Child Care & Parent Productivity:

Making the Business Case

December 2004

Linking Economic Development

&
Child Care Research Project

By
Karen Shellenback

CORNELL UNIVERSITY
CORNELL COOPERATIVE EXTENSION
DEPARTMENT OF CITY AND REGIONAL PLANNING
W. SIBLEY HALL, CORNELL UNIVERSITY
ITHACA, NY 14850-6701
HTTP://ECONOMICDEVELOPMENT.CCE.CORNELL.EDU
Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
 Child Care and Parent Productivity:
Making the Business Case
by Karen Shellenback

QUALITY CHILD CARE SUPPORTS THE BOTTOM LINE THE IMPORTANCE OF MEASUREMENT
Quality child care for employees is important to employers Measurement is the key to successful business practices…
because it improves productivity, reduces absenteeism, and key business impacts are measured every day. Sensitive
cuts turnover… and can increase company value. corporate measurements are tracked and managed daily,
monthly, quarterly, yearly … in fact, whole industries have
• In a 2000 American Business Collaboration been built around such metrics: measuring market share,
report, 63 percent of member employees shareholder value, return on investment (ROI) of new
reported improved productivity while using business investments, break even point of a new product
quality dependent care (ABT Associates, 2000). line, costs of benefit plans (particularly healthcare
• Twenty nine percent of employed parents insurance), marketing and advertising costs. However, the
experienced some kind of child care breakdown most important measurements in business have remained
in the past three months, and those child care elusive, measuring the impact of human capital. While
breakdowns were associated with absenteeism, there has been a strong intuitive link between effective
tardiness, and reduced concentration at work personnel management practices and increased business
(Bond et al., 1998). outcomes, the link has remained tentative, most likely
• The average American working parent misses nine because of the assumption that, “what really counts can’t
days of work per year (Carillo, 2004). As children be counted” – the human factor is much too complex to
move through daycare and into elementary school, simplify into financial calculations.
the number of days missed increases to thirteen.
These absences are costly for employers, as is Until recently, estimating the economic impact of work/
turnover, estimated at one and half times annual life initiatives has been sporadic at best. For over two
salary for an exempt employee and three-quarters decades human resource (HR) managers and executives
of annual wages for hourly workers (Phillips and have tried to make the “business case” for work/life
Resiman 1992). initiatives by relying on corporate anecdotal information
and national demographic statistics.
Child care breakdowns leading to employee absences
cost businesses $3 billion annually in the United States. Renewed emphasis on the importance of work/life
Fifty-four percent of employers report that child care strategies (of which child care is a part) is causing
services had a positive impact on employee absenteeism, increased interest in how to measure the impact of
reducing missed workdays by as much as 20% to 30% work/life policies on business performance. This article
(Friedman, 1986). Furthermore, a child care program can will discuss:
reduce turnover by 37% to 60% (Ransom & Burud, 1988).
Employee retention is a key driver of customer retention, • studies linking “people effectiveness” and work/life
which in turn is a key driver of company growth and strategies with improved business performance,
profits. One study showed that a 7% decrease in employee • why metrics have not traditionally been collected
turnover led to increases of more than $27,000 in sales in the human capital and work/life arena.
per employee and almost $4,000 in profits per employee • why it is important to collect human capital data,
(Huselid and Becker, 1995). Companies with childcare • a “5 Step Plan” for human resource and work/
programs or who are considering them need to be able life professionals to use to initiate data collection,
to measure the value of these programs as a return on including possible sources for data collection,
their investment. • examples and explanations of economic impact
formulas: ROI, Cost Benefit Analysis, Break Even
Point and Payback, as well as work/life related
absenteeism and turnover cost examples.

http://economicdevelopment.cce.cornell.edu 1
 HISTORICAL PERSPECTIVE A NEW AGE
Since the 1987 Hudson Institute publication, Workforce The much quoted “Sears Study,” although not a work/life
2000: Work and Workers for the 21st Century, there has study, was the catalyst for an increased focus on work/
been much discussion about workforce projections and life economic impact research. As the new millennium
the scarcity of highly skilled workers due to demographic approached, many organizations realized the importance
and cultural forces, including the “Graying of America” of substantiating the financial impact of their work/life
(Hudson Institute, 1990). In the 1980’s and for most efforts.
of the next 20 years, recruiting and retaining a talented
workforce became a much discussed priority and served In 1998, Bright Horizons Family Solutions (a national
as the major impetus for work/life initiatives. The field quality child care provider) studied “family supportive
started with forward thinking organizations investigating companies” and found that these companies consistently
the possibility of offering corporate child care services to outperformed the performance of the Standard & Poor
attract and retain the burgeoning flow of female workers 500 companies over the past three years (Bright Horizons
into the workforce. Inc., 2004). Furthermore in 2000, Vanderbilt University
and Hewitt Associates studied Fortune’s 100 Best
In 1989, the Families and Work Institute published the Companies to Work For list1 and found that the companies
Productivity Effects of Workplace Child Care Centers, one on this list outperformed similar companies and “showed
of the first studies to delineate the effects of child care substantial financial performing advantage”( i.e. showed
on parent productivity (Families and Work Institute, cumulative stock returns 50% higher than the market
1989). In the early 1990’s practitioners focused on the norm) (Vanderbilt University and Hewitt Associates,

