SHRM Benefits and Business Case Study

ToTAL RewARdsinstructor’s Manual Benefits and Business at Aflac and L.L. Bean By Sandra M. Reed, SPHR Project team Author: Sandra M. Reed, SPHR SHRM project contributors: Bill Schaefer, SPHR Nancy A. Woolever, SPHR External contributor: Copy editing: Design: Sharon H. Leonard Katya Scanlan, copy editor Kellyn Lombardi, graphic designer © 2009 Society for Human Resource Management. Sandra M. Reed, SPHR Note to Hr faculty and instructors: SHRM cases and modules are intended for use in HR classrooms at universities. Teaching notes are included with each. While our current intent is to make the materials available without charge, we reserve the right to impose charges should we deem it necessary to support the program. However, currently, these resources are available free of charge to all. Please duplicate only the number of copies needed, one for each student in the class. For more information, please contact: SHRM Academic Initiatives 1800 Duke Street, Alexandria, VA 22314, USA Phone: (800) 283-7476 Fax: (703) 535-6432 Web: http://www.shrm.org/education/hreducation 09-0235-IM sandra M. Although they have been largely overlooked. no matter how well the company performs. sending inconsistent messages about the company to its employees. employee loyalty and workforce morale. employee satisfaction with their compensation and benefits packages remains low. Employers are missing critical opportunities to maximize employee job satisfaction and other organizational outcomes through their total rewards programs. Reed. They are expected to keep learning new skills and to assume broader roles.Case overview In its 2008 annual Job Satisfaction Survey Report. Brand identity. bottom-line profitability. promotion policies. As a consequence. dramatic changes in the organizational rules have frequently rendered traditional compensation strategies ineffective. in its publication Implementing Total Rewards Strategies. health plans and pensions”. © 2009 society for Human Resource Management.”3 Today. “employees are least satisfied with their companies’ bonus plans. or creating artificial expectations of continued advancement and raises. But despite the importance of these aspects.”2 Furthermore. According to a Conference Board report. the Society for Human Resource Management (SHRM) reported that for the past five years. employees rated compensation and benefits among the top three aspects most important to their job. Performance & Pay. The Hay Group asserts that traditional pay structures no longer keep pace with the emerging.1 In the book Dynamic Compensation for Changing organizations: People. we are slowly coming to the realization that we may be paying for the wrong things. “What shifted were organizational work values. These results range from enhanced individual and organizational performance to improved job satisfaction. sPHR 1 . employee job satisfaction and increased management focus are all outcomes that can be achieved in part through an organization’s total rewards program. HR professionals are responsible for programs far beyond the profession’s administrative personnel roots. Employees today are expected to work in teams rather than solely on their own. strategy-focused organizations that exist in today’s globally competitive market. They are expected to take more risks and responsibility for results. They are expected to measure the success or failure of HR practices based on the achievement of organizational outcomes. SHRM notes that “the right total rewards system—a blend of monetary and non-monetary rewards offered to employees—can generate valuable business results. This case examines two very different organizations and how they align their total rewards programs with their organizational goals and values. work cultures and business strategies. The Aflac case study is based on an interview with Casey Graves. about Aflac’s compensation and benefits programs. as well as to create a positive work environment for their employees. and L.Assignment details LeveL of DifficuLty Moderate auDieNce Undergraduate Summary of SPecificS n This case study is focused on how two different companies use total rewards to support the organization’s mission and values and achieve strategic outcomes. sandra M. with emphasis on how total rewards statements and employee communication helped the company improve employee job satisfaction and retention. n n n Hr toPicS covereD n Total rewards Total rewards statements Strategic planning Corporate values Corporate social responsibility n n n n 2 © 2009 society for Human Resource Management. Aflac vice president of Human Resources.Bean case focuses on how elements of total rewards are used as tools to enhance the strategic review process. Both companies have extensive employee recognition and rewards programs designed to support specific outcomes. sPHR .L. It includes an overview of the two companies. Reed. The case study ends with a team presentation using PowerPoint with the goal to educate fellow students on the team’s findings and opinions. work/family balance.L. The L. a privately held retail store. such as employee training and development. Aflac Insurance. and equitable compensation practices. a publicly traded company.Bean. n iNformatioN to be iNcLuDeD iN StuDeNt PreSeNtatioNS Student presentations should include the following information: 1. sPHR 3 . Apply the concepts of traditional and lifestyle benefits administration as a tool to achieve corporate objectives. 