Laura Graves of San Jose National Bank recalls the day her boss, James Kenny, the bank’s president and CEO, asked her: "How would you like to bring your baby to work?"

Graves, who at the time was pregnant with her first child and held the position of human resource director, gave him what seemed to be a good HR answer: "The bank can’t afford on-site day care."

Kenny explained that he wasn’t talking about a formal day care program. "He was talking about me literally bringing my baby with me to the job," says Graves, "and taking care of him while I worked."

To Kenny, the benefits of such an arrangement—perhaps considered impractical by most employers—outweighed the risks. He wanted employees to return eight weeks after giving birth instead of taking the extended vacation and sick time they may have accrued. Not only would he save hundreds of thousands of dollars in leave costs, he would minimize use of consultants and temporary workers.

"At the time, the bank had four women who were pregnant. Two of them managed departments," says Graves, now vice president of investor relations. "Faced with the idea of using consultants or temporary employees, the bank wanted to come up with a plan to curb the leave costs and get employees back to work sooner."

In place for three years, the program allows new parents to bring their babies to work until the children are six months old or start to crawl. Employees are allowed to take eight weeks of leave after a delivery without complications. The program has three basic ground rules:

Feeding and diaper changes take place in private. The parent is primarily responsible for the baby. Other employees can request a baby-free workspace. Management decides which employee moves, based on space and equipment considerations. Since the program started, no employee has requested a baby-free workspace.

Like Kenny, other CEOs approach work-family—or work-life—benefits with the bottom line in mind. In fact, there is quite a bit of quantitative analysis being done. Companies are proving that their "do-gooder" work-life programs do more than just accommodate employees.

Reduced absenteeism

Some employers are finding work-life programs effective in reducing the number of employee absences. According to the 1996 Unscheduled Absence Survey by CCH Inc., the rate of absenteeism has increased more than 14 percent since 1992. On average, absenteeism costs $603 per employee, according to the survey. And more absences are now attributed to family responsibilities and personal stress. 

To curb costs associated with unplanned absences, the Arnold & Porter law firm in Washington, D.C., has made it easier for employees to come to work even when a child is ill. Because of backup childcare, including sick care, partner Fern O’Brien points out, "people are able to come to work when they wouldn’t otherwise." The partners concluded that in 1993 alone, the firm saved $800,000 by providing backup childcare for employees’ children.

Implementing flexible schedules is another way employers are reducing unplanned absences. A Xerox customer operations site reduced absenteeism by 30 percent by allowing work schedules other than 8 a.m. to 5 p.m. five days a week. Some employees chose to work four long days a week, leaving the fifth day off for errands and more time with their children.

"We wanted people to feel whole, to have a feeling of well-being outside and inside work," says Jill Allen, marketing support manager at the U.S. customer operations in Lewisville, Texas. "Everyone is also accountable for the business because we expanded that responsibility to all employees. Now the work teams make decisions about work processes and work schedules. They can be flexible in meeting team members’ needs as long as the business need is met."

Eighty-five percent of the 300 employees at the customer operations site take advantage of flexible work schedules. Only 2 percent of workers had untraditional schedules before 1991.

"Before we had specific ground rules we operated by," says Allen. "Managers were restricted by policies, and working 70 hours a week was equated with high commitment and achievement. That perception was not really reality because you are not always productive just because you are there." 

Reduced turnover 

Other alternative work arrangements, such as part-time or reduced hours, have proven to curtail turnover costs.

At Aetna in the late 1980s, the turnover rate was 23 percent among high-potential, professional women who took leave for childbirth. By modifying policies to allow employees to return part-time after family leave, attrition was cut by more than 50 percent. The result: About a 90 percent retention rate for leave takers after five years, and an annual savings of more than $1 million in recruiting and hiring costs. Michele Carpenter, Aetna’s director of work-life strategies, says, "The costs really came out to $2 million, but we wanted to be conservative in quantifying the success."

Carpenter believes that managers do not appreciate the total costs associated with turnover. "We always use 93 percent of a person’s outgoing salary to figure the costs of hiring and training a new person," she says. "This formula also accounts for lost productivity and the supervisor’s time." The cost of replacing a person making $25,000, for example, is $48,250. Ninety-three percent of salary is $23,250, which is added to the current $25,000 salary to get the total in turnover costs.

If you can determine why employees are voluntarily leaving and find ways to resolve their dissatisfaction, Carpenter advises, you can reduce turnover by 5 to 10 percent. "This may not sound like a lot, but in terms of money," she says, "it is millions of dollars" for Aetna.

Before Lancaster Labs in Lancaster, Pa., opened an onsite childcare center in 1986, half of the company’s female employees who went on maternity leave never returned. Since then, 94 percent of new mothers return to work. Carol Hess, vice president of human resources, says that the savings in turnover costs are at least twice the $50,000 annual cost of operating the center.

