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Strategic Flexible Working Programs Produce Results

By David Wagstaff & Scott Friedrichs

Strategic flexible working is based on the core concept of traditional flexible working and telecommuting programs. But when elevated to a major corporate initiative driven by producing measurable results, it leads to lower costs through improved employee productivity and a decrease in occupancy per full-time equivalent (FTE), while simultaneously improving the quality of employees and their satisfaction. Strategic flexible working initiatives overcome challenges in traditional telecommuting programs, substantially reduce expenses, improve productivity and boost employee morale.

Lean and agile organizations are well-positioned to deliver superior returns to shareholders. However, when the only tools used in cost reduction are limited to a continuous cycle of downsizing and headcount reductions, the results are often a decline in productivity, an unhappy workforce, and difficulty in attracting and retaining the best employees. The financial service industry, especially banks, has been hit hard by this trend, due to the inevitable downsizing after mergers and acquisitions.

How can banks improve productivity and employee satisfaction while lowering costs?

Banks can differentiate by taking a holistic and strategic approach to flexible working. Organizations can address the many potential pitfalls and develop a foundation from which they can achieve substantial quantitative and qualitative benefits.

A strategic flexible working program is neither an afterthought nor something done on a one-off basis, but rather a major corporate initiative. It is focused on producing bottom-line results with both soft- and hard-dollar components through productivity gains, turnover improvements and occupancy savings.

Traditional flexible working programs vary widely and the most innovative programs allow for non-traditional work hours and multiple locations outside of the fixed-desk environment. Work locations in the traditional flexible working model can vary each day and would allow employees to use a combination of hot-desking, home offices, client sites and other alternative locations, such as coffee shops or satellite offices. Best-in-class programs are driven by a strategic imperative and their effectiveness is measured against objective targets through job satisfaction, employee retention, employee productivity and occupancy cost. That is, strategic flexible working is a win for the corporation and a win for the employees.

When both the strategy and the execution are aligned, the benefits are measurable and substantial.

Strategic flexible working programs produce several key financial benefits:

Lowering occupancy expense per FTE;

Increasing productivity; and

Decreasing hiring cost through lower turnover.

One of the three largest components of corporate expenses for a financial institution is occupancy cost. On average, these occupancy expenses comprise from 10 percent to 15 percent of the total non-interest expenses within the financial services industry. Current data from the largest financial institutions demonstrates the correlation: When occupancy expense per FTE increases, return on equity (ROE) decreases. Reducing occupancy per FTE increases ROE!

Better Financial Results

When comparing the cost of flexible working programs with the reduction in occupancy expense, best-in-class companies are able to demonstrate 25 percent to 35 percent per FTE for participating employees. One key is requiring employees to exchange their fixed location for a flexible environment.

Both within and outside financial services, these savings have been estimated to be in the neighborhood of $4,000 to $6,000 per participating employee. For a large money center bank with 100,000 employees and a 5 percent acceptance rate, this could produce $25 million in annual savings once fully implemented. The potential magnitude of savings justifies corporate priority.

Even though occupancy-related cost savings are extensive, these may be similar or secondary to gains in productivity. Reported productivity increases are in the range of 10 percent to 40 percent, with an average of 20 percent according to a study by American Demographics and a survey by The International Telework Association & Council. Companies tend to overstaff by as much as 20 percent to compensate for staff absences due to seen and unforeseen circumstances. An estimated 3 percent to 6 percent of the workforce is absent every day due to unscheduled issues. Employees working in flexible working arrangements take less sick-leave and have less unscheduled absences. As a result, overstaffing concerns are significantly reduced with strategic flexible working arrangements. Using the same sample large money center bank with 100,000 employees, assuming a 5 percent acceptance rate, and 10 percent to 20 percent productivity gain for enrolled employees with an estimated $40,000 in salary, this sample bank could produce $20 million to $40 million in productivity gains.

While often less easy to quantify or prove, best-in-class strategic flexible working programs have documented decreases in turnover. In one notable example, British Telecomm reported a 99 percent return rate for employees who had been out on maternity leave after it implemented a flexible working program. This number is significant compared to the industry average of 49 percent.

Benefits don’t stop with quantitative cost savings. Some companies are actually most excited by significant gains in employee satisfaction, which they believe distinguish their company and can be used as a competitive advantage, both in attracting and retaining high-quality employees.

