In November 2008, a German development aid agency, the German Technical Cooperation (GTZ)1, published a study titled Employee Financial Wellness: A corporate social responsibility. The study was an ambitious collection of eight feature articles, which covered a full spectrum of issues and challenges that needed to be addressed if workplace financial wellness programmes were going to work.
In addition, the study included four case studies that provided detail on how four separate corporate employers: BMW SA, Ernst & Young, Liberty and SA Breweries had gone about structuring their own financial wellness initiatives over the years 2006 to 2008.
Perhaps the most meaningful outcome of the project was the formal launch of the Financial Wellness Forum, an initiative that allowed member corporates to share their insights and successes in that space. Surely a collaborative initiative such as this would prove to be a powerful catalyst for ensuring the success of these programmes.
Three years later, when the funding for the GTZ-BMW SA programme ceased, the Financial Wellness Forum went quiet. Go to the site www.financialwellness.org.za and you’ll see a banner stating: “Soon to be the new home of... www.financialwellness.org.za”.
Presumably the website was handed over to the National Credit Regulator when the German agency decamped – but it appears as though little else has happened since then.
So, where does that leave us? Has the problem of financial wellness quietly gone away? Are employers not interested anymore?
If anything, the demand for financial wellness programmes appears to be higher now than ever. In the US, a broad range of studies proclaim that “financial wellness is the next frontier in wellness programmes2”.
The problem is most of these enthusiastic studies are funded by the insurance industry, with indicative benchmarks being derived from the types and quantities of insurance coverage they need to sell to declare an individual financially well. But let’s assume that the case for financial wellness programmes remains viable. The harsh reality is that the renewed wave of enthusiasm is at risk unless we get better insight into whether these programmes add value and if not, why not?
The GTZ report captures this first problem precisely. The reality is many programmes put in place as far back as 2006 have changed substantially. Contributing factors are retiring heads of human resources, retiring programme champions, shifting corporate priorities, and changing funding resources. The irony is that the more financially stretched a company gets, the more likely it is that the financial wellness programme gets cut back.
At some level, this lack of sustainability and continuity speaks to the funding model of these programmes. In the BMW project, funding and support were derived from a public–private partnership. What we had was collaboration between a willing employer (BMW) and a willing and experienced developement aid agency, the German Technical Cooperation (GTZ). When that three-year project ceased and the funding with it, so too did the momentum behind a collaborative initiative involving a number of similarly concerned corporates.
Going forward we need to determine how we can create a more sustainable programme design. In many developed economies, the issue of financial well-being has been addressed by the government or non-profit initiatives. In countries like the UK and Australia, keeping these programmes in the public domain is seen as an important curb on conflicts of interests that might be introduced by financial services companies.
A developing economy like South Africa faces a more demanding challenge – it’s a challenge that will reverberate across Africa. Governments will be unable to fund such initiatives out of the current fiscus. More importantly, research suggests that unless there is a commitment from the employer of some kind, these programmes won’t get the ‘air time’ they need to keep employees engaged and produce sustainable outcomes.
A 2011 study on Management of employee wellness in South Africa: Employer, service provider, and union perspectives3 provided the following main findings. After assessing employee wellness programmes at 16 participating employers, they determined that: “The results showed that organisations, service providers and labour unions define employee wellness differently and that these role players give different reasons for introducing employee wellness programmes (EWPs) or employee assistance programmes (EAPs).”
To start with, there is confusion around the nomenclature. EAPs and EWPs may sound very similar but there are important differences of emphasis. An EAP can be thought of as a reactive type of programme. It provides an emergency backstop for employees in crisis. Legal services, debt counselling, marriage counselling, alcohol and addiction interventions would be cases in point.
EWPs provide a more proactive service. By promoting programmes that provide preventative care, more employee crises might be averted. Examples would be smoke-enders, physical fitness programs, nutritional counselling, budgeting and financial planning assistance.
But, as the 2011 study added, this confusion in programme distinctions has meant that half of the participating employers in the study had no baseline measurement with which to compare their various programmes. Until there is agreement as to what these terms mean and how they should be measured, we can’t begin to understand whether any of these programmes matter or are even working.
The same criticism can be made about programmes employers introduce to address financial issues. Is the ambit of the service about the management of financial crises, or does it extend to include such concepts as budgeting or financial planning, or is it striving for something even greater. More importantly, are these services outsourced by either the EAP or EWP provider and therefore tangential to the overall focus of the service provider. These considerations become important if we are trying to promote a more expansive conversation around financial well-being.
