Robyn Perkins

An alarming number of business owners can’t quantify the real dollar cost of not managing people effectively, let alone how much improved productivity actually adds to financial performance.

According to Robyn Perkins, Aon Hewitt’s Managing Director, People Risk, the old-fashioned belief that managing the workforce is the sole territory of the human resources department is preventing businesses from eliciting the hard data, and understanding the true financial return on investment of having the right people management strategies in place.

“The reality is that when we talk about managing “people risk” we are referring to optimising the way an organisation addresses everything from absence management, staff turnover rates, health and safety strategies, management of temporary staff, right through to workers’ compensation. Managed well, each of these can be used as a lever with a direct effect on the bottom line. But the real skill lies in understanding how they work together to improve productivity and financial outcomes, often exponentially,” she said.

Ms Perkins went on to say that employers should know that it is possible to calculate the specific dollar cost of different people risks, and from there identify drivers and strategies to address and reduce risk.

“Putting metrics in place and showing the ROI around happy and healthy employees is absolutely possible. The challenge is to identify factors or measurements which are discernible and contestable. There are many factors such as absence, turnover, leave, overtime, use of contractors, labour hire and so on. The key is to combine these measures with others such as insurance costs and productivity impact to really understand the cost, risk control issues and priorities to drive reductions,” said Ms Perkins.

Ms Perkins noted that while a number of Australian companies were beginning to fully appreciate the benefits of a well-managed workforce, there was still a long way to go. And this is an important gap to fill because, just as there are significant benefits from good people risk management, there are serious downsides when the risks are not effectively addressed.

“Often firms believe they are managing their people risk well but their cost structures keep blowing out. This is usually because they are not addressing the most important factors. For example, a firm which had a $37m cost problem was able to reduce that cost by over $17m by identifying the most important drivers and strategies for addressing and reducing its people risk.”

Ms Perkins concluded by saying that clichés such as “people are our most important asset” are clichés precisely because they are true.

“Every business may well be different, but the net effects of good or poor people management tend to be very much the same. And the fact is that employers are in the driver’s seat. They have a fiduciary responsibility to mitigate against workforce related risks by having a considered people risk management plan that pushes all the levers in the right direction,” said Ms Perkins.

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The Aon Hewitt Top Companies for Leaders study evaluates and recognises what it takes to execute best-in-class leadership and talent management across the globe. This year’s Australian and New Zealand Top Companies were selected and ranked by a panel of independent judges using a number of criteria, including assessing strategies and success in the attraction, identification, retention and development of leadership talent.

“A new normal now exists. Leadership practices that used to differentiate are now commonplace within Australia and New Zealand. However, a new benchmark has now been set by Aon Hewitt’s 2014 Top Companies – DHL, Lion and Z Energy. These Top Companies all exhibit highly effective practices that, combined with clear outcomes and measurement, ensure strong leaders are continuously coming up through the ranks,” said James Rutherford, Principal and Head of Leadership at Aon Hewitt.

Z Energy was recognised as a Top Company because it embeds a positive leadership culture, provide leadership development opportunities and integrate leadership expectations into on-boarding and induction processes. Lion develops authentic leaders, drives culture and engagement through leaders, identifies future leaders and helps them flourish. WhileDHL was praised for promoting diversity and inclusion through leadership, providing strong leadership development frameworks and creating and embedding engaging leaders within the business.

The 2014 Australian and New Zealand insights showed that Top Companies are moving the dial and taking their practices beyond the ‘new normal’. Aon Hewitt’s 2014 Top Companies for Leaders study identified six areas where Top Companies within Australia and New Zealand are setting a new standard:

Top Companies are moving from:

1. Processes to outcomes: It is no longer about processes, policies or simply completing an activity or program. Top Companies consistently measure the effectiveness of such practices and hold their leaders accountable for the outcomes.

o Key data point: 90% of Top Companies hold leaders accountable for the promotion rate of high potentials Vs 30% of other organisations.

2. Engagement measurement to developing engaging leaders: Almost all organisations now measure engagement, Top Companies however have an increased focus on the selection, attraction and development of leaders who through their personality, sense of purpose, experience and behaviours create engagement in their organisations.

o Key data point: 65% of Top Companies hold leaders accountable for the engagement levels of Managers and Managers’ direct reports Vs 30% of other organisations.

3. Diversity to inclusion: Top Companies focus much more on the gathering of diverse perspectives and insights from both within their organisation and externally.

o Key data point: 70% of Top Companies track gender diversity for successors to the CEO Vs 43% of other organisations.

4. Accumulating followers to developing leaders: Top Companies believe that the primary role of leaders is to identify and nurture upcoming leaders.

o Key data point: 95% of Top Companies use 360 degree feedback to assess how leaders are developing their talent Vs 55% of other organisations.

