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Compliance Toolkit Overview – Navigating Compliance with the Patchwork of New Transparency Laws and Regulations
View a replay of this webinar HERE.
Join us for a free 45 minute webinar on December 14, 2021 at 1:00 PM CST.
Actuary Steve Cyboran, Wes Rogers, and Attorney Howard Lapin will conduct a new free webinar to review the contents of the Compliance Toolkit and explain how to use it to comply with the new requirements under the CAA and the “Transparency in Coverage” regulations.
This Webinar focuses on how to use the Compliance Toolkit. To view the Webinar presenting details of the compliance requirements, or download the presentation slides, please access our prior Blog Post.
On November 11, Humaculture, Inc. released its Compliance Toolkit. Humaculture, Inc. designed the Toolkit to help you comply with Requirements Under the Consolidated Appropriations Act (“CAA”) and the New “Transparency in Coverage” Regulations. The Toolkit includes over one hundred and seventy-five (175) pages and contains over fifty-five (55) Exhibits and Attachments.
Consider attending this Webinar to understand the Toolkit contents and how to use each aspect effectively to help meet the compliance requirements. The Webinar will:
- Include a question and answer period,
- Be recorded, so you will be able to access the recording at anytime in the future, and
- Be limited to 500 participants.
After registering, you will receive a confirmation email containing information about how to join the webinar with a link to add an appointment to your calendar.
If you have any comments or questions regarding any of the above information, please do not hesitate to Contact Us.
Compliance Toolkit Available Now – Navigating Compliance with the Patchwork of New Transparency Laws and Regulations
Many of the new requirements in the Consolidated Appropriations Act and the New Transparency in Coverage Regulations are effective in 2022, and some were effective earlier this year. Humaculture, Inc.’s Compliance Toolkit is designed to support your compliance needs. View a replay of our webinar overview of the Compliance Toolkit here.
Are you ready?
Do you know what to do as an Employer, Insurer, or Third-Party Administrator for group and individual health plans?
The new law and regulations require many changes to plan documents, Summary Plan Descriptions, administrative services agreements, and claim procedures. In addition, new disclosures must be provided to covered individuals and new reporting must be submitted to several governmental agencies.
If you do not comply, the penalties for noncompliance can be severe, up to $100 per day per affected individual.
Compliance Toolkit Contents
To address the situation, Attorney Howard Lapin, Actuary Steve Cyboran, and I have created a Compliance Toolkit to address all of the requirements in the new law and regulations. It contains over forty documents, including:
- A detailed explanation of the law and regulations;
- A compliance tool that highlights all of the required changes and what steps needed to be taken to comply;
- Sample provisions for plan documents, Summary Plan Descriptions, and administrative services agreements;
- All of the model notices that have to be provided to covered individuals;
- Sample notices that have to be provided to participants; and
- Sample disclosures and reports that have to be made to the governmental agencies.
There are over one hundred and seventy-five (175) pages of documents in this Compliance Toolkit. It has been specially designed for use by employers, insurers, brokers, and third-party administrator to help them effectively to comply with all of the requirements.
Notice: All items contained in the Compliance Toolkit comply with our current understanding of the requirements of the Consolidated Appropriations Act and the New Transparency in Coverage Regulations. The Sample Language, Model Language, Sample Reports, explanations, etc. have been prepared before all guidance has been released by the various governmental agencies. If any changes are required after any guidance is released, the Compliance Toolkit will be amended to reflect any changes (quarterly through September 30, 2022 at no additional cost). In addition, you are advised to seek legal counsel in the use of this Compliance Toolkit.
Webinar Reviewing the Compliance Toolkit
On December 14 at 1:00 pm we conduced a free webinar to review the Compliance Toolkit. We reviewed its contents and explained how it can be used to comply with the requirements. You can view the webinar here. Don’t miss it!
Ordering
When you order the Compliance Toolkit, it will be provided to you in a Word file and can be easily branded for use with your clients.
How do I order? Contact us.
You can purchase the Compliance Toolkit for only $450 by responding to this email and we will invoice you for the purchase price.
The price includes quarterly updates through October 31, 2022 at no extra charge.
As soon as we receive your payment, we will send you a copy of the Compliance Toolkit.
If you would like to see a sample, please contact us and we will schedule time to review the Toolkit with you.
Questions? If you have any questions before or after ordering the Compliance Toolkit, please contact us.
