Page 245 - Fundamentals of Management Myths Debunked (2017)_Flat

244 Part 3 • Organizing
enroll in a smoking cessation program, can get free annual physicals, colonoscopies, and
100 percent coverage of preventive care as well as lower deductibles and costs. At Black
and Decker Corporation, employees and dependents who certify in an honor system that
they have been tobacco-free for at least six months pay $75 less per month for their medi-
cal and dental coverage. At Amerigas Propane, employees were given an ultimatum: get
their medical checkups or lose their health insurance. Some 67 percent of employers are
concerned about the effects of obesity on medical claims expenses. 67
All these examples illustrate how companies are trying to control skyrocketing employee
health-care costs. Since 2002, health-care costs have risen, hitting $3.8 trillion in 2013. The
actual dollar amounts for 2014 were not available but increased by 5 percent over the previ-
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ous year. Two health areas of concern for organizations are employees who smoke and
obese employees. Smokers cost companies an estimated $6,000 a year, with about a third
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of that being health-care costs. The biggest health-care cost for companies, however, is
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obesity. Morbidly obese individuals cost employers more than $8,000 a year. A study of
manufacturing organizations found that presenteeism, which is defined as employees not
performing at full capacity, was 1.8 percent higher for workers with moderate to severe
obesity than for all other employees. The reason for the lost productivity is likely the result
of reduced mobility because of body size or pain problems such as arthritis. Another study
found that injuries sustained by obese workers often require substantially more medical care
and are more likely to lead to permanent disabilities than similar injuries suffered by employ-
ees who were not obese. 71
Is it any wonder that organizations are looking for ways to control their health-care
costs? How? First, many organizations are providing opportunities for employees to lead
healthy lifestyles. From financial incentives to company-sponsored health and wellness
programs, the goal is to limit rising health-care costs. About 43 percent of companies use
some type of positive incentives aimed at encouraging healthy behavior, up from 34 percent
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in 1996. Another study indicated that nearly 90 percent of companies surveyed planned
to aggressively promote healthy lifestyles to their employees during the next three to five
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years. Many are starting sooner: Google, Yamaha Corporation of America, Caterpillar, and
others are putting health food in company break rooms, cafeterias, and vending machines;
providing deliveries of fresh organic fruit; and putting “calorie taxes” on fatty foods. At
Wegmans Food Markets, employees are challenged to eat five cups of fruits and vegetables
and walk 10,000 steps a day. And the “competition” between departments and stores has
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proved to be very popular and effective. In the case of smokers, however, some companies
have taken a more aggressive stance by increasing the amount smokers pay for health insur-
ance or by firing them if they refuse to stop smoking.

What aboUt emPLoyee PenSion PLan coStS? The other area where organiza-
tions are looking to control costs is employee pension plans. Corporate pensions have been
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around since the nineteenth century. But the days when companies could afford to give
employees a broad-based pension that provided them a guaranteed retirement income have
changed. Pension commitments have become such an enormous burden that companies can
no longer afford them. In fact, the corporate pension system has been described as “fun-
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damentally broken.” It’s not just struggling companies that have eliminated employee
pension plans. Lots of reasonably sound companies—for instance, NCR, FedEx, Lockheed
Martin, and Motorola—no longer provide pensions. Only 42 Fortune 100 companies now
offer pension plans to their new hires. Even IBM, which closed its pension plan to new
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hires in December 2004, told employees that their pension benefits would be frozen.
Obviously, the pension issue is one that directly affects HR decisions. On the one hand,
organizations want to attract talented, capable employees by offering them desirable
benefits such as pensions. But on the other hand, organizations have to balance that with
the costs of providing such benefits.

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