluate the objectives of their reward programs to ensure they are aligned with that definition.”

Nearly two-thirds (64 percent) of those surveyed say managers at their organization consider the knowledge and skills required in an employee’s current role when making merit-increase decisions, according to the study. That compares to fewer than half (46 percent) who say their programs are designed to take these performance indicators into consideration.

The Willis Towers Watson findings probably shouldn’t come as a huge surprise to those in HR, since they echo the findings of other studies we’ve reported on in the past.

Roughly a year ago, for instance, we reported on research by Organizational Capital Partners and the Investor Responsibility Research Center Institute that found 80 percent of S&P 1500 companies are not measuring the right metrics, over the right period of time, for performance-based executive compensation.

So what’s the key takeaway here? Well, if we’re to believe the research, it’s the fact that employers clearly have a lot more work to do when it comes to pay for performance—and no one knows this better than the companies themselves.

But, of course, knowing and doing something about it are two entirely different things.

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The Ramifications of Stacked Rankings

It’s fair to say that employee-ranking systems are controversial and pretty unpopular. But illegal?

A former Yahoo! Inc. employee contends the Sunnyvale, Calif.-based technology company’s quarterly performance reviews violate state and federal laws, and claims as much in a lawsuit filed Monday in San Jose, Calif.

The reviews, which rate every Yahoo! employee on a scale of 1 to 5, have been one of Marissa Mayer’s “signature policies” since taking over as CEO in 2012, according to the New York Times.

Earlier this week, the Times summed up the suit filed by Gregory Anderson, in which he challenges Yahoo!’s performance review system as “discriminatory and a violation of federal and California laws governing mass layoffs,” according to the paper.

Anderson, an editor who supervised a handful of Yahoo! sites before his November 2014 firing, charges that the company’s senior managers “routinely manipulated the rating system to fire hundreds of people without just cause to achieve the company’s financial goals,” notes the Times.

Such cuts, Anderson claims, amounted to “illegal mass layoffs.”

As the paper points out, California law mandates that employers making layoffs that involve more than 50 employees, and take place within 30 days at a single location, must provide workers 60 days advance notice. On the federal level, the Worker Adjustment and Retraining Notification Act obliges employers to offer advance notice for a layoff of 500 or more employees.

According to the Times, Yahoo! never provided such notices when it let go of 1,100 employees between late 2014 and early 2015, “ostensibly for performance reasons.” The company is now faced with the prospect of paying each affected employee $500 a day in addition to back pay and benefits for each day of advance notice it failed to provide, the Times reports.

For its part, Yahoo! maintains that its rating system is sound. In a statement, the company says its performance review process “also allows for high performers to engage in increasingly larger opportunities at our company, as well as for low performers to be transitioned out.” In regard to Anderson’s legal complaint, the company says his specific allegations are groundless, and claims that Anderson unsuccessfully sought a $5 million settlement before filing the suit.

It could be a while before this case winds its way through the legal system. And we’ll certainly be following it here. (In fact, come back to HREOnline early next week for a more in-depth analysis of Anderson’s claims, including some expert insight into the nuances of the lawsuit and its chances of succeeding.)

In the meantime, the stacked rankings that have been a hallmark of Mayer’s tenure at Yahoo! will likely remain a polarizing concept. Although the stacked ranking system has never had a shortage of detractors, a claim that such rankings are actually illegal seems unique. It will be interesting to see how this one plays out.

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Change Brings Unclear Expectations

When it comes to change in the workplace, employees aren’t as worried about workload as one might think, according to a new  poll from ComPsych Corp.

It finds 31 percent of more than 2,000 surveyed employees are most troubled by unclear expectations from supervisors, while 20 percent are most worried about people issues around change.