Available Support
We are available to support you in your compliance and financial needs. This Compliance Toolkit, including Financial Analysis Tools will help facilitate self compliance. Our team of consultants, including actuaries, clinicians, behavioral health, pharmacy, and legal resources are also available to guide you through the compliance process, or we can take the lead. We would be happy to have a conversation regarding your needs and can customize a proposal for the level and type of support you may need. Please contact us.
Steve Cyboran Brings Humaculture® Perspective on Data Driven Results
Steve Cyboran brings the Humaculture® Perspective to a panel discussion on Data Driven Results for HR Professionals. Join Steve on October 21, 2021 at the Junior League for the Houston Compensation & Benefits Luncheon.
When:
October 21, 2021
11:30 AM CDT – 1:15 PM CDT
Add to Calendar
Where:
Junior League of Houston
1811 Briar Oaks Lane
Houston, TX 77027
Register: Here
Transparency Webinar Replay: Big Changes Coming! How to Comply with the Consolidated Appropriations Act (CAA) and Transparency in Coverage Rules!
A replay of and presentation deck for our July 20 Webinar is now available. This webinar addresses several new laws and regulations that significantly impact group health plans and individual insurance coverage. The Consolidated Appropriations Act (CAA), signed into law December 27, 2020, contained the No Surprises Act (NSA) and rules for the additional analysis required for Mental Health Parity (MHP). In addition, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Agencies) issued final “Transparency in Coverage” regulations requiring certain disclosures for group health plans and individual insurance.
Compliance Responsibility for Penalties
The following table summarizes the CAA, NSA, MHP, and Transparency in Coverage rules, including the responsible party, applicability, who will enforce the law or rules, and which party is subject to penalties. As of this date, there are still several uncertainties which we expect to be resolved as more guidance is made available by the DOL, HHS, and Treasury. We are working with the CMS oversight group to determine if, or how, these rules may, or may not, apply to self-funded student health plans.
| Insured Group Health | Self-Funded Group Health | Individual/Insured Student Health | Self-funded Student Health | |
| No Surprises Act | ||||
| Responsible Party | Uncertain | Employer | Uncertain | Uncertain |
| Applicability | Yes | Yes | Yes | Uncertain |
| Enforcement | State, then HHS | HHS, DOL, IRS | State, then HHS | Uncertain |
| Subject to Penalties | Uncertain | Employer | Uncertain | Uncertain |
| Transparency | ||||
| Responsible Party | Uncertain | Employer | Uncertain | Uncertain |
| Applicability | Yes, except Grandfathered Plans | Yes, except Grandfathered Plans | Yes | Uncertain |
| Enforcement | HHS, DOL, IRS | HHS, DOL, IRS | State, then HHS | Uncertain |
| Subject to Penalties | Uncertain | Employer | Uncertain | Uncertain |
| Mental Health Parity | ||||
| Responsible Party | Insurer | Employer | Insurer | MEC Plan Sponsor |
| Applicability | Yes | Yes | Yes | Maybe |
| Enforcement | State, then HHS | HHS, DOL, IRS | State, then HHS | State, perhaps |
| Subject to Penalties | Uncertain | Employer | Uncertain | Uncertain |
| Fee Disclosure | ||||
| Responsible Party | Service Provider1 | Service Provider1 | Insurer | Uncertain |
| Applicability | ERISA Plans | ERISA Plans | Yes | Uncertain |
| Enforcement | DOL | DOL | HHS | Uncertain |
| Subject to Penalties | Service Provider1 | Service Provider1 | Uncertain | Uncertain |
Why is transparency compliance important?
For group health plans, the penalty for non-compliance will be up to $100 per participant per day. For a group of 1,000 affected participants, the penalty could be about $36 million over the course of one year of non-compliance.
Available Support
We developed a Compliance Toolkit to facilitate self compliance, which is now available. Watch a replay of an overview webinar of the Compliance Toolkit. Our team of consultants, including actuaries, clinicians, behavioral health, pharmacy, and legal resources are also available to guide you through the compliance process, or we can take the lead. Please contact us.
Mental Health Transparency Implications
Mental health and substance abuse disorders (MH/SUD) are a big issue as a result of the COVID-19 response, economic shut down, and social isolation resulting from the transition to virtual work and education. As a result, we have seen significant increases in depression, where rates of depression tripled, substance abuse, and opioid use, in particular, where related deaths are were up 80% in 2020 to 90k, expanding on over 40 years of exponential increases in mortality.
With the passage of the CAA transparency rules, health plans are immediately required to conduct a detailed Comparative Analysis of both financial and non-financial treatment limitations if an Agency or plan participant requests the analysis, report, and supporting documentation. The Agencies are ramping up staff to focus on compliance.
