The myths and realities of day care
Few aspects of managing a business have developed as negative a mythology as child care. Critics say that it costs too much, is difficult to administer, and is fraught with liability problems. Some of the smartest companies around manage to provide some form of child-care assistance -- and they're boosting productivity and making recruiting and retaining easier. Let's take a look at what happens when you deal with this issue -- possibly the benefit of the '90s -- the way you would stock options, profit sharing, or any other incentive. -- E.W.
Having a family, said comedian Martin Mull, is like "having a bowling alley installed in your brain." Nowhere do the pins clatter louder than at work, where the kids may be out of sight, but never out of their parents' worried minds. Are the little ones getting along OK? What if they are too sick for day care, or the sitter quits -- again?
For most employed parents, peace of mind comes with high-quality, dependable child care that they can afford. Unfortunately, given the long waiting lists, the high turnover rate among providers, and a weekly bill that tops $100 in major cities, parents are rolling more gutter balls than strikes in that game. Many families, in fact, aren't sure from one week to the next who will be taking care of the kids.
All these concerns affect the way a person works. Count the ways: the days that begin late and end early, the lack of concentration, the frequent phone calls home, the dubious sick days. What's more, it's no longer uncommon to see mothers and fathers turning down promotions when job and parental responsibilities clash. Lack of child care is a major culprit in perennial management problems such as retention, recruiting, and absenteeism.
Few companies are untouched by child-care difficulties. Those that feel they can ignore the problem may not be able to do so for long; tight labor markets predicted for the years ahead may stimulate many more companies to offer child care as part of their strategy to recruit and retain female employees. Already a tiny cadre of small companies is tackling the issue head-on. Among them:
Integrated Genetics Inc., with its associated venture, Gene-Trak Systems, a $12-million biotechnology business in Framingham, Mass., offers an information and referral service to employees in need of child care.
Group 243 Inc., an advertising agency based in Ann Arbor, Mich., administers a plan that enables employees to pay their child-care costs with pretax dollars. It also sponsors an on-site child-care center.
Perkins Geddis Eastman, an architecture firm in New York City, is liberal in its use of flexible work schedules and parental leaves.
Tempting as it may be, don't write these companies off as social crusaders or do-gooders. In reality, adding child-care assistance is a strategic decision, and companies make it for the same reason they might choose to offer stock options, profit-sharing plans, or other incentives: a significant payoff exists for the company. They are convinced that child-care assistance makes for more loyal, more reliable, and more productive employees.
That's not to say they didn't take a show-me attitude in the beginning: did their employees really need child-care assistance, or was the company merely being sucked into another fringe-benefit fad? Was child-care assistance affordable? Would it cause liability problems? Would it tangle the company in bureaucratic or internal red tape? And how would nonparents react to it?
These companies satisfied themselves that while little about child-care assistance comes easily or cheaply, most of the pitfalls associated with it are either exaggerations or outright myths.
How do companies make a decision like this one? "I guess you make it the same way you make any big decision," says Larry Taylor, vice-president of Taylor Corp., a company in the printing business that has had an on-site child-care center for nearly 10 years. "Is the problem costing us employees? Is it making it hard to get them? I mean, would it be good business? That's always going to be the bottom line, isn't it?"
Few aspects of managing a business have developed as negative a mythology as child-care assistance. But when you examine the myths one by one, you get a different picture.
We don't need it.
Chances are, you do -- now, or you will in the future.
Gone forever is the time when parental worries were left at home with the wife and children. Today, less than 10% of American households fit the Ozzie-and-Harriet, Ward-and-June image that many of us outdatedly consider a "normal" family. Increasingly common: two-thirds of married couples with children have two-paycheck households, and 25% of children live in single-parent households.