“Change has become a constant for many workplaces, whether in the U.S. or globally,” said Dr. Richard A. Chaifetz, Founder, Chairman and CEO of ComPsych. ”Employees are telling us that much of the disequilibrium around change is coming from managers. These challenges have resulted in our training topics of ‘resiliency’ and ‘coping with change’ being by far the most popular,” he added.

When you experience change at work, what is most stressful for you?

31 percent said “unclear expectations from supervisors”

20 percent said “confusion / conflict between coworkers / departments”

18 percent said “belief that workload will increase or become more difficult”

15 percent said “uncertainty about future / questions about stability of company”

13 percent said “new processes / operating rules / skills needed”

3 percent said “other”

It’s interesting to note that employees cite their managers as the primary source of disequilibrium, which makes me think there is an opportunity for HR here to better train managers to be clear with their expectations of their workers.

As for the 20 percent who are most concerned about the
“people issues around change,” it seems that communication efforts could be well-utilized to allay such workers’ concerns about their roles in a changing workplace landscape.

And, while wonky words such as disequilibrium and resiliency may not have been in the workplace lexicon for very long, as the pace of business continues to accelerate, it seems certain that we will be seeing much more of them in the future. I suggest you start building up your resiliency to them now.

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The Perils of Anonymous Feedback

A number of firms have reached out to us recently about their internal feedback tools, which they say can increase engagement and improve performance by letting employees send their colleagues kudos or offer constructive criticism. Now that “continuous performance management” is officially a thing, it would seem that the time is ripe for HR leaders to push for rolling out these tools within their organizations.

They might want to proceed cautiously, however, after reading Quantum Workplace’s Natalie Hackbarth, who reminds her readers that the New York Times’ less-than-flattering expose on Amazon’s workplace culture last August included details of how employees used the company’s Anytime Feedback Tool to slam and criticize each other, leading to what sources described as a “bruising workplace” and “purposeful Darwinism.”

Now if “purposeful Darwinism” is the sort of workplace culture that you and your CEO are aiming for, then have at it. For everyone else, Hackbarth included some advice and perspective from industry thought leaders on the lessons learned from Amazon’s experience.

Here’s Bersin by Deloitte’s Josh Bersin on the matter:

“Our research shows that companies that value open feedback and communication outperform their peers. This does not mean, however, that an anonymous feedback tool should let employees do away with respect, honesty, confidentiality, and fairness. We urge companies that use these tools to set guidelines in place, and communicate that nobody should say anything online that they would not say in person.”

And here’s Paul Hebert, an engagement and recognition consultant:

No one ever erred by underestimating human behavior. I’m sure that when Amazon did this some guru said it was the future of employee reviews—transparent and real time. This is why we shouldn’t blindly follow outliers and try to emulate who we ‘think’ is doing it right. Yes, even Amazon can make big mistakes. Transparency without accountability is a cesspool.”

And finally, here’s John Whitaker, of HR Hardball, whose last line I find especially memorable:

“Many business leaders will see this as a justification for not employing feedback tools that offer a wonderful way to build engagement. This story only justifies the paranoia many already feel about an open forum for employees to vocalize. Don’t bury the lead, though—the real story is the reflection on Amazon’s culture. When you create a culture of fear, don’t hand the inmates a shiv.”

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Leadership Development Needs Sponsorship at Top

There has certainly been no dearth of studies and stories, both here at HRE and beyond, on the challenges and failings of leadership-82821233 -- business leaderdevelopment programs. Here, for instance, is our last look at this problem that Staff Writer Mark McGraw wrote about on Nov. 30.

In that piece, sources told McGraw a major stumbling block keeping most leadership-development initiatives from succeeding is the tendency for line leaders to hand the LD reins over to human resources without taking responsibility for the huge role they, themselves, play in steering those initiatives.

As Debbie Lovich, head of the Boston Consulting Group’s  Leadership and Talent Enablement Center in Boston, says in that story:

“As soon as [those reins are handed over, talent issues are] disconnected from the business. You see it happen when line leaders are developing plans for their businesses, and ownership for anything to do with talent goes to HR. … [T]he best-in-class companies don’t just throw it over the fence to HR.”

