Monday, October 06, 2008


The hidden Costs of Business


Dhruv Sonthalia

Saket Sanganeria

Presenteeism is opposite of absenteeism, both are a headache for the industries. Absenteeism it refers to the absence from duty or obligation. The obvious reason for absenteeism seems illness or sickness but an employee may be absent due to many reasons. Some other reasons for regular absence are emotional problems, family problems, etc. Absenteeism cost mainly consists of payment paid in the form of wages to absent employees, additional overtime and temporary staff covers. It is estimated that the cost of absenteeism was around 12 billion pounds for United Kingdom for the year 2002. It is considered to be a major concern not only because of the actual absence of the employees, but also because the absence is without sufficient notice or justified using fake reasons.

However recently there has been a marked shift in discussion from absenteeism to presenteeism. Presenteeism is the complement of absenteeism. It refers to the problem off employees showing up for work but not being able to be fully productive because of ill-health or other problems. It is a concept close to employee engagement. Some researchers believe that the cost of presenteeism could be around 7-9 times more than that of absenteeism. Many Indian companies have also started to take note of this and are developing policies to solve it. Some believe that increasing number of days of sick leaves, better health insurance coverage and better work environment can help reduce this cost. But these are just some solutions which may or may not have the desirable effect on the cost of presenteeism.

A better understanding of the problem helps

Presenteeism exists in various forms. These forms have their specific modalities and reasons. Each of these problems give rise to a clear distinct situation. To help us appreciate the real face of the problem we need to look at it various forms in details

Working with illness

Working with illness or any other factor which hinder the performance of an employee is presenteeism. The fear of loss of income or employment on the part of the employee is a major cause of presenteeism. Many workers and employees come to work when they are ill – they work with headache, mental pressure, anxiety, and other undesirable conditions that impair their performance. The below par performance adds to cost for the employer and adds to the peril of employee. The effect may not be very serious for a person working manually on repetitive jobs. However, with the growth in contribution by the knowledge workforce the impact is much higher. Mental performance is the key to productivity and output here. Given the nature and requirement of the work, if the employee’s mind is not on the job or if he is unable to contribute his hundred percent he (she) becomes a liability to his (her) organization.

Erratic working hours and instability in work life balance

Erratic working hours give rise to presenteeism. Presently there has been a growing trend among white collar employees to devote extra hours to their work. Employees work in a culture where coming in early, working till late and battling illness is expected and required. This is done to enhance career prospects and sometimes demanded by the work culture in the organization. In many cases it has been found that the employer makes it clear to employees that working till late and reporting early is expected of them, as normal job requirement. Presenteeism disrupts the work life-balance and is like taxing the employee off his normal life. Both employer and employee are confusing between hard-work and over-work.

The rise of corporate work culture and specialisation in each field in India the problem of presenteeism is expected to engulf a large portion of the Indian economy. The transition phase is bound to demand its casualty. The employees moving towards the more organised fields are prone to presenteeism as they are ambitious and not shy to over-work. On the other hand, the managers and employers do not realise that this over work would come at a cost much higher that the revenue being generated from it. In an economy where unemployment is prevalent the employees don’t have much choice but to play by the rules formulated by the employers.

Employee disengagement and lack of motivation

Presenteeism can be viewed as a problem of employee disengagement. The productivity of the employee is low because they are not involved in the work they are doing and thinking about something else like a cricket match, a party or some personal problem. Some researchers also believe that other factors such as loss of productivity due to excess travelling (in cities like Mumbai and Bangalore) also contributes to presenteeism. However this is a controversial issue in the HR world.

Absenteeism vs. Presenteeism

Presenteeism seems to be an absolute opposite of Absenteeism. Absenteeism leads to a direct and apparent increase in cost for the business but presenteeism is no lesser evil. It may be argued upon that due to absenteeism 100% of the worker’s productivity is lost each day as the worker is not on the job and thus the cost of absenteeism is more that presenteeism, but this is not true at all time. The cost here is hidden in the sense that sometimes the cost of low quality work is higher than no work. Working under illness, anxiety or without interest prolongs recovery. Proper rest and care are very important for fast and complete recovery and rejuvenation. Due to presenteeism, employees are devoid off the time and required rest. The ultimate suffering of the employees trickles down as huge cost to the enterprise.

Many companies have been formulating policies to tackle presenteeism. Some Indian companies have used traditional approaches like improving work life balance. However their initiatives are restricted to a few policies or programs which do not last more than six months. Recently things have started changing. Quite a few organizations are now enforcing policies which lay great emphasis on the health of its employees. Employees are also discouraged to come for work when they are sick. Other practices such as encouraging sick employees to work from home are also adopted.