In addition to complying with MHP, we also recommend developing a plan to mitigate the behavioral health issues in your organization. Compliance alone will not likely address the impact on your employees. An effective approach will require a more sustainable approach focusing on a purposeful culture, a healthy culture, and cultural alignment of all reward and benefit programs.
The webinar addresses these topics in much greater detail.
Humaculture, Inc. Sponsors Misericordia Fundraiser
Creating organizations that allow people with various special needs to realize their potential and thrive is a key aspect of the Humaculture® philosophy and approach. As such, we are proud to announce that Humaculture, Inc. sponsored the “Marshalls for Misericordia Golf Outing”. Misericordia is located in Chicago, Illinois. It is home to over 600 individuals with a broad range mental and physical disabilities. The annual “Marshalls for Misericordia Golf Outing” raises funds to benefit Misericordia Home. You can learn more about Misericordia at https://www.misericordia.com/.
Free Webinar: New Transparency Rule/No Surprises Act
This webinar can now be accessed from Here.
Our Humaculture, Inc. approach to partnering with the best and brightest continues to grow and produce successes for our clients and partners alike.
As part of our continued efforts to bring to you the best resources, we want to make you aware of a free webinar on July 20, 2021 at 1:00 PM CDT.
Please register Here for the webinar.
The Consolidated Appropriations Act and the “Transparency in Coverage” regulations are potential game changers, affecting how health plans set prices for services, negotiate provider contracts and pay for out-of-network emergency care, report information and provide disclosures to participants.
These substantial new requirements will be effective for plan years beginning on or after 2022.
Steve Cyboran, Chief Behavioral Officer and Actuary, and Wes Rogers, Chief Guidance Officer, at Humaculture, Inc., will join attorneys Howard Lapin and Larry Grudzien to conduct a new free webinar reviewing the requirements for the Consolidated Appropriation Act and the “Transparency in Coverage” regulations on July 20 at 1 PM CDT.
The Webinar will be 90 minutes in length, and will cover a lot of detail and answer questions like:
Preventing Surprise Billing:
- What new requirements will be imposed to prevent surprise billing?
General Transparency:
- What new requirements must be added to insurer and TPA contracts to meet the new transparency requirements?
- What new EOBs must be provided to participants before any scheduled care?
- What new services must be provided to a “continuing care patient”?
- What new price comparison guidance must to be provided by phone or Plan website to participants?
- What new advanced explanation of benefits must be provided to participants if requested for scheduled services?
- What new provider directories must be provided and how often must they be updated?
- What new disclosures must be made to the plan for broker, TPA and other vendor fees?
Mental Health Parity Transparency:
- What detailed comparative analysis must be provide to governmental agencies if the plan provides both medical/surgical benefits and mental health/substance abuse benefits?
Reporting:
- What new reporting must be made to governmental agencies on drug prices?
Transparency in Coverage:
- What information must a health plan publicly report on negotiated in-network and out-of-network amounts?
- What information must health plans provide to participants on cost sharing?
We will also provide suggested steps to comply with these new reporting and disclosure requirements.
To mitigate technical issues, we are limiting the registration for this webinar to 500.
This Webinar will include a question and answer period.
A copy of the slides will be provided for all who register. After registering, you will receive a confirmation email containing information about joining the webinar.
If you have any comments or questions regarding any of the above information, please do not hesitate to contact us.
Employee Benefits – The Humaculture® Perspective
Photos above: Just as different plants thrive in different soils, different people also thrive in different organizations. Aloe vera thrives in thin, rocky, dry soil. Similarly, there are also certain organizations that employ people who may primarily have access to benefits through a spouse or parent and don’t require rich benefits. Other organizations may need moderate benefits (like drip irrigation on grapes) designed and structured to nurture them to thrive properly. Still other organizations may require benefits designed to protect and nourish employees, much like lettuce requires mulch and abundant moisture.
Did any person, or any organization, ever become great by striving to be average? Many business leaders instinctively look at what every other organization in their particular industry is doing, then defensively adopt benefits that make their organization “competitive” with their peers. But, does this approach really make an organization distinctive and magnetic to talented people who will lead to success? Is it really a good idea to attract employees who are concerned primarily about benefits?
