Watch our Consumerism 360º® Podcast 7, and listen to Dr. Richard Thaler, co-author of “Nudge,” discuss how behavioral economics can help employees become responsible consumers.
The move from DB to DC pension plans continues. Even unions are signing agreements that require new hires to become members of a Group RRSP. Current members often keep their employer sponsored DB plan.
Multi employer pension plans (MEPP) provide predictable benefits, low fees and shared risk, portability of benefits, fair treatment, and financial stability and favourable savings room. Group RRSPs do not provide predictable benefits, low fees or shared risk and are not always financially stable. A Group RRSP is really just a collection of individual RRSPs.
It’s said that the biggest advantage of belonging to a union is solidarity or not being alone. With a RRSP solution retirement benefits can vary widely with some doing very well and others doing very poorly. Where’s the solidarity in that?
A DC plan for new hires will take several years before a critical mass of assets is reached to take advantage of any economies of scale. Initially it may be cheaper to administer a Group RRSP than a MEPP. But a MEPP created by the national union and open to all locals could quickly reach the critical mass needed to take advantage of the economies of scale.
So, why do unions opt for Group RRSP rather than Multi Employer Plans?
We might be doing it all wrong. We’ve spent years doing what we thought was right, but now we can know for sure.
HR communicators have had an “HR knows best” perspective on the ways to entice and engage employees to take action. That could all change now. Our colleagues on the external marketing side have known for years that the best way to motivate actions is to track outreach, measure effectiveness and adjust accordingly.We can – and should – do that, too. In many cases, the technology is right at our fingertips.
The Marketing department likely has a robust customer relationship management (CRM) tool that tracks each potential customer, their habits and the effectiveness of outreach efforts. Why not use the same tool to look inward? Why not hook it up to our portals, websites, social media, print and in-person communication efforts to see just how effective we are and how effective we can be?
HR has access to the type of information that makes marketers salivate – demographic, savings, earnings, health conditions, to name a few. Certainly, we have an ethical and legal responsibility to protect that data. Morally, though, perhaps we should be looking at ways to use certain aspects of that data to help our employees make more informed decisions about the programs we offer. Using a CRM alongside some degree of that data – depending on the degree of organizational paternalism/individualism – we can push messaging that encourages the right actions for our employees.
Applying the CRM model, we monitor the messages we send out, or post, or even hear, and measure which are having the most impact. We can also measure, to the individual, the right medium or media for those messages. Using self service, employees can augment the data by letting us know what information they need, what media they prefer and the frequency they desire.
In this way, HR can be more than just a top-down disseminator of information. We can be a warehouse of content, a multi-channel distributor and a metrics-driven arbiter of effective internal marketing efforts. Maybe we can even get our Marketing folks to pay for it!
We’ll dig deeper into this topic in future posts. We’ll explore current studies of social media, behavioral economics, complex systems, marketing theory and other relevant topics that help us better understand our employees and encourage them to take the best possible actions.
All’s well that ends well it seems. It feels like only yesterday we were in financial meltdown – everywhere you looked there was another bank tripping over a huge pile of debt, private and institutional investments were in free-fall. Fast forward 12 months and it’s all good again.
The cries of “the emperor has no clothes on” were, it seems, false. He is fully suited after all, probably with belt and braces! Stocks head back to where they were and people are spending again – all a false alarm! Except I don’t believe it.Our economy faces the same challenges it did when everything was doom and gloom, the same levels of consumer debt, the same over-priced houses, the same overseas competition, the same price challenges on domestic manufacturing etc. etc. etc. It seems to me that stock markets just don’t work any more, there is no correlation between value and price, and sentiment and “irrational exuberance,” to quote the long discredited Mr. Greenspan, are more relevant.
Actually given the rebound maybe Mr G. is back in favour now! What puzzles me is I don’t see institutional investors, in this case pension funds, reacting any more sensibly than the average investor, whatever that may be. Maybe I am just an eternal pessimist but why are pension funds not scaling down their equity exposure? ….”and invest in what” I guess is the obvious question given nothing else looks any more attractive. How about long term bonds as a means of de-risking your plan (particularly in plans with no salary link on the benefits that accrue) – the idea is you hold until maturity so short term movements in interest rates just don’t matter. Somehow we have to crack this pension investment dilemma – I would argue your pension plan should not be the place you take risk, any takers? Or maybe we need a whole new model of corporate ownership – shares in a corporation were never intended to fall prey to the day trader and the blanket news coverage that is 24 hour business television. Put my retirement plan at the mercy of that beast – not a chance!