From the employer’s perspective
Introduce the concept of financial wellness to employers and it becomes apparent that employers’ top concern is helping employees cope with financial crisis. Addressing financial crisis was the primary target for all four case studies reported in the GTZ study of financial wellness programmes in the South African workplace. Two specific areas of focus were the burden of garnishee orders on payroll systems and the impact employees in financial crisis had on absenteeism and productivity in the workplace. There’s a definite logic here: if corporates are going to spend precious resources on their employees, it stands to reason that those in the greatest need should be targeted first. That’s why the EAP model is the default choice. But therein lies an important limitation.
If corporates are going to spend precious resources on their employees, it stands to reason that those in the greatest need should be targeted first.
Many corporates believe their EAPs adequately cover any financial concerns of the employees. Service providers who specialise in EAPs will make the following facilities available:
What EAP providers do is monitor and categorise the types of queries that come to them from a specific set of employees. Based on those inputs, the company then determines which services they might need to expand on and to what extent.
In theory this seems a sensible approach. In practice a range of employers expressed concern that the model fell far short of expectations. As BMW learned quickly, financial well-being is as much a socio-psychological issue as it is about developing a level of financial literacy or financial capability. Follow-up research on ‘programme graduates’ highlighted that, while debt counselling and debt restructuring might address short-term crises for individuals, keeping people out of debt, or, more importantly, keeping them from falling into debt in the first place seemed an important missing piece in creating a viable programme.
A major frustration with outsourced assistance programmes was that ‘in the spirit of maintaining employee confidentiality’, employers would be informed that ‘x’ number of employees were requesting ‘y’ services, but there was little information to indicate what had happened to those employees. Had their problems been resolved? Were they financially solid again? Had they developed an enhanced level of financial capability? None of this information was available. Measurement appeared to be restricted to how many times a particular counselling service was requested and by what department.
In the article called 'What counts' we described the primary objective for the policymaker as enhancing the financial capabilities for South Africans. The concern is making sure the individual becomes a better financial consumer. “A more financially educated population is likely to save and invest more, to be better equipped to run successful businesses, and to be more likely to purchase and use financial products which are appropriate to their circumstances. These factors should stimulate economic growth and help to reduce levels of poverty and deprivation, placing less of a burden of government social safety nets4.” This goes beyond keeping the individual out of debt – an individual with a high level of financial capability would not get into a debt hole in the first place.
The question is how prepared is Government to help employers with funding these programmes in the workplace?
Is this enough – particularly when most of these funding obligations have already been earmarked for work-related skills development? Many employers argue it’s not. But at this point in time, this appears to be as far as government is prepared to take the discussion.
As it stands now, a properly constituted financial well-being programme that facilitates consumer education stands to tick three important funding boxes:
A handful of financial services companies have begun to enter into the market promoting services such as on-site financial advice and financial wellness days in the workplace. This is likely to stimulate uptake of financial products, especially by establishing financial institutions’ ‘social licence’ among people who view formal financial institutions with distrust. Financial education can also reduce risks and costs associated with people using products that are unsuitable for them5.
From the employees’ perspective, wellness programmes appear to be free but the cost of it is often embedded in the monthly service fee.
From the employer’s perspective this solution seems unobtrusive. They can make available space in the lunchroom and employees can visit during breaks.
An employee’s compensation package is as much about the benefits and social protections attached to that package as it is about the income the member takes home. Effective financial education around the value of these benefits keeps the member invested and ensures they get the best return from these packages6.
Most retirement fund boards recognise that they have a duty to provide effective member communication that introduces these concepts from the start to the member. But, because communication costs are typically attributed to the fund, (and therefore deducted from a member’s specific fund credit), there is some reluctance from fiduciaries to be too generous with this facility. This understandably puts funds into a quandary in terms of determining how much to allocate to communication and education.
The relationship between the employer and employee is complex. That said, the dynamic around providing financial programmes in the workplace is also complex. At one level, research shows us that employees will tend to trust the advice of their employer (or at least their validation of a service) before they trust the recommendations of a financial services provider.
The flip side of this coin is that the deeper the humiliation or shame associated with an individual’s financial distress, the less people want their employer, or anyone, to know.
But what employees want most is a credible, unconflicted, knowledgeable resource that is on tap 24/7 where they can turn to for:
What’s missing from this list is financial education, although you could argue that it’s implicitly there. We know that many attempts in this area fail because:
What the employee wants is likely to be at odds with what other stakeholders want to see out of such a programme. What the employee is not interested in is hours of dreary lecturing about concepts he or she neither understands nor has an immediate interest in.
