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 implement a new open time off policy and I thought you would find it interesting. Both from the standpoint of the policy itself but also because of the challenges they experienced and how they addressed them.
Like many businesses today, our client discovered they were facing recruiting challenges. Internal research (employee feedback, roundtables, feedback from managers through their 1:1 with employees, etc.) discovered one of the hurdles to attracting talent was their vacation policy.
So, we wanted to address the challenge but in a way that appealed to the greatest number of employees. The internal research told us that it wasn't just Millennials who craved the flexibility.
For example, Generation X and above want to take time off to attend kids’ events and take care of sick loved ones without “wasting” their vacation days. In general, employees also wanted time off to volunteer, go on field trips; and general life maintenance.
The flexibility is more than a "millennial" benefit. Our client was offering new employees three weeks of paid vacation, which is comparable to what local companies and industry were offering. But when they 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.
An “Open” Vacation Policy
In response to the company’s recruiting and vacation challenges, we developed a system called “OpenTime”. Basically, it’s an “open” (aka unlimited) vacation policy. There’s no limit on how much time any employee can take. Instead employees work their schedules out with their supervisors.
Before we talk about the specifics, let’s talk about policies in general. One of the reasons that policies often do not work is because the concept of the policy didn’t 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.
I’ve had the privilege of working with this client for quite a number of years and one of the things I had noticed is that they are a company that prides itself on being an organization where family comes first. Even over business. I’ve heard the three founders and partners often say it many times that family comes first. So, it was important to them that this policy reflect their philosophy and culture. 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, the parental leave time was increased and added up to $3000 to help offset the cost of adoption and we created a scholarship program for employees’ children. 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 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 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 and scholarship programs. They viewed their vacation accrual as a sort of savings account.
To help employees work through this major change, we focused on communication. Managers received training and coaching on strategies for handling conflicting scheduling requests. We also conducted several town hall style meetings and the founders even met with employees individually.
The COO of the company even said, "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 the company over the policy change."
OpenTime Results: Better Engagement, Higher Profits
This program has been in place since 2017 and technology tracks the numbers. In the first year that the program was launched, employees took off an average of 2.6 days more than under the traditional accrued PTO policy. Yes, that’s right. Just less than three days more off.
In addition to tracking vacation, they also tracked employee engagement. Since the new open time policy was implemented, engagement scores increased from 84 to 87 percent. Turnover dropped from 6.4 to 5.6 percent. And just in case you’re wondering, the company says it’s still very important to track and report time off even though it’s ‘unlimited’ so teams have enough coverage and so HR and managers can ensure employees are taking enough time off to rewind and refuel.
The focus of the program is people. Oh and let me leave you with one more result, last year their revenues increased by 12%. It is possible to create policies that are a win for employees and the bottom-line. Even when it doesn't all start off as planned.