By Sharlyn Lauby
Employees like time off. According to an article in Harvard Business Review, flexible hours and vacations are the two most popular employee benefits after health insurance. If organizations want to remain competitive, they need to offer benefits that employees want. You would think that any benefit that gives employees more time off would be met with cheers and adoration.
I recently had the chance to hear about how Kronos rolled out their open time off policy. I thought you would find it interesting, both from the standpoint of the policy itself and because of the challenges Kronos experienced and how they addressed them.
You know our friends at Kronos. Tens of thousands of companies use Kronos products, such as Workforce Dimensions, including over half of the Fortune 1000. They have 5,400 employees globally, with almost 1,500 in their Massachusetts headquarters. Like many businesses today, Kronos discovered they were facing recruiting challenges. Internal research discovered one of the hurdles to attracting talent was their vacation policy.
Kronos wanted to address the challenge but in a way that appealed to the greatest number of employees. Their internal research told them that it’s not just Millennials who crave flexibility. For example, the largest users of the company’s student loan repayment benefit are Gen Xers. And older employees want to take time off to attend kids’ events and take care of sick loved ones without “wasting” their vacation days. Employees also wanted time off to volunteer, go on field trips, and for general life maintenance.
In an article for Harvard Business Review, Kronos CEO Aron Ain talked about flexibility being more than a “Millennial” benefit. “We were offering new employees three weeks of paid vacation, which is comparable to what local companies with which we compete for talent were offering. But when our recruiters tried to hire people in their thirties or forties with significant tenure at other companies, they often learned that those people had four or five weeks’ vacation. Vacations are important, and persuading people to take a job with less time off was a challenge.”
myTime: An “Open” Vacation Policy
In response to the company’s recruiting and vacation challenges, HR developed a system called “myTime”. Basically, it’s an “open” (aka unlimited) vacation policy. There’s no limit to how much time any employee can take. Instead, employees work out their schedules with their supervisors.
Before we talk about the specifics with Kronos myTime, let’s talk about policies in general. One of the reasons that policies often do not work is because the concept of the policy does not take the company’s culture into account. For example, many companies adopt unlimited vacation policies not out of the goodness of their hearts but to save money. We all know that traditional “accrual” vacation policies can be a substantial expense. For large employers, it can add up to 2-3 million a year because unused accrued days are banked, so whatever money it formerly paid departing employees goes directly to the bottom-line.
I’ve had the privilege of working with Kronos for years and one of the things I’ve noticed is that they are a company that prides itself on being an organization where family comes first. I’ve heard Aron Ain say many times that “family comes first.” And Kronites are family. It was important to them that their new policy reflect their philosophy. “From the beginning, we decided not to try to profit from abandoning a vacation accrual system. We felt it made more sense to reinvest those savings in other employee benefits. So, in addition to offering an open vacation policy, we increased parental leave and added up to $3000 to help offset the cost of adoption. We increased the 401(k) match, created a scholarship program for employees’ children, and launched a child care assistance program. In the end, those new benefits exceeded the savings from changing our vacation policy, but I believe they were worth it.”
Communicate, Communicate, and Communicate Some More
You might think this policy would be welcomed with fanfare. And many employees were thrilled with the change. However, there was an incredibly vocal minority who were unhappy. And even though they were a minority, let’s face it, sometimes a very vocal minority can have a negative impact on company culture and morale.
In addition, some managers were unhappy because they felt this new policy would make their jobs harder. They were concerned that employees would take advantage of the policy.
And, there was a group of long-tenured employees who were unhappy because they felt their length of service entitled them to get more vacation than new employees. Other employees were unhappy because they didn’t value the new benefits like parental leave, scholarship programs, and child care. They viewed their vacation accrual as a sort of savings account.
To help employees work through these major changes, Kronos focused on communication. Managers received training and coaching on strategies for handling conflicting scheduling requests. Kronos conducted several town-hall style meetings and Ain met with employees individually. “I learned a long time ago that people are entitled to their feelings. It’s never my job to tell them how they should or shouldn’t feel. When talking with people I sympathized, and in some cases I gently pushed back on their logic. A few people were so upset that they talked about quitting, but in the end, I don’t think anyone really left Kronos over the policy change.”
myTime Results: Better Engagement, Higher Profits
The myTime program was put in place since 2016 and Kronos has been tracking the numbers since then. In the first year that the program was launched, Kronites took off an average of just 2.6 more vacation days than under the traditional accrued PTO policy. Yes, that’s right. Fewer than three more days off.
In addition to tracking vacation, Kronos also has tracked employee engagement. Since myTime was implemented, engagement scores increased from 84% to 87%. Turnover dropped from 6.4% to 5.6%. And just in case you’re wondering, Kronos says it’s still very important to track and report time off even though it’s ‘unlimited’ so that teams always have enough coverage and so that HR and managers can ensure employees are taking enough time off to unwind and refuel. The focus of the program is the people.
Kronos shared a comment with me from an anonymous source on Glassdoor who said, “With its unlimited vacation policy, Kronos has upped their game when it comes to benefits.” And now instead of managers saying, “No can do” to vacation requests, they’re now asking employees, “Why aren’t you taking more time off?”
Let me leave you with just one more result. Last year, Kronos revenues were $1.3 billion (up $390 million from the year prior). It is possible to create policies that are a win for both employees and for the bottom-line.
Sharlyn Lauby is the author of HR Bartender (www.hrbartender.com), a friendly place to discuss workplace issues. This article was reprinted with permission from Kronos (www.kronos.com), a leading provider of workforce management and human capital management solutions. You can connect with them on Twitter at @KronosInc and @HRBartender.