human resources Archives

Three Competing AI Definitions of Strategic and Transactional HR Issues

We’ve been researching how HR contributes to organizational success. One of the key issues to consider is the division between strategic and transactional HR issues.

To get an idea of how much consensus there is on that topic, I asked an identical question of three of today’s most widely discussed generative artificial intelligences: “What kinds of HR issues are strategic and what kinds are transactional?” Here’s how they responded. The only change I made was to bold a few words.

ChatGPT 3.5

In general, HR (Human Resources) issues can be classified as either strategic or transactional based on their nature and impact on the organization. Here’s a breakdown of each category:

Strategic HR Issues:

Workforce Planning: Developing long-term strategies to ensure the organization has the right people with the right skills in the right positions to achieve its goals.
Talent Acquisition and Retention: Attracting and retaining top talent by implementing effective recruitment strategies, employer branding, competitive compensation packages, and employee development programs.
Succession Planning: Identifying and developing potential leaders within the organization to ensure a smooth transition in key positions.
Performance Management: Establishing performance standards, providing feedback, and implementing performance improvement plans to align individual and team goals with organizational objectives.
Learning and Development: Identifying skill gaps, designing training programs, and implementing initiatives to enhance the knowledge and capabilities of employees.
Organizational Culture and Change Management: Shaping the desired culture and managing change processes to facilitate organizational effectiveness, employee engagement, and adaptability.
Employee Engagement and Satisfaction: Developing strategies to enhance employee morale, satisfaction, and motivation, leading to improved productivity and retention.
Diversity and Inclusion: Promoting diversity, equity, and inclusion within the workplace through initiatives such as diverse hiring practices, creating an inclusive environment, and addressing unconscious biases.

Transactional HR Issues:

Payroll and Benefits Administration: Managing payroll processing, tax deductions, and administering employee benefits programs, such as health insurance, retirement plans, and vacation accruals.
Employee Onboarding and Offboarding: Handling the paperwork and processes associated with bringing new employees into the organization and managing employee departures.
HR Policies and Compliance: Developing and communicating HR policies, ensuring compliance with labor laws, and managing employee records and documentation.
Time and Attendance Management: Tracking employee attendance, leave requests, and managing time-tracking systems.
Employee Relations and Conflict Resolution: Addressing employee grievances, managing disciplinary actions, and facilitating conflict resolution within the workplace.
HR Data Management: Maintaining accurate and up-to-date employee information, managing HR databases, and generating reports related to workforce analytics.
HR Technology and Systems: Managing HR information systems, implementing technology solutions, and ensuring data security and privacy.

It’s important to note that some HR issues may have elements of both strategic and transactional aspects, and the categorization can vary depending on the organization and its priorities. Additionally, the strategic and transactional aspects of HR are interrelated and require collaboration to ensure the overall effectiveness of HR functions.

Bard

Transactional HR is the day-to-day work of HR, such as:

Hiring and onboarding new employees
Managing employee benefits
Enforcing company policies
Resolving employee conflicts
Complying with employment laws

Strategic HR is the work of HR that is aligned with the organization’s overall goals and objectives, such as:

Developing a talent strategy
Creating a culture of engagement
Measuring employee performance
Driving innovation
Reducing turnover

Here is a table that summarizes the key differences between transactional and strategic HR:

Characteristic	Transactional HR	Strategic HR
Focus	Day-to-day operations	Alignment with organizational goals
Time horizon	Short-term	Long-term
Impact	Efficiency	Effectiveness
Scope	Narrow	Broad
Role of HR	Supportive	Strategic partner

Transactional HR is essential for the smooth functioning of an organization, but strategic HR is what can help an organization achieve its long-term goals. The best HR departments are able to balance both transactional and strategic work, and they use their knowledge of both to help the organization succeed.

Here are some examples of how transactional and strategic HR can work together to achieve organizational goals:

Transactional HR can help to identify and recruit the best talent for the organization. Strategic HR can then work with the organization to develop a talent management plan that will help to retain and develop that talent.
Transactional HR can help to ensure that employees are compliant with company policies. Strategic HR can then work with the organization to develop policies that are aligned with its values and that will help to create a positive work environment.
Transactional HR can help to resolve employee conflicts. Strategic HR can then work with the organization to create a culture of respect and inclusion that will help to prevent conflicts from happening in the first place.

By working together, transactional and strategic HR can help organizations to achieve their goals and objectives.

Bing

According to some sources ² ⁴, strategic HR issues are those that are value- and future-focused, such as culture and retention strategies, recruitment and selection programs, developing onboarding programs, increasing value out of employees through training programs, developing outreach programs for recruitment sources, developing best practice guides or assistance, etc. Strategic HR helps implement strategies that help focus on an organization’s goals and address the challenges that need to be met by the human resources.

