Speeches

Worker Productivity and Money Matters, 1997, National Foundation for Credit Counseling, Atlanta, Garman

WORKER PRODUCTIVITY AND MONEY MATTERS[1] Thank you for inviting me to be here with you today. The people in this room know that education makes a difference in people's lives. As a fellow educator, I know I am among friends. My association with non-profit credit counseling goes back over 30 years. I've served on NFCC's board of trustees as well as on the board of directors of our Southwest Virginia CCCS. Today I bring good news! Recently, I heard an employee say to his human resource manager, "Boss, please don't give me a $100 raise this year-instead, give me $100 worth of personal finance education." What a great idea! Let's examine some of the ramifications of this employee comment.

These are the Best of Times

The United States economy is the best in 40 years, perhaps the best in history. Economic growth is steady and inflation remains subdued. These are perfect conditions for business to sell more products, hire more workers and make more profits. Unemployment is hovering at record lows, less than 5 percent in many communities. Corporate profits have been soaring, and the U.S. stock market has been skyrocketing. Values have increased 100 percent over stock prices three years ago. Opportunities for success abound.

These are the Worst of Times

A full "two-thirds of Americans say they have trouble paying their bills and worry about money" (Coping with money woes, 1996). A national survey by Money magazine shows that 59 percent currently are "often worried about money matters (Keating, 1997). Further, over half of women say, "that an unexpected bill for $1,000 would be a big problem for their household." A survey last year revealed that 3 out of 4 Americans faced at least one significant financial problem recently, such as being unable to save for future needs, delaying medical care, or having problems with a collection agency. A Gallup poll finds that, "twenty percent of Americans predict they will be worse off financially in a year's time" (Trend spotter, 1997). Personal bankruptcies last year rose to "1,242,700 filings, up 35%" over the previous year (Criticism..., 1997). VISA U.S.A. estimates that consumers filing for bankruptcy will reach 1.44 million in 1997-an additional 12 percent increase (McDonnell, 1997). With more than 6 million bankruptcies in just the past five years, this means that on every single block of every suburban neighborhood a family recently went bankrupt, figuring 20 families per block. These bankruptcies have been occurring during the best economic times in forty years (Criticism..., 1997). One of these days the inevitable economic recession will occur-and although nobody knows when, we all know that those bad times will arrive-the recession will be exacerbated by excessive household indebtedness (Dunn, 1997). How many millions more consumers will be literally beating down the doors of your agencies to get help?

Peoples' Poor Personal Financial Behaviors are Harmful to Their Families and Their Employers

What are personal financial mistakes and careless behaviors? Two examples are occasionally spending too much money and writing a check with insufficient funds in the account. Some people occasionally make these financial mistakes. However, when they occur in excess they become poor financial behavior. Examples of poor personal financial behaviors that can negatively impact one's family life and/or one's employment include regularly spending too much money, often being unable to pay due bills, frequently losing money by gambling and/or buying lottery tickets,[2] habitually receiving "overdue notices" from creditors, having property repossessed, and filing for personal bankruptcy. One employer told me last month that some of his employees "think that garnishment is just a another way of paying bills." The cost of processing garnishments is only one example of how a worker's poor personal financial behaviors can negatively impact one's employer.

Employees With Poor Personal Finances Cost Their Employers Big Money

There are substantial costs to employers caused by the stresses associated with the poor personal financial behaviors of employees. This is the most glossed over and ignored worker issue today. With the absence of blood on the workplace floor or an understanding of some of the genuine factors contributing to such situations, it is easy for employers not to recognize how employees' personal financial problems spill over into the workplace. As a result, most employers have taken little notice of the negative effects of the poor personal financial behaviors of employees that are carried into today's offices, stores and factories. Approximately 25 to 30 percent of workers report high work stress. Over one-third of America's workforce report that money worries sometimes hamper job performance. Do employees take time off work to deal with their financial problems? I think you know the answer. Yes, workers take time away from productive labor to confer on the telephone with creditors, seek sources of additional credit, converse with co-workers about stresses, talk with supervisors about financial problems, and place gambling wagers. Employees sometimes even call in sick to their employers so they can make court appearances, talk with attorneys, and meet with others concerning their personal financial problems. They also take occasional extended work breaks, supposedly to use restroom facilities or to eat a meal, but instead spend the time dealing with financial stress. For example, an employee who misses four days of work in one month personally experiences a 20 percent loss in productivity (4 days missed divided by 20 working days). This does not include any related costs for temporary labor, worker's compensation, employee health care, and increased insurance premiums. Nor does it include the opportunity cost of the disrupted productivity of other workers inconvenienced by the financially troubled employee. The extremely high costs incurred by employers include lower job productivity, absenteeism, tardiness, loss of customers who seek better service, loss of revenue from sales not made, accidents and increased risk taking, healthcare costs for stress-related illnesses, disability and worker compensation claims, thefts from employers, time lost from the job dealing with personal finance matters, and employee turnover. Research shows that "approximately 15 percent of workers in the United States are currently experiencing stress from poor financial behaviors to the extent that it negatively impacts their productivity" (Garman, Leech & Grable, 1996; Garman & Leech, 1996). One employer recently told me that "40 to 50 percent of my employees are over-stressed about their debts such that it reduces their productivity, and that is a very conservative estimate." Depending upon employee income levels, ranges of age, stage in the life cycle, and the cost of living, the proportion of workers experiencing financial problems that negatively impact productivity for a single employer could range as high as 40 to 50 percent. This is not an unrealistic number. A research study by the Military Family Institute concludes that the annual productivity loss to the U.S. Navy for the poor personal financial behaviors of service members is conservatively estimated to be $207 million annually, including $172 million in measurable productivity losses and $35 million in paper processing costs (Luther, 1997). Since there are approximately 425,000 service members in the U. S. Navy, the productivity loss for poor personal financial behaviors amounts to over $517 annually per service member. Do you think that employers in your community are aware of the extent of the cost? Just think about that point, please. If you want to change perceptions of employers about the high cost of workers with personal financial management problems, what should you do? I suggest three steps.