The key to success around financial well-being will be to find ways to integrate the objectives of all the stakeholders.
With these potentially competing agendas for achieving financial wellness, determining what constitutes success is fraught with problems.
For those employers who focus on workplace financial crisis management, there are some straightforward metrics we can employ, as long as the employer and their HR departments are involved in the process.
Assessments can be made on whether:
For companies like BMW these achievements were monitored and documented. Translation into a quantifiable returns on investment (ROI) to the company was a tangible possibility. Without doubt, these sort of metrics are essential for maintaining employer buy-in to the process. But for employers who outsourced their financial assistance programmes to EAP service providers, often the only gauges they had to work with was whether the number of employee queries for help increased or decreased in specific areas. The obvious drawback here is that an employer has no clear idea whether the fall-off in requests was due to failure of the programme to engage individuals or the success of the programme in resolving their problems. And given that most financial difficulties take years to resolve, you have no idea whether there’s any progress.
The GTZ report recorded a number of telling comments by HR professionals involved in the reported projects:
“Success was measured according to the number of employees who make use of the various other programmes and workshops on offer7.”
“What we didn’t have a feel for was whether our employees’ needs were actually being adequately serviced.”
“The data provided merely indicated utilisation rates, with a further breakdown of the percentage and type of employees presenting with financial and money management issues8.”
A handful of financial services companies have taken on the task of providing on-line programmes that help individuals determine their level of ‘financial wellness’. Often these indicators reflect the extent to which the individual has bought the right financial products given their particular circumstances. While at some level, meeting these objectives constitutes some level of financial capability if they indeed chose the right products, there is little insight into how absolutely necessary those products might have been to establishing a viable level of financial wellness. This is an area of development well worth watching though.
Policymakers have already gone through an extensive exercise with the OECD model of setting a baseline and a benchmark for financial capability in South Africa. More importantly, they are developing an assessment framework against which service providers can measure whether their own programmes will make an impact. The challenge they face is how to get the array of service providers on board the same bandwagon and tackling the same objectives.
The most tangible measure of success for the individual is whether they found enough reward in whatever programme they were exposed to, to simply stick with it. What is patently obvious is that over the course of time an individual’s financial well-being is something that waxes and wanes. This is hardly a linear process. That means that the longer an individual sees value in sticking with what’s on offer, the greater the probability that the programme is adding real value in their lives.
To date, we have almost nothing to go by here. Our days of measuring success are really in their infancy. Little by little, though, we are starting to form a consensus around what needs to be measured and how we could go about doing it.
Arguably, the most ambitious programme that South Africa has seen to date has been the BMW programme. They did a particularly thorough job of thinking through the issues.
BMW recognised early on that while their initial financial education campaign might have been effective in tackling issues of indebtedness what they needed was an ongoing, sustainable programme that would focus on behavioural changes, not quick-fix solutions. As their programme director, Dr Natalie Mayet, pointed out, they needed a programme that focused less on financial education and more on life skills development and behavioural changes.
In keeping with this insight, BMW determined that it was more important to get people who could impact behavioural change first – and then equip these individuals with financial information, than it was to start with people who were financial specialists. The skill-set most needed was that of a life coach.
The BMW programme followed something called the Cologne Model. The concept was a programme that focused not just on improving their financial specifics but included an individual’s psycho-social situation. The idea was to make a significant impact on people’s self-confidence and to deal head-on with the reason they had gotten into debt in the first place.
What made the BMW programme so compelling was that it included the following key components:
Sucess was measured for two crisis groups and across the organisation. The first crisis group entered the programme in 2006 and had 63 participants. The second crisis group entered the programme in 2007 and had 93 participants.
At the end of the GTZ involvement in 2009, there were important insights to be gained. Three points that were specifically mentioned were as follows:
BMW themselves recognised that they were only touching on the first part of the problem: how to get their employees out of financial stress. Elevating the project to a full-blown well-being exercise demands that they help their members address both short-term and long-term financial needs. They needed to help employees understand the balancing act that comes with managing the trade-offs between these short- and long-term goals.
The journey continues.
1 Deutsche Gesellschaft fur Technische Zusammenarbeit
2 Prudential (2014)
3 Sieberhagen, Pienaar & Els (2011)
4 Genesis Analytics (2015)
5 Genesis Analytics (2015)
6 Benefits Barometer 2014, Part 2: Chapter 8 Failure to Launch
7,8,9,10 GTZ (2008)