Transactional HR issues are those that are routine and administrative, such as payroll, workers compensation, benefits management, compliance with employment laws, etc. Transactional HR encompasses everything that makes hiring, training, paying, and managing your employees. Transactional HR is necessary but not sufficient for achieving organizational success.

For example¹, a transactional approach to hiring new employees is to write 10 job descriptions, post them, interview candidates and fill the positions. A strategic approach means partnering with the manager to understand the challenge that needs to be addressed, developing a long-term plan for a talent pipeline and networking to uncover the best passive candidates.

Source: Conversation with Bing, 5/15/2023
(1) Transactional and Strategic HR: What is the Difference, and … – SolveHR. https://solvehr.com/transactional-and-strategic-hr-what-is-the-difference-and-why-do-you-need-them/.
(2) Separating transactional from strategic HR not cut and dry. https://www.hrreporter.com/news/hr-news/separating-transactional-from-strategic-hr-not-cut-and-dry/310103.
(3) HR Strategy: Stop Being Transactional and Start Being Strategic. https://www.adp.com/spark/articles/2018/03/hr-strategy-stop-being-transactional-and-start-being-strategic.aspx.
(4) Traditional vs. Strategic HR: How to Guide Your Business into the …. https://www.hrci.org/community/blogs-and-announcements/hr-leads-business-blog/hr-leads-business/2022/02/14/traditional-vs.-strategic-hr-how-to-guide-your-business-into-the-future.

Who Has the Best Response to the Question?

I wish I could say there’s a clear winner here, but the truth is that they gave similar answers but in a form that complements the strengths of each one. ChatGPT gave a very straightforward and well-numbered response, demonstrating why it became the most widely adopted software tool in the history of the Internet.

Bard‘s response went to the trouble of creating a table that abstracts the characteristics of strategic and transactional in an interesting way, and it took the extra step of showing how the concepts are complementary. It’s interesting to note that the AIs don’t entirely agree on whether talent acquisition is strategic or transactional.

Meanwhile, Bing did what Bing tends to do best, which is provide a relatively succinct answer but one that provides links to original sources that supposedly support its arguments. I say “supposedly” because I’ve found that sometimes the sources it provides do not really support the assertions it makes in its summaries. Bing also wrote one incomplete sentence.

I found them all useful. In practice, I tend to use Bing a lot because it gives me sources I use to verify (or not) its assertions. This is very useful to a researcher, and I think Bing is underutilized for that reason.

That said, I’m impressed by Bard’s advances in recent weeks and will probably use it more than I have been. But ChatGPT3.5 is still a very impressive and intuitive tool, and it provided, in my eyes, the most straightforward answer.

Vive la différence! There’s room in the world for more than one scary-smart-but-annoyingly-hallucinogenic AI, it seems. May we (including us human intelligences) all learn to get along in a civil manner. That would the hallmark of a rich and interestingly complex intelligence ecosystem.

Note: The image featured is from Microsoft Bing Image Creator, in which the prompt was “In the style of Utagawa Kuniteru, show three sumo wrestlers wrestling one another”. Please note that there’s no implication that today’s AIs are somehow Japanese. I just wanted an image of three powerful wrestlers illustrated in the style of an excellent artist who has long since passed on and would have no concerns about copyright issues.

100 Ways ChatGPT Could Help HR

How Can You Help, Chatbot?

I’ve been reading a variety of articles on the topic of how ChatGPT and similar AIs can help HR professionals do their jobs better. But I wanted to see what the AI thinks it can do. So, I asked about the ways ChatGPT could help HR professionals carry out their tasks in 20 different functions. It came up with the 100-item list you’ll see below.

To be clear, I asked the chatbot what it can do for HR, but I think what I ended up with is what it someday might be able to do.

Are You Sure You Can Do That?

When I read through the list the chatbot produced, I was skeptical that could actually do these things. So, to get a second opinion, I asked ChatGPT-3’s smarter younger brother Bing (based on ChatGPT-4) about it. Specifically, I asked Bing if ChatGPT could truly do the things it said it could do.

Here’s what it had to say:

Generative pre-trained models … have limitations, such as a lack of logical understanding, which limits their commercial functionality. According to some sources, generative pre-trained models can potentially assist HR professionals in some of the actions you listed…However, these applications are still experimental and not widely adopted in the industry. They also require careful supervision and evaluation to ensure the quality, accuracy, and reliability of the generated content. Moreover, they pose ethical and legal challenges such as privacy, security, bias, accountability, and transparency that need to be addressed before they can be deployed in real-world scenarios. Therefore, generative pre-trained models are not yet ready to fully replace human experts in HR compliance tasks, but they can potentially augment their capabilities and efficiency by providing assistance or support in some aspects of their work.

