Advisor, ZLC Employee Benefits Solutions
You may ask yourself, what do employee benefits have to do with “The Great One”, Wayne Gretzky? Believe it or not, there actually is a parallel here. When Gretzky was asked about the key to his success as hockey’s most prolific scorer, he indicated that you need to “skate to where the puck is going to be, not to where it is”. When it comes to employee benefits, many plan sponsors can become overly focused on where they are or have been with their employee benefits plan, rather than focusing on where they should be going with their group benefits. In our industry some people refer to this process as “benchmarking”.
Employers may periodically seek out benchmarking information to compare their employee benefits program to other employers. Most of the large HR consulting firms and some industry associations spend tremendous amounts of time and resources collecting this information and then selling it to plan sponsors. However, we have to ask, how relevant is this data and is there really value in purchasing it? Here are some thoughts to consider:
Old Data – Benchmarking data typically provides old, historical information rather than future-oriented information. The data itself could often be two to three years old given the work involved in maintaining benchmarking databases. Using old data is a bit like trying to drive your car forward by using the rear view mirror—you could technically do it, but you may not be able to effectively navigate the curves ahead of you in the road. Similarly, if your objective is to ensure that your group benefits plan is up to date, is there any point in comparing it to data that is likely out of date?
No Future Indicators – Benchmarking data indicates where the broader market has historically been, but it doesn’t indicate what your employees might want to see now. Also, employees might instead be interested in a better benefits plan and be willing to pick up some of the cost of improvements.
Narrow View – Benchmarking data doesn’t reflect that employee benefits are only one part of the total rewards offering or employment brand. It doesn’t necessarily explain the more holistic view if, for example, you are perhaps above market on one benefit but below market on another benefit. Benchmarking data focused purely on employee benefits also doesn’t address situations where a plan sponsor might want to simply provide a basic group benefits plan but be a market leader on things like spending accounts, retirement plans or cash compensation.
Lack of Relevance – Benchmarking data can be heavily influenced by who collects it, what regions it was collected in, or which organizations participated in providing their plan design information. For example, if the survey source is predominantly large companies in Eastern Canada, it is not likely relevant to a plan sponsor that is a small business in B.C. If the data is overly weighted to union employees, it is less relevant if you have non-union employees. And if you attempt to cut that broader survey data down to better address your competitive market, it is possible that the benchmarking data is no longer robust enough to be relied upon.
No Cost Data – Benchmarking data typically focuses on plan design details, but it can’t really help with benchmarking the costs of those benefits plans. Plan design and employee demographics ultimately drive claims, and claims, insurer expense charges and inflation assumptions drive plan costs. As such, the same plan design could have remarkably different costs when comparing, for example, a forestry company versus a high-tech company. As well, insurer expense charges are largely driven by the size of the plan sponsor, so the same plan design could have very different costs for a company with 25 employees versus a company with 500 employees. Lastly, costs can also be driven by whether a company chooses to self-insure a benefit instead of having a fully insured benefit. Ultimately plan design benchmarking data cannot by itself help with decisions around costs, and costs are always a significant factor in making any plan design changes.
Need to Pay – As noted above, most of the large HR consulting firms and some so called “disruptors” in the employee benefits industry maintain their own benchmarking databases. They in turn charge clients for access to that data. At ZLC Employee Benefits Solutions, we do have access to relevant benchmarking data, but we focus our discussions with clients on where plans are going rather than where they have been. As well, we do NOT charge for this information as we believe this is simply an essential part of what any good employee benefits advisor provides to their clients. We believe it is our job as your advisor to stay on top of industry trends and developments, and we should perspective on how your plan compares and where the market is heading.
Employee benefits benchmarking data will likely always be in demand by some employers in the market. Arguably we believe there are some better sources of information when looking to assess your employee benefits plan. Often the best information is available internally if plan sponsors take the time to gather it. For example, what do former employees say about the plan on their way out the door in an exit interview? When a prospective employee does not accept a job offer from you, did you ask them whether the employee benefits plan influenced their decision? What are your operational managers hearing directly from employees? What is being talked about around the “water cooler” or being posted on social media? What does your broader “employment brand” stand for and how do you want to be perceived in a competitive market, and how might that influence your group benefits plan design?
We believe strongly that plan sponsors should stop focusing so much on gathering large amounts of benchmarking data and looking at where you and your competitors have been two or three years ago. Plan sponsors should start focusing on getting good information to help them attract and retain the key talent they need to execute on their business strategy. Paying for benchmarking data that is potentially old and not relevant, and that is overloaded with charts and graphs, might cause internal decision paralysis rather than help facilitate better and faster decisions. Having the most benchmarking data does not necessarily mean you have the best information.
At ZLC we believe that you should focus on where the market is going with your employee benefits plan and then, just like with Wayne Gretzky, you will start scoring more and hopefully you too will be perceived as “The Great One” in your competitive market. We would be pleased to discuss your specific situation with you to identify the best strategy for your employee benefits plans. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.
ZLC Employee Benefits Solutions is one of the fastest growing advisors for employee benefits and group retirement programs in Vancouver and we are fortunate to have the best people, resources, and clients. We provide value by leveraging one of the most skilled benefits teams – collectively almost 400 years of experience within our team of 20 employee benefits specialists. We have been working with businesses ranging from 3 to over 75,000 plan members for over 35 years.