Now, the latest global study on this issue by Los Angeles-based Korn Ferry suggests the inherent problems with leadership development have less to do with who’s taking responsibility and more to do with who’s sponsoring the effort.

The study, Real World Leadership, which polled more than 7,500 executives from 107 countries, found a “lack of executive sponsorship” to be the chief barrier. Survey respondents not only indicated there was a general lack of active sponsorship, buy-in and support from the top, but they expressed disappointment in the programs altogether, with 55 percent of respondents ranking their return on such efforts as only “fair” to “very poor.”

“Executives have identified the crux of the problem,” says Noah Rabinowitz, a Korn Ferry senior partner and global head of leadership development. “The next step is to identify practical steps to create a solution.

“Given the central role leadership plays in the success of any organization,” he adds, “the view of leadership development has to shift from a ‘nice-to-have’ to a ‘must-have’ business process, as integral as the supply chain, marketing or IT.”

Dési Kimmins, Korn Ferry’s principal consultant, had some very specific and practical advice for HR leaders seeking executive buy-in for leadership development:

“The first step … is to start with strategic business needs. Executives must examine what challenges the organization currently faces, where the business is going and the leadership profile that will help the company get where it needs to go. This process starts with the C-suite, and must sustain that level of endorsement and sponsorship to be successful. The most senior leaders need to engage in the development strategy and insist the impact is regularly measured and reported.

“People assume that development happens naturally, but that’s not necessarily the case. A CEO, for example, not only has to run a business but also [has to] deal with a large number of external stakeholders, such as shareholders, the board of directors, business partners and even the media …  . That’s why stepping into the CEO role is sometimes described as a career change, not just another step on the career ladder. Development and feedback even at this level are essential when so much is at stake.”

Even more specifically, the report lists tips for increasing the effectiveness of leadership development and creating a robust and sustainable leadership pipeline:

  • Embed leadership development in the culture and strategy, ensuring it is consistently sponsored by top executives.

  • Embrace the idea that leadership development is a continuous process and not just made up of one-time classes or one-off events.

  • Make leadership development more relevant and engaging by focusing programs on the organization’s current strategies and business issues.

  • Roll out relevant and appropriate development for all levels in the organization, including senior-most executives and the C-suite.

  • Don’t cut back on investing in leadership development when times get tough. That is the time to double down on efforts.

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KPMG to Ditch ‘Abused’ Engagement Surveys

We can now add KPMG to the growing list of employers that are choosing to retire employee-engagement surveys.

According to this story posted this morning on Australian Financial Review’s website, Robert  Bolton, the lead partner of KPMG’s global HR transformation center of excellence, said the professional services firm — which employs 162,000 in cities all over the globe — will strive to swap employee-engagement surveys for a more robust diagnostic that focuses on “something truly worth measuring.”

“This term engagement is abused, it’s misunderstood, it’s not evidence based, and it’s a minefield,” Bolton said. “In reality, engagement is an ill-defined term. And measuring it once or twice a year with some static survey is not very scientific, no matter how much it’s dressed up to appear so.”

According to the story, KPMG’s UK office is being used as a “test bed” to roll out a new deal diagnostic tool which looks more specifically at the nature of the deal between employer and employee.

The intellectual property is unique to KPMG and has been tested on a number of clients along with a series of other HR offerings with evidence-based data analytics at their core.

“We are entering an era of evidence-based people management,” Bolton said.

All of which ultimately begs the question: What era is your people-management process from?

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Making a First (and Fast) Impression

In baseball, there are can’t-miss talents with potential that’s abundantly and immediately clear.