3. © 2009 society for Human Resource Management. students will be able to: n Correctly define elements of strategic compensation and benefits administration. Understand that strong shareholder returns and excellent customer service are achieved through employees. 4. How the company aligns its benefits with its corporate values. 7. 5. sandra M. n n taSkS n Students will select either the Aflac or the L. This exercise is not meant to be a comparison of companies. How the company uses its own products or services to enhance the total compensation for its employees. Examples of traditional and non-traditional rewards and how they are used to meet organizational objectives. Recommendations by the team regarding an expansion of the benefits programs offered at the company that would further align HR with the accomplishment of organizational goals and values.LearNiNg aPPLicatioNS aND objectiveS By the end of this case study. Reed. not in spite of them. It may be useful to have students prepare a bibliography and summary of the resources used to ensure that the appropriate level of research is conducted to accomplish these objectives. but rather an exploration of how two different companies use their compensation and benefits structures to achieve organizational outcomes. and that employees are more assets than liabilities. The internal strengths and weaknesses your team identified and how the company responded to these factors from a total rewards perspective.Bean case as a basis of study for their team presentation. 2. student teams will create a PowerPoint presentation to present to the class. Company overview. 6.L. Using the material presented in the case studies and publicly available information obtained through independent research. The external opportunities and threats your team identified and how the company responded to these factors from a total rewards perspective. L.llbean.shrm. eat your vegetables.Bean (2006. marketingvox.L. E. R.Bean is number one in customer service. L. L. Simon. VA: SHRM Foundation.georgiaencyclopedia. Aflac ranked among the 100 Best Places To Work for tenth consecutive year [press release]. Retrieved from www. Retrieved from www. Alexandria.L.org/ nge/Article. Herald Tribune. August 30). Cambridge. (2006).com/ll-bean-number-one-in-customer-service-in-2007-035941. December 5). L. Retrieved from www.L. Chapters 12-14]. Bean: The making of an American icon. A tale of two companies. Reed. n Mathis.jsp?id=h-1754. (2008. United States: Southwestern Publishing.org/hrdisciplines/benefits/ Documents/07RewardsStratReport..aspx?rid=1098780. J. CNN Money. L. J. Aflac. R. Retrieved from www. (2007). (2008).dll/ article?AID=/20061205/BUSINESS/612050545/1007. This is more likely to result in the students accessing the data they will need to accomplish the objectives so that learning occurs. Aflac corporate web site: www. Retrieved from www. (2004.com/ customerService/aboutLLBean/newsroom/stories/08302006_LLBean_Named_ One_of_AARP_Best_Employers_for_Workers_over_50. Gorman. Retrieved from www. Compensating Human Resources.com Daigle.L.aflac. Heneman. Aflac.htm. sandra M. L. L. n n n n n n n n n n 4 © 2009 society for Human Resource Management.pdf.html. L. Human resource management (12th edition) [Section IV. L.llbean. H. Necerra. April ).aflac. (2007). January 22).com.cnn. Implementing total rewards strategies. Attention workers. & Jackson. MA: Harvard Business School Press. (2005. Retrieved from http://money.heraldtribune.com/magazines/fortune/fortune_archive/2004/04/05/366369/ index. April 15).Bean named one of AARP’s Best Employers for Workers Over 50 [press release].Bean corporate web site: www.recommeNDeD reaDiNg It may serve the objectives of this case study to assign this case at the beginning of the semester and require a summary of each of the web sites researched to be completed a week prior to the final presentation. sPHR .com/apps/pbcs.L.com/us/en/aboutaflac/ PressReleaseStory. (2006. htm?campaign_id=msn. (2008. Retrieved from www.prnewswire. Business Week. Inc.pl?ACCT=109&STORY=/ www/story/03-09-2007/0004543313&EDATE.aarp. sandra M. September). (2008.L.businessweek. L.org/money/work/best_employers/ articles/ll_bean_2008. McGregor. Retrieved from www. n n © 2009 society for Human Resource Management.Bean. AARP. March 9). reports 2006 net sales results.L.html. Reed.com/cgi-bin/stories.com/ss/08/01/0117_ global_perks/index_01.n L. The right perks.Bean Inc. (2007. PR Newswire. J. sPHR 5 . Retrieved from http://images.: 2008 AARP Best Employers for Workers Over 50. January).org. ” afLac’S miSSioN To combine innovative strategic marketing with quality products and services at competitive prices to provide the best insurance value for consumers. including accident/disability.S. care plans. Aflac Japan sells cancer plans. 