In 1998, Sears Corporation broke new ground with the release of their pivotal study, The Employee-Customer-
Profit Chain at Sears (Rucci et al., 1998). This study found very strong causal links between employee satisfaction,
customer satisfaction and increased profits. Employees that were happy working for Sears had higher customer
service ratings, which in turn led to increased profits –“every 5 percent improvement in employee attitudes drives
a 1.3 percent improvement in customer satisfaction and a .5 percent growth in store revenues.” (Rucci, Kirn,
and Quinn, 1998). This study was a major turning point in the work/life field, demonstrating that satisfied
employees are profitable employees. Work/life initiatives had demonstrated for years that availability
and usage of such programs increased employee satisfaction, but no previous study had linked satisfaction with
positive economic impact.

needs of all American workers, as well as women, and 2000). The researchers found that organizations with
many national demographic studies such as: the National progressive human resource programs have higher
Study of the Changing Workforce, 1993 (and 1997, 2003) operating incomes, higher returns on assets and spend
and Women: the New Providers, 1995, both completed more money on research and development. In summary,
by the Families and Work Institute, as well as Catalyst’s being an “employer of choice” is related to profitability.
Women in Corporate Management, 1990, provided the In 2000, another landmark project was completed.Watson
field with statistics on hours worked and work/family Wyatt produced a large study researching 405 NASDAQ
stress (Bond et al., 1998; Catalyst Inc., 1990; Families and New York Stock Exchange (NYSE) companies. The
and Work Institute, 1995). For approximately ten years, Linking Human Capital and Shareholder Value research
these cornerstone studies provided much of the national found a clear relationship between the effectiveness of
demographic data that has been used to bolster the a company’s human capital and the creation of superior
“business case” for work/life initiatives. It was not until shareholder returns (Watson Wyatt Worldwide, 2001).
the late 1990’s that organizations began to investigate The study asked a variety of questions about how
the “ROI” of workplace policies implemented to alleviate organizations carry out their human resource practices,
reported work/family stress. including pay, development, communication, and staffing.
After collecting the survey data, Watson Wyatt matched

2 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
the human resources (HR) departments’ responses to 2003). Other institutes, such as Mercer Consulting, the
objective financial measures of each company’s value Saratoga Institute (now part of PwC’s Human Resource
including: market value, three and five year shareholder Services practice) and Cornell University’s Human
returns, and Tobin’s Q (an economist’s ratio that Capital Bridge Framework have begun the complicated
measures an organization’s ability to create value beyond process of measuring the value of human capital (Mercer
its physical assets). Watson Wyatt also gathered data on Investment Consulting, 2004; Zimmerman, 2001). Again,
7,500 employees at all job levels and in all industries. there is a growing body of evidence that people really are
Participants answered 150 questions about their attitude the key to corporate performance, and the creation of
toward their workplaces and work lives. They found sustainable strategic advantage.
that companies with a high human capital index have
high shareholder value. Companies with a low human However, most of the research to date has been completed
capital index have low shareholder value. Watson Wyatt by outside organizations reviewing the data of multiple
also demonstrated that the correlated relationship was corporations. Only upper echelon companies have
so clear that a significant improvement in 30 key HR collected data within their respective organizations to
practices was associated with a 30% increase in market measure the economic impact of their internal initiatives.
value. In addition, those organizations ranked with a According to the 2001 Harvard Business School Press,
high employee commitment level outperformed others The HR Scorecard: Linking People, Strategy and Performance,
in total shareholder value (three year total return to 968 firms researched by HR management gurus, Becker,
shareholders: 112% for companies with high commitment Huselid and Ulrich, recognize the lack of formal estimating
employees vs. 76% for companies with low commitment procedure (Elswick, 2001). The following chart, from the
employees). According to Watson Wyatt, employee HR Scorecard, indicates what these 968 companies are or
commitment does not translate to old fashioned loyalty, are not measuring:
rather, it reflects employees who are satisfied, proud to
work for their company and would recommend
their company to friends. They believe that this
research demonstrates that good human capital
Subjective Formal
management and high economic value move in Do NOT
the same direction, creating a “virtuous cycle.”
Estimate or Estimation
Determine
Intuition Procedure
Employee replacement costs 38.2% 48.8% 13.0%
Economic value of employees to the organization 67.4% 26.6% 6.0%
Cost of various employee behaviors
(absenteeism, smoking, etc.)
48.3% 38.2% 13.5%

Economic benefits of various training levels 47.2% 46.5% 6.3%

Economic benefits of increasing job satisfaction,
organizational commitment or similar job attitudes
54.9% 42.3% 2.8%

Economic benefits of high, medium, and low

performance on a particular job
54.2% 39.7% 6.1%

In addition, PricewaterhouseCoopers’ 2002 Global Despite productivity gains in many sectors, labor force
Survey and other PwC studies regarding “effective people projections indicate that workforce shortages will
management” have found that companies rating high on continue for the next 20 years (U. S. Bureau of Labor
their HR strategy index showed 35% higher revenue Statistics, 2001). The most resilient organizations are
per employee. Another interesting finding to emerge staying ahead of this curve by collecting internal data that
from the 2002 Global Survey is that organizations with measure the economic impact of their human capital
lower absenteeism have higher profit margins (Breen, initiatives.