Take Mike Trout, for instance. At age 24, the Anaheim Angels centerfielder/four-time American League All-Star/freakish baseball prodigy’s trophy case already includes the 2012 American League Rookie of the Year, 2014 AL Most Valuable Player and two All-Star Game MVP awards. And, as one of a handful of names on the short list for this year’s AL MVP, he may soon be taking home more hardware.

Then there are late bloomers like the Toronto Blue Jays’ Jose Bautista. The right fielder and occasional third baseman showed flashes in his first five years at the big-league level, but not enough to keep him from being jettisoned by four teams between 2004 and 2008. Bautista finally broke out in 2010—his third season with the Jays and first in a full-time role with the club—when he earned his first of six All-Star Game selections. Since then, he’s led baseball in home runs twice, picked up two Hank Aaron awards and bashed his way to three Silver Slugger awards as well.

The point of all this is that some don’t start as strong as others, and being patient with a prospect just might pay off in a big way sometime down the road.

Those in the corporate world, however, apparently don’t have that kind of time.

Consider a recent online survey, in which 319 executives at companies with revenues of at least $1 billion shared their thoughts on entry-level employees. In the poll, 78 percent of respondents said they think employers take less than three months to make a judgment as to whether an entry-level employee is likely to succeed with the organization. Twenty-seven percent said they form an opinion within the first two weeks.

Now, this particular Harris poll was commissioned by Fullbridge Inc., an education technology company with a learning platform that offers “everything students and young professionals need to rise to the next level,” according to Fullbridge.

It’s natural—and not unfair, I think—to be a bit skeptical of this sort of poll, given the company that commissioned it just happens to offer the type of technology designed to make sure these fresh-faced young employees thrive in your organization.

But that’s not really here or there, at least as far as my purposes here are concerned. Misgivings about survey methodology aside, the aforementioned findings—especially the percentage of companies saying new employees essentially have 10 business days to prove themselves—still seem to beg the question: How long should it take to get a good read on a young, new employee’s likelihood for success? For that matter, what sort of variables should factor into making that judgment?

I put those questions to Dave Ulrich, Rensis Likert Professor of Business at the University of Michigan, partner at The RBL Group and frequent contributor to HRE.

Not surprisingly, there’s no specific timeframe for predicting—at least not with any real accuracy—how an entry-level worker’s going to fare over the long haul, says Ulrich. And he cautions against rushing to judge new employees in their first few weeks on the job.

“First impressions limit future impressions,” says Ulrich. “This is sad, because many first impressions are based on visible look and feel, and real impact often comes from insight and ability to manage relationships.”

Still, 90 days or so should be long enough to gain a sense of how an employee’s going to perform, he says, adding that “it’s important to give new employees autonomous responsibility for a task or project to determine their technical skills and cultural fit.”

It’s even more critical, he says, “to know if they have ‘learning agility’ and an ability to adapt and change [when] given new information.”

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Let’s Get the Career Conversation Started

Even the best managers don’t always look forward to talking with employees about how they can be better at their jobs.

But your people are craving these conversations, which, unfortunately, don’t seem to be happening at many organizations.

Take Mercer’s recent Employee Views on Moving Up vs. Moving On survey, for example. The New York-based consultancy polled 1,520 employed workers in the United States and Canada, finding more than half (51 percent) of these respondents saying they receive “no input” or “input only once in a while” from superiors on how to perform better in their roles. In addition, 78 percent of employees indicated they would stay with their current employer if they had a better sense of their career trajectory with the company.

Leave workers in the dark about how to improve and advance at your own risk, warns Ilene Siscovick, partner and North America talent and career leader at Mercer.

“Clearly, lack of communication from managers along with a lack of transparency about career progression within the organization is impacting employee loyalty and hampering retention efforts,” said Siscovick, in a statement.

The aforementioned percentages are significant, but maybe not all that surprising when you consider some other recent research.

A Right Management report from July, for instance, finds that two-thirds of the individual performance drivers employees consider most important are tied to career conversations.