Strategically driven flexible working programs improve corporate morale and lead to higher job satisfaction. In several studies and through conversations with its financial institution partners, PA Consulting Group has noted increases in job satisfaction in the range of 7 percent to 10 percent. Reasons given for great job satisfaction include better ability to manage the work-life balance, a feeling of empowerment and stronger emphasis on results.

When banks are considering adopting strategic flexible working programs, it’s not uncommon to hear questions like: “We already have a telecommuting program and flexible working program, why are we not realizing the benefits, what are best practices?”

Program Challenges

In working with some of the largest financial services companies, where traditional telecommuting or flexible working programs haven’t produced significant value, it’s common for programs to either focus on benefits to employees or real estate savings, but typically not both.

In the worst cases, policies vary from one employee to the next, depending on an employee’s relationship with their manager. Many times these programs are only seen as an employee benefit and, as such, are expected to add expense rather than save money and are implemented accordingly (see second chart below).

In reviewing programs, we find four broad areas that require key attention. These are program management, technology, people and productivity.

Program Management: The most fundamental challenge is a lack of strategic imperative and management priority. Many traditional programs, developed from the bottom up, fail to articulate a clear business case and are often not elevated to a management level that would champion the initiative and track results. These shortcomings permit an ad-hoc implementation by well-intentioned managers, often creating inconsistencies in such areas as policies, processes, tools and technology, implementation approach, expectations and communications. As a result, these programs often suffer from limited resources for meeting space, limited or non-existent hot-desking, often underutilized fixed desk locations and unaddressed risk and security issues.

To address these challenges, the best companies secure senior management’s commitment and focus on delivering tangible value to shareholders by developing specific targets that will be used to measure and encourage continued improvements in program results. These programs utilize cross-functional teams with a broad understanding of complex program management, human resources, real estate, technology and business processes.

Technology: A common challenge with technology is the failure to select the right people for the project. Banks that perform poorly in technical issues of flexible working fail to plan for connectivity challenges, security, provisioning or overlook an integral component. Other providers fail to plan for the impact of wide-scale remote and mobile employees working varied hours. Or they don’t provide technology that can be consistently accessed from various locations and establish the requisite technology standards and frameworks which will allow employees to operate in a functioning and secured computing environment. Other banks trying to address standards adopt “one size fits all” solutions and then overspend for unused licenses or pay for services that are not required and don’t fit the many different needs of various business units.

To address these technical challenges, the best programs start with a technology strategy and vision that incorporates flexible working and then apply appropriate technology tools built on an agile framework. These programs leverage collaborative tools that facilitate employees sharing and working with one another, regardless of location. These programs universally embrace new (but proven) technologies which facilitate working from the most convenient location, be it their home, a client site, a hotel-type office or any flexible corporate location.

People: People are at the heart of all successful programs. While programs that have challenges often overlook the importance of social networking and career advancement, the most basic failing is typically communication.

Whereas, the most effective implementations clearly articulate and communicate the value, objectives and measures of the program; gain commitment from managers at all levels within the organization; qualify employees to participate, both on job fit and employee performance level; align performance measures with outcomes, results and customer satisfaction; address criteria for career advancement; and develop methods for social networking among staff.

Productivity: Productivity challenges can emanate from a variety of sources, including vague or overly broad employee job descriptions, a lack of trust in the program, insufficient training and support, and changes to core business processes that may be impacted by flexible working arrangements. Those firms that don’t measure and monitor progress toward goals often fail to achieve optimal results.

To obtain the best results from these programs, businesses re-think business processes and confirm nearly all processes are focused on outcomes, rather than time worked. The businesses also prepare for processes and functions that are most heavily impacted.

Strategic flexible working programs create competitive advantages by allowing banks to improve productivity, employee satisfaction, attract and retain employees, and allow lower occupancy expense per employee. These programs also provide flexibility for companies as the markets change. Strategy-driven programs avoid the many traps and challenges encountered by traditional programs. When implemented as a strategic priority, it can produce millions of dollars in annual savings. In the past, what was good for the corporation was not necessarily good for the employees, but that is not the case with a strategic flexible working program – a properly executed strategic flexible working program delivers the often sought-after, but rarely achieved, “win-win” result for both the corporation and its employees.          

David Wagstaff is managing consultant in PA Consulting Group’s financial services practice, based in New York.               Scott Friedrichs is managing consultant in PA Consulting Group’s project management practice, based in Arlington, Va.


Copyright 2007 The Warren Group

Posted on Tuesday, September 04, 2007 (Archive on Monday, January 01, 0001)
Posted by Scott  Contributed by Scott


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