5. Assessing skill to aligning for fit: Top Companies assess both the skills required for the future success of the organisation and the fit to the organisation’s aspired culture and strategy.

o Key data point: 75% of Top Companies use personality assessments to measure the potential of front line managers Vs 49% of other organisations.

6. Higher performance to higher purpose: It’s not just about performance, Top Companies create a sense of higher purpose and look at how they contribute to the environment and how their strategy affects the communities in which they work.

o Key data point: Top Companies are twice as likely as other organisations to offer employees special assignments directly related to their CSR strategy.

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Many organisations not aware that employee insurance premiums may be increasing due to challenges within the life insurance market.

New survey reveals Australian businesses are in the dark about the changing superannuation and insurance landscape

Recent significant changes to the superannuation and insurance landscape have left Australian businesses reeling, with many taking little or no action to mitigate the impact on their employees and their bottom line.

This is one of the major findings of the recent Aon Hewitt Superannuation and Insurance Pulse Survey (the Survey). The Survey, which collected data from 131 organisations around Australia, provides an overview of current superannuation and employee insurance practices and details how organisations are responding to the rapidly changing environment.

The results of the Survey are of particular interest now, given the number of significant changes to superannuation that have recently been introduced. These include the second increase in the superannuation guarantee (SG), from 9.25% to 9.5% in July 2014, and changes to concessional contribution limits.

Ashley Palmer, Principal & Actuary within Aon Hewitt’s Retirement and Financial Management team, said that organisations were well-prepared for the second increase in the SG and other legislated changes such as MySuper. However many organisations are not aware that employee insurance premiums will in many cases be increasing due to challenges within the life insurance market.

“Many organisations are unaware that premium increases are on the cards because they have premium guarantees in place. They may therefore not be informed of the likely increases in premiums by their insurer or super fund until the guarantee is due to expire,” he said.

In fact, according to the Survey, just under four out of ten (38%) organisations have been informed that their group life premiums will rise, and of those which have been informed, more than half (52%) do not know how much the increase will be.

“Australian companies need to assume that insurance premiums are going up, and the risk for companies is that the increases are potentially substantial, which could have a big impact on their bottom line where the employer pays these premiums. The Survey shows that in some cases premiums have more than doubled.

“When you think about the effect of MySuper and the insurance changes together, it is astounding that nearly 40% of organisations have no intention of undertaking a review of their corporate superannuation and insured benefit arrangements to understand the possible effects,” Palmer explained.

When companies were asked about their policy regarding the cost of insurance, approximately 60% of companies surveyed reported paying insurance premiums in full or in-part on behalf of employees, with employees meeting the full cost themselves in the remaining cases.

“How employers manage the communication of these increases to their employees will also be vital,” Palmer said.

Other key findings from the Survey include:

• Only around one third (31%) of organisations set aside additional funds on top of the remuneration review budget to cater for the increase in SG to 9.5% in July 2014, a further 28% allocated funds from within the remuneration budget, and for 18% of organisations their employees absorbed the cost under a total remuneration package approach.
• When employers currently paying above the SG were asked whether they intend to continue to pay more than the mandated amount, over half (56%) said that they would be giving up their market leading position in the future to eventually be paying at the SG rate.
• Only a quarter (25%) of those employers currently paying above the guaranteed level said they would continue to increase their super at the same pace as the SG.

In conclusion, Palmer said that given superannuation is the highest benefit spend after pay for most organisations, and that around 60% of organisations pay insurance premiums in full or in part for their employees, Australian companies would be well advised to be aware of the changing landscape and to take action to mitigate risk.

“The potential benefits of conducting such a review are many, and include identifying cost savings, harmonising approaches, removing or de-risking legacy arrangements and implementing consistent and competitive insurance arrangements for all employees.

The bottom line is that superannuation and related insured benefits are an expensive and highly regulated component of an employee benefits package, so taking steps to maximise the potential return on this major spend and communicate it effectively is crucial for success,” Palmer said.

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Ms Davis is an established McDonald team member, having held a Senior Consultant position with the firm since 2010 before taking on the Head of Operations role last December.

“Both the firm itself and McDonald clients can consider themselves very fortunate to have someone of Sue-Ellen’s calibre and experience taking on the Lead role,” said Steven Gaffney, CEO, Pacific from Aon Hewitt. “She has deep first-hand knowledge of the firm, the market and the clients and will more than ably guide the team in the continued provision of deep insights that support the mining and resources sector in finding the right human resources solutions.”

Ms Davis will formally commence her new role from 10 April 2014. She will be replacing current McDonald Lead, Dave Edwards, who will be stepping down from the Perth-based position to return to Melbourne with his family.

