When speaking with friends and clients who own businesses, or head up teams of employees, a common lament, particularly in this historically strong job market, is finding and retaining talented employees. What’s more, owners are realizing the importance of continually fostering an environment which incentivizes employees and aligns their success with that of the company. One area often overlooked, is the impact of an employee’s personal financial condition on job performance. I have experienced this firsthand in advising on two operating companies for a client. These companies rely on a small number of key, front-line, customer-facing employees. On more than one occasion, a material and unexplained dip in financial performance was, upon closer inspection, attributable to a marked deterioration in an employee’s job performance, caused by a recent personal financial setback.
It is in an owner’s direct financial interest to focus to improving the financial literacy and financial stability of his employees. Without argument, companies already invest considerably in their employees, from competitive incomes to offering generous health plans and retirement plans, among other benefits. This investment is augmented by a material amount of time and resources devoted to ongoing training and educating of employees. Employers invest a lot in their employees, but it is important to determine if they are getting a sufficient return on that investment. At a time when the typical job tenure for a millennial is 18 to 24 months, often, the answer is often no.
While it is true money worries tend to be more pervasive and acute in younger and lower-paid employees, financial anxiety and stress permeates the American workforce, across age demographics, and income levels. It could be your promising 28 year old salesperson, whose job performance has become increasingly inconsistent. Could it be due to her inability to navigate large swings in her month to month commissions, given her high levels of student debt? Maybe it's your previously steady 52 year old employee who suddenly seems disengaged, and complaining about compensation. Is this change caused by accumulated stress due to large college tuition payments for his kids, inadequate retirement savings, couped with a surge in unexpected health care costs for an elderly parent?
The prime sources of stress typically revolve around near-term financial insecurity due to heavy debt loads, little or no savings, overspending and living paycheck to paycheck, or a large, unanticipated emergency expense. For employees dealing with these front-burner issues, despite their best efforts, job performance tends to suffer. Whether expressed in obvious ways such as increased absenteeism, poor or erratic job performance, and increased job turnover, to more subtle ones, such as a desire to maximize near-term income at the expense of the long-term, an employee’s private financial condition can directly impact their employer’s bottom line.
Companies are increasingly realizing that providing employees with financial education and financial planning benefits can leverage the impact of their current benefits package while improving employee job performance and productivity. It can also help attract and retain talented employees. While large companies have increasingly offered financial wellness programs, the adoption rate for small and midsize companies has been modest. Where companies can drive positive change is by investing in personalized financial planning and increased financial literacy for their employees.
Dolan Partners’ process works first through a discovery session to confidentially assess an employee’s financial condition, and then determine immediate financial issues, concerns and action items. Often the first action item is to tailor and maximize the employee’s usage of company benefits, from picking the optimal health plan for their needs, to opening an HSA, to nudging them to start contributing or increase contributions to the company 401k. Then the process looks at employee spending, working to create a stable monthly cash flow, and looks to build a suitable emergency fund. The planning process can extend to education and retirement planning, investing, life insurance, and beyond. For most employees, a couple seminars a year, coupled with two individualized one-on-one planning sessions can result in a material improvement in their near-term financial health. For a modest annual per-employee fee, we believe there is considerable tangible financial benefit to business owners who make this investment in their employees. In addition, employees recognize when their company cares not only about its own bottom line, but about their personal financial success and security, and are willing to invest in it.
ryanpdolan@dolanpartners.com