6 © 2009 society for Human Resource Management. Today. medical/sickness riders. Treating employees with care. Reed. sandra M.S.S. John. overseeing the operations of its subsidiaries by providing management services and making capital available.Aflac Insurance comPaNy iNformatioN Aflac is a Fortune 500 insurance company founded in 1955 by three brothers. American Family Life Assurance Company of Columbus (Aflac). which is marketed and administered through its subsidiary. Aflac employs more than 4. Its principal business is supplemental health and life insurance. fixed-benefit dental. Paul and Bill Amos. long-term care. sPHR . which operates in the United States (Aflac U.” afLac corPorate PHiLoSoPHy “Since its beginning. sells cancer plans and various types of health insurance. living benefit life plans. sickness and hospital indemnity.) and as a branch in Japan (Aflac Japan). Aflac’s insurance business consists of two segments: Aflac Japan and Aflac U. Aflac has believed that the best way to succeed in our business is to value people. ordinary life insurance plans and annuities. “Aflac Incorporated is a general business holding company and acts as a management company. dignity and fairness are founding principles of Aflac.500 people and has more than 71. general medical indemnity plans. hospital intensive care. ordinary life and short-term disability plans. vision care. The following is an excerpt from the New York Stock Exchange business summary.000 licensed independent agents throughout the United States and Japan. Aflac U. sPHR 7 . Employee satisfaction surveys and focus groups conducted in 2007 with Aflac employees and managers drove the needs identification process. including recruiting. n n tHe caSe at afLac With a desire to be an employer of choice.guiDiNg PriNciPLeS To offer quality products and services at competitive prices and use new technology to better serve our policyholders. Although survey results varied. Organizational outcomes related to human resources at Aflac reflect many of the basic functions. all within a rapid period of growth. Supply quality service for our agents. says that the needs of the company’s employees continue to be the driving factor behind Aflac’s total rewards programs. The consistent thread throughout this process. Aflac’s response was consistent: to give employees what they need from a benefits perspective while balancing the cost.500 employees while staying competitive in the insurance market. a number consistently below the national and state levels in other industries (Exhibits A and B). This makes finding and retaining qualified individuals to deliver positive results to shareholders an ongoing challenge. diversity and training. which have been directly influenced through the company’s enhanced total rewards efforts. How does the company made famous by the duck maintain the integrity of its brand while delivering results through its people? How important are benefits and compensation to the company’s ability to compete in a growing industry? Casey Graves. Aflac Insurance is no stranger to the competition for talent among employers in the United States. A key focus of the survey was to help recruit talent and improve retention in an industry with low unemployment rates. Reed. vice president of human resources in charge of compensation and benefits at Aflac. Graves explains that Aflac’s total rewards statements have evolved from a one-page document to an in-depth review of the true value of the employment compensation and benefits. Provide an enriching and rewarding workplace for our employees. In fact. At Aflac.3 percent in March 2008. n Build better value for our shareholders. the unemployment rate in the insurance industry was at 3. Aflac prides itself on being ahead of the curve from a consumer perspective and desires to mirror that philosophy in its treatment of employees. sandra M. As with most programs. according to the Bureau of Labor Statistics (BLS). retention. © 2009 society for Human Resource Management. it begins with an employee needs assessment and continues to be measured through outcomes. according to Graves. the company strives to deliver quality service to its 4. is the quality of communication. ” in which an employee is awarded for the time spent volunteering at his or her charity of choice. employer health insurance premiums increased by 6. Reed. The annual premium for an employer health plan covering a family of four averaged nearly $12. support organizational initiatives and provide opportunities for professional development. Aflac dedicates resources to efforts that support the community in four areas: health. which includes adding staff. a company-paid cancer policy and companysubsidized accident protection insurance.400.Throughout the process. The first is a leadership development program with on-site courses for all employees from entry level to senior management.” n n Cost-containment is on every HR professional’s mind when discussing employee benefits. Aflac seeks to accomplish this by: n Providing Aflac products to employees at little to no cost—for example. One benefit offered to Aflac employees is the recognition of a “Volunteer of the Month. Course topics range from “Managing Your Career” to “Preventing Diabetes. 8 © 2009 society for Human Resource Management. “in 2007. the cost of offering health insurance continues to outpace inflation. the company focused on providing value-added programs that would improve employee job satisfaction. that is added to the cost of steadily growing the business each year. In fact. According to the National Coalition on Healthcare. employee benefits become a conspicuous line item on profit and loss statements and must therefore enhance the achievement of organizational outcomes in order to be justified. some classes require employees to have taken prerequisite courses that are a part of the offered curriculum. There are three levels of classes. youth and the arts. An important theme in Aflac’s communication to its employees is that the health care cost containment is an employer and employee shared responsibility.100. The annual premium for single coverage averaged over $4. Instructor-led classes offer a variety of subjects for workers seeking both career and personal development and are designed to help