Bending Rules

By Shabi, Rachel | Financial Management (UK), November 2000 | Go to article overview

Bending Rules


Shabi, Rachel, Financial Management (UK)


Flexible benefits may be flavour of the month, but they are not suitable for every company. Rachel Shabi asks which firms could gain from introducing a flex scheme and looks at the pitfalls they should avoid

It's early days and flexible benefits continue to be hailed as a rip roaring success for all the organisations involved. But, although so far it's been nothing but good news, that is not to say that there haven't been problems. As with any huge undertaking, implementing flex brings its own mix of teething troubles, stumbling blocks and headaches.

"Not many companies back out of an arrangement once they have installed it," says David Wreford, senior consultant at William M Mercer. "But a lot of companies find that the process of implementing flex is more difficult than they might initially have thought." While some of these problems will be idiosyncratic, there are common issues that companies introducing flex should consider.

For a start, the main issue that everyone cites is communication. John Manion, principal at Towers Perrin's benefits strategy division agrees. "Among companies that have tried flex, it is communication that is the make or break factor," he says. Launching a flex system is, he points out, rather like launching a brand new consumer product that no one has heard of. On top of that, you are asking your staff to make a huge mental shift by expecting them to take responsibility for their own benefits package. Throw in a hefty dose of scepticism and resilience to change, and it is clear why communication becomes such a big deal.

"Accountants are the most difficult group of people to communicate with, because they are taught to be sceptical," says Paul Sheffrin, special adviser, compensation and benefits at PricewaterhouseCoopers. The company now has a cafeteria-style benefits system, introduced as a way of harmonising terms and conditions after Pricewaterhouse merged with Coopers & Lybrand.

"Employees tend to think that any innovation from management is a cost-cutting exercise," Wreford says -- which explains the scepticism. This was an issue at the Royal Bank of Scotland, according to Trevor Blackman, the bank's head of reward, who says that the bank may have underestimated this aspect when it rolled out a flex scheme to its 25,000 employees. Fortunately, however, the communication strategy paid off.

"We were very upfront about what was in it for the bank and emphasised that, in fact, flex would cost more to administrate than the existing system," Blackman says. "We explained that flex was being implemented in response to staff requests and because it would give the bank a competitive advantage."

Not surprisingly, an organisation's culture can work against it when it comes to communicating about flex. "If your organisation has a history of effective communication, then you already have a good platform," Manion says. "But the kind of companies that do not have this historic culture, where employees are still viewed as a cost rather than an asset, will run into problems."

For PwC, which had an intensive communication programme, the only sticking points were nuts and bolts details, rather than the overall concept. "Even people who were uncomfortable with the specifics were positive about the idea of having a flexible benefits system," Sheffrin says. The staff need to feel they understand all the small print. "If employees don't understand flex, they will just do nothing," Wreford argues.

Partly because of this need to rake over the detail, time allocation is another potential pothole. "You need a good 12 months to set up flex properly," Wreford advises. And Manion agrees. "It takes a long time to consider all the impact and not miss the finer points," he says. "Teething problems are fairly normal in the first year, because employers are still learning how the system works."

Similarly, employees will take a while to reap the benefits of flex.

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