Earlier this year, Right polled 616 North American workers, 68 percent of whom said their managers aren’t actively engaged in the career development of their employees.

These Right Management figures help form the foundation of a feature that’s set to appear in our September issue. “Creating Coaches” focuses on a handful of organizations that excel at helping managers become coaches for their employees, and at making employee development a critical component of supervisors’ jobs—and a key performance measure for managers.

For that story, I spoke with Bruce Tulgan, founder of New Haven, Conn.-based management training and consulting company Rainmaker Thinking Inc.

Since 1993, Rainmaker has conducted research based on interviews with more than 200,000 managers, says Tulgan, who estimates that nine out of 10 “fail to regularly and systematically engage” in a regular, structured, one-on-one dialogue with their direct reports.

Some managers, he says, may be “naturally gifted in terms of being the kind of supportive, developmental leader that helps his or her employees with building themselves and their careers.” But becoming an effective coach for employees “isn’t about being a natural.”

Rather, “you really need to have regular, structured, substantive dialogue with your people that includes talking about how they’re doing their work and how they’re continuing to learn not only technical skills, but broader, transferable soft skills as well,” he says. “This is all part of a coaching style of management, and it has huge implications for employees’ career growth.”

HR, of course, has a responsibility to help ensure that managers grasp the importance of nurturing their employees’ development, adds Tulgan, who serves as an executive-level coach and advisor, and has written multiple books on effective management.

“I try to make a very strong business case to managers for doing this. It’s what managing is. The career development part is just the outcome of doing the hard work of managing people well in a substantive way.”

He also urges spelling out the concrete actions you expect managers to carry out in terms of coaching their reports.

Managers, for example, must understand how often they should be meeting with their people, how long those conversations should be, and what they should be talking about, says Tulgan.

Because, much like the employees they’re charged with leading, “you can’t hold managers accountable if you don’t tell them exactly what’s expected of them.”

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SHRM ’15: Global Shift, High Performers and More

Blistering temperatures hovering around 115 degrees apparently didn’t keep folks away from this week’s SHRM 2015 Annual Conference and Exposition in Las Vegas. Under the theme “It’s Time to Thrive,” the event attracted a record 15,500 attendees from around the globe. (Vegas seems to be a draw, no matter what the time of the year.)

SHRM photoCrowds and the heat index aside, I did notice at least one refreshing change at this year’s event: a lot more practitioner speakers.

Though I didn’t do a thorough analysis, a quick scan of the program book suggested there were definitely more HR leaders on the program than in prior years—a development I would certainly put under the category of a good thing.

Case in point: a Monday morning session by Steve Fussell, executive vice president of human resources for Abbott Laboratories in Abbott Park, Ill.  Titled “Managing a Global Workforce During Times of Change: M&A, Organic Growth and Spin Offs,” Fussell’s talk recounted Abbott’s dramatic and impressive transformation in the aftermath of spinning off its research-based pharma arm, AbbVie, in 2012. (Fussell, BTW, was named to HRE’s Honor Roll in 2010.)

As Fussell explained to the packed room, the spin off left Abbott with a much more global business and workforce. (Today, he said, less than one-third of the firms’ revenue now comes from the United States and 70 percent of employees are outside of the country.)

On top of that, he added, Abbott became, almost overnight, a much more customer-facing business.

These changes, Fussell said, will inevitably lead a very different leadership mix in the coming years.

“Three to five years out,” he said, “I can tell you that we will probably double the number of people in senior leadership roles … who do not carry a U.S. passport.”

As a part of the transformation, HR focused on three specific buckets: core, critical and unique.

“Core,” he explained, is having people who feel and behave like owners and are able to make hard decisions. “We don’t want GMs saying this doesn’t matter in this market,” he said. To that end, he continued, Abbott built business advisory committees in every one of its markets around the globe and requires leaders in those markets to talk about those areas they consider to be core.

“Critical,” he said, “are the [issues] we have to get right together to build the market presence that allows us to [successfully] compete.”