Let’s Put Some Numbers to That!

I thought that was a good if cautious summary, so I asked Bing if it could assign probabilities to the five compliance-related actions that ChatGPT said it could take on behalf of HR pros. Still sounding a note of caution, Bing stated, I cannot assign exact probabilities to those five actions, as they depend on various factors such as the quality and quantity of the data, the specific model and parameters used, the level of human supervision and feedback, and the evaluation criteria and metrics. However, based on my understanding of the current state-of-the-art in generative pre-trained models and their applications in HR compliance, I can provide some rough estimates of how likely they are to perform well on those actions today. These estimates are subjective and not based on empirical evidence, so please take them with a grain of salt.

Then, with those sober caveats properly laid out, Bing gave these estimates of how likely ChatGPT could really do these five things:

Researching and staying up-to-date with labor laws and regulations: High (80-90%)

Helping HR professionals ensure that company policies and procedures are compliant with relevant laws and regulations: Medium (50-60%)

Assisting in drafting compliance reports and audits, ensuring accuracy and completeness of data and information: Medium (50-60%)

Aiding in identifying potential areas of non-compliance by analyzing employee data and HR practices: Low (20-30%)

Providing guidance on best practices for compliance training and development programs: Low (20-30%)

These estimates are based on the assumption that generative pre-trained models are fine-tuned on relevant data and tasks, and that they have access to reliable sources of information. They also assume that the generated content is verified and validated by human experts before being used or shared. The estimates may change over time as generative pre-trained models improve or new challenges arise.

Being a nerd, I was tempted ask about the probabilities for all 100 actions, but since Bing correctly noted that the numbers were “subjective and not based on empirical evidence,” I thought that might be overkill. (Sidenote: I’m fascinated by the idea of subjectivity in an artificial intelligence).

100 Ways ChatGPT Might Help HR Pros

So, without further ado, here are the 100 things ChatGPT might, under the right circumstances, be able to do for Human Resources. I’ve listed them alphabetically by name of the HR function.

1) Compliance

Assist HR professionals in researching and staying up-to-date with labor laws and regulations.
Help HR professionals ensure that company policies and procedures are compliant with relevant laws and regulations.
Assist in drafting compliance reports and audits, ensuring accuracy and completeness of data and information.
Aid in identifying potential areas of non-compliance by analyzing employee data and HR practices.
Provide guidance on best practices for compliance training and development programs.

2) Compensation

Assist in analyzing market data to determine appropriate salary levels and benefits packages for employees.
Help in conducting salary surveys and researching industry compensation trends.
Aid in answering employees’ questions about their compensation and benefits packages.
Provide guidance on the design and implementation of employee benefits programs, such as health insurance, retirement plans, and paid time off.
Help HR professionals to create fair and equitable compensation policies and programs.

3) Diversity, Equity, and Inclusion

Assist in the creation of diversity, equity, and inclusion policies and programs.
Help HR professionals identify and eliminate bias in recruitment and selection processes.
Provide guidance on diversity and inclusion training and development programs for employees.
Assist in analyzing employee feedback and sentiment regarding diversity, equity, and inclusion.
Aid in identifying potential areas of bias or inequality within the organization.

4) Employee Benefits Administration

Assist in managing employee benefits enrollment, including answering questions and providing guidance to employees.
Help HR professionals analyze data to determine the effectiveness of employee benefits programs.
Aid in identifying potential areas for improvement in employee benefits programs.
Assist in managing employee benefits-related data, such as enrollment forms and plan documents.
Provide guidance on compliance with regulations related to employee benefits programs.

5) Employee Communications

Assist in developing and delivering internal communication strategies to employees.
Help HR professionals to quickly respond to employee inquiries and feedback.
Aid in analyzing employee feedback and sentiment regarding company news, policies, and initiatives.
Assist in managing employee communications-related data, such as email campaigns and messaging platforms.
Provide guidance on best practices for employee communications, such as creating clear and concise messaging.

6) Employee Engagement

Offering personalized recognition and rewards to employees
Providing guidance on employee wellness and work-life balance
Conducting virtual team building and social events
Providing information on opportunities for career growth and development
Generating reports on employee engagement metrics and trends

7) Employee Relations

Develop chatbots to help employees navigate the organization’s HR policies and procedures and answer common questions.
Use natural language processing to analyze employee feedback and sentiment to identify potential areas of concern and address them proactively.
Provide mediation services for employees involved in workplace conflicts through a virtual assistant.
Develop chatbots to handle employee complaints and grievances and ensure they are resolved fairly and consistently.
Use chatbots to provide employees with 24/7 access to HR support and guidance.