Understanding the Nature of the Organization – Vision, Mission, and Strategy
The horticulturist understands that different plants, different production goals, and different climates require soils to be built in specific and intentional ways. Each planting bed is designed with climate, soil texture and drainage, fertility, pH, and other factors in mind based on the types of plants and crops desired. So, the successful horticulturist begins with a vision and mission, then develops a strategy based on the vision and mission while considering climate and available resources. While other inputs may be required (irrigation, support, row covers or other protection), the soil is the key. Without well designed soil one can typically expect mediocre results at best. The most successful gardens “feed the soil, not the plant.” A well-chosen plant in well-designed and prepared soil will naturally thrive and produce the desired fruit.
To be successful and highly effective, organizational leaders must take a similar approach. Each organization has different goals, different purposes, and operates in different business, social and legal environments. All of these factors will have tremendous impact on how the organization is able to attract, engage, grow, retain, sustain, and transition employees or other people who will in some way be a part of, and grow, in the organizational “soil.” Many leaders have at least some idea of their organization’s vision and mission, even if only informally. They also know they need the “right” employees to carry out the strategy to accomplish the vision and mission, so much so that the focus becomes “feeding the plant, not the soil.” But failing to understand the importance of building a good organizational “soil” substantially reduces the effectiveness of recruiting, compensation, benefits, well-being initiatives, engagement, safety, and any other perk or program directed at employees.
Pitfalls of the “We Offer Excellent Benefits” Approach
One large health system sought to have only the “very best” benefits, desiring to be viewed as cutting edge to potential employees and to motivate current employees, which is popular among progressive and innovative organizations. The health system combined the Paid Time Off (PTO) benefits for 7 recently integrated entities by adopting a richest benefit approach. This put the new, larger system above the 75th percentile of its peers. However, the workforce plan and job designs did not allow employees to effectively use those benefits, which led to a lot of frustration and inequitable use. It’s a little like over fertilizing plants, they may be “burned” by the excessive fertilizer. The intent of PTO is to recharge and re-energize people so they can better perform in their job. In this case, the employees felt resentment over a benefit they couldn’t readily access and still meet the patient and business needs of their jobs. There must be an appropriate balance between no time off and full time off. It is important that the PTO be designed for optimal performance. The strategic workforce plan and jobs should then be designed for the level of time off provided (e.g., preparing organizational “soil” to allow the employees to use the PTO benefit to help them thrive).
Similar scenarios are repeated in many organizations, especially as organizations look to benefits and other benchmark surveys to guide their benefit choices. So often, organizations implement or modify benefits programs based on benchmark studies, then struggle with high benefits costs and look for the latest “cost containment” measures, programs, or services. For example, a large utility maintained a traditional sick leave program to remain “competitive” with its industry peers. The 100% pay replacement led to over-utilization, excessive costs, scheduling challenges, and increased time to manage employee relations issues related to absence. It simply became much harder to manage and was not attracting and retaining the employees who would best thrive and contribute to continue to build the organizational “soil.” Yes, “everyone else” was doing it but the choice to be average led to high costs and failed to make this organization distinctive and magnetic to the employees who could best produce the intended “fruit” and nourish the “soil”.
How We Design Benefits from a Humaculture™ Perspective
Humaculture™ recognizes that the organization itself is the key to a thriving, engaged, and contributing workforce that leads to success. Benchmarks are good against which to test designs and cost levels to assure they are distinctive and magnetic, but the designs should first support the vision and mission of the organization. While many advisors may suggest, for example, a healthcare organization should provide rich health care benefits, the Humaculture™ approach would view it a little differently. Humaculture™ would focus on the vision to model healthier behaviors, understand the consumer choices their patients are making, and differentiate the type of talent that may choose their organization (e.g., make the benefits less rich for those who aren’t willing to engage in healthier behaviors).
Such a design would support the organization’s effort to attract, engage, grow, retain, sustain, and transition employees who will buy-in to the vision and mission, be fruitful, and contribute to the tilth of the organizational “soil.” Well-designed soil requires fewer inputs of fertilizer, pesticides, water, etc. to successfully produce a crop. Likewise, well-designed organizations, including benefits and compensation that are aligned to support the vision and mission of the organization, will have much lower costs and achieve greater results than those organizations who “burn” the employees with rich or misaligned benefits. For example, one health plan had a copay for emergency room (ER) visit but applied the deductible and coinsurance for office visits. After switching the design to copays for office visits and increasing the ER copay, ER utilization dropped by 20% and non-emergent ER costs dropped by 99%. Overall, the broader behavioral redesign rolled back the cost levels 3 years of double digit increases without increasing plan participant costs.