And then there are those issues that are “unique”:

Don’t call me up and ask me about the summer bonus somewhere … . If I’m getting those calls … I need to question the people we have in those jobs.

Fussell also shared what he looks for in leaders. First and foremost, he said, leaders need to be able to analyze a situation. “Do they have an analytical ability to notice the things that are happening in the markets in which they serve?” he asked. “Can they see things our competitors can’t see?”

Second, he continued, are they leaders who can diagnose the things that ultimately will determine outcomes?

Third, are they able to describe a direct course of action? “Do they have a sustainable record of taking what they’ve seen and diagnosed, and then put together an outcomes-based approach … ?”

And fourth, can they execute? With a tone of sarcasm, he said “I’m sure none of you have seen a business that noticeably missed its plan for the year, perhaps by a mile, and then, after looking at all your performance ratings, found that 36 percent [of the employees]exceeded performance.”

Performance—and rewarding those employees who excel at it—was certainly at the heart of a presentation delivered Tuesday afternoon by Michelle DiTondo, senior vice president of human resources for MGM Resorts in Las Vegas.

In the session title “MGM Resorts: What is it Worth to You to Keep Your Top Performers?” DiTondo shared the talent-retention challenges facing the gaming giant and detailed an approach currently being piloted to help address them.

Envision having 50,000 of your 62,000 workers all located on a single street—and then having the vast majority of biggest competitors located on that same street as well. (In this case, the street is the “Las Vegas Strip.”)

That’s the reality facing MGM Resorts, DiTondo said.

To tackle this challenge, DiTondo said she put a unique twist on question business leaders at MGM Resorts were more than familiar with: What are your very best customers worth to you?  She asked them to think about what their very best-performing employees were worth to them?

“It’s an easy analogy for us,” she said. “As business leaders, we understand the value of treating our best customers [known as ‘whales’] differently from all of our other customers. We understand why an airline has a first-class lounge for customers who pay more …  .”

By making sure all of this is done in a very public way, she said, you’re able to drive “aspirational behavior.”

Every industry has “whales,” not just gaming,  she added.

At MGM Resorts, DiTondo said, the highest level of its loyalty program is called “NOIR.”

These “whales” represent less than 1 percent of the company’s total customers and are treated very differently, she explained. “They get exclusive awards such as being picked up in a private plane [or] staying in “The Mansion,” [exclusive quarters] just behind the MGM Grand. Why are they treated differently? Because while they represent just 1 percent of MGM Resorts’ database, they drive 600x more revenue compared to the average customer.”

Building off of this model, DiTondo, with her CEO’s blessing, began to rethink the way MGM Resorts’ approached its top talent. “If we have high-performing employee, do we apply the same sort of things to them that we give to our high-performing customers?” she asked. “Do we give them access to the chairman? Are they given access to senior leaders? Are they given exclusive benefits that are only for high performers? Do we have personal relationships with them? Do we know about their family, their interests, their personal milestones? Do we understand the impact on the business were they to leave? Do we treat them like VIPs? From my standpoint … the answer is no.”

In the pilot, DiTondo said, MGM Resorts partly copied an approach taken by Chipotle Mexican Grill to groom more restaurant managers internally. Under the initiative, she said, general managers at the chain were given a $10,000 bonus for each individual who was promoted into Chipotle’s management program.

To hold onto and incent its top talent, DiTondo said, MGM created, as a part of the pilot, a tiered bonus program for general managers and executive chefs who met certain benchmarks that included a “super incentive” of 1 percent of both the restaurant’s top and bottom lines.  (At one of the highest performing buffets, she said, these high-performing individuals could now receive a $30,000 bonus, compared to $3,000 under the prior arrangement.)

On top of that, she said, they also now have the potential of reaping a bonus of 10 percent of a person’s base pay if that individual is promoted to a GM and executive chef job. (To receive the bonus, the individual needs to put in a place a plan, as well as coach and mentor the candidate.)