8) Employee Wellness

Use chatbots to provide employees with personalized recommendations on wellness resources and activities.
Develop wellness trackers that use natural language processing to track employee progress and make recommendations for improvement.
Use chatbots to provide employees with 24/7 access to mental health resources and support.
Provide personalized coaching and advice for employees on health and wellness topics based on their individual needs and preferences.
Develop personalized wellness plans for employees using natural language processing to analyze health data and identify areas for improvement.

9) Health and Safety

Use chatbots to provide employees with safety training and information on safety procedures and protocols.
Develop virtual safety simulations using natural language processing to simulate emergency situations and help employees prepare for potential safety hazards.
Use predictive analytics to identify safety risks and proactively address them before incidents occur.
Use chatbots to collect and analyze safety data and identify areas for improvement.
Develop chatbots to provide employees with real-time safety alerts and updates.

10) HR Analytics

Use natural language processing to analyze employee feedback and sentiment to identify potential areas of concern and address them proactively.
Create predictive models that use HR data to forecast employee turnover and identify potential areas for improvement.
Use chatbots to collect and analyze HR data and identify trends and patterns in employee behavior.
Develop chatbots to provide HR analytics dashboards that display key HR metrics and data in real-time.
Use chatbots to perform ad-hoc data analysis and answer HR-related questions quickly and efficiently.

11) HR Information Systems (HRIS)

Provide real-time assistance to HR professionals in managing HR data, such as helping them locate specific employee information or assisting with data entry.
Help automate certain HR processes, such as scheduling interviews or generating reports.
Assist with employee self-service by providing instant answers to common questions, such as how to update personal information or check pay stubs.
Analyze HR data to identify patterns or trends, such as turnover rates or attendance patterns.
Help HR professionals stay up-to-date with the latest HR technology and trends.

12) Labor Relations

Provide legal guidance and assistance to HR professionals in managing employee relations and ensuring compliance with labor laws and regulations.
Assist with collective bargaining negotiations by providing data and analytics on industry standards and trends.
Help HR professionals navigate complex labor issues, such as union grievances or strikes.
Provide training and development resources to help HR professionals build their labor relations knowledge and skills.
Help HR professionals stay up-to-date with the latest labor laws and regulations.

13) Onboarding

Provide new employees with a virtual onboarding experience that includes interactive tutorials and videos on company culture, policies, and procedures.
Assist HR professionals in preparing and delivering onboarding materials to new hires.
Provide new employees with personalized assistance, such as answering questions about benefits or guiding them through the onboarding process.
Collect feedback from new employees on the onboarding experience to help improve the process.
Assist HR professionals in tracking and managing onboarding tasks, such as verifying employee documents or setting up equipment.

14) Organizational Development

Assist in facilitating the strategic planning process by generating ideas, identifying potential risks, and providing insights into industry trends and best practices.
Analyze employee data and HR practices to identify areas for process improvement.
Recommend process mapping tools and suggest process improvement initiatives that align with the company’s strategic objectives.
Provide recommendations for leadership development programs that align with the company’s strategic objectives.
Suggest leadership assessment tools, training materials, and coaching resources.

15) Performance Management

Assist HR professionals in setting and monitoring employee goals and objectives.
Provide real-time feedback to employees on their performance, such as alerting them to areas where they need improvement or recognizing their accomplishments.
Provide HR professionals with analytics on employee performance, such as identifying top performers or areas where the organization needs improvement.
Help HR professionals create and manage performance improvement plans for employees who need additional support.
Assist HR professionals in conducting performance evaluations and delivering feedback to employees.

16) Records Management

Assist HR professionals in managing and organizing employee records, such as resumes, job applications, and performance evaluations.
Help HR professionals comply with data privacy regulations by ensuring that employee records are stored securely and confidentially.
Assist HR professionals in locating specific employee records or information quickly and easily.
Provide analytics on employee records, such as identifying patterns in hiring or turnover rates.
Help HR professionals stay up-to-date with the latest record-keeping regulations and best practices.

17) Recruitment and Selection

Assist in creating job descriptions and job postings that are more engaging and attractive to potential candidates.
Help screen resumes and applications more efficiently, allowing HR professionals to focus on the most promising candidates.
Assist with scheduling interviews, sending reminders, and providing basic information to candidates.
Provide information to candidates about the company, its culture, and its values.
Assist in creating and administering pre-employment assessments, such as personality tests or skills tests.

18) Succession Planning

Help identify high-potential employees for key leadership positions based on performance data and other factors.
Assist in creating development plans and programs for high-potential employees.
Help identify skills gaps and training needs within the organization, and recommend training programs to fill those gaps.
Assist in identifying potential external candidates for key leadership positions.
Help HR professionals monitor and track the progress of high-potential employees in their development plans.

