Springs Industries is hardly alone when it comes to wrestling with the growing problem of absenteeism, which increases a company's costs of operations in myriad–and not always readily measurable–ways. These range from lost productivity caused by skilled employees being gone to added overtime for remaining workers picking up the workload, to increased costs for customer service if product quality suffers. According to a recent study by Mercer Human Resource Consulting and Marsh Inc., the direct costs of employee absences (a number that includes both absenteeism and short- and long-term disability leaves) at U.S. companies averaged 15% of payroll in 2002. That number has been gradually drifting upwards over the past several years, and the trend is only expected to worsen as the U.S. population ages, leading to an increased incidence of muscular/skeletal injuries, obesity problems, including diabetes, heart disease and depression.

While historically absenteeism has been considered largely beyond a company's control, in today's more competitive global market, with workforces trimmed to the bone and profits being squeezed, managers are increasingly looking at all health-care related costs, and absenteeism is no exception. "Obviously, you can't eliminate most of that 15% of payroll that's going to absence programs," says William Craig, a senior vice president at Marsh, explaining that many of those absences are important for employees, whether it's to heal an injured back or care for a sick child. "What is controllable is about 1% to 2% of that, but that can still be a lot of money."

Initially, Springs Industries decided to address chronic health problems by offering a free voluntary health screening to all its employees. It hired Johnson & Johnson, which proceeded to test employees for cholesterol, blood sugar levels and blood pressure–the three most common chronic health conditions that lead to absenteeism. "People fell into one of three buckets," says Gilles. "There were those who knew they had a problem and were managing it, those who knew and were ignoring it, and those who simply didn't know they had a problem."

Since federal law bars employers from charging disabled employees or those with health problems more for their health benefits, Springs Industries had to extend a carrot to make employees act to avoid health problems or treat them early. The program: Any employee who would sign up for screening and stick to a treatment regime, if necessary, qualified for a reduction in the co-pay required by the company's health coverage. The company also established a 24-hour nurse-on-call system, so employees could phone for health advice, explanations of physician instructions, etc.

Trimming the Fat

The company has screened half its employees to date (it expects by the end of the screening to test 95% of employees) and so far, close to half failed to meet at least one of the three health standards being monitored in the program. These results may seem shocking, but for the $1 million annual cost of the program, Gilles predicts that Springs Industries can eliminate the entire above-the-benchmark costs the company identified as being related to chronic health problems within 18 months. "It's not a hard sell," says Gilles. "If we'd presented it as a way to improve productivity, we would have had a tough time, but showing management that we were spending more than our competitors–that made it easy."

This is only the first shot in the war on absenteeism at Springs Industries. Gilles anticipates that it will take a couple of years at least for Springs Industries to eliminate entirely its uncompetitive overhead. Even so, it is far ahead of many companies that haven't even begun to assess the impact of absenteeism in the first place. According to the Mercer/Marsh report, 77% of the 723 companies surveyed still don't even isolate the costs of disability leaves, much less trace them back to individual departments or business units. The sources of absenteeism are likewise not widely accounted for, with only 18% of reporting companies saying that they identify management units with specific absentee rates. One result: "A lot of companies still don't see the advantage of establishing prevention and wellness programs to attack absenteeism and disability claims," says Mark Bilodeau, senior vice president for employee benefits at Willis. "But that's starting to change. With data mining, people are starting to realize that they can get a return on that investment much earlier than they imagined. You don't need to wait two years for a payback. The whole prevention and disease management area is developing rapidly."

FedEx Express is one company that has gained a reputation for trying to get a grip on absenteeism. After running a program that reduced costs related to disability by close to $1 billion over the past seven years, the company's transportation unit, which represents some 90% of parent FedEx Corp.'s total workforce, turned its sights on absenteeism. Again, the company offered incentives connected to employees' use of their five paid sick days. "If you're sick more than that, it comes off your floating holidays or vacation days," says Larry McMahan, vice president for human resources performance and support at FedEx Express. "But if you don't use those five days, you can cash them in at the end of the year for a cash bonus." The result of the program: a 32% reduction in medical absences in 2002 and savings of "tens of millions of dollars." The program has proved wildly popular, with 40,000 workers receiving bonuses last year for not using all their absence days.

The popularity of FedEx's incentive program is important to note. The Mercer and Marsh report stresses that many companies say that their benefits programs–particularly their generous leave policies, which for example often allow workers to take sick days for other, non-medical family emergencies–are important in recruiting and retaining top employees. As Marsh's Craig notes, "attacking absentee costs is not about cutting benefits, which can be very demoralizing for the workforce."

One Size Won't Fit All

While some programs aimed at attacking absenteeism and disability costs are probably easily replicable, others need to be adapted to specific company conditions. In Springs Industries' case, Gilles says the company's historically "paternalistic" relationship with its employees, and its low turnover rate, helped make its screening program work. "Our overall turnover rate is just 25%, but after people are here for three years, it's very little," he says. "I don't think this kind of screening program would make sense in a retail setting where you have turnover of 70% or higher."

On the other hand, FedEx's McMahan says the kinds of programs set up by his firm aren't rocket science either. "What we've accomplished," he says, "could be done by any company."