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Taking a closer look at benefits: the Wegmans way

In the board game “Jenga” players try to remove sections of an assembled tower without sending the structure crashing to the floor. Those who keep their towers standing, win. That idea got me thinking about a short story I recently read about Wegmans. It said the grocery chain will discontinue newspaper advertisements and rely instead on its employees to communicate directly with customers.

Wegmans’ reputation as one of the best companies to work for in the United States is renowned, but for a grocer to count on employee loyalty in this manner is remarkable, especially in today’s business climate. We’ve all seen news reports around the country about employee resentment rising as companies and government agencies work to find a balance between benefits and costs.

To learn more about Wegmans’ relationship with its employees, I sat down with Gerry Pierce, the company’s senior vice president of human resources and Anne Meath, Wegmans’ director of organizational development. I asked them the “Jenga” question: If changes to a benefit plan have to be made, how do you make sure you don’t topple the tower?

The two pointed me to a unique employee study Wegmans conducted four years ago. Employee surveys are not new to Wegmans. The company has appeared on Fortune magazine’s list of “100 Best Companies to Work For” every year since the list began in 1998 (it ranked No. 3 this year). But, Gerry said, the employee surveys used in that type of program do not provide the level of insight Wegmans needed to evaluate its pay and benefit packages as a whole. Wegmans wanted to dig deeper, he said, and assess what parts of the benefit package mattered to folks and in what way.

Anne described the effort this way: “What we wanted to find out is if we had to make a change (to the benefits and compensation package) where should we make the change?”

The study included three parts:

  • Understanding the level of employee engagement
  • Assessing what factors attract employees to the company and keep them working there long term
  • Applying conjoint analysis, a statistical method often used to measure how consumers value product features

Conjoint analysis? This method is used in market research to determine what consumers value. Automobile manufacturers, for example, will apply conjoint analysis to determine what features on a new car should be considered “standard” or an “upgrade.” The method simulates a buying experience to determine how much a consumer is willing to “pay” for each feature. The analysis then derives a relative value for each item.

Using conjoint analysis enabled Wegmans to take employee responses regarding what benefits they valued the most, analyze the cost and relate that information to actual investments the company is making in terms of pay and benefits.

“When you are looking at benefits there are a lot of things that have value with people that don’t necessarily cost whole dollars,” Gerry said. “Sometimes those things are worth more or as much as direct pay items.”

For example, through the survey, Wegmans learned that predictability clearly was important. Employees would rather pay a bit more for benefits upfront if it shields them from out-of-pocket exposure down the line. “This was an important insight and one that did not match what we had heard anecdotally,” Gerry added.

About 1,000 of the company’s then employees from 17 locations participated in the study. In an effort to assess what things employees valued the most, a survey asked workers to rank factors that influenced why they joined Wegmans and why they stay.

Employees were asked to rank 12 factors such as wages, health benefits, flexible schedule, fun at work (see full list in sidebar). The top three factors that influenced employees’ decision to join Wegmans were:

  1. Flexible work schedules
  2. Company reputation
  3. Health benefits

(Base pay was ranked second to last, and “time off” appeared last on the list.)

The top three factors employees cited for staying with Wegmans were:

  1. Health benefits
  2. Flexible work schedules
  3. Employment security

Wegmans’ Key Benefits

Health. Wegmans currently pays about 85 percent of healthcare costs for about 16,000 full-time employees (part-time employees working more than 24 hours per week are eligible for single coverage healthcare). As the healthcare landscape changes, with traditional group healthcare coverage shifting to other formats such as high-deductible insurance plans, Wegmans will monitor the situation using two primary filters, Gerry said. “Before we move in any direction we ask what the impact on our budget is, and what is the impact on our people’s budget?”

Work. Wegmans employees also enjoy a long list of additional benefits such as:

  • Dental Coverage
  • 401(k) Retirement Savings Plan
  • Wegmans Retirement Plan
  • Scholarship Competition
  • Paid Time Off
  • Medical Spending and Dependent Care Reimbursement Accounts
  • Life Insurance
  • Adoption Assistance

While some of these benefits represent direct costs (since the Scholarship Program made its first awards in 1984, for example, Wegmans has assisted more than 24,000 employees, awarding more than $81 million in scholarships), many benefits such as flexible scheduling, professional development opportunities and a fun, family-like atmosphere have value with employees without costing the company, Gerry noted. Understanding what employees value is critical to a company that considers its people as its “go to” market strategy. The other piece is communication, he added.

When changes do occur, it’s important to add “time” to the communication strategy. Managers need the space and focus to make sure the messages get across. “We make sure not to ‘announce and do,’ Gerry said. “We make sure that change is completely understood before it is made.”

The Stakes

As the economy slowly recovers, an increasing number of employees may be eyeing the door, according to MetLife’s Ninth Annual Study of Employee Benefits Trends, released recently. According to the study, less than half (47%) of the 1,412 full-time employees interviewed reported feeling very strong loyalty to their employer – down from 59 percent three years ago.
Yet many employers, according to the study, believe their employees feel the same loyalty toward them today as they did several years ago.

Talking with employees goes a long way to addressing this disconnect, Anne said. Companies that take the time to ask their people what factors they value stand a lot to gain. “For decision making purposes we looked at the conjoint survey, but we also learned a lot from the employees simply ranking what they valued,” she said. “We look at that page as much as we do anything.”

© HR Works, Inc.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.