employees achieve a quality work/life balance.1 percent. Suddenly. which was two times the rate of inflation. Developing employees for their next career level through extensive employee training and leadership programs to keep pace with the strategic growth goals being executed company-wide. as Graves points out. education. More than 91 percent of Aflac’s employees at the senior vice president level and above have been promoted through the ranks. sandra M. Providing total rewards in line with philanthropic goals. offering employer-paid life insurance. sPHR . Aflac’s corporate training department hosts two employee learning initiatives.” And. according to Graves. Aflac sponsors outdoor adventure days. Eighty-nine percent of employees consider Aflac’s total rewards statement an effective communication tool.” For Aflac. it includes designing benefits packages that reflect the needs of a multi-generational workforce—some seeking portability. © 2009 society for Human Resource Management. with 81 percent of employees saying they believe it is better than that of other companies. sandra M. positioning Aflac to lead its industry to enhanced service levels. Aflac recognizes the actual value of employee benefits. Reed. These benefits. on-site fitness centers and service discounts. It is about creating a positive work environment that is conducive to productivity—by offering one of the largest on-site child care facilities in the United States. and as a result. It pays 100 percent of the employee premium for its groundbreaking cancer insurance. sPHR 9 . others seeking stability. send the message to employees that they and their lifestyles are important to the organization. Employees are happy with the profit-sharing bonus. The proof continues to be demonstrated in recent employee survey results: n Approximately 90 percent of employees were attracted to and remain at Aflac because of company reputation. in line with the company’s philanthropic commitments as a socially responsible organization. n n Perhaps most telling of all in the competitive world of insurance—employee turnover fell below 10 percent in the first quarter of 2008.Aflac seeks to administer benefits in a cost-effective manner while staying true to the concept of employee service. its overall philosophy is that “it’s all about the employee. in addition to competitive salaries. 6 4.7 (P) 2.7 4.2 4.2 5. aLL iNDuStrieS Labor Force statistics from the Current Population survey year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 jan 4.9 4.6 5.5 5.0 3.4 4.7 4.8 6.2 4.4 4.3% 2. 2008 Unemployment Unemployment rate 2.314.7 4.9 5.8 5.2 (P) 1.7 6.exHibit a: tHe bureau of Labor StatiSticS.2 3.9 feb 4.5 5.5 jun 4.9 5.5 4.3 5.9 1.8 mar 4. 2007 jan.1 Dec.6 4.0 4.8 6.316.9 5.8 aug 4.4 4.3 4.7 5.1 4.0 5.7 5.1 3.6 4.6 Nov 4.2 5.5 4.310.4 4.9 5. 2008 mar. aPriL 2008 iNSuraNce carrierS aND reLateD activitieS: NaicS 524 employment.7 4.6 5.0 4.022 7 468 Footnotes (P) Preliminary (Source: Current Employment Statistics.7 4.0 5.2 10 © 2009 society for Human Resource Management.0 4.0 4.0 4.6 5.3% Layoffs Mass layoff events Initial claimants for unemployment benefits 9 514 13 1. Reed. Mass Layoff Statistics) exHibit b: tHe bureau of Labor StatiSticS.3 5.7 5.9 5.4 4.1 5.5 5.2 4. Current Population Survey.6 4.4 4.9 5.7 6.0 7.4 4.8 Dec 4.1 5.4 4.7 4.6 4.1 5. sandra M.8 6.8 5.8 6.7 6.7 5. Unemployment & Layoffs: Data series Employment (in thousands) Employment.9% 2.7 5. all employees (seasonally adjusted) Employment.9 6.2 oct 4.7 6.1 4. nonsupervisory workers 2.9 5.4 5.7 6.5 4.0 2.6 jul 4.1 3.3 4. Sep 4.8 4.0 4.3 4.9 5.313.0 4.7 5.4 5.0 5.8 4.848.3 4.5 5.5 5.8 1.4 5.0 5. 2008 feb.839.836.0 4.1 4. sPHR .2 4.7 6.2.2 5.3 5.1 4.4 5.2 4. uNiteD StateS civiLiaN uNemPLoymeNt rate.6 5.5 4.0 4.6 5.3 5.0 may 4.7 4.5 5.1 4.4 5.6% 3.0 (P) 2.5 4.7 6.1 apr 4.3 3.8 5.7 4.5 4.6 5.5 4. L. Internet and in-store sales.L. Strategists.Bean. L. L. Bean comPaNy iNformatioN L.Bean also operates about a dozen retail stores and some 15 factory outlets throughout the Northeast. an outdoor enthusiast and entrepreneur.L. In his autobiography. marketing specialists and other business professionals (including the competition) have tried to duplicate the company’s achievements with varying degrees of success. the president and founder of a retail giant.Bean has always been a marketing professionals’ dream of creating a brand into an institution. rubber-bottomed hunting shoe. fly-fishing.Bean’s library includes about 10 specialty catalogs offering products in categories such as children’s clothing. service and status created by using a particular product or working with a specific © 2009 society for Human Resource Management. Bean wrote that nothing eventful occurred before his 40th year when he created a leather-topped. housewares. it sells online through English. with an average annual growth rate of 6. As described by Yahoo finance online: “With L.L. an author and.L.L.Bean’s annual sales grew from $616. telephone. Bean is a privately held outdoor apparel specialty catalog and retail store founded in 1912 by Leon Leonwood Bean. A brand is built on perceptions about quality. with approximately 80 percent of those sales coming from Internet and catalog sales. and the Maine hunting shoe upon which the company was built. As the legend goes. My Story.Bean paid a 10 percent company-wide bonus.” L. camping and hiking gear. tHe braND L.000 people worked for the company during the 2006 holiday season.L. outerwear. sportswear. More than 11.L. The outdoor apparel and gear maker