Do your family-friendly programs make cents? Businesses make significant strides in calculating the return on family-friendly programs - Benefits

HR Magazine, Jan, 2004 by Elayne Robertson Demby

On-site child care is a company tradition, a family affair and even a plus to the bottom line at Lost Arrow Corp., the Ventura, Calif., manufacturer of Patagonia apparel and sporting goods.

Photographs of Lost Arrow's earliest days two decades ago show founders Yvon and Malinda Chouinard packing boxes while their children play in the background. "Because of their own experience, as the company grew the owners felt it was important for employees to be able to have their children here as well," says Anita Garaway-Furtaw, the company's director of family services.

Lost Arrow opened its on-site facility for employees' children in 1984. Today, the center's programs, conducted in three buildings on the corporate campus, serve 83 children ranging in age from eight weeks to nine years. Each weekday afternoon, buses from Lost Arrow go out to area schools to transport girls and boys back to the center for after-school activities. The programs are also open to employees' grandchildren (one now enrolled is Garaway-Furtaw's grandson, and she lays him down for his nap each day). When space is available, children of nonemployees can be admitted.

The program is supported not only by the company but also by tuition revenue. An employee with a 2-year-old in the pre-school program five days a week pays $467 per month, for example, while a nonemployee pays $570.

On-site child care is just one of several family-friendly programs at Lost Arrow, which offers a long menu of employee benefits and has been cited as one of the "100 Best Companies for Working Mothers" by Working Mother magazine. Referring to those benefits and their economic impact on Lost Arrow, Garaway-Furtaw says, "We do it because it's the right thing to do, but the numbers support it as well."

Lost Arrow--often referred to as Patagonia, a strong retail brand among climbers and other outdoor enthusiasts--spends about $530,000 a year on family-friendly benefits. In return, it captures more than $190,000 in federal and state tax breaks, and it saves an estimated $350,000 in costs associated with recruiting, training and productivity because its family-friendly approach helps hold turnover below the average for apparel manufacturers.

Moreover, the benefits' financial pluses don't include the value of increased morale and enhanced company reputation, Garaway-Furtaw says. "The analysis really puts a numerical value on the hard cost issues for the program but doesn't account for the soft costs."

A Family of Three

Child care, flexible work arrangements and extended parental leave are the most recognized family-friendly perks, and they help place organizations on "best places to work" lists such as Working Mother's and Fortune's.

What's more, at many companies--as at Lost Arrow--family-friendly is also bottom-line-friendly. According to a 2003 report by Circadian Technologies, a Lexington, Mass., consulting firm specializing in extended-hours operations, a company can achieve a measurable return on investment (ROI) by sponsoring a child care program, whether an on-site facility or an inexpensive resource and referral program. The financial benefits typically come from reduced absenteeism and turnover and improved recruitment and productivity.

According to the report, turnover rates among extended-hours employees decreased to 7.7 percent from 9.3 percent when extended-hours child care services became available.

Jennifer Allen, author of the Circadian study, "Cost Benefits of Child Care for Extended Hour Operations," says, "The report shows that when you look at the money you can save on absenteeism and turnover by having child care programs, there is definitely a return on investment."

Flexible working arrangements offer pluses as well, some companies have determined. New York-based Deloitte & Touche, a global consulting and financial advisory company, estimates that formal flexible work arrangements available to its 30,000 partners and employees in the United States helped the company avoid $41.5 million in turnover-related costs during 2003. The arrangements at Deloitte include compressed workweeks, reduced-hour provisions and telecommuting.

Each year Deloitte surveys its client service professionals, employees and partners, asking them if they would have left the company if it did not offer the option to work on a flexible schedule, says Kathryn Davie Wood, Deloitte & Touche's Boston-based senior manager, national human resources.

According to the Employer Tool Kit, based on a similar document prepared by the Oregon Commission for Child Care and other agencies and available from the Maryland Child Care Resource Network, pharmaceutical giant Merck & Co. found that it cost approximately $50,000 to replace the "average" employee but only $38,000 to give the employee a six-month parental leave of absence with partial pay and benefits.

Merck, based in Whitehouse Station, N.J., provides employees with benefits and full pay for up to eight weeks following the birth or adoption of a child. After eight weeks and up to six months, employees on parental leave do not get paid but keep their benefits and are guaranteed reinstatement. From six months to 18 months, they retain their benefits but are not guaranteed job reinstatement, although they have access to inhouse job postings.