First, Explain to Employers how to Measure the Decline in Worker Productivity

If the decline in worker productivity is 20 percent, the cost to an employer of 1,000 people is estimated at $900,000 annually. This is calculated as follows: $30,000 (annual employee wage) X 150 (current number of financial troubled employees) X .20 (lost productivity). This amounts to $6,000 per financially troubled employee, and it is based upon the assumption that workers experience personal financial problems to the extent that their productivity is reduced 20 percent, a fair estimate.

Second, Get Past the Idea that Budgets, Diets and Research All Seem Hard to Do and Instead Recognize that They are Not Difficult When People Know How to Go About It

When figuring out a personal budget, it might take two or three hours to collect the information and set up a system that works. Maintenance of a budget might take four hours a month. It's about the same when going on a diet. In fact, my registered dietician spouse would say here that "going on a diet" is always the wrong approach. What works in weight reduction also works in money management. People who get control of their personal finances establish a new spending lifestyle that includes an occasional spending spree-these are the credit counseling successes. People who get control of their body weight similarly establish new eating habits with an occasional high-fat treat-they don't starve themselves. You-the leaders in the credit counseling industry-must conduct research in order to convince employers of the value of any personal finance education they might provide in the workplace. Conducting research is somewhat parallel to budgeting and dieting. If you change your mindset a bit-take a newer perspective on your everyday work with employers-you can carry out successful and meaningful research. Action research is an inquiry or investigation into a problem with the expectation that the findings, not definitive answers, might provide some insights to its resolution. Action research is often conducted with questionnaires that contain only a few questions and variables. I urge that consumer credit education directors conduct action research in their communities, share research instruments with others, and publicize findings with employers and with colleagues in other member agencies and with other audiences.

Third, Help Employers Calculate the Numbers that will Convince Them to Pay Part of the Salaries of NFCC Educators