Indeed, women have filled some 60% of the new jobs created since the 1970s. In small business, the proportion of women in companies of fewer than 100 employees was at 44% in 1983. Sixty-seven percent of the jobs created from 1988 through 1995 will be filled by women. Demographers say that 80% of these women will become pregnant sometime in their working lives. In a sharp departure from past decades, when pregnancy ended careers, economic necessity will keep most of these women working. That's why the fastest-growing segment of the work force, now and for the foreseeable future, is mothers of young children. Already, two-thirds of women with children under three years old hold full-time jobs.
What's more, as the baby-bust generation comes of age, employers will face a shrinking labor pool and greater competition for workers. How to expand the pool? A 1982 Census Bureau survey revealed that 26% of nonworking mothers with young children say they would look for work if reasonably priced child care were available.
The overall aging of the U.S. work force is already creating tight hiring conditions in some regions and industries. Princeton University demographer Thomas Espenshade believes the worst is yet to come: "In the not-too-distant future, employers are going to find themselves in a zero-sum game, competing for the few good employees that will be out there. Many of them are going to have to increase their total benefits packages to attract and retain workers, and I think employer-sponsored child care is going to be particularly attractive."
Don't write child care off as a women's issue, though. In a recent survey of parents of children under the age of two, 89% of women and 62% of men reported work-related child-care problems.
The need for child-care assistance is so great that it promises to become a major political issue in the 1990s. Already Congress has before it more than 100 bills that could have some impact on child care.
Child-care assistance means an on-site center.
Companies actually have many alternatives to providing on-site day care. And even the simplest plan can be a tremendous help to employees with kids. Here are the plans most often pursued by small companies:
* providing information and referral services that guide parents to high-quality care available in the community;
* offering flexible work schedules that allow parents to match their hours to their babysitters' schedules;
* establishing an IRS-approved plan enabling employees to pay for child care with their pretax earnings;
* subsidizing the cost of child care either directly (through a voucher system that pays a set percentage of the bill) or indirectly (through a plan that may or may not be tied to the benefits package);
* establishing on- or near-site child-care centers on their own, or with other companies.
Companies should begin their consideration of day-care assistance by conducting a careful needs audit. But don't simply round up the preschoolers' parents and ask them for their child-care preferences. Focus on what's happening right now -- where the family lives; the kids' ages; the problems their parents are having with child care; the number of different child-care arrangements made each week; and in some detail, how the family is coping with child-care needs before school, after school, in the summer, and when the kids are sick.
During the study, try not to build false expectations by mentioning services you know the company can't or won't deliver. And don't ask how much the parent would be willing to pay for child care. "If the answers come back 'five bucks a week,' well, you asked!" says Phoenix-based consultant Nadine Mathis. But do include nonparents in the survey -- they may know better than anyone how child-care problems affect morale and productivity in the work force.
What percentage of employees can you expect to participate in the day-care plan? From 5% to 10% participation is considered normal, 20% very good.
Only after the survey are you in a position to figure out what sort of child-care assistance -- if any -- is necessary. Would your company benefit from an on-site child-care center, or would your employees be grateful merely for help in finding quality care in your community? Do employees need help paying for child care? Or would they prefer a more flexible work schedule that might allow them to take on more of their children's care themselves?
We can't afford it.
It's true that on-site child care can be expensive. But the alternatives -- the various reimbursement plans, information and referral services, and the flextime approach -- cost surprisingly little, either in time or money.
The cost of resource and referral programs vary with the size of your organization and the contractor you choose. Integrated Genetics, in Framingham, Mass., is paying a mere $3,500 per year for its program, assuming 6% usage on the part of 300 employees. For that fee, the company receives access to 1,300 child-care providers plus parental seminars four times a year.
A dependent-care assistance program, enabling employees to set aside pretax dollars to pay for child care, cost Group 243 only normal fees for bookkeeping changes the first year. "There's a nominal cost in the first year, because you're setting aside salary dollars for your employees," says senior vice-president of corporate administration Carey Ferchland. "After that, there's really nothing to it either financially or logistically -- there's just a ceiling [the maximum amount the employee can withhold] to keep an eye on."