19) Talent Management

Help identify and source top talent from external sources, such as job boards or social media.
Assist in creating and administering pre-employment assessments, such as personality tests or skills tests.
Help HR professionals track employee performance and identify top performers.
Assist in creating career development plans for employees to help them grow within the organization.
Assist in creating and implementing employee retention strategies, such as recognition programs or career development opportunities.

20) Training and Development

Assist in creating and administering training programs, including creating training materials and quizzes.
Help identify skills gaps and training needs within the organization, and recommend training programs to fill those gaps.
Assist in creating and administering online learning courses and modules.
Provide personalized training recommendations based on employee performance and development goals.
Help HR professionals track employee progress and completion rates for training programs.

Final Thoughts

ChatGPT-3.5 is, let’s say, a very confident bot. But it’s not always an accurate one. Still, these robust large language models continue to dazzle and are doing things I never thought I’d live to see. So, while Bing and I are skeptical about 3.5’s current abilities, who knows where we’ll be in a year as HR technology vendors adapt these technologies to their own purposes?

My guess is that the AIs will continue to surprise us. Mostly in good ways, I hope.

Addendum

A List of 22 Articles on ChatGPT and HR

Balancing the Pros and Cons of ChatGPT and AI in HR

Beyond Job Descriptions: 6 HR Tasks ChatGPT Can Do for You

ChatGPT – A tool for accelerating innovation, but not a panacea

ChatGPT 101 for HR Pros

ChatGPT and the Future of Human Resources: A Step-by-Step Guide

ChatGPT can improve HR functions, but not without risk

ChatGPT in Human Resources

ChatGPT Takes Over HR

ChatGPT: ‘Bigger than anything’ HR has ever seen?

ChatGPT: Is this the next disruptive trend in the HR space?

ChatGPT: The Secret To Helping HR Save Time And Reduce Stress

ChatGPT’s Applicability Toward the HR Department

How ChatGPT Can Be a Game Changer in Human Resource Management

How useful is ChatGPT-style AI for HR?

How will ChatGPT impact HR?

Leveraging ChatGPT in HR Activities: How Automation Can Support HR Upskilling

One-half of HR leaders evaluating ChatGPT guidelines

Performance review cycles are tough—could ChatGPT help?

The 7 Best Examples Of How ChatGPT Can Be Used In Human Resources (HR):

Third of HR professionals want to use ChatGPT at work, exclusive data reveals

Uses Of ChatGPT In HR

What ChatGPT and other generative AI tools mean for HR

Financial Wellness for All Americans

(Part 3 of 3)

We Can Do Better, and We Should

Employee financial wellness programs, of the kinds I described in my previous post, are a net good. But the U.S. can do better via partnerships among employers, nonprofits and government entities. We should have financial wellness for all Americans. Let’s think about how.

Don’t Hold Your Breath on UBI

There are some good and even powerful people working on the idea of a universal basic income (or UBI), which in theory would go a long way to improving the financial wellness of Americans. It may yet happen in the long run, though I remain skeptical that’ll be anytime soon. In a country that still won’t even change it’s highly expensive and dysfunctional healthcare system, UBI feels unlikely.

Hurry Up and Make Online Education Free

But other things are, I believe, more achieveable. One of those is a universal, free higher education program in the U.S. I’ve outlined an idea for this in a previous post.

It’s badly needed and will work better if employers are involved, able to incorporate their own online training and development courses into the offerings. This would give them a more direct pipeline to well-trained potential recruits.

Although my original proposal focused on online college education, it would not need to be limited to that. It could include trade schools as well, although trying to learn certain trades completely online isn’t feasible. There’s no replacement for hands-on learning in some fields.

Get with the Apprenticeship Program

This leads me to the idea of apprenticeship programs. We could, in part, crib from the very successful German apprenticeship programs, which include:

an employer-integrated and supported system in which apprentices not only get practical experience but paychecks as well
a well-strucured curriculum that truly prepares people for careers
cerifications that talent acquistion professionals recognize
accessibility by people who may not have stellar academic credentials but are willing and eager to learn

Figure Out How to Help Employees Save More

There are many possibilities here, but let’s point to an existing program as an example of how employers and the government can work together to increase employee financial well-being. The Secure Act 2.0 has already been passed into law. It seems like a worthy piece of legislation, though we’ll find out more once it goes into effective. Here are some of the features:

Automatic enrollment in retirement savings programs. Starting in 2025, most organizations with 401(k) and 403(b) plans will be required to automatically enroll employees.

Automatic enrollment of employees in emergency savings accounts, which are capped at $2,500 or less.

Various other savings related features, such as making it easier for savers to get their tax credits, being able to roll over unused 529 (that is, college saving) plan money, allowing people who are 50 and older to make additional “catch-up contributions” to their retirement accounts, and more.