So, what steps should be taken to design and implement benefits that support the organizational vision and mission, as well as reduce costs and support employees who thrive? How should you begin to develop an effective Humaculture™?
- Either develop or formalize and articulate the Organization’s vision, mission, and strategic priorities.
- Consider and design benefits that support the vision, mission, and strategic priorities.
- Optimize benefit design by applying principles of behavioral economics and choice architecture.
- Develop metrics that will provide actionable insights into the performance of the benefit designs.
- Evaluate benefit effectiveness relative to vision, mission, and strategic priorities and performance.
- Modify designs accordingly and continue to measure and evaluate.
Applying these Humaculture™ principles will move your organization toward providing fertile “soil” for employees, reduce benefit costs (even before “cost management” techniques or services are used), and contribute to a much more productive and profitable organization. Please see our real world applications of this approach and the outcomes achieved with time off, health care, and financial well-being benefits. Take the Humaculture™ Benefits Assessment to conduct a high level analysis of how you are doing.
About Humaculture, Inc.
Humaculture, Inc. transforms organizations—the way organizational leaders understand the organization and the relationships among the people in it, and the way people think about their position and role in the organization. Humaculture™ is a philosophy and systematic approach for creating profitable, aligned, and healthy organizations conceptualized as “soil” in which people can thrive. Humaculture™ helps organizations create the right culture in order to naturally attract, engage, retain, sustain, grow, and transition people who enable the business—and each other—to thrive. More information can be found at: Humaculture.co. Learn more about our team at https://humaculture.co/who-are-we/.
Authors:
Wes Rogers, Chief Guidance Officer for Humaculture, Inc. Wes has almost 35 years’ experience in consulting and senior management positions with a variety of organizations, facilitating groups of people with diverse perspectives and objectives to coalesce around a singular vision and marshal resources to achieve the vision. This experience provides exceptional insights into how organizations operate and succeed. Contact Wes at [email protected].
Steve Cyboran, ASA, MAAA, FCA, CEBS, Chief Behavioral Officer, Consulting Actuary for Humaculture, Inc. Over the past 30 years, Steve has worked extensively with leading corporations, higher education institutions, and health systems across the country to articulate a vision for a healthy and effective workplace culture, develop a total rewards strategy to support that vision and brings deep benefits expertise with a behavioral approach and sound analytics to achieve and measure the desired outcomes. Contact Steve at [email protected].
Leadership & Tomatoes: 3 Business Principles from My Garden
About 1 in 3 people aspire to a leadership role in business.1 About 1 in 3 people grow a kitchen garden.2 The motivation is the same with both demographics. What is it? The tomatoes, of course. Business success. The harvest.
In turn, successful businesses and successful gardens also have something in common: the people who are rooting (pun intended) for it all to be a thriving ecosystem, resulting in a bountiful harvest for everyone.
Over the years, I have observed that many horticulture principles can provide insights and understanding to help those in leadership build more successful organizations.
Leadership Principle #1 — First build the soil.
Without first building healthy soil, gardening is unlikely to be successful. Well-prepared, deep garden soil gives plants the best opportunity to grow a strong root system.
In my garden, I till the soil each spring while the temperatures are still dipping below freezing. I add compost, fall leaves, and grass clippings to add nutrients and texture to the soil. I add alkaline wood ash from winter fires to maintain the soil’s pH balance, since I know my iron-laden well water tends to acidify the soil over time.
Well-prepared soil ensures the plants have the nutrients they need. Good soil also maintains a more consistent temperature, and it allows excess water to drain away faster, retaining only a healthy amount of moisture and retaining it longer.
If we think of businesses and organizations as the soil in which we grow and earn our living, we can easily begin to see parallels between a garden and an organization. An organization that is well prepared has sufficient capitalization, delivers products and services consistent with its vision and mission, is conducive to employee health and well-being, has reserves to weather economic storms, etc.
Most new businesses fail because those who form them are focused primarily on the success they hope to achieve (i.e. harvesting a bumper crop of metaphorical tomatoes), rather than first focusing on the soil preparation that will be critical to that success.
Leadership Principle #2 — Support the plants as they grow.
Once the soil is prepared, the hardest work is done. I have created a nutrient-rich, foundational environment the tomato plants can send deep roots down into and draw resources from to thrive.
In addition to building the soil, I also have further resources to ensure the tomatoes’ success. I supply supports for the plants as they grow taller and bend under the weight of their fruit. I provide irrigation, giving plants the extra water they need in the dry summertime. I walk through the garden almost every day to identify stressors affecting the plants so I can intervene with extra support if necessary.