On-site child care is far more expensive, of course. Companies typically subsidize part of the costs of the center rather than the entire cost. Group 243 subsidizes $50,000 of its center's $100,000 to $200,000 program. Taylor Corp. chips in $1,000 per child, or about 40% of operating cost.
Perhaps the smallest company offering subsidized on-site child care is Oliver Wight Cos., a 24-employee management consulting firm in Essex Junction, Vt. It subsidizes more than 50% of the cost of operating its center for 11 children. But the company doesn't find it an outlandish figure. "It's less than it costs to hire one good executive," says benefits administrator Debbie Peck.
We won't get much back for all the expense and trouble.
You can't take the benefits of child care to the bank. Most of them aren't easily measured. Still, a whopping 95% of the companies responding to a 1984 survey said the benefits of their child-care programs outweighed the costs.
To what extent, however, most companies don't know. "You want to reduce it to dollars and cents?" asks an incredulous Larry Taylor. "Foolishness. There are too many variables to get an accurate measurement. But we see the benefit in positive employee feedback, parental peace of mind, a more dependable work force, improvements in recruitment and retention, and higher numbers of women in management. These are the things that make it worthwhile for us."
To that list add good public relations, says Group 243's Carey Ferchland. "We've gotten at least one major advertising contract out of this, not to mention headlines in publications we normally couldn't have dreamed of getting into at our age," she says.
Many of the companies that Inc. interviewed believed it would be possible to run their on-site child care centers in the black. They simply choose not to. "I think I could run ours at breakeven," ventures Ferchland, "but it would mean lower salaries, greater staff turnover, worse staff-child ratios, and in general, a lower-quality program. And that's not what we want."
We're too small and understaffed.
You don't need a mature organization with a full-fledged personnel department to run a program. For example, resource and referral plans are well within the grasp of most small companies. You can contract for the service or work with church and community leaders to compile a list of your own.
Any of the reimbursement options can be easily handled by a staff accountant, or contracted out to a bookkeeping firm. One such option enables employees to pay for child care with pretax dollars. "It's so easy to set up," says Ferchland. "You just get the IRS to bless it, and then attach it to your accounting and paperwork function."
Flexible work schedules, which are a major help to parents, are already offered by many companies as part of their general workstyle. Parental-leave policies may require a bit of fancy footwork, but they too prove manageable even in start-up companies. In fact, many companies find that flexible scheduling allows them to expand their business day, and companies that institute job-sharing programs enjoy the peace of mind of knowing that each shared position has its own back-up in the event of illness or attrition.
Although few small companies want to go this far, even running a child-care center may not be out of the question. Oliver Wight Cos. built child-care space into its new building when it outgrew its facilities (in the president's house) seven years ago. Today the center serves 11 children from seven families.
Liability exposure is too big a risk for us.
There has not been a successful liability case against a corporate-sponsored child-care center, as far as can be determined. And, according to sources at San Francisco's Child Care Law Center, there is virtually no liability exposure in corporate subsidy of employees' child-care costs.
A company can provide some protection for its assets by establishing a separate division to operate an on-site center and by subcontracting for referral services. Above all, be sure you get some insurance -- it's cheaper and easier to obtain than you might think.
Insurance carriers are generally willing to write policies that cover corporate child-care centers. The cost? At $2,000 to $7,000 per year for an enrollment of approximately 30 children, most companies find the premiums reasonable. Another insurance break comes by way of an Austin firm, Human Services Risk Managment, that offers a course in liability loss control. Several insurers provide incentives to companies that complete this training.
It's not fair to employees without children.
Surprisingly, consultants say they've encountered few examples of resistance from employees without children to corporate child-care assistance programs. Studies report that nonparents show little or no resentment about their employers' child-care programs.
Still, keep in mind that no employee benefit is going to be universally equitable, and that corporate child-care assistance will help reduce absenteeism, turnover, and recruitment problems -- all of which burden nonparent employees from time to time.