*      *      *

In other news: SHRM continued its tradition of releasing its latest Employee Benefits Survey at the annual conference.

According to Evren Esen, director of SHRM’s survey programs, the big headline this year was employers’ continuing commitment to wellness. Of the 463 respondents, employers with wellness programs jumped between 2011 and 2015 by 10 percent, from 60 percent to 70 percent.

Esen suggested that employers were investing in wellness as a way to counter the financial strain resulting from healthcare.

In line with this increase, the study revealed significant increases over the past five years in the use of healthcare premium discounts for participating in wellness programs (from 11 percent to 20 percent) and healthcare premium discounts for those not using tobacco products (from 12 percent to 19 percent).

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Towers Watson and Willis Announce Merger

According to this press release sent out early this morning, Willis Group Holdings and Towers Watson just announced the signing of a definitive merger agreement under which the companies will combine in an all-stock merger of equals transaction.

According to the release, the implied equity value of the transaction is approximately $18 billion. The transaction has been unanimously approved by the Board of Directors of each company. The combined company will be named Willis Towers Watson.

John Haley, Chairman and Chief Executive Officer of Towers Watson, said, “This is a tremendous combination of two highly compatible companies with complementary strategic priorities, product and service offerings, and geographies that we expect to deliver significant value for both sets of shareholders.”

Haley says he also expects to “realize substantial efficiencies by bringing our two organizations together, and have a well-defined integration roadmap to capitalize on identified savings, ensure the strongest combination of talent and practices, and realize the full benefits of the merger for all of our stakeholders.”

There’s no word yet on how — or even if — the two organizations will combine their robust human-capital management practices, but we’ll keep you posted here  when we learn the answer to that one. (Calls to both sides for comment have yet to be returned.)

Mark Stelzner, founder and managing principal of Inflexion Advisors in San Francisco, shared his thoughts on the merger with HRE Daily earlier today.

Towers Watson and Willis, he said, complement each other in many ways, creating potential for stronger offerings for the newly combined organization and, by extension, its clientele.

“Like any merger of this size and complexity,” he said, “clarity of purpose, organizational restructuring, operational rationalization and cohesive external messaging are going to materially impact the success or failure of the newly combined entity.”

Stelzner’s advice to existing clients of both organizations: Take the time to weigh whether the emerging philosophy, strategy, services and product offerings are strategically aligned with their current and future needs.

Meanwhile, Liz DeVito, an associate director at Kennedy Consulting Research & Advisory in Keene, N.H., who specializes in HR consulting and covers the benefits, human capital, outsourcing and investments markets, says the merger’s timing may put TW in a precarious position from a talent perspective.

“TW is now vulnerable to client and talent poaching,” she says. “The deal has six months to close, which is a long time, and I’m sure the competition is drawing up campaigns to poach consulting clients from TW, especially in the areas of rewards, talent management and HR transformation.”

DeVito says she was at Mercer when Aon bought Hewitt and Towers Perrin & Watson Wyatt merged, “so I speak from experience. The competition will be able to exploit client anxiety over the next few months.”

She says the same goes for consulting talent as well.

“I’m sure Willis-TW leadership will come up with an attractive stock options program to retain key talent, but there will be some leakage,” she says.

What I have noticed in my research over the past six months is that the HR consultancies are poaching talent right and left. I’ve never seen it so active in my three years of covering this market.

They’re poaching from the Big Four human capital consulting practices and strategy firms, as well as each other, she says.

“They’re looking for consultants with very specific capabilities as they build out next generation service offerings in talent management,  HR technology advisory, HR analytics (particularly strategic workforce planning), HR transformation, organization design, and change management.  And these are all areas where TW has very strong capabilities and talent.

“I’m sure there were a lot of phone calls today from TW consultants to the competition,” DeVito says.

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