“In welcoming Sue-Ellen to the new position we would also like to thank Dave for his contribution to McDonald and wish him well in his new role outside of Aon Hewitt,” said Steven Gaffney, CEO, Pacific, Aon Hewitt.

Ms Davis has over 25 years’ experience in Human Resources Management primarily in the mining and resources industries. She has held senior generalist and specialist Human Resources management roles on industrial and mine sites as well as in corporate offices with a number of large global resources companies. Prior to joining the McDonald team, Sue-Ellen held responsibility for Remuneration and Planning at Rio Tinto Coal Australia.

“We’re particularly pleased to have Sue-Ellen on board as Lead and a support to the Aon Hewitt team, delivering value to our clients in the mining and resources industries,” concluded Gaffney. “It’s no secret that the economic prosperity of the country is tied closely to the sector, and we see our ability to add value there as one with flow-on benefits for all.”

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Both appointments have been made from within the Aon Hewitt team, with Mr Fotheringham previously presiding as the Aon Hewitt Chief Executive Officer, Pacific, and Mr Gaffney, as the Aon Hewitt Chief Commercial Officer, Australia.

In their new roles, Mr Fotheringham and Mr Gaffney will be responsible for driving their established business segments’ strategies, with a focus on aligning more closely with other Aon businesses. This is in line with Aon’s desire to operationalise “Aon United” – an initiative that sees the crossing of existing organisational boundaries to better serve its clients and also provide a platform for growth and expanded career opportunities for its people.

Mr Fotheringham joined Aon in 1985, based initially in the UK, where he was responsible for Consulting’s operations in Scotland, North of England and the South West of England. Since moving to Australia in 1999, he has consistently led business growth through a combination of new services, acquisitions and geographic expansion.

“I’m pleased to welcome Stewart to the role, and look forward to working more closely with him as an important member of the Global Consulting Executive Committee and APAC leader. Stewart has had great success in collaborating across business lines in Australia and will apply the same approach throughout Asia, building on the strong partnership that currently exists amongst Aon’s various business units,” said Yvan Legris, Global CEO, Aon Hewitt, Consulting.

Mr Fotheringham, who will report to Mr Legris, replaces Edouard Merette, who has resigned from his position to pursue other career opportunities.

“While it is sad to farewell a colleague we wish Edouard all the best for his future endeavours,” said Mr Legris.

Mr Gaffney joined Aon in 2000 and initially served as the lead for Aon’s Master Trust business, before serving as Chief Commercial Officer for the Pacific region. He replaces Mr Fotheringham.

“Steven has been a passionate advocate of a united approach to growing our business and has worked closely and collaboratively with all of our Pacific practice leaders. In his new role, he will also continue to work closely with the senior leadership of Aon Risk Solutions and Aon Benfield in strong support of our overall Aon United strategy. I am confident that Steven’s experience and strong leadership skills will ensure continued success for our team and our clients,” said Mr Fotheringham.

Both appointees commence their new roles effective immediately.

Mr Legris concluded: “It’s particularly pleasing to be able to put in place our established succession plans and assign leadership from within our own Aon ranks. It’s a real testament to the capability of our people and ensures the transition will be as seamless as possible for clients and colleagues alike.”

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EQT to provide an estate planning referral service for AON Hewitt advisers.

Aon Hewitt has selected Equity Trustees Limited (EQT) to provide an estate planning referral service for its advisers.

Through the partnership, Aon Hewitt will have access to the services and assistance of EQT’s accredited estate planning and wills specialists, on behalf of its clients.

The service is available to Aon Hewitt’s financial adviser network although over time it will be extended to members of the Aon Master Trust and corporate clients.

Jayson Walker, general manager, Aon Hewitt Financial Advice, said there is an increasing need amongst its advisers for quality estate planning services for their clients.

“Australia’s aging population and the transfer of wealth from baby boomers to their children and grandchildren means that estate planning is an area of key importance to Aon Hewitt advisers.

“As a licensee we are keen to assist our advisers in ‘future-proofing’ their business wherever we can. One of the ways we hope to do this is by introducing solutions that help our advisers add value to their client relationships, and assisting multiple generations of a client’s family to see the difference that quality holistic financial advice can make to their financial situation is a good way to do that.

“We spoke with a number of service providers in the market and selected EQT because of its experience in partnering with advisers to deliver client and business outcomes. It has a robust estate planning process, national coverage, independence, and highly experienced and qualified estate planning professionals,” Mr Walker said.

David Plant, general manager operations at Aon Hewitt Financial Advice, added that: “Providing high quality estate planning services will also ensure our advisers are able to meet Future of Financial Advice (FOFA) requirements by ensuring a full understanding of their clients’ circumstances, and acting in their best interests.

“We therefore piloted a scheme with EQT where our advisers can access EQT’s estate planning specialists and over the next year, the service will be rolled out across the rest of the Aon Hewitt business.

