The diversity matrix: Responding to the benefits preferences of a diverse workforce

Twenty to 25 years ago, a uniform benefit offering typically met the needs of most employees. At that time, the workforce was more homogeneous, there were fewer double-income families, same-sex spousal coverage was the exception, not the norm, and companies were not as global as they are now.

Today, companies are faced with the challenge of having to meet the needs of a widely diverse workforce. One-size-fits-all benefits plans no longer cut it.

Benefit plans and total reward strategies, which include cash, incentive plans, vacation, retirement benefits, perquisites and so on, need to embrace the broadness of workplace diversity as it exists today and which can be labelled as the “diversity matrix.” This matrix manifests itself in the following four categories: geographic, demographic, societal and cultural.

Geographic
Inequities can exist when an employer plan does not reflect provincial differences in areas such as medicare, maternity and paternity leave, east/west cultural differences and English/ French language issues.

For example, British Columbia residents may be interested in alternative therapies as opposed to Newfoundlanders. But cultural differences don’t end with Vancouver/St. John’s comparisons — employees in Toronto may have very different attitudes from those at a sister plant in Peterborough, an hour’s drive to the northeast. An employee group in one part of the country may hold strongly to benefits entitlements, while another is accepting of cash in lieu of benefits.

When it comes to drug coverage, provincial plans vary greatly. And Quebec’s RAMQ legislation carries stipulations about employer drug plan coverage, so a plan designed for another province may not easily transfer to Quebec operations. Drug coverage for retirees is another issue.

Provincial vision care coverage, a benefit key to many employees, varies greatly from province to province.

In terms of English/French language issues, a key consideration surrounds the translation of benefits materials to ensure there is no misinterpretation of terminology.

Looking beyond Canada, employees that are relocated to and from the U.S. will look for equitable coverage.

Then there is the increased evolution by companies to secure global branding. This branding needs to be external with customers but reinforced internally with globally consistent benefit and total reward offerings.

The degree to which employers concern themselves with developing uniform coverage that ensures workers in Halifax receive the same type of benefits as those in Calgary, regardless of provincial government policies, will depend upon an organization’s unique circumstances, taking into account industry sector, the employee population and competitiveness issues.

Demographic
The nature of work is changing, witness the introduction of the term “knowledge workers.” Today’s workforce includes hot skills, special classes of employees with a select skill and increased variable pay arrangements that differ among employees of the same company.

Redefined family units include a new prevalence of single parents, same-sex couples and combined families. Also, there is an increase in part-time arrangements, more employees who want to work on a contract basis and who appreciate flexible hours.

Societal
In the workplace today, four colliding societies coexist. These different mindsets accompany the demographic issues referenced above.

Older employees (over 55) don’t want change, are risk averse and have a strong entitlement mentality. Baby boomers (40 to 55) work hard, play hard. Generation X (25 to 40) is looking for work-life balance. The new “twitch” or nexus generation (18 to 25) wants to learn it now and get promoted for it today.

Generally speaking, each group will place different priorities on benefit offerings. For example, employees in mid-life will be looking for family friendly benefit packages. The best pension plan conceivable may be of little interest to staff younger than 25. And retirement planning will be more of a concern among older employees.

Cultural
Your company may have grown over time via mergers and acquisitions, in which case there will be issues among different managers and employees who question the alignment of the prior cultures with the new integrated company.

Even without any mergers or acquisitions, leadership change brings with it cultural change. Changes in customer demand lead to the necessity of cultural evolution. All organizations, if they are going to continue to thrive, must “refresh” their culture from time to time. Not all employees are onside for the ride. Culturally, some get left behind — creating cultural diversity.

The flexible solution
Given the magnitude of diversity, described above, it doesn’t take a rocket scientist to figure out that the traditional benefit or total rewards offering (which represents a huge cost to a company) needs to include some moving parts.

Managing this diversity requires an alignment of people and business strategy, as well as a total rewards offering. It’s not about parallel alignment anymore. To secure the right fit between the total rewards offering and the workforce requires an alignment by matrix. It requires an evaluation of workforce diversity and a cross-check to the perceived value of the total rewards package.

Look at the connections, the disconnects, the gaps and the overlaps. Tailor your total rewards offering such that it becomes an asset to attraction and retention goals and not a liability.

Not managing the diversity matrix results in high turnover, loss of key talent, challenges in employee recruitment and low productivity, as individual resentment can permeate the workplace when employees perceive inequities exist. Adding choice and flexibility is essential for companies forced to grapple with the diversity issue given its potential negative impact if left unaddressed.

One approach to addressing this challenge is the application of total flexible compensation (TFC). This concept involves valuing the total rewards offering and reallocating components to best meet the needs of a diverse workforce.

TFC is a bit like a deck of cards. Most card games are limited to 52 cards. Some cards you use, others sit in the pile. You reshuffle the deck as appropriate, ideally drawing cards to your advantage in the upcoming hand.

TFC is the same. Companies have a limited budget (only 52 cards in their deck). Some components of the total rewards package are fixed, others can be up for reallocation (shuffling) by the employee. The “budget” associated with those components of the total rewards offering that can be reallocated at the employee’s discretion is how you can address the needs of a diverse workforce while, at the same time, adding value but keeping costs the same.

Compensation and benefits cost a lot. Getting the right fit given the “diversity matrix” is a challenge. By being strategic in your HR focus, you will overcome it.

Flex plan reading list
For an in-depth look at designing a “total rewards” or “flexible compensation” program see the following:

“Total flexible compensation key in the new world of business” by Daphne Woolf, CHRR, May 3, 1999.

“Serving up flexible compensation” by Edward Elliott and Claudine Kapel, CHRR, Feb. 12, 2001.

“Why isn’t everybody flexing their benefits?” by Ashim Khemani, CHRR, Guide to Pensions & Benefits, June 18, 2001.

To access these articles online, visit Canadian HR Reporter’s web site at www.hrreporter.com, select “Search,” choose topic area “Benefits,” then select sub-topic area “Flexible.”

Daphne Woolf is a consultant in the Toronto office of William M. Mercer Limited. She may be contacted at (416) 868-2879 or [email protected]

Latest stories