July 3, 2022

Article 5.18


Most businesses want to attract and keep good employees long enough for them to learn and work together to execute a good strategy in a consistently excellent way. Employee retention practices were simpler in the ‘70’s than now because the four - there may be more - intersecting trends below have complicated the objective:

  • Health insurance, which is part of working Americans’ total compensation, has become critically high and still rising. The cost of insurance per employee has gone from insignificant in the ‘70’s to a US corporate average of $5200 last year. This sum is 14.8% of the total compensation for a $30,000 per year wage earner. During the past six straight years of double-digit health insurance cost increases, more, small, US businesses have stopped offering health insurance. And, big companies, on the margin, outsource more jobs to Asia where employee overhead and benefit costs don’t exist.
  • The US workforce is aging thanks to the effect baby boomers who were born from 1946 to 1964. The median age of the US workforce is projected to be 40.5 years in 2005 up from 32.9 years in 1990 and even younger in 1970 when the boomers first started to flood the job market. The current median age of the boomer group is 48, an age when chronic, old-age diseases start setting in for many. With fears of losing jobs to outsourcing and bigger health bills, mature workers are more attracted to solid companies and insurance benefits than ever before.
  • The Bush Administration and many states - that are being eaten alive by their medical costs - are pushing through legislation to enable "health savings accounts"(HSAs), which will in turn boost "consumer driven healthcare". 2005 is a "transition year" for the HSAs wave; how many small businesses will be prepared to take strategic employment advantage of HSAs in 2006? For more on strategic implications of HSAs see articles 5.15 and 5.17 at www.merrifield.com. http://www.merrifield.com/articles/5_15.asp and http://www.merrifield.com/articles/5_17.asp.
  • Global commoditization is forcing every mature, commodity product and service business in America to reinvent its customer value propositions, but this requires bottom-up, healthy energy from can-do spirited employees. People who need the structure and the normal activity of the business to pull them through the day can not, unfortunately, contribute to - and often thwart - proactive, change initiatives involving non-normal activities.


Back in the early ‘70’s, a few smart companies like FedEx, UPS, L.L. Bean, Nucor, etc. figured out how to lower total people costs by paying higher wages and gainsharing bonuses. By paying more, they were able to select better quality people who would stay long enough (boomers were very mobile back then) to learn how to brilliantly execute both strategic initiatives and daily service. This led to greater customer retention, penetration and pricing power, all of which led to both sales and margin dollars growing faster than people costs. People costs as a percent of margin contribution became the lowest in the industry while profits became the highest. The premium profits were then reinvested back into the faster growing business, so the virtuous cycle began anew. All four major corporate stakeholder groups – employees, customers, suppliers and shareholders – won. For more on retention economics see articles 5.1, 5.5, 5.6 and 5.61 at http://www.merrifield.com/articles/5_1.asp; http://www.merrifield.com/articles/5_5.asp; http://www.merrifield.com/articles/5_6.asp; http://www.merrifield.com/articles/5_61.asp.

The assumptions and practices behind high performance personnel management still apply today, but the implications of both the trends above and the new health math below have to be blended into the old practices.


  1. "Healthy life expectancy" wealth yields 17 more years. In a recent study in England, the top 10% of the wealthiest citizens had a life expectancy of 77.4 years with the last 11.2 years being in "poor health" for a net healthy life expectancy of 66.2 years. The poorest 10% had a total life expectancy of 71.4 years – just six less than the richest 10%, but poor health started at 49.4 years and lasted for 26.3 years. The poorest 10% are getting 17 years less of good living and are being, no doubt, a big drain on both the public healthcare system and their employers as they try to drag themselves through the last 15 years of their working career. How many US employers are thinking about the total economics of employees who hit poor health around 50 years of age? What’s our own personal "net healthy life expectancy" goal?
  2. With the "age wave" there is now a "Wellness Revolution"(google the phrase to see how popular it is). Because the boomers have dictated every big new trend for the past 50+ years in America, it isn’t surprising that, given their median age of 48, they are now leading the way in trying to stave off chronic disease and aging. In the US, we have historically been spending about 95%+ of all public health dollars on remedial sick-care and less than 5% on preventative well-care. Smart, disciplined, educated, aging and affluent boomers have been increasing, however, their consumption of preventative wellness solutions for the past 5+ years. Just look at the amazing growth margins, profitability and stock price action for Whole Foods Market (AKA "whole paycheck"). Growth rates for personal trainers, botox injections, etc. are also exploding. But, when, if ever, will the preventative, wellness revolution start to penetrate into the bottom 80%+ of the aging payrolls of corporate America?
  3. Americans haven’t been saving any money since 2001. In 2004 the average paycheck in America rose less than the general inflation rate and health insurance paycheck deductions grew 23%. With less disposable income, who can afford to save? Not the bottom half of the payroll: 59% of employees who made $30,000 or less and were eligible last year to contribute to corporate 401K programs didn’t contribute even with employer match incentives. And, even employees who have medical insurance do not have a rainy day fund to cover their growing out-of-pocket expense costs when random medical emergencies occur. An estimated 29 million Americans currently have medical debts, and the average medical debt of those families that have been declaring bankruptcy is $12,000, even though 68% had medical insurance in effect.
  4. HSAs provide a mechanism for both saving for the occasional medical emergencies and providing a big incentive for all employees to be healthier and shop carefully for all medical services that they do use. Although the economics of HSAs in this transition year of 2005 will vary by state, carrier and company shopping ability, let’s assume that high-deductible, low-premium policies will eventually reduce premium costs by 50% for both company and employee. If both parties put their savings into the employees’ HSAs, then the employee wellness incentive and potential savings flow will be activated. But, flowing as much of the company’s health insurance premium money through employee HSAs is just the tip of the employee wellness engagement iceberg.

With the potential to save through HSAs and a goal of more net healthy years, both a company and its employees can get quick returns on investing in corporate wellness programs. See article 5.16 at www.merrifield.com

Many companies that have big, formal, on-going wellness programs have been getting total returns of 2 to 12 times their investment. See article 5.16 at http://www.merrifield.com/articles/5_16.asp.

Dean Ornish, the former heart surgeon turned preventative wellness guru, has done many studies on how quickly people can reclaim their health with modest changes in diet and exercise. (Ornish’s organization is "Preventative Medicine Research Institute" at Every small business should consider starting a simple, to scale wellness program.


Many working US citizens – considering their average age, health, non-savings and rising health insurance costs (or it’s discontinuation) – will have little choice but to seek catastrophic coverage that will qualify for a health savings account and adopt healthy habits. The only "solutions" for our national healthcare mess that appear to be forthcoming from state and federal governments is the further empowerment of HSAs until at least 2009. Even then, there are no assurances that politicians can transform a mess instead of continuing to tinker at the edges.

Small firms with a big percent of lower paid employees have, in theory, the biggest opportunity for improving the quality and retention of their employees and their health by using HSAs and simple-to-scale corporate wellness programs. Why? Because health insurance tends to be an average-cost-per-employee item, those with lower salaries can get a bigger percent of their salary flowed, tax-free through their health savings account, which, well managed, could solve their lack of savings and medical rainy day fund problems. And, because lower paid workers, on average, have poorer health habits and health, they have the most to gain from a corporate wellness effort that offers simple education, structure and emotional, support-group help.

Blending new health math realities with tried-and-true, high-performance, service practices is tough mental work, but the status quo isn’t an alternative. Because most companies won’t change, those who do will be able to turn health problems into wealth opportunities for a big strategic advantage.

Ó Merrifield Consulting Group, Inc., Article 5.18

D. Bruce Merrifield, Jr.

May, 2005