mails more than 200 million catalogs per year. he sold his first 100 pairs by mail order with a 100 percent satisfaction guarantee. In 2000. L. you can tame the great outdoors—or just look as if you could. Reed. and in 2007 the company reported $1.and Japanese-language Web sites.169 billion in 2000. Bean borrowed $400 from his brother to perfect the design and went on to become a clothing consultant for the military during World War II. footwear.8 million in 1990 to $1. he kept his promise and made the refunds. In addition. of course.8 percent. The company continues to evolve into a multi-channel sales giant through mail order. When 90 pairs were returned defective.L.5 billion in sales. sandra M. sPHR 11 . L. grandson of Leon Leonwood Bean. Strong brand identity can build a relationship with the consumer. When Leon Gorman. It uses recycled fiber.Bean built the brand by using employees as the critical channel through which to accomplish strategic directives. n Labor rights When the company decided to move some operations offshore. employees. n Paper procurement L.Bean was ultimately accountable in a values-driven business. L. and improvement of the quality of life of the company’s employees and the communities in which it operates. L.L.L. In addition to a strong customer focus.L. the company terminated at least three offshore vendor relationships that did not meet its human rights standards. Social responsibility is a business concept driven by the principles of ethically sound practices. The company operates on the belief that the brand should reflect Bean’s values. 12 © 2009 society for Human Resource Management. In fact. and advertising campaigns targeted to a desired demographic. In L.L. sPHR .Bean focuses its philanthropic efforts on preserving the environment. charitable giving and employee participation in preservation activities. the company sought to solidify the brand through social responsibility. not just the products it sells. Social responsibility at L. this is a relationship with Maine and the great outdoors. awareness of the business imprint on the environment. This code of conduct includes processes for auditing and investigating complaints. communities and the natural environment. and suppliers are required to have programs in place to support sustainable management of natural resources. it made a commitment to labor rights.L. assumed the presidency of the company in 1960.company. A brand can be built using marketing techniques such as visual imagery.Bean’s case. including human rights monitoring. and fair compensation and benefits.L. responsible paper procurement.Bean is divided into four categories: n The environment With company products geared for outdoor use. Examples include green building. Bean is committed to sustainable. an important consideration because the company mails more than 200 million catalogs each year. This case examines how L. sandra M. wording that identifies what the organization does.Bean’s stakeholders were its customers. he sent a message to employees defining their stakeholders— those to whom L. vendors. Included in Bean’s Vendor Code of Conduct are standards for safety. Reed. non-discriminatory practices. L. This was no longer the case by the 1990s when the competitive landscape reflected a more technically savvy and cost-conscious customer and global employee market. It sponsored the Peace Climb up Mt. The SBUs were part of a decentralization process in which each unit had responsibility for its profit and loss and was held accountable to a balanced scorecard approach in performance metrics. Profits. In 1995. and for the first time under Gorman’s leadership. The strategic review process began in 1996 and included analyses of both strategic and operational processes. however. It was the first time the board of directors voted to not award annual bonuses to employees.L. particularly in mail order. sales were stagnating. sPHR 13 . In 1996. sandra M. productivity was declining and the mailing list was not growing. Everest. and as a result.beaN L. during which more than three tons of trash was collected.n Charitable giving Charitable giving at L. the company reported a decline in sales.S. Bean launched their e-commerce web site. Reed. total rewards were used as strategic solutions to many of the © 2009 society for Human Resource Management. the company had lost direction. In addition. 1990 was the worst year for L. economy slipped into a recession. were a byproduct rather than a corporate focus. and Gorman believed that because of the rapidly changing external environment.Bean is based on Gorman’s concept of the stakeholder and the company’s heritage in the outdoors. This designation for the HR department allowed it to develop operational tasks such as compensation and benefits into a strategic process with measurable outcomes—for example. tHe ProbLem The company spent the 1970s and 1980s developing the brand into an American institution. linking pay to performance and increasing employee job satisfaction.L. The U.L. The need to reorganize became obvious to Gorman.Bean operated on the premise that profits are an outcome of strong customer service. L.L. In addition.Bean launched a strategic review. target markets and operational competencies (employees). tHe caSe at L. There was significant upper-management turnover. sales flattened again. The 80+-year-old company had been through decades of change. HR was one of the strategic business units (SBUs) developed as an outcome of the review process. yet its core business