Ellen Wojahn is a Boston-based writer. Her most recent book is Playing by Different Rules (Amacom), about the failed merger of Parker Brothers and General Mills.
PERKINS GEDDIS EASTMAN
THE FLEXTIME STRATEGY
Revenues: $5 million
Employees affected: 12
Annual cost: NA
Start-up cost: NA
Money isn't the issue. The architects, interior designers, and staff at Perkins Geddis Eastman, in New York City, can afford to buy quality child care, if they want it. No, what the parents in this 50-employee firm want is time to provide their own child care. That's why the firm offers both male and female parental leaves, followed up with a flexible work policy that allows them to work one or two days a week at home, just to ease the transition.
The policy was established when the firm was launched in 1982, a year before any babies came on the scene. "We were looking for stability," recalls partner Barbara Geddis. "We know how demanding the profession can be. The typical attitude in this business is, 'Having a baby? Well, come back in three years when you're done." ' Geddis and her partners thought it important to do what they could from the start to hang onto their senior employees and let them use their time more flexibly for both work and child rearing. "We believe that, ideally, a person with a child should be a parent," Geddis says.
The first three employees to take advantage of the flexible workweek were men. All three took unpaid, three-week paternity leaves and, for about a year after that, worked out of their homes at will. As women began starting families, the policy was modified to allow for longer leaves. "We've found women seem to need more time off, at least in the beginning," explains Geddis. "Probably six months totally off, and a year after that in some sort of flex."
The evolution continues. "Now, as the kids get to be two, three years old, and new people start families, we see people wanting their flexibility in different ways," Geddis explains. "They want flexible hours instead of days, and they want to know they can bring the child to work if they need to."
Geddis admits that accommodation has had its consequences. A few clients, for example, have been momentarily irritated to find that their architect is at home with the baby. It can be inconvenient for co-workers, too, who sometimes have to take up the slack in order to get work out on time.
"The people who have chosen the three- or four-day option effectively put their careers -- well, not on hold, because their careers didn't stand still, but they certainly froze their responsibilities," says Geddis. "That was acknowledged ahead of time, and it's had some impact on salary negotiations." But there have been no gripes. "Most of these people are '80s couples with mutual commitments. They're doing what they want, and they're accepting the consequences."
GRIECO BROS. INC.
THE PARTNERSHIP STRATEGY
Employees affected: 55
Annual cost: $50,000
Start-up cost: $50,000
How do you attract and retain $8.75-an-hour garment workers when labor is a seller's market? That was the problem facing Tony Sapienza, vice-president of manufacturing at Grieco Bros. Inc., makers of Southwick brand men's clothing, when the economic boom hit eastern Massachusetts in 1984. If he didn't come up with something, the 59-year-old factory in Lawrence would be forced to shut down.
Child care made sense. Seventy-five percent of his work force was female. With $50,000 of Grieco family money in hand, Sapienza set out to establish an on-site center.
It wasn't long before Sapienza realized he would need to at least double his capital. He cajoled another nearby mill, Polo Clothing Corp., to sign on with a contribution of $20,000. Foundations kicked in $20,000. The Lawrence city council coughed up $10,000. Still, it was not enough to cover renovation costs. Where would the operating monies come from? And could they find some deep pockets to defray the workers' $120 weekly fees?
Sapienza consulted Ed Clark, regional vice-president of the Amalgamated Clothing & Textiles Workers Union, who agreed to champion a per-employee contribution of 1¢ per hour. That added up to $21,000 a year. "Older employees and some of the immigrants said they had done without child care, [so] why couldn't today's young people?" Clark recalls. "But less than 1% of the 600 people voted against it."
Next, Sapienza hammered out a plan whereby the center would be run independently, by Grieco's predominantly Hispanic work force, as a minority-owned and -operated enterprise. Then Michael S. Dukakis's administration agreed to subsidize low- and moderate-income parents' fees totaling $298,287 per year. A subsequent low-interest start-up loan of $30,000 from the Massachusetts Industrial Finance Agency put the project "over the top," Sapienza says.