There are other ideas that could be enacted as well. For example, a surprising number of Americans do not have access to traditional banking services, which can make it difficult to save money or access credit. By promoting financial inclusion and expanding access to banking services, more Americans can improve their financial well-being.

Ensure More Affordable Childcare

Childcare can be brutally expensive for many families. If we can increase affordable access to childcare, families will have a lot more money in their pockets to spend and to save.

Some child care costs more than college, but young parents haven’t had the time to save up for it. What’s more, it’s super costly to businesses. When childcare arrangements break down for any reason, parents are forced to scramble, and this results in $4.4 billion due to lost productivity.

What we do know, though, is that lowering the cost of child care could have a huge impact on the financial well-being of families with young children.

President Biden’s budget for the current fiscal year includes “an investment of $600 billion in early care and education that would fund states to provide universal preschool for four-year-olds and subsidize high-quality child care from birth to age five for families earning up to $200,000.”

The goal is that the lowest income families would pay nothing out-of-pocket and most families would pay no more than $10 a day per child. But with a divided U.S. Congress, it seems unlikely this kind of proposal will go through for now.

Get with Your Community

There are, of course, other ways of supporting employee financial wellness that do not involve government or employers. For example, there are financial support groups, both formal and informal. Various formal groups try to help people improve their ability to save money, build credit, gain a greater level of financial literacy, etc. Then are more informal groups of friends or family members who can provide others with supportive networks and help them stay accountable.

Take a Look at Fintech

Some financial technology (fintech) companies offer new-fangled financial products and services, such as budgeting apps, online investment platforms, and digital banking services. I don’t use any fintech per se, but some people claim fintech’s latest apps and services are more affordable than the stuff coming from traditional financial services.

Caveat emptor, but they might be worth a try, especially for the younger employees they seem to be targeting.

Financial Wellness Has Become More Critical

As I write this, the media–both real and social–is rife with all kinds of economic doomsayers. Honestly, it’s wearing a bit thin. They’ve daily been predicting doom for a couple of years now.

Yes, they’ve often been wrong, but eventually we’ll get a honest-to-God recession. We always do. Maybe it’ll be a big ‘un, maybe it won’t.

Credit Card Debt Is Now High

But, to fair to the doomsayers, there are some bad signs. One of them is that, given inflation rates, more people are leaning on credit cards to afford necessities such as food and rent. In fact, total credit card debt rose to a record $930.6 billion at the end of 2022, an 18.5% spike from a year earlier, and the average balance rose to $5,805.

That all sounds pretty grim. But I should also note that delinquency rates on credit card are still pretty low by historical standards, something the doomsayers seldom mention.

Now, if people start losing their jobs in huge numbers, that could change pretty quickly. Till then, however, chill a bit, doomers.

Economic Indicators Are So-So

There are a lot of financial indicators you can look at to determine the health of an economy, such as:

treasury yield curves (slightly inverted, not a great sign)
unemployment rates, still very low (typically a good sign, unless you’re worried about an overheated, inflationary economy)
GDP growth (predictions for the first quarter of 2023 are all over the place, from -.5% to +1.1%, depending on the source)
then there are things like industrial production, durable good orders, and consumer spending, none of which look especially terrible right now

But a Lot of Consumers Are Really Hurting

So, the economic indicators are pretty mixed right now, though none look disastrous. But if you’re an American consumer, especially one in lower-income brackets, things are bleaker.

The Washington Post reports, “[T]he average lower-income family spends much more than it earns. These families live paycheck to paycheck and still can’t pay their bills; they typically bridge the gap between what they earn and what they spend with a combination of government benefits and loans.

Seeking Solutions, Not Scapegoats

These are great days for political demagogues, who focus on winding up frustrated people seeking someone to blame for their problems. These politicians seldom if ever have viable long-term solutions, but they are excellent at scapegoating and spreading outrage and fear, hoping to accrue power that way.

And that’s part of my fear of what will happen if we, as a nation, can’t ensure the financial wellness of employees. Because if they’re not well, then they’ll become ever more likely to vote in some despot who signals being a “strong leader.”

In the end, these dictatorial demagogues are the types of people who can set the nation back indefinitely in terms of civil liberties and basic morality. So, we want financially well Americans, especially working Americans, not just because providing such wellness is the right thing to do for them. But because it’s the right thing to do for all of us.

Checking Out the Deets of Financial Wellness Plans

(Part 2 of 2)

What Is Financial Wellness?

Okay, that first post took us on a bit of a journey, but we’re now ready to tackle financial wellness.

In the research in which I was involved, we specified:

Employees’ financial wellness means that they are able to satisfy ongoing financial needs, feel secure about their financial future, and are free to make choices that allow them to enjoy their lives. It also implies that employees have the competencies and knowledge needed to navigate the complexities of financial decisions.