Employees—even those in the best-prepared organizational soils—will experience negative stressors and challenges from time to time. Distressed tomato plants, just like people experiencing excessive stress, will never be as productive as they would be if they were healthy, and the quality of what they produce will likely be lower as well. Like a horticulturist walking through the garden, a person in a leadership position needs to be able to recognize when something is preventing the employees within their span of care from fully thriving.
Perhaps the employee is not well-matched to the job; they might benefit from transplanting to another area of the organization. Perhaps some benefits, compensation, recognition and performance management programs, advancement pathways, etc. are not properly designed to align with the organizational vision or mission; more beneficial behavioral designs could be put in place instead. Perhaps there are organizational climate challenges; the team might need special support during especially trying times to overcome the difficulties and thrive.
Often, the problem lies not with the employee, but with the organization and whether it optimizes the availability of its resources so employees can effectively leverage them and thrive.
Leadership Principle #3 — Plants don’t exist for soil; soil exists for plants.
The primary focus of a successful garden is never actually the plants. Plants come and go. If they are happy and healthy in well-built soil, they will thrive and produce a great crop.
Yet I never think of my tomato plants as resources to be exploited. Rather, in partnership and anticipation, I provide them with great soil and support them as they grow and produce. Most of my effort is directed into building the soil for the plants and making sure they have everything they need to thrive; the plants themselves do the rest. Both my tomatoes and I work in this gardening venture, looking ahead to the reward – a bountiful harvest.
One of the most important lessons I have learned from gardening is that just as the plants do not exist for the soil, people do not exist for the organization. Employees—humans—are not “resources” or “capital.” In fact, these terms have come to bother me deeply. “Capital” and “resources” are things an organization owns, rents, or acquires through debt to produce a product or deliver a service. Grouping people into a category of owned or rented assets is very discomforting to the thoughtful person.
Further, I have observed that developing policies and practices based on the analogy of owning or renting people (as the capital/resources terminology implies) leads to confusion on many fronts. Ultimately, it often leads to employees who are demoralized and perform poorly.
So, what if we thought of businesses and organizations as soil created for people to grow and thrive in? What if we thought of the organization’s resources as the support people need to produce abundant value (the harvest)? Organizations do not own employees. Employees are not the resource. Organizations are the soil in which people can root themselves to do meaningful, fruitful work – to grow and to thrive.
Just like I build the soil for my tomato plants because they grow better in a prepared garden, people create organizations of all sorts because we grow better and accomplish more together.
Practical Applications
So, if we change the way we think about organizations and people, how do we also rethink the way leadership handles traditional “human resources” or “human capital” topics (e.g. pay, talent development, performance management, benefits, time off, total rewards, etc.)? In other words, what is the practical application of these principles?
The Humaculture® approach addresses this. In order to apply the concept of building the soil, we first have to ask some questions: Why does the organization exist? What is its vision? In what sort of climate does the organization operate?
After gaining some clarity about these factors, the Humaculture® approach leads us to consider which people will best achieve the organization’s vision and mission (peach trees are unhelpful if the goal is a tomato crop, just as nurses are unlikely to design the best engine for a cutting-edge vehicle prototype).
The Humaculture® approach also leads us to consider what structure and delivery of the organizational resources will allow the people—and, in return, the organization—to thrive and be abundantly fruitful.
It might seem like more work at the outset, but the tomatoes (the fruit, the value created) are always worth it.
1 http://press.careerbuilder.com/2014-09-09-Majority-of-Workers-Dont-Aspire-to-Leadership-Roles-Finds-New-CareerBuilder-survey
2 http://www.farmerfoodshare.org/farmer-foodshare/2017/6/15/gardening-boom-1-in-3-american-households-grow-food
Author:
Wes Rogers, Chief Guidance Officer for Humaculture, Inc. Wes has almost 35 years’ experience in consulting and senior management positions with a variety of organizations, facilitating groups of people with diverse perspectives and objectives to coalesce around a singular vision and marshal resources to achieve the vision. This experience provides exceptional insights into how organizations operate and succeed. Contact Wes at [email protected].
Contributor:
Steve Cyboran, ASA, MAAA, FCA, CEBS, Chief Behavioral Officer, Consulting Actuary for Humaculture, Inc. Over the past 30 years, Steve has worked extensively with leading corporations, higher education institutions, and health systems across the country to articulate a vision for a healthy and effective workplace culture, develop a total rewards strategy to support that vision and brings deep benefits expertise with a behavioral approach and sound analytics to achieve and measure the desired outcomes. Contact Steve at [email protected].