Moving towards a solution

The root cause

The impact of presenteeism has plagued the work culture in public sector and government run organisations. Employees attend work for the sake of attendance and are least interested in the job at hand. The effect is felt on the overall performance of the enterprise. It was believed that the root cause was improper organizational structure and work culture being promoted in these organisations but now the experts accept that as the main focus is to control absenteeism, the problem of presenteeism has aggravated.

Importance of working environment

The trick in tackling employee presenteeism is to ensure a good working environment with employee friendly strategies in place, without encouraging useless absence from work and faking illness. Many employees at Google believe that it is the flexibility and financial security offered by the company keep the employees going as they can do their best without worrying about too many things. Thus promoting a work environment which encourages creativity and flexibility helps Google tackle the problem of presenteeism. This is an example which could be followed by other company.

Importance of work culture

Managing moral is also extremely critical for an organization. A firm which has a culture of promoting intense competition and politics would have a much greater cost of presenteeism than an organization which promotes working in teams. Thus the cost of presenteeism is to some extent dependent on the culture. Managers have to improve the work environment in order to solve the problem of decrease in productivity.

Path for managers

Indian economy needs to prevent presenteeism from stepping into the normal work culture of the economy. It is very easy to stop a disease from spreading than to eradicate it later. Once the total work culture starts indentifying it as a general necessity to step up in life and to meet the requirements of their work, it would be very difficult to break the shackles.

Change in approach

Presenteeism is largely based on the choice of the employer and employee regarding their work schedule. The first measure to solve the problem is the spread of awareness among the employer and employees the fact that presenteeism is indeed a cost that they cannot afford to bear. Once the enterprises start recognising the cost, steps would be taken to reduce it.

External pressure

A complete change in the work culture is not possible just through a spread of information. Government needs to give relaxation to employees in the form of extended leave during illness and regulation of erratic working hours. The same cannot be used for white collar employees. These employees need to understand that although there job structure is such that they do not have much power in their hands but they should demand professionalism from their employers regarding the fixation of office timings and the overall job structure.

Internal process backbone

The biggest implication of presenteeism for an HR manager is to ensure that data on absenteeism is collected and analysed in the correct way. The results should be strategically used. Managers should discourage ill employees from coming to work. A few organizations use flexi hours or give the option of working from home. These strategies have done wonders and reduced the cost of presenteeism.

The performance appraisals of managers should not only be based on the specific business performance but criterions such as absenteeism rate should be included to track absenteeism as well as presenteeism. This would seem strange as it would ideally increase presenteeism. However the managers would be required to keep a track of the health of the employees and this would be one of the criterions on which their performance will be evaluated.

Change in company policy to implement the change

Sick leaves have a huge impact on absenteeism as well as presenteeism. The high cost of presenteeism is primarily due to less number of days for which an employee can avail sick leave forcing him to come to work even if he is unwell. Thus companies can increase the number of days of sick leave. However this could lead to an increase in absenteeism. A solution to this problem could be having such a culture in place where an employees’ absence is not penalised. At the same time the office should be made an interesting place to work which would make him or her come to the office. A number of companies have increased their number of days for sick leave. Even governments are responding to presenteeism. Recently the state of San Francisco passed a regulation requiring organizations to give sick leaves and paid leaves.


Divya Kumar said...

Employee Engagement surveys sometimes tell a lot about the reasons for 'presenteeism'. Flexible work schedules go a long way in reducing presenteeism. Having a policy level infrastructure in place is important but having a culture/mindset change specially at middle management level(the executors of policies) is critical for the success of these inititatives. The role of HR manager as a coach/change agent becomes critical to sensitize them to the problem and business case behind the initiatives.
My company does not even have a cap on sick leave and it is the only leave category in our system which does not even need approval from the manager. It gets aproved automatically as you apply. This is a policy/system level intervention giving a strong message of trust. But for things like flexi timing, job sharing, part time working, working from home - ensuring implementation by middle managers is as important as having a policy.

Robin said...

Good Article....My 2 cents on this is that sometimes personal drive of a person is so high that it will make a person work even if he shouldn't. More than HR policy, it is something that the immediate manager should take note of and make sure it is avoided.

Saket said...

In the article we have referred to several ways of tackling the problem of presenteeism, but the manager needs to be critical about all these. none of these are free from disadvantages in terms of the required structure, organisational culture and as Divya rightly pointed out the support of the management at the required levels.

Robin has rightly pointed out that there are people sometimes have the drive to push themselves too much. There immediate manager should understand the possible future outcomes and take appropriate steps, but in my experience during the Summer Internship process i noticed that there are managers who don't understand the problem of presenteeism and thus motivate and push their team members and subordinates to actually work more than they should. At such times there needs to be an HR intervention to help the managers.