model had consistently provided excellent growth and profit. The company has donated more than $5 million toward environmental conservation efforts to groups like The National Park Foundation and Ducks Unlimited. Growth was strong.Bean in a decade. including brand identity. By 1990. Sales growth improved in 1992 when the company expanded into the Japanese market. therefore. quality of life of the Bean employee and customer is reflected in the company’s charitable giving efforts to groups such as United Way and the Portland Symphony Orchestra. though. including global outsourcing. Traditional benefits offered at L. total rewards at L. sPHR . Internet retail sales doubled each year since 1996. The company decided to expand their brick-and-mortar stores and capitalize on the opportunity presented by the Internet (Exhibit A).L.issues identified in the review process. As far as Bean was concerned. L. The lack of technical skills such as data processing threatened to topple the organization if it didn’t acquire the staff with the required knowledge. Back in the days when pay was 18 cents an hour.”4 14 © 2009 society for Human Resource Management. including a comprehensive job analysis process. multi-channel marketing initiatives. These practices reflect the L. The diversification initiative took staffing to another level. The development of new jobs required thorough market research.Bean values—the love of the outdoors. L. on-site fitness programs and the use of company-owned outdoor gear such as tents and canoes. A weakness identified in the strategic review was that the company’s financial and human resources were geared to grow the catalog business but not retail expansion or Internet sales.L. Non-traditional benefits include store discounts. and it began with employee satisfaction. Multi-channel marketing was another outcome of L. For example.L.L. As a result of the strategic review process.Bean values. Developing job descriptions and conducting salary surveys allowed the company to develop a comprehensive compensation and benefits framework to manage this period of rapid growth and diversification.L. and to sustain our natural environment. employee recognition and the redefining of the brand. finances. to secure their investment. They trust us to go the extra mile in everything we do. paid in brown envelopes of cash. According to Gorman. the decentralization of the management team to other locations required concentrated efforts by the company to infuse the non-corporate facilities with L. As Leon Gorman put it: “Our stakeholders have invested their patronage. social services and outdoor values in our enterprise. to guarantee satisfaction. Multichannel marketing is the ability to offer customers more than one way to purchase a product.Bean’s strategic review. the company had an obligation to stakeholders. Bean include performance-based bonuses and cafeteriastyle health care. Reed. skills and abilities to perform in a highly competitive market at an organization that was used to setting the standards for quality.Bean philosophy that the employees’ passion for the company and its products will translate to the customer. to sell quality products.Bean became a core business practice critical to the accomplishment of organizational goals. careers. to pay fair wages and provide opportunities for growth.L. sandra M. to participate in society. Bean surprised employees with bonuses calculated as a percentage of profits—Bean’s employees were paid when the company performed. The company continues the tradition of outdoor adventure days and trips as a way to connect employees with the L. They trust us to grow to the extent that we can enhance our benefits to them. Bean himself believed in profit-sharing with employees long before it became a strategic compensation practice. They trust us to tell the truth. Global outsourcing of operations brought intense scrutiny to the function of compensation and benefits. launching $90 million in investments in our hometown of Freeport.Bean’s 2006 Year in Review press release. a 4. Japanese employees typically collect one lump-sum severance payment at the time of retirement based on years of service. L. firing those who failed to comply.8 million will be allocated to the pension plan.L.L.54 billion. Reed. “2006 was a year in which we made excellent progress on a variety of strategic initiatives important to the future of our business. L. our business performed very well and the product line continues to hit the right mark with our customers. “We had a strong start and strong finish to the fall and winter selling season.beaN iNc. keeping the plan fully funded. expanded on the year-end results for 2006. sandra M. This resulted in Gorman leading the challenge for fair wages at the company’s global subsidiaries and vendors and. In addition. L. I am very proud of all that we accomplished in 2006 through our employees’ hard work and dedication. Commuter costs and housing subsidies are also common fringe employment benefits in Japan.Bean reported record annual net sales of $1. in some cases.6 Did the 1996 strategic review work? Were employees rewarded for their continued excellence.S.” © 2009 society for Human Resource Management. sPHR 15 .” said Leon Gorman. rePortS 2006 Net SaLeS reSuLtS “For the 2006 fiscal year ending February 25. global benefits were markedly different from U.5 In addition.L.Bean’s Chairman of the Board.” Chris McCormick. a payout of approximately $25. We are pleased to be in the position of rewarding Bean employees for their