So, you’re financially well (or, at least, weller) if you’re not stressed out about money all the time and able to afford the basics (for example, being able to go on vacation once in a while, live free of debilitating debt, save for retirement, etc.).

Of course, your average Joe might say, “Hey, if you care about my financial wellness, then just pay me more!”

To which employers might say, “Let’s table that discussion for a minute and talk about financial planning and earned wage access and …”

It’s very tempting to call bullshit on this HR-speak and just keep chanting “Show us the money!” But, well, capitalism. Employers have got to make a buck to stay in business and labor tends to be expensive. Therefore, employers want to pay you enough to get your services but not so much that you’re cutting to far into their profit margins.

It’s a dance, a negotiation, a horse trade in which you’re often the horse.

Feeling Strapped

If you’re not bringing that much to the trade–or at least fail to convince your employer that you are–then your pay is not going to be all that high. In that case, you may be living paycheck to paycheck. You may not be able to pay off your loans. Your monthy credit card debt may be so high that you’re barely able to pay the minium balance.

Which only gets you in deeper into the financial quagmires over time.

You could really use a hand.

So, you go to your boss and ask if maybe they can give you a raise. Your boss shakes their head sadly, saying times are tough, business is flat, and there’s a wage freeze is on.

After that talk, you’re feeling depressed, but then your boss shoots you an email that tells you about the company’s financial wellness program. Shit. You sigh. More confusing HR stuff. You try to avoid HR whenever you get the chance. You feel those folks tend to only show up when bad stuff is cooking.

Giving It a Try

But, hey, you’ve got to try something, so you call a number and they give you the rundown on what’s included in the benefits. Here are some of the possibilities:

Financial education
Retail discounts programs
Easy access to savings planning
One-on-one financial coaching/counseling
Health savings accounts
Retirement plans
Flexible spending accounts
Life and disability insurance
Help with medical bills
Lifestyle benefits
Low cost loans
Help with physical therapy/rehabilitation
Earned wage access
Payday advance
Personalized financial wellness plans
Student loan repayment assistance
Debt-relief benefits

The Pros and Cons of Financial Wellness Programs

The Pros

The pros are straighforward if the programs actually do what their providers say they will, which is:

Bump up employee productivity since employees are less worried about their finances
Retain and engage employees who are grateful for the help
Reduce financial stress, which can impact some of the other wellness issues we discussed in the prior post
Give employees better financial habits; that is, they become better at budgeting, saving, investing and handling financial emergencies.

The Cons

For employers, some percieved cons might be:

the cost of offering and implementing a financial wellness program
limited employee participation in the program, in which case the cost of the program may not be worth the money and effort put into it

For employees, some perceived cons might be:

privacy concerns related to sharing their personal financial information with their employer or a third-party provider
a lack of savings because their abilty to tap into to their daily pay becomes too easy via earned wage access
frustration if they receive advice or services that don’t really help them in the long run

The Limitations

I think financial wellness programs are generally a good thing, though their efficacy no doubt varies from offering to offering and company to company.

The bigger question: Are theseprograms bandaids being applied to proverbial bullet wounds?

There’s no easy answer to that question. It just depends.

Let’s say you take advantage of a program that gives you 1) same-day access to your pay and 2) financial education. The same-day pay has proven useful to you a couple of times, like when the car broke down and the dog got sick.

Meanwhile, the financial planning education has taught you about the dangers of credit card debt and high car payments, but the advice has been hard for you and your family to follow given your means and expenses.

Ultimately, you appreciate the advice and it helps at the margins, but you’re still going to need a raise or to find a different job that pays more. You sigh. Easier said than done. The rat race is getting to you.

In my next post, part 3 of 3, I discuss some ideas for programs that might do more to increase the financial wellness of Americans.

On Helping Financially Unwell Workers in America

(Part 1 of 3)

Wellness Becomes a Thing

The HR Research Institute recently finished a major study on employee financial wellness.

It’s an interesting topic during these weird financial times, so I thought I’d provide a short history of employee wellness programs in general, put financial wellness in its current context, then talk about other ways we can improve the financial well-being of more people.

If you’re not familiar with it, financial wellness is one of the newer forms of worker benefit offerings. The basic idea is that if an employee is financially unwell, then they are a lot less likely to be productive and engaged at work.

This is both an intriguing and a “no-shit-Sherlock” kind of assertion. It’s interesting (to people like me) because it’s case in which the concept of wellness is being expanded into yet another area of employee’s lives.

So, before we get into financial wellness (aka, well-being), let me lay out a brief history of employee wellness.

A Brief History of the Long Struggle to Keep Workers Fit Enough to Survive the Treadmill

The Stupidly High Costs of U.S. Healthcare

When I first started researching HR issues, wellness initiatives were fairly new (yeah, I’m getting up there), and they typically focused on physical wellness.