Increased productivity 

Because employers can track productivity in various ways, the effect of family-friendly programs on productivity is one of their best-documented benefits.

Two-and-a-half years ago, at Hewlett-Packard’s Financial Services Center in Colorado Springs, Colo., employees approached management about working compressed workweeks of four 10-hour days. The employees, who handle financial transactions for the company, argued that the schedule would have two advantages: Customer service would improve because longer shifts would better span time zones for customer calls, and a weekday off would relieve stress and boost morale.

Thirty-eight of 60 employees chose to work compressed workweeks, and overlapped their schedules to cover all their responsibilities on their weekday off.

The immediate result: Productivity almost doubled. Each employee in the group that works compressed workweeks completed 63 transactions per day, while employees working traditional eight-hour schedules completed 37 transactions daily.

What employees discovered, says Morgan, is that "when you work 10-hour days, you get into a set pace. There are gains in productivity because there is more quiet time available in the early morning hours as fewer people are in the office."

There is also an added service benefit: "You have more time in one day to deal with customers because you are expanding the hours you are available to customers in different time zones," Morgan notes.

The change in work schedules produced other unexpected savings. According to Jerry Cashman, HP’s work options program manager, overtime hours were cut in half. Historically, overtime accounted for 7 percent of the hours worked by employees. Compressed workweeks reduced the figure to 2.7 percent of hours worked per employee.

And more satisfied employees is a bonus that has helped in recruiting new employees, Cashman adds.

Customer retention 

The newest discovery about the business benefits of work and family programs is their direct correlation with increased customer retention and satisfaction.

First Tennessee Bank surveyed employees and customers at its branches and analyzed the financial performance of each branch. Results showed that the bank, by meeting employees’ needs, encouraged employees, in turn, to provide more value to customers.

"We knew [based on internal research] that customer retention drove profitability and that customer satisfaction strengthened if we kept employees longer," says Patricia Brown, First Tennessee’s vice president and manager, family matters. "If managers had the tools to help employees find balance between work and life, we believed employee satisfaction would improve, thereby improving customer service—and the business."

And how do employers find out what employees want and need? Simply by asking, Brown says. Brown and bank managers discovered through discussions with employees that the most significant need was flexibility in the way work gets done. The bank’s first step was teaching managers how to focus on employees’ performance instead of their time spent in the office. Employees at all levels are allowed to work schedules other than the traditional 9 to 5. 

By overhauling work processes and time schedules, First Tennessee Bank actually increased profits. The numbers certainly tell the bank’s success story: The account-processing department instituted longer shifts at the beginning of the month because this was considered a "crunch" period. Employees then took a day off during a slower time of the month. The change reduced the time required to reconcile customer accounts from 10 days to four, increasing customer satisfaction with no added cost. 

Business units run by managers who ranked highest—as measured by employee surveys—in the work-and-family area have a 7 percent higher customer retention rate than other units.

"This may not seem like a lot, but it amounts to multimillions of dollars," says Brown. Employees with more supportive bosses stay employed at the bank 50 percent longer than others. As a result, the bank saved more than $1 million in turnover costs in the past three years. "We now have one of the highest customer retention rates of any bank in the country," says Brown. "What drives this is our ability to retain employees."

Once reduced hours with full benefits were instituted, of the employees who switched over from full-time hours, 85 percent say they would have quit otherwise. The bank estimates that total replacement costs saved is $5,000 to $10,000 per non-managerial employee, and $30,000 to $50,000 per executive.

The key to integrating family friendly programs with business operations, says Brown, is to understand the business and how it makes profits. "We approach all programs to see what the bank is getting out of them," she says.

Even in an open and flexible work environment where employees have a lot of leeway in making decisions and are provided a lot of flexible work opportunities, managers don’t accede to every employee request, Brown notes. "We have to be realistic; we are in business to make money."

"Our philosophy is that profit begins with satisfied employees," says CEO Ralph Horn.

That formula is working. In 1996, when the industry average was 6–7 percent, the bank’s overall revenue growth hit 11 percent. 

More research to come

Though many companies are continually tracking the effect of work-life programs on the bottom line, more research is under way to quantify how integrating work and life needs affects business operations. Radcliffe economist Paula Rayman is working with the Fleet Financial Group to create formulas to calculate the returns on investment in work-family programs and the effect these programs have on business performance.

Rayman will compare turnover, absenteeism and productivity rates at the company versus a control group of 300 employees who will be telecommuting or working flexible hours. The Fleet study will also examine the impact of childcare and elder care policies.

"In graduate school, the guys were not interested in putting factors in the formulas that I wanted to put in, like costing out child care," says Rayman. "Trained as an economist, I feel I can bring some legitimacy to the link between work and family. Work and family is not only a women’s issue, but an economic liability of all family units," she says. "Ozzie and Harriet are dead. Regardless of what people think, we are not going back there."