achievements. among Japan’s official holidays are Respect for the Aged Day. An additional $8. although Japan’s retirement system was similar to the United States (a combination of Social Security and employer-sponsored plans).5% of annual pay to eligible employees.” he continued. the Emperor’s Birthday and Physical Fitness Day.” he said. For example. including the opening of three additional stores. and making further progress on the international side of our business. “It was an exciting year with a lot of energy and growth. a Cultural Day. benefits because they were infused with cultural purpose.Bean’s President and CEO.L.5 million. as reported by PR Newswire: L. 2007. “Although unseasonably warm weather had an impact on sales in December and early January.6 % increase over 2005. The company also announced that its Board of Directors approved a cash award of 7. “It’s a well deserved bonus.L. loyalty and dedication to the corporate objectives? Let’s look at L. mfg Professional & commercial eqt wholesalers Electronics & appliance stores Electronic shopping & mail-order houses Software publishers Communications eqt mfg Electrical & electronic goods wholesalers .8 13. Industries with highest labor productivity growth rates.7 27.exHibit a: L. eStabLiSHmeNtS PrimariLy eNgageD iN retaiLiNg aLL tyPeS of mercHaNDiSe uSiNg NoN-Store meaNS SucH aS cataLogS or eLectroNic meDia The eight industries with the highest productivity growth rates over the 1990–2000 period. sPHR Computer & peripheral eqt mfg Semiconductor & other electronic comp.5 13. Reed. on average.0 12.2 15% 10% 5% 0% 14. each experienced growth in output per hour of more than 12 percent per year. 1990-2000 35% 30% 25% 20% 16.9 13. beaN-bureau of Labor StatiSticS for eLectroNic SHoPPiNg & maiL-orDer HouSeS. sandra M.4 31.L.4 16 © 2009 society for Human Resource Management. however. For that reason. both Aflac and L. this may be a good opportunity to discuss corporate responsibility to employees in particular and society in general. students should recognize that organizations can enhance their total rewards programs with benefits unique to their core business services or products. For example. In addition to the overviews provided in this case. In addition. Company overview. would it be as valuable if Aflac did not focus a portion of its philanthropy on this charitable cause? Students may find this type of insurance valuable regardless of the fact that Aflac is an insurance provider. Families with children may enjoy company-sponsored health care. sPHR 17 . It is also important to note that employee demographics play an important role in creating benefits packages that will enhance employee performance or retention. younger workers may prefer additional time off. How the company uses its own products or services to enhance the total compensation for its employees. the company offers cancer insurance to their employees with 100 percent of the premium paid by the company. Much of this information is also in this instructor’s resource and in the cases themselves. Aflac helps fund pediatric cancer research. as many will have known someone with cancer.iNStructor aNSwer guiDe 1.L. sandra M. Ask students how this benefit feature enhances the total rewards more so than if a non-insurance provider were to offer it. answers will vary and may include how an organization’s benefits enhance their quality of life and quality of their employment with the organization.Bean have extensive corporate information available online both on their web sites and in the media. © 2009 society for Human Resource Management. As a result. 2. Depending on the demographic composition of the student group. Throughout the research process. Reed. The instructor should review the student presentations to ensure they have identified that employees recognize when a “disconnect” exists between what an employer offers its customers and what it offers to employees. At L. measurable outcomes and assessed employee opinions through comprehensive surveys. At Aflac. management training programs and expanded fringe benefits are all examples of total rewards items that contributed to the accomplishment of these objectives. This fringe benefit also enhances total quality because employees are encouraged to provide feedback on how the products hold up to their designated use. performance-based pay. an external threat continued to be the increase in the cost of employee benefits. 4.L. 3. Its response was to improve the company’s existing strength—its employees—by rewarding performance.Bean made changes in an effort to grow the business while maintaining the integrity of the brand.L. increasing opportunities for advancement and enhancing employee service levels. Aflac was struggling with retention and responded through increased communication of the value of employment with the company.Bean product improvement. This practice serves as both a team-building effort and an opportunity to make recommendations for L. The internal strengths and weaknesses your team identified and how the company responded to these factors from a total rewards perspective. sPHR . n n Establishment of global compensation standards. discretionary cash bonuses.L. 18 © 2009 society for Human Resource Management.Bean. The company put in place HR programs with clearly defined. L. a passion for the outdoors drives many of the company practices.L. L. sandra M. including technology and the Internet. It did so by: n Responding to the opportunities presented by multi-channel retailing. By improving