Back then, the idea was to distinguish between healthcare benefits, which were the status quo, and wellness benefits, which were a way to reduce healthcare costs. After all, the U.S. is—and even then was—virtually alone among so-called industrialized nations in terms of not providing universal healthcare to all its citizens. My father was a doctor and not exactly a liberal, but when I was growing up, even he thought our system was stupid and needlessly cruel.

As a result of the sheer weirdness of our U.S. health insurance system, which largely rests on the shoulders of employers, organizations have a vested interest in keeping healthcare costs low so that they are not paying as much to provide health insurance to workers.

The fact is, however, that U.S. has the most expensive healthcare system in the world on a per capita basis and gets pretty crappy results for all the money it spends. That’s not the fault of employers, however. It’s the fault of the frankly stupid way our system is set up.

In my opinion, the vast majority of voters should be mightily pissed off about this, voting out every self-serving, money-grubbing politician who is not in favor of fixing our expensive, busted system, but the majority of voters still aren’t there…yet. So it goes.

Making the Best of a Bad Hand

A lot of Americans like our employer-sponsored system of health care, but most employers surveyed by the Kaiser Family Foundation think our current system is so broken, expensive and usustainable that in the near future the government is going to need to step in to fix things–or at least help the current creaky system limp along.

For now, though, employers are as about as stuck with current system as the rest of us.

Although employers get tax breaks and can shift a lot of the costs to their employees, they still spend an absurd amount of money to provide that health insurance (assuming they do, of course).

So, employers have long since decided to encourage their employees to raise their level of wellness so that they, the employers, can reduce the costs of providing health insurance.

Back in the Day

When wellness benefits first emerged (the term ‘well-being’ came later), they were mostly focused on getting employees into better shape physically. This basically meant getting them into better aerobic shape (heart disease being a killer, both physically and financially) and getting them to stop poisoning themselves with legal substances (such as tobacco and alcohol) as well as the illegal ones.

So, employers started paying for, or at least contributing to, things like gym memberships and smoking cessation programs. And, they started offering financial incentives, such as lower health insurance costs, to employees if they cut down on the cigs and the booze.

It all seemed pretty obvious at the time.

Did It Work?

Maybe, sometimes. Studies differ, and success probably depends on the execution of those programs. Today Americans tend to smoke less than they did 30 years ago, but that probably has less to do with wellness benefits and more to do with government packaging warnings and restrictions on advertisements.

It hasn’t been all good news. During the same interval, Americans’ consumption of alcohol has risen and fallen, whereas obesity has generally ballooned. Of course, the global obesity epidemic (pandemic?) is driven by a lot of different factors that wellness programs have not been able to prevent.

Then Came the Mental Side of Things

Once you start pulling at the wellness thred, however, you start to see how entangled it is with other kinds of wellness, especially mental. After all, people smoke and drink not just because it feels good (getting high has deep biological roots not only in humans but other animals as well) but because they’re stressed out and suffering emotional/mental tribulations.

To get people to cut down on their smoking, drinking, and/or eating, sometimes you need to address their mental issues. And so, employers started putting greater emphasis on employee assistance plans (EAPs), addiction treatment, and eventually things like mindfulness.

And Don’t Forget the Work Environment

We shouldn’t forget about environmental wellness, either. When I first started out, ergonomics were all the rage. Personal computers had entered the workplace and suddenly people were sitting in front of screens more while clicking their keyboards and mice. This led to backaches, carpal tunnel syndrome, eye-strain issues and more. There was this big push for ergonomically designed office furniture.

There was also the crappy air in office buildings where all the windows were sealed and god-knows-what chemicals were oozing out of printers, ceiling tiles, acrylic floors, etc. That’s when “sick building syndrome” became a thing.

Of course, the concern with the work environments started much earlier, when plant workers were suffering from sundry issues related repetitive stress injuries, machine accidents, chemical exposures and more. A lot of employers didn’t want to think about these things, but the combination of broken employees and union representation tended to concentrate their focus.

Social Well-being Joins the Fitness Team

If you keep pulling at that wellness thread, it’s not long until you realize there are social elements at play as well. Some of this stems from the research into employee engagement, especially by Gallup. Their studies suggested that the social environment at work also affects employees.

Of course, in retrospect, this is another one of those “no duh” moments in HR. Obviously, if you have friends at work and good relations with your boss, you’re more likely to be engaged and productive.

So sum up, your physical wellness is influenced by your work environment and your mental health, which is in turn influenced by your social well-being at work and outside of it.

Okay, so that’s my very brief history of wellness programs. In my next post, part 2 of 3, we’ll focus on another step in wellness evolution: today’s financial wellness initiatives.