Measuring the Immeasurable 

(Article originally published by WFC Resources, October 2003, as a Guest Column written by Cynthia Hurkes, Business Liaison for the Oregon Child Care Resource and Referral Network)

Working in child care resource and referral (CCR&R) services for 12 years has enhanced my perspective of the increasing need for healthy employees and healthy businesses. It is clear that employees do not leave their child care problems at home; they take them into the workplace. In November 2002, after taking on the role of Business Liaison for the Oregon Child Care Resource and Referral Network, I began to assist our resource and referral agencies to develop employer supported child care solutions, and help them communicate with employers about what they had to offer.

CCR&R programs have provided services to employers for many years. Yet programs struggle with the delivery of that service. There is a difference between how human service providers and employers view employee benefits. In addition, there are few financial tools available to impress employers with the urgency for providing child care solutions. This observation is not new, but the lack of attention to it is affecting success.

There is no clear formula for speaking with employers about child care costs and benefits. Increasing productivity, reducing absenteeism, and reducing turnover are the most commonly used terms when talking about child care in the workplace. But these concerns have not convinced employers, in general, to "buy into" child care solutions. During our first presentation to a group of employers, we discussed employee performance and unmet child care needs. But these employers told us that in order to justify employer-supported child care, they wanted cost-benefit analysis and return on investment information.

So we began a search for a cost-benefit model that could quantify the costs and benefits of child care, and that could easily forecast the payback for investments made for child care benefits offered to employees. The challenge became "measuring the immeasurable."

The simple definition of ROI is benefit less cost. This definition was the basic accounting tool used to create the model for our model company (the XYZ Company). We considered the changing demographics that affect the workforce, as well as information about losses incurred due to absenteeism, low productivity, and turnover resulting from employee child care issues. The model was developed using the following information:

• The Oregon document "Data for Community Planning, 2000 Oregon Population Estimates & Survey Findings" created by the Oregon Childhood Care and Education Data Project, identifies the number of families using paid child care in Oregon and the number of children in child care
• Information from the "2002 Oregon Child Care Market Rate Study," which identifies child care provider rates
• Nationally published documents of current data on absenteeism and turnover rates

Here's the cost-benefit model we were able to present to employers:

• An Oregon company with a workforce of 100 employees and an average salary of $44,000
• An investment of $77,500 (Oregon Dependent Care Assistance tax credits for 31 employees @ $2500 per employee annually)
• A turnover rate of 5% for employees who leave their jobs to work for a company that offers child care benefits (37% to 60% consider leaving jobs for child care benefits - "It’s Good Business to Invest in Child Care – Engaging Business Partners: An Employer Toolkit Template")
• An annual absenteeism reduction of 2 days for employees who have children in stable child care (Employers report 20 to 30% - "It’s Good Business to Invest in Child Care – Engaging Business Partners: An Employer Toolkit Template")
• An assumption of 12.5% (1 hr. per day) increase in productivity by reducing the amount of "on the job stress" due to unstable child care (conservative projection based on anecdotal information)
• Applying both state and federal tax credits for child care and including a Dependent Care Assistance Plan, (Internal Revenue Code section 125), the cost to the employer was $8,099
• The ROI in this model for the first year of implementation was $357,409

Every presentation offered to employers continues to focus on these cost-benefit savings, and results have been encouraging. Employers have responded and are asking more questions. What are the advantages, what are the disadvantages, and can you provide a break-even analysis? The employer community is responding to the fiscal information with questions and thoughtful input, and willing to engage in a dialogue about quantifying the dollars involved with employee benefits.

It's critical for employers and other decision makers to understand how to measure the outcome of employee benefits, both to the employer and to the employee. The current economy has fewer dollars to provide benefits. The decision regarding employee benefits is a crucial one. Dollars invested in employees’ benefits that best fit a given workforce can measurably add to the long-term profitability and quality of life for the organization. It is essential to encourage employee advocates, human service professionals, and human resource professionals to understand the importance of quantifying the ROI on employee benefits.

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Cynthia Hurkes can be reached at churkes@oregonchildcare.org, 503-375-2644.