Virtually every employer in the U.S. is seeking to adapt to an increasingly challenging set of workforce dynamics.  With four distinct workforce generations (all possessing differing value sets), multiple ethnic groups, and the predominance of dual-income families, employers often struggle with offering a comprehensive employment proposition and programs that are effective with all segments of their workers – especially when it comes to driving higher levels of workforce retention and engagement.  An approach that works for one set of demographics usually is not very effective within others.  It is rare, yet extraordinarily valuable, when a single effort can have equal power and effectiveness across all workforce demographics.  What this paper will show is the impact employee personal financial well-being can have on workforce engagement and employee outcomes.

For purposes of this article, a thoroughly engaged employee is defined as one who:

The issue of dis-engagement is that employers often do not see it.  Dis-engaged employees tend to “fly under the radar.” Their goal is to get by, not rock the boat, and hang on.  In addition to the obvious organizational impacts of dis-engagement is the cost of lost recruits, employees, and customers.[i]

The Detrimental Impact of Personal Financial Dissatisfaction/Distress on Employers

Very recent national research reveals that, in any workforce, on any given day, a significant portion of that workforce will be dealing which personal financial issues so critical that they severely and negatively impact both their personal and professional lives.  For employers, this has very significant cost, operations and quality implications. 

Another major portion of any workforce may not be in severe financial distress – but are working multiple jobs and/or extra shifts, just to make ends meet.  They may be “getting by” financially, but both their personal and professional capacity is limited.  On the personal front, this group feels like they’re missing out on family time, experience and presence that cannot be recovered.  This is such a prevalent issue that the most significant request of two-wage earner families is “how to become a single wage earning family!”

Still others in any workforce may feel like they have their current finances under control, but have no idea how to go about planning for their financial future.  With almost no financial education in our schools, families and houses of worship, people enter their adult lives with no roadmap for preparing for both today and tomorrow…whether it’s planning for a child’s future, or knowing how and when to start preparing for longer term financial goals.  The result, a major segment of any worker population will tell you that they are dealing with matters related to their personal finances to the extent that their sense of personal well-being (both at work and at home) is diminished. 

In a culture where (rightly or wrongly) people are defined by what they earn and what they own, there is often a stigma associated with talking openly about personal financial issues.  This is why many employers and their leaders are often surprised by the information regarding the prevalence of personal financial dissatisfaction or distress in their workforce.  In reality, personal financial issues are actually the number one cause of stress and is the most prevalent need presenting to Employee Assistance Programs across the U.S.

The impact of this reality is seen within organizations in the following areas:

• Increased Attendance, Tardiness, and Overtime
• Higher Turnover
• Higher Costs of Healthcare, Sick and Disability Claims
• Lower Employee Engagement and Productivity

The Strong Correlation between Employee Engagement and Business Outcomes

In view of the above (especially the negative impact that financial distress and dissatisfaction has on employee engagement), the lost opportunity to employers is significant.  Towers Perrin, an international human resources research and consulting firm who just recently merged with Watson Wyatt produced two case studies[ii] that do a very good job at connecting the dots between employee engagement and key desired business outcomes, as illustrated below:

The Surprising Power Financial Well-being has on Workforce Engagement

In a 10,000 employee group, the Pathways Financial model was fully implemented and measured through an employee survey with a contiguous financial well-being assessment tool.  Shortly after program implementation, the leaders of that organization were surprised to see the prevalence and depth of personal financial reality on their employees’ personal and professional lives.  In this survey, the employees indicated that their personal financial acumen, disciple and situation were negatively impacting their job and their family.  On a four-point scale where 1 was the most negative impact and 4 was the most favorable, the average score was 1.2 – the lowest scoring segment of the entire financial well-being assessment.  Interestingly, this result was consistent across all income and education levels!  

Fast forward two years.  Not only did the survey reveal improvements in personal financial awareness and well-being – an indication of improved financial behaviors – a more powerful result was revealed.  Using a statistical method called factor analysis to discern the drivers of workforce engagement, basic financial well-being proved to be the 4th most powerful driver of engagement out of the 18 factors in the combined employee survey and financial well-being assessment tool.  What impressed that organization’s leadership was that financial well-being (which was costing virtually nothing through the Pathways Financial delivery model) scored ahead of areas that they were investing huge organizational resources (e.g. Compensation & Benefits, Manager Effectiveness, Staffing and Resources).  The conclusion, the ROI and effectiveness of the Pathways Financial model are, in fact, “low hanging fruit” – and is consistently effective across all workforce demographics!