“It has already resulted in positive outcomes for advisers who trialled the arrangement,” said Mr Plant.

Geoff Rimmer, head of Private Wealth Services at EQT, said that EQT is seeing an increasing level of interest amongst advisers in accessing the kinds of specialist assistance and expertise that EQT offers.

“Rather than attempt to be all things to all people, many advisers are recognising that a better approach – both for them and for their clients – is to have access to a network of experts that can be called on as and when needed.

“This allows them to continue to own the relationship with the client while at the same time having confidence that they are satisfying the fiduciary responsibility, the best interest requirements of FOFA, as well as broadening the base and strength of client relationships.

“We believe we are in a strong position to create similar approaches and services to other financial planning groups,” Mr Rimmer said.

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This is despite the fact that, for many organisations, the new regime is likely to change key aspects of their business, including remuneration packaging, how much superannuation they intend to pay and selection of a default MySuper fund.

The survey, the first to directly address the effect of the Stronger Super reforms on employers, was conducted by Aon Hewitt, and its findings compiled in the Australian Superannuation Pulse Survey Report. This looks at how over 160 small, medium and large Australian companies plan to respond to the Stronger Super reforms.

The report findings were discussed in detail at Sydney and Melbourne seminars hosted by Aon Hewitt, subject matter experts across superannuation, reward and insurances. The focus of the session was how employers can be both compliant and market competitive under the new rules. Further seminars will be held throughout Australia in the coming weeks.

Topics for discussion included how to fund the mandated increases in the Superannuation Guarantee, the introduction of MySuper default funds, employee reward structures, insurances and changes to concessional limits.  Attendees were given the opportunity to ask questions and have them answered by Aon Hewitt’s panel of experts.

According to Aon Hewitt Senior Consultant and Actuary, Ashley Palmer, from an employer perspective, superannuation is an expensive and highly regulated component of an employee’s benefits package. As such, whenever changes are introduced employers need to make a number of often complex decisions.

“The results of the Australian Superannuation Pulse Survey Report give a snapshot of the challenges that many companies are facing and the strategies that they have in place to manage them,” he said.

Mr Palmer explained that the objective of the seminar was to share the results of the survey in order to help Australian employers understand and prepare for what lies ahead.

“On one level, employers understand the need for compliance, but at the same time don’t have all the information they need to make informed decisions. They also don’t necessarily know what other organisations are doing and thinking,” he said.  “We wanted to share our insights into this, as well as to highlight current trends.”

Mr Palmer continued by pointing to some of the specific challenges for employers.

“Just one example is how employers intend to approach the increases in Superannuation Guarantee starting from 1 July 2013 and eventually reaching 12% in 2019. The effect will be different depending on a company’s particular remuneration approach. Broadly speaking, those who use a Remuneration Packaging method may be passing the cost on to employees, while employers who use the Base Plus approach will be bearing the increase themselves,” he explained.

“In addition, of the almost 30% of organisations currently paying over the Superannuation Guarantee, only 11% say they intend to stay the same amount ahead of the minimum when the increase hits. The approach taken this year may set a precedent for future increases.”

Mr Palmer went on to explain that, due to the introduction of the ‘MySuper’ default superannuation regime later this year, companies need to make an active decision on their default fund.

“The surprising finding here,” he said, “is that over 50% of companies surveyed have not yet decided what to do about choosing a default fund, compared with only 12% that intend to conduct a review to determine which fund to choose.  That’s concerning, considering that companies will need to be able to contribute to their chosen default MySuper fund from 1 January 2014. Our experts at Aon Hewitt are increasingly being asked by organisations to undertake independent reviews of their arrangements focusing on compliance and competitiveness.”

Mr Palmer concluded by saying that legislative changes to the superannuation regime can cause headaches or worse, such as financial penalties, for companies that don’t have a plan to address them.

“The Australian Superannuation Pulse Survey Report was conceived to pinpoint the issues and provide information on its practical effects to help employers prepare,” he said.

Australian Superannuation Pulse Report key findings:

• Of the 29% of organisations currently paying above the Superannuation Guarantee (SG), only 11% intend to stay the same amount ahead of the minimum when the SG goes up, whereas 32% will absorb the increase by foregoing the above-market position they currently maintain.
• Employers using a Base Plus approach to remuneration are more likely (40%) to set aside additional funds to finance the Superannuation Guarantee increase in 2013 compared with only 12% of employers using a Remuneration Packaging approach.
• 58% of organisations say they are yet to determine their response to the Superannuation Guarantee increases beyond 2013.
• Only 12% of organisations intend to commence a review to determine which MySuper fund to use as their default fund. Over half (52%) are still deciding what to do.
• Almost three-quarters (74%) are yet to consider an early transition strategy to transfer existing default super balances to MySuper.

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