Hey CEOs, Want to $ave Cash? Here’s What Few See

In my last post, I described the nightmare that CEOs in America face when dealing with employee health costs, which have become the third-largest expense in business. I also promised to outline the simple steps that CEOs can take to rein in these spiraling health costs.

My first suggestion is to employ a tried and true management technique that every CEO learned in business school — one that gets economic incentives working for you rather than against you. I’m referring to the old adage: If you want to achieve a business objective — be it launching a new product or reducing employee health costs — you need to incentivize your managers to help you succeed.

Yet, I doubt there’s a CEO in America who offers bonuses or other incentive pay to the HR and benefits managers who can most effectively reduce these crippling employee health costs.

Why not? Isn’t that just basic Management 101?

Ironically, incentivizing your HR and benefits managers doesn’t cost you any money, it doesn’t require an outside consultant, and it can happen in a matter of minutes regardless of the size of your company. Just tell your HR and benefits managers that if they manage to reduce employee claims costs or the cost of your company health plan (but not its benefits), you’ll give them a financial reward.

Giving a piece of any savings in health costs to the people who can make it happen is just common sense — no different in essence from paying a higher commission to your best salespeople.

And not offering your HR and benefits people any incentives is just plain dumb. Think about it: If your company health plan premiums increase by 10 to 15 percent, as they surely will in the next two years if you do nothing, that’s money flowing right out of your bottom line. And it’s a lot more money than you’d have to pay to incentivize your managers to keep those plan costs in check or even reduce them.

If you’re smart, you’ll tie the bonuses you pay to HR and benefits managers not only to reductions in your company’s premiums but also to the improved health (and as a result, the reduced claims costs) of your employees. How exactly you can achieve that is the subject of my next post.

But for now, your first task in trying to achieve a critical business objective — in this case, reducing health costs that are undermining your company’s financial health — is to get your top managers working their tails off to help you achieve it.

So bring your HR and benefits people on board. Tell them you know that improving the health of employees and driving down health costs will mean more work for them. That’s why you’re going to make it worth their while — more than worth their while — to make it happen.

Darrell Moon is CEO of Orriant, a wellness-program provider serving companies nationwide. This article appeared at Vistage’s Executive Street Blog.

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