"Our people are the fabric of our organizations. They are the differentiator. The way we select, develop, motivate, and retain them now will determine how we succeed. This is our time to make a profound difference."
So said Aon Consulting Worldwide CEO Kathryn Hayley at Aon Consulting's first Client Symposium held on October 26-28, in partnership with the Kellogg School of Management at Northwestern University in Evanston, Illinois. Hayley issued a challenge to the 42 employers from diverse industries who were in attendance, to find new ways to lead their businesses and invest in talent in an uncertain economy and amid a global recession.
During the symposium, which featured plenary sessions by three of Kellogg's most forward-thinking professors, participants focused on their most pressing human capital challenges, attending various breakout sessions on health and benefits, retirement, pay and performance, and human capital risk. The four major trends and employer challenges emerging from those discussions are outlined on the following pages.
Employers had varying concerns on their defined contributions and defined benefit plans, depending on the average age of their workforce and existing plan strategies. Many are choosing to reevaluate their pension strategies.
Confidence in defined benefit plans in general has dropped dramatically. The current economic climate has demonstrated employees' lack of financial savvy when managing their retirement investments for the long term. Many employees began investing when the market was booming—and now are seeing the value of their pension plans decreasing by 20 percent or more.
Employers are acutely aware that the majority of their workers aren't anywhere close to being financially prepared for retirement. The combination of medical advancements that help people live longer and worker apathy toward retirement savings is leading to millions of employees having little money left for retirement.
THE CHALLENGES: Experts suggest that the best solution to this dilemma is for workers to remain in the workforce 5–8 years longer than anticipated. But will future generations of workers be healthy enough to work beyond the current retirement age, and will they be willing (or forced) to do so? How can organizations help their employees heed the call to action and save for retirement?
As employers look to the future of healthcare management, one thing on their minds is sustainability. Can business continue to provide healthcare? How much more can it afford?
For developed countries, the average health expenditure in 2006 as a percent of gross domestic product was 8.9 percent, according to the Organisation for Economic Co-operation and Development . Participating in that survey were France (11.1 percent), Germany (10.6 percent), Canada (10 percent), Australia (8.8 percent), the U.K. (8.4 percent), and Japan (8.2 percent). The U.S. topped the list with 15.3 percent, which translates to more than $7,000 per person.
Given that healthcare costs will continue to rise globally—8.9 percent on average—how can employers work to improve the health and productivity of their workforce, versus cost shifting through plan design changes? And how can they balance pressures to find immediate solutions versus making long-term investments in order to demonstrate return on investment (ROI)?
Through initiatives like disease management and smoking cessation, employers are trying to drive a culture of healthcare consumerism and patient choice, promoting healthy behaviors, mitigating costs, and promoting wellness in an integrated way. Meanwhile, they find themselves with less leverage and negotiating power with their providers because of vendor consolidation.
THE CHALLENGES: How can employers continue to give employees both a financial—and personal—stake in their own health? How well are incentives working, and how can employers pay for them with shrinking budgets? How much risk can they afford?
Shrinking profits and declining stock values have limited the tools employers have to reward employees. For most industries, there is the very real prospect of downsizing, pay freezes, zero bonuses, underwater options and performance plans that have little chance of paying out now or in the near future. The old benchmarks don't apply.
Meanwhile, employee and employer concerns often appear to be at odds. Employers need to control costs, increase productivity, and maintain a talented workforce, while employees expect an improved standard of living, promotion and better rewards in exchange for strong performance.
THE CHALLENGES: Many companies have found that relying on compensation alone to attract employees and reduce turnover doesn't work and is too costly. Given these conditions, how do employers find the "right" level of compensation for the level of contribution and performance? How do they find new ways to reward employees in a tough economy?
The global economic crisis is putting increased emphasis on business leadership strategies. Globally, more than 30 million managers and leaders will retire in the next five years, challenging companies to find new ways to attract and develop a new generation of leaders. The projected "brain drain" is a clear concern.
The anticipated leadership shortage also has put pressure on companies to recruit high-potential talent so that they have deep pools from which to fill open positions. Employers also are trying to determine their succession risks.
THE CHALLENGES: Which partner relationships would be at risk if key leaders left? What would be the cost to the organization and its reputation if a key executive left?
As the Aon 2009 Client Symposium confirmed, there are no simple answers and certainly no "one size fits all" solutions to the challenges firms are facing in the current global economy. But Aon can help your organization weather the economic storm and come out stronger and more adept at meeting any and all issues and concerns now and in the future.