The bottom-line benefits of consumer credit counseling services have long been known to creditors, and, as a result, many creditors have voluntarily remitted a portion of funds back to NFCC member organizations. Another question is how can a NFCC operation persuade a large employer in their community-who is not already a supportive creditor-to pay part of the salary of a NFCC educator? The answer is a straightforward process. Convincing an employer to pay part of the salary of a credit educator requires good evidence from two sources. To accurately estimate the number of employees at certain large employers who have consumer credit problems, your first source of information will be NFCC member historical records. Begin by analyzing data sources to ascertain the number of clients who during a given year were employed for certain large employers. For example, XYZ corporation has 1,000 employees and during the year 110 workers came in for counseling. That amounts to 11.0 percent (110/1,000), although that number is not the true tally of people in financial trouble. Next add in an appropriate estimate for the number of people who schedule appointments yet do not show. For example, if the no-show rate for counseling appointments is 50 percent, and given local knowledge it may be fair to deduce that one-quarter of those people later reschedule and do see a counselor. This reveals that the NFCC member organization is not seeing three-quarters of the no-shows. Thus, an additional 37.5 percent (.75 X .50) of people in a geographic area-fairly distributed among all walks of life-are experiencing serious stress about personal financial matters. Multiplying the 37.5 percent times the 11.0 percent reveals that another 4.1 percent (.375 X .11) and adding it to the base number of 11.0 percent shows that a better estimate of the true tally of workers at a particular employer who are experiencing serious stress about financial matters would be 15.1 percent. As an important aside, let me point out that an even more accurate figure could be deduced by adding on to the 15.1 percent figure additional numbers representing turndowns for loans from credit unions, consumer finance companies and banks as well as approvals for debt consolidations from those same lenders. This is where NFCC members can get creditors to help do the needed research. Creditors who are unwilling to pay their fair-share contribution may be quite willing to pay for research and education efforts to measure the impacts on the bottom line. The second source of evidence comes from the employer and the employees. The task is to determine to extent to which the NFCC member organization's information, education and services make a difference to the employer's bottom line. It is vital for NFCC members to approach large employers and creditors to help underwrite the costs of research and education efforts to measure the impacts on the bottom line. This is important. Evidence must be accumulated in one or more of six areas: (1) increasing employee motivation, self-confidence and job productivity, (2) decreasing absenteeism due to matters associated with personal finances, (3) decreasing healthcare costs, particularly for stress-related illnesses, (4) saving work time from not attending to personal finances during the workday, (5) securing employee loyalty and retention, and (6) avoiding lawsuits from employees claiming employer negligence.[3] Employers and NFCC members can work together to place values on these factors. The best way to obtain the information is to bring the key people together-employers along with providers of information, education and services-so that they can agree on data analysis as well as the solutions. After offering work site educational programs, such as seminars, workshops, and classroom instruction, as well as face-to-face interactions, it is vital to measure the results and share the findings with employers. Calculating the numbers should reveal that the personal financial wellness of employees is something that can be turned from a cost into a positive contributor for employees, employers and shareholders. Proponents of credit and budgeting education, or what I more broadly describe as comprehensive personal finance employee education, must be able to make a dollar-based economic impact statement such as, "This calculation shows that a PFEE program valued at X dollars will save the company Y dollars per year." The return-on-investment calculation will do no good, however, unless the information is publicized. Newsletters aimed at human resource managers are "an excellent vehicle for reaching employers and EAPs" [employee assistance programs] (Rupe, 1997). Speaking at professional meetings is another effective way to publicize return-on-investment findings. Employers need to be learn that offering financial wellness information, education and services for employees is a great deal for both the employer and the employees.

Employers are Adding a Comprehensive Financial Wellness Component to the Human Resource Services Offered Employees

There is a growing national movement to offer financial education in the workplace (Lee, 1997), partially because so many workers are not saving for retirement that they are going to have extreme difficulty finding the money for retirement (Swoboda, 1997). Fifty-six percent of employers "are offering employees financial education on saving and investing for retirement" (KPMG..., 1997). However, only 17 percent of large employers offer education on debt and money management (Fee-based education favored, 1997). This low percentage must change! All employers who offer retirement education should also offer education on debt and money management. I call upon NFCC members to help employers realize the benefits of adding a comprehensive financial wellness component to the human resource services offered to employees. Information, education and services on financial wellness that can be offered by non-profit consumer credit counseling agencies to employees through their employers are (1) preventive information and education for those facing money challenges, (2) remedial assistance for those experiencing a financial crisis, and (3) productive information for those considering financial opportunities. With the help of NFCC members, employers need to seek out employees experiencing stress from personal financial management difficulties and provide them with assistance. These employees, and possibly members of their families, need information, education and perhaps counseling to help them make better financial decisions. It is important to recognize that most people with personal financial problems typically suffer from these problems because of bad financial decisions, not bad luck. Workers today live in a financial world of great complexity and challenge, a world far different than a generation ago. Employers need to help workers make good decisions about pension plans, cafeteria plan benefits, credit and money management, and consumer rights. A comprehensive personal finance education program can help get people past their difficult days of credit problems, and counsel them well into the times when they are saving money for the future and making fundamental investment decisions. Such employer-based education can help move people from lives of anxiety and consternation to financial comfort and confidence, and then on to lives of personal financial security. Offering financial wellness services to employees, especially those experiencing personal financial problems, helps workers help themselves. People who are in control of their personal finances are more secure in their feelings about life, more self-confident, and happier in family and job relationships. A bank president recently said that, "People who plan and manage their finances well tend to have less stresses which can hinder job performance" (The HR Battlefield, 1997). Financial wellness programming means upgrading the person's education as a personal finance consumer in the marketplace which will create a better employee in the workplace. The availability of effective financial wellness services increases job productivity and reduces employer costs. The Ford Foundation study titled Relinking Work and Life concludes that "paying attention to employees personal lives increases corporate productivity" (Kleiman, 1997). Today I add my voice to the call of other leaders asking that financial education be made mandatory for all employees (Salisbury, 1997). A successful employer-based financial wellness program requires employing professionals with appropriate expertise to educate employees who will then make decisions to enhance their personal finances. Success also requires aggressive promotion of programs in personal finance for employees. Remember the employee's refrain, "Boss, please don't give me a $100 raise this year-instead, give me $100 worth of personal finance education."