communication and defining benefits as a shared responsibility. The external opportunities and threats your team identified and how the company responded to these factors from a total rewards perspective. Transitioning to global outsourcing.Bean was struggling with the changing industrial landscape in several areas. Supporting the company’s commitment to social responsibility. including brick and mortar store development and Internet sales. The company maintains an employee-use room that houses outdoor equipment such as kayaks and hiking gear for employees and retirees to use free of charge. the company has been able to balance the rising costs of benefits with strategic initiatives such as offering company products and services to employees and communicating value over price. It is a regular practice for teams of employees to take adventure days together. Reed. flexible spending accounts. Examples include those mentioned above. This develops strong brand identification within the employee ranks that goes beyond traditional compensation and benefits packages. In addition. along with a mix of cafeteria-style benefits plans. diversity and many other strategic objectives.Bean continues to build on decades of strong customer focus to deliver profitable results to its employees and other stakeholders while maintaining private ownership.L. customer service. 6.L. How the company aligns its benefits with its corporate values. paid vacations and generous retiree benefits. Both companies employ traditional and non-traditional rewards effectively to meet the organizational needs of improved productivity. sPHR 19 . competing in a global landscape and a continuing its commitment to the environment are stated L. L. retention. L.L.Bean values. The company provides opportunities for employees to participate in activities that sustain the environment and encourages employees to test the company’s products in team-building adventure days. Examples of traditional and non-traditional rewards and how they are used to meet organizational objectives. the company’s total rewards statement to employees is an effective communication tool designed to increase retention as a direct result of the quality of benefits offered while still using cost-sharing to offset the rising cost of offering benefits.Bean continues its tradition of employing older workers and offers traditional benefits to employees even after retirement. Aflac focuses on being an employer of choice. employee job satisfaction.5. Reed. Responding to changing market conditions. sandra M.7 L.L. with more than 75 percent of employees participating in in-house classes in 2006.Bean has adopted fair labor practices for workers outside of the United States in the area of wages and working conditions. For example. © 2009 society for Human Resource Management. Traditional benefits offered include in-house training to develop employees to respond to the changing market conditions. This includes providing opportunities for management and supervisory development using a combination of in-house training and external resources to develop strong leaders. VA: Author. VA: SHRM Foundation.L.: 2008 AARP Best Employers for Workers Over 50. February 28). Bean: The making of an American icon. The Conference Board.cfm?press_ID=2582. Reed. L. Cambridge. 5. L. New York: The Free Press. 2. (2006). L. 2008 job satisfaction: A survey report by SHRM. 20 © 2009 society for Human Resource Management. Alexandria.org/hrdisciplines/benefits/Documents/07RewardsStratReport.org/documents/fact_sheets/f_hr. Cambridge. particularly in jobs that are more commonly outsourced. Inc. Retrieved from www. L. L. Gorman. Retrieved from www. sandra M.aarp.Bean.conference-board. September). Recommendations by the team regarding an expansion of the benefits programs offered at the company that would further align HR with the accomplishment of their organizational goals and values. Retrieved from www. job satisfaction keeps falling [press release]. (2006). 3. Expanded cafeteria-style benefits so employees can spend their benefits dollars in the area of greatest need. sPHR . AARP. students should be able to recommend benefits such as: n Programs that allow employees to donate their personal time off to other employees in the time of crisis. Society for Human Resource Management. “Green” initiatives that allow employees to save money and positively affect the environment.S.shrm. L.pdf. MA: Harvard Business School Press. Financial planning for employees to manage the gap between earnings and increasing expenses. Implementing total rewards strategies. Heneman. Increased focus on job sharing. (2005. R.org/money/work/best_employers/articles/ll_bean_2008. (2008).jetro.org/utilities/pressDetail. telecommuting and other alternative work arrangements. Gorman.html.org. Dynamic compensation for changing organizations: People. L. 4. Retrieved from www. Expanded training opportunities for skill acquisition. Alexandria.pdf. Human Resources and Payroll Tax Administration [fact sheet]. 7.7. (2008. (2007). The Hay Group (1996). With the changing workforce and struggling economy. n n n n n 1. Performance & Pay. 6. MA: Harvard Business School Press. U. The Japan External Trade Organization. Bean: The making of an American icon. L. shrm. . if you are not a SHrm member and would like to become one. please visit www.SHrm members can download this case study and many others free of charge at www.org/join.shrm.org/education/hreducation/pages/cases.aspx. VA 22314-3499 .1800 Duke Street Alexandria.