Edited by:
Rachel Rogers, Editor for Humaculture, Inc. Rachel holds an A.A. in Liberal Studies with an emphasis in English and Communications. As a published writer with training in creative storytelling and corporate storytelling, her experience with writing, editing, and advising writers includes both technical and academic documents, as well as creative works.
About Humaculture, Inc.
Humaculture, Inc. transforms organizations—the way organizational leaders understand the organization and the relationships among the people in it, and the way people think about their position and role in the organization. Humaculture® is a philosophy and systematic approach for creating profitable, aligned, and healthy organizations conceptualized as “soil” in which people can thrive. Humaculture® helps organizations create the right culture in order to naturally attract, retain, sustain, grow, and transition people who enable the business—and each other—to thrive. More information can be found at: Humaculture.com.
Weathering the Storm: Is Your Organizational “Soil” Healthy Enough to Weather Both Floods and Droughts?
During these unprecedented times with businesses having been shut down due to an outside order by the government in response to COVID-19, many sectors of the economy, labeled as “non-essential,” were ordered to close business for a period. Organizations that are highly leveraged (a significant portion of the revenue is used to pay debt) or in lower margin businesses face an even greater challenge. Organizations need to figure out how to weather the storm. These options may include reduction in force to rolling furloughs, and potentially reorganizing through bankruptcy. What is the right decision for your organization?
If we think about an organization like the soil, the employees like plants growing in the organization, and the fruit they bear as the value or profit of the organization, then horticulture can provide a good analogy from which to view options for addressing the current situation. From a horticultural perspective, the current “storm” is like a drought. The first thing a horticulturist might do, for example, when faced with a drought is add mulch and preserve soil moisture, not jerk plants out of the garden. As another example, during an unexpected late freeze, it may become necessary to cover plants to enable them to maintain their heat.
“It is not nice to garden anywhere. Everywhere there are violent winds, startling once-per-five-centuries floods, unprecedented droughts, record-setting freezes, abusive and blasting heats never known before. There is no place, no garden, where these terrible things do not drive gardeners mad.” Henry Mitchell, author of the Essential Earthman
When weighing options to reduce costs and capacity such as layoffs, furloughs, rolling unpaid time off, treatment of unused PTO, leadership needs to weigh several considerations. For example,
Culture – One of the most important considerations may be how the organization wants to come out of this trying time. The approach may vary depending on the type of culture currently in place. For example:
- Strong, Productive Culture and Balance Sheet – If an organization has a strong, productive culture, with good talent and is financially strong enough to weather the current challenges (e.g., well prepared, fertile soil, that is more resilient), layoffs can be one of the most detrimental actions an organization can take to the long-term health of the organization and its people. There will be a drain on talent that may later be needed to support a strong recovery for the business, and that talent may wind up joining, or starting, competitors and taking a certain portion of knowledge with them. Layoffs made too hastily, where the remaining jobs aren’t redesigned to accommodate the reduction in staff and pick up the essential tasks of those leaving, may result in the need to rehire many of those positions. Then the organization assumes the cost of the layoff, and training of the new hires for the same positions, without any long-term value gain. In addition to considering the impact of the loss of talent from layoffs, the organization should budget for an increase in health, absence, and disability costs. We have seen 5% to 10% unanticipated increase in these costs depending upon the size and nature of the restructuring. The implications of a layoff may have long term impact that may make the long-term cost not worth the short-term gain. Other considerations may achieve the same goal while preserving the culture and health of the organization and its people.
- Culture is In Need of a Refresh – On the other hand, if there has been a need to rethink the culture and business structure (remove plants not well-suited for the garden, transplant some to different soil, and prune existing plants to shape them to be more productive), then it may make sense to consider some form of restructuring of the leadership and/or workforce. This can present a great opportunity to accomplish the organizational change that has been desperately needed but deferred. The type and nature of the restructuring may depend upon the suitability of the employees to achieve the business strategy. Organizational leaders should consider aspects of both cultural alignment and cultural health. A few examples (certainly not comprehensive) to consider may include:
- Working Retired – If there is a segment of the workforce at normal retirement age that may still be employed, but lack the energy and commitment necessary to take the organization where it needs to go. Then the organization may get more energy and innovation from a younger, less costly resource. In this case, an early retirement window may make sense. One client has a location where 70% of the workforce is retirement eligible and has the highest labor costs, but the employees are unprepared and afraid to retire. An early retirement window may be beneficial to those eligible for retirement and the organization.