The center opened for business in January 1986. By Sapienza's measures, the program is a success, showing that management and labor can cooperate on shared goals.
Clark agrees. "Grieco did this with not entirely altruistic motives; we saw an opportunity to improve our lot. We got good results because both sides wanted it and needed it."
Sapienza hopes that onlookers come away with the lesson that child care need not be a white-collar, rich-company phenomenon. "Anyone can raise the start-up money if they try."
Operating funds are another story, however. Sapienza acknowledges that state support was critical. "The state spent $110 million on child care last year. Other states don't spend like that. But, of course, they're probably wondering why their welfare recipients won't go back to work."
ENABLING WOMEN TO ADVANCE
Revenues: $200 million +
Employees: 5,000 total; 2,200 local
Employees affected: 140
Annual cost: $140,000
Start-up cost: $400,000
Nancy Schwamberger's husband died six years ago, leaving her with two boys to raise -- one age four, the other a preemie with respiratory problems.
Without her employer's on-site child-care center, Schwamberger would have been unable to maintain a full-time schedule and would have had to give up her financial independence. She certainly couldn't have risen to the position she holds today, staff accountant for Taylor Corp., a printing business in North Mankato, Minn. After all, you just don't find child care to cover a six-day, 47-hour floating schedule like hers.
Shauna Brignac, a married mother of three, is another satisfied parent. "In the past, I spent my days worrying and feeling distracted," says Brignac. "I'm sure it affected my job performance. Now, I don't think about the kids all day, probably, unless I'm afraid Rebecca, who's still in diapers, is getting sick. Even then, all I have to do is pick up the phone and say, 'Can I have a report on Rebecca?' "
Taylor Corp. owner and CEO, state senator Glen Taylor, is a major advocate of child-care assistance. He and his brother, Larry Taylor, established the center in 1979, when the company was a 1,000-employee operation in the midst of a growth spurt.
Back then, Glen Taylor recalls, the company was having trouble recruiting and retaining workers. It couldn't assure parents of finding child care in the area. Things had gotten so bad, in fact, that even veteran employees were turning down promotions, fearing that the extra responsibility might complicate their already tenuous babysitting arrangements. When a supervisor named Jean Andersen told the Taylors that her two-year-old had gone through four babysitters in a matter of a few months, they urged her to begin putting together a case for on-site child care.
Taylor invested $400,000 into the construction of a cottage that houses the center, and it subsidizes care at $1,000 per child -- or about $140,000 per year. That's a big overhead item, but recruiting, promoting, and retaining workers -- especially women -- has become easier.
Meanwhile, Glen Taylor is pushing legislation that would give tax credits to companies that establish an assistance plan. If passed, it would be the most ambitious set of child-care incentives in the nation. "As long as business needs employees, and as long as women need to work but can't without adequate child-care options, a problem exists. If we want to keep women in the work force, off public assistance, and, most important, if we want them to advance, we have to recognize the problem that's holding them back. It's lack of child care."
COUNTDOWN TO START-UP
Revenues: $38.4 million
Employees affected: 30*
Annual cost: $60,000*
Start-up cost: $90,000*
Mid-November, 1987: The wags at Perceptronics Inc., a maker of military training devices, say it must be in the water -- how else could they explain the spate of new babies? Devra Weltman, then working as an internal auditor, recalls that chief financial officer David P. Nelson had once raised the possibility of adding some sort of child-care assistance to the benefits package. Nothing came of it. Weltman, finishing up her undergraduate studies and eager to carve a role for herself at the Woodland Hills, Calif., company, brings the idea to her father, CEO Gershon Weltman, who greets it with interest. Devra tells personnel to put her on the routing list for anything related to child-care assistance. She also begins sending for books and pamphlets.
December: The word is out, and women are telling Weltman that nothing short of an on-site center will do; child care is difficult to find in Greater Los Angeles, they say. An expectant mother stops into Weltman's office to urge Devra on. "If you don't get us this child-care center, and soon," she says, teasingly, "this baby's going to end up in your office!"