What is "Personal Finance Employee Education" and the PFEE Outreach Project?

Personal finance employee education is information, education and/or services provided by an employer to help its employees make informed decisions about (1) employer-sponsored retirement plans, (2) cafeteria plan employee benefits, (3) credit and money management, and (4) consumer rights. Through distinguished faculty at Virginia Tech and outside experts, the Center for Organizational and Technological Advancement (COTA) disseminates research findings which advance technology transfer, provides training and education which update employee skills and overall workforce development needs, and promotes best practices in the private and non-profit sectors. Personal Finance Employee Education (PFEE) is a COTA outreach project designed to exhibit model information and education programs for employees, conduct research, and host meetings to share knowledge about the best practices at the Hotel Roanoke and Conference Center. "PFEE Best Practices and Collaborations" conferences are scheduled for November 5-6, 1997 and May 13-14, 1998 (see the PFEE web site at http://www.chre.vt.edu/~/pfee/ ). Our vision for the future is that leading-edge employers will compete to attract and retain the very best employees by offering top quality, comprehensive personal finance employee education programs. Our PFEE credo is "Personal financial wellness increases employee productivity, and our 'best practices and collaborations' conferences will prove it beyond a doubt." Please come to these conferences, share your model programs and collaborations with employers, and tell others about your action research findings. Please bring an employer or two to these conferences, because it is here where I can do my best to help convince employers in your community to decide to contribute to the salaries of NFCC educators. Employers will do so because they will learn to highly value the information, education and services provided to their employees. You have been a wonderful audience, and I sincerely appreciate the comments of my volunteer panelists who were terrific. Today's presentation has been my third to an NFCC audience in 30 years, and I hope that another 10 years does not go by before I am invited again. Thank you very much.

References

Coping with money woes (1996, December 27-29). USA Today, A1.

Criticism grows with rise in bankruptcies (1997, March 5). USA Today, B2.

Dunn, R. M., Jr. (1997, August 19). Danger signs for the economy. The Washington Post, A13.

Fee-based education favored (1997, May). Plan Sponsor.

Garman, E. T. & Leech, I. E. (1996, November 14). Employers pay a high price for productivity losses caused by the poor personal financial behaviors of employees, speech to the 14th Annual Conference of the Association for Financial Counseling and Planning Education, Amway Plaza Hotel, Grand Rapids, Michigan.

Garman, E. T., Leech, I. E., & Grable, J. E. (1996). The negative impact of employee poor personal financial behaviors on employees. Financial Counseling and Planning, Volume 7, 157-167.

Keating, P. (1997, October). Welcome to the age of anxious affluence. Money, 160-166.

Kleiman, C. (1997, February 23). Concern for workers' private lives is just good business. The Roanoke Times, Business 3.

KPMG retirement benefits survey finds gap in plan participation (1997, August 31).Retirement benefits in the 1990s: 1997 survey data. KPMG Peat Marwick LLP (Washington, DC). Data from KPMG web site.

Lee, D. (1997, June 9). Employee financial education a must. Registered Investment Advisor, 11+.

McDonnell, S. W. (1997, July/August). Credit literacy: First line of defense against bankruptcy. Credit World, 24-27.

Rupe, R. (1997, July 16). Letter to E. T. Garman.

Salisbury, D. (1997, July 23). Speech to TIAA-CREF/ASEC Seminar. New York, New York.

Swoboda, Frank (1997, April 18). Study: Many in the graying work force may not have the green to retire. The Washington Post, G3.

Trend spotter (1997, October). Worth, 26.

The HR battlefield (1997, Spring). Cents & Cents-Ability (Consumer Credit Counseling Service of Greater Denver, Denver, Colorado), 1:1, p. 1.

[1]Worker Productivity and Money Matters, Speech presented to the National Foundation for Consumer Credit, Atlanta, Georgia, September 29, 1997. At the time of the presentation, Garman was Professor and Fellow, Center for Organizational and Technological Advancement, and Director of the National Institute for Personal Finance Employee Education, Virginia Tech, Blacksburg, VA 24061. Garman retired in 2000 as Professor Emeritus at Virginia Tech. E. Thomas Garman, Distinguished Scholar and Director of Educational Services, InCharge Institute of America, 1768 Park Center Drive, Suite 400, Orlando, FL 32835; E-mail: tgarman@incharge.org; Phone: 407-532-5883; Fax: 407-532-5750; Web: InCharge.org.
[2]A Money magazine survey reveals that 21 percent of Americans currently buy lottery tickets weekly (Keating, P. [1997, October. Welcome to the age of anxious affluence. Money, 166]).
[3]Jill Landauer in the July 1997 issue of HRFOCUS (pp. 3-4) describes the first five broad areas, using similar but different terminology, as useful to demonstrating the benefits of work/life programs for employees.