- Strategically Misaligned – If there are certain businesses or shared service segments that may not be a good strategic fit (not directly driving the strategic priorities of the organization), then the organization may consider selling off, outsourcing, or co-sourcing those functions. For example, if your business is higher education, an outsourced food services contract affords greater flexibility during periods where the campus is shut down.
- Re-alignment – If there are opportunities to automate, streamline, or eliminate positions, then the organization may need to restructure. If the organization chooses this route, it is important that jobs are redesigned to ensure important functions don’t fall through the cracks, that you have the right talent in those positions, which may involve “transplanting” employees to other areas of the organization, and retraining or hiring different talent. Some of our clients have worked with a management consulting firm to evaluate staffing ratios to determine how many people should be appropriate. Following those recommendations, the client reduces staffing levels as indicated, but without redesigning the remaining jobs, they must often rehire those positions because critical work isn’t getting done.
Temporary Nature – Organizations will also need to consider if, and to what extent, this challenge will be a short term. If this will only be a temporary set-back and demand is simply deferred (e.g., delayed purchases such as iPhones, or elective procedures), or even if business will rebound to similar levels of activity from prior to the current downturn, then the organization may want to consider more of a shared responsibility approach with rolling unpaid time off or even furloughs. With the right messaging, the organization may be able to enhance its relationship with employees, letting them know the organization doesn’t want to let any of its teammates go during these challenging times, so we all need to consider ways to save money and share in the sacrifice. However, with 40% of the workforce living paycheck to paycheck[1], they may need to consider the potential impact on the financial well-being of the workforce if they are asked to work less (for example, 20% reduction in hours, and a corresponding 20% pay cut).
“My heightened awareness of stewardship to those within my span of care gave me a clear sense of purpose and clarity through which to view the situation. I thought to myself: We’re a family at Barry-Wehmiller so we need to act like one. What would a responsible family do in this crisis? A loving family would share the burden. Rather than watching a few of our colleagues face devastation, we decided that our reaction would be one of shared sacrifice.” Bob Chapman, CEO of Barry-Wehmiller
Other Cost Saving Opportunities – There are a number of dials in the various reward programs that can be considered. For example, time off programs can be leveraged to save cost and moderate the capacity of the workforce. The time off policies, and other state and local regulations, often drive a number of cost considerations, such as:
- Do you pay out unused PTO upon termination or at the end of the year?
- How does time accrue (e.g., front-load, weekly accruals)?
- To what level and extent should time accrue, or temporarily stop accruing during an economic downturn?
- What is the right level and balance between scheduled time off (PTO/vacation/holidays) vs. unscheduled time off (sick leave, disability, emergency)?
While there may be pressure to make rash decisions to lay people off for quick cost savings to preserve the profitability of the organization, take a step back and consider alternatives that may be similarly impactful, but preserve the “tilth” of the organization for the future.
Authors:
Steve Cyboran, ASA, MAAA, FCA, CEBS, Chief Behavioral Officer, Consulting Actuary for Humaculture, Inc. Over the past 30 years, Steve has worked extensively with leading corporations, higher education institutions, and health systems across the country to articulate a vision for a healthy and effective workplace culture, develop a total rewards strategy to support that vision and brings deep benefits expertise with a behavioral approach and sound analytics to achieve and measure the desired outcomes. Contact Steve at [email protected].
Wes Rogers, Chief Guidance Officer for Humaculture, Inc. Wes has almost 35 years’ experience in consulting and senior management positions with a variety of organizations, facilitating groups of people with diverse perspectives and objectives to coalesce around a singular vision and marshal resources to achieve the vision. This experience provides exceptional insights into how organizations operate and succeed. Contact Wes at [email protected].
About Humaculture, Inc.
Humaculture, Inc. transforms organizations, the relationship with their people, and how they think about their people. Humaculture® is a philosophy of, and systematic approach to, creating profitable, aligned, and healthy organizations conceptualized as “soil” in which people can thrive. By creating the right culture, the organization naturally attracts, retains, sustains, grows, and transitions people who enable the business to thrive. More information can be found at: Humaculture.com.
[1]Research from the Federal Reserve found that 4 in 10 Americans couldn’t afford a $400 emergency, and 22% say they expect to forgo payments on some of their bills (https://www.marketwatch.com/story/half-of-americans-are-just-one-paycheck-away-from-financial-disaster-2019-05-16).