January 1988: Weltman makes her first semiformal pitch to Nelson and president Amos Freedy. "We're losing people," she says. "One woman took on a consulting contract for a while after she adopted a child, but now she's not working for us at all. Maybe we could have kept her if we'd had something to offer her." Nelson and Freedy free Devra from her duties to delve into the research. Weltman begins visiting child-care centers.
January 29: Weltman meets with Sandy Burud, president of Summa Associates Inc., a Pasadena, Calif.-based consulting firm. Burud agrees to help Perceptronics choose a child-care assistance program. That includes helping conduct a needs assessment and later, helping with construction, licensing, staffing, marketing, maybe even operation. Burud says an on-site center for a company the size of Perceptronics should accommodate about 30 children, or about 10% of the work force. She says a September 1988 opening date is not only feasible, but desirable: parents are most receptive to changing their child-care arrangements at the beginning of a school year.
But the big topic is liability. Burud assures Weltman that Perceptronics need not worry: insurance coverage will cost $150 to $180 per child, or, in this case, about $5,000 a year. Afterward, Weltman reports to Nelson, who agrees that "liability won't be the swing issue" on a go/no-go decision. "It'll rest on the cost-benefit analysis."
February: Weltman's on the road again, touring various child-care centers. She's begun thinking about space. Because Perceptronics rents facilities in a cluster of three buildings, she will not only have to select an area that is suitable to the company and the state regulators -- who require 35 square feet per child inside and 75 out -- but also acceptable to the building owners. Late in the month, Burud appoints colleague Choral Nasser Brown to handle the project.
Early March: Weltman and Brown meet and agree to a two-step plan: first the development of a sample budget, followed by a needs-assessment survey of the work force. "Let's hope it shows us whether child care will help us recruit and reduce absenteeism -- and gives us some idea of how it will affect things we can't measure, like morale and productivity," Nelson says. Before the the month is two-thirds gone, Brown produces the budget. Lots of figures are soft, but she tells Perceptronics to expect an annual operating subsidy of up to $2,000 per child. Weltman discusses the budget with Nelson, who is now more explicit about his concerns. "As a defense contractor, we're going to have to be sure this won't jeopardize our profits. And I'm going to have to look at how other government contractors are dealing with this. I'm not against pioneering, but if nobody else is doing this, I think we ought to examine why."
Late March: The pace quickens. After another round of visits to day-care centers, Weltman selects an architect. She touches base with the building owner again, this time to obtain blueprints to show the architect, and to discuss the possibility of turning part of a parking lot into a playground. To Weltman's pleasure, he is completely supportive. A week later, Weltman meets with the architect, who asks questions she can't easily answer. Will this be a structured program, or will the kids determine their own activities? She'll have to decide these things before he can design the structure. Nonetheless, he says he can meet a September deadline.
April: Weltman and CFO Nelson distribute the needs-assessment survey. There's an air of excitement; Weltman finds herself reading through each survey as it is handed in, enjoying the many positive responses. Still, definitive results won't be available until the end of the month. Then, the company will either commit to child care or abandon the idea. "We're not going to dabble," Nelson tells her. "We're not going to commit blindly, either. But if everything continues to look positive, we'll go forward. And if we go, we're really gonna go."
May: The numbers are crunched. Encouraging as the results had seemed initially, Weltman and Nelson decide that establishing an independently operated center is not wise. "Disappointing as it is," says Weltman, "I've got to be realistic. We're going to have a bit of a baby boom in five years, but going ahead now is a little too much for us to handle."
August: Weltman remains on the stump for child care, but now she's lobbying neighboring companies that might want to invest jointly in a program. "We hope to have something concrete put together before the end of the year." And remember the woman who jokingly threatened to drop her little one in Devra's lap if something weren't done to alleviate her child-care problem? "The baby spent most of the summer in my office," says Weltman, laughing.