http://economicdevelopment.cce.cornell.edu 3
 “WHAT’S NOT MEASURED CAN’T BE COUNTED” business partners – effectively opening up a seat “at
If measurement is fundamental to business success, and the table”. Collecting and measuring “ROI” data helps
work/life initiatives are so essential to effective business HR, OE and child care professionals inform and support
performance, why haven’t companies made a concerted decisions before programs are implemented. Instead of
effort to collect data to measure “ROI” of human capital being in the awkward position of “propose and defend,”
initiatives? The answer is simple, because unlike other it affords accountability for the programs recommended.
business industries, those in the work/life field haven’t Good data also sustain the viability of effective initiatives
been expected to ... and why go there if we don’t need and permit timely elimination of programs that are not
to? effective. Collecting data and calculating metrics also
allows corporations to benchmark against one another
Simply, the media campaign, (i.e. the desire to be on the helping to position themselves as “employers of choice”
“100 Best” lists2) has worked even without having to and/or “100 Best”. Last but not least, in an era where the
present hard numbers (Shellenback, 2000). And although focus on business has finally come around to the human
there have been studies that have started to investigate capital aspects of business performance, the current
the economic returns to businesses that embrace corporate focus on people (rather than processes)
work/life and human capital effectiveness strategies, presents an important strategic opportunity for HR
most companies have bought into the “feel good” professionals.
idea that these programs work and make a difference
for employees, businesses and the community at large; The purpose of collecting “ROI” information is to cost
accountants, actuaries, and other bean counters need not justify the value of current programs, and new initiatives,
apply! by estimating hidden costs and calculating the economic
return or benefit to the organization. But where does an
Other reasons given for not rigorously collecting human organization start, what kind of data can be collected and
capital data: where can one look in his/her organization for credible
information?
• Too complex. “How do you measure the cost of
human behavior?” The 5 Step Plan
• No training. “I don’t know where to begin or how
to proceed.” The following is a 5 Step Plan (Shellenback, 2000) for
• No established standards. “How do I know I am HR, OE and work/life professionals to use to initiate data
measuring the ‘right’ things?” collection, including possible sources of data.
• Lack of resources. “In today’s tight economy,
I don’t have the resources – time, expertise or STEP 1: CREATE THE RESEARCH ADVISORY TEAM
money.” Creation of a research team is the first step in collecting
• Fear of accountability. “What if I find out my good data. This team will serve as an advisory resource
program is not successful. I do not want to be committee for the project. In considering who to invite
accountable for poor financial decisions.” to participate on this team, you must consider the key
stakeholders in the process. Who has a stake in the
WHY SHOULD COMPANIES COLLECT “ROI” outcome of this project and who can bring resources or
INFORMATION? a unique perspective to the table? Invite HR professionals
Companies and those interested in moving the work/life who manage HR and benefit data, conduct exit interviews,
and human capital field forward are interested in collecting recruit employees, collect federal and state employee
metric data, not only to further understand employee information, etc. OE professionals can also be strong team
and management behavior, needs and values, but to members lending performance management and cultural
ground their work in key business drivers. Focusing on audit information. It is important for the advisory group
business drivers leaves less room for the perception that to consist of HR and OE members, but it is critical to
work/life initiatives are of “soft” value to the company involve other functional areas that may not be historically
and helps position HR, Organizational Effectiveness (OE) focused on human capital issues, but are concerned about
and child care professionals strategically as credible operational issues and traditional business drivers. The

4 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
team, therefore, should also contain senior and executive Example: Possible measurable standards for outcome
level management including operational managers, finance variable: “employee commitment”
and facilities. Others who must be included are those
who are considered, “nay sayers” and those who belong • Decrease regretted loss3 turnover by 30%
to and often spearhead the “gossip underground”. It is • Increase employee satisfaction rates on annual
extremely important to bring these individuals into the survey to 75%.
discussion so they can be fully informed and also educate • Decrease absenteeism by 20%.
the team on possible resistance and challenges to the • Increase productivity by 25%.
success of the initiative. Furthermore, if you are able
to convert this constituency and address their concerns, The business drivers are your “guideposts for
these individuals often become staunch “champions,” measurement”. Start with the objective and go after
advocates and credible spokespersons of the project/ measurements that are relevant to it.
process.
Depending on the key business drivers in your
The last group to consider is an outside professional who organization, the team may want to focus on one or
is experienced in research and evaluation projects. Not a variety of variables. The team should decide on the
only can an outside perspective be extremely illuminating, level of complexity of the project. Will the study be an
but often these professionals can lend credibility and informal assessment researching one outcome variable
expertise that only an appropriately-credentialed or a formal evaluation project assessing multiple outcome
outsider can bring. variables linked to appropriate key business drivers?
What are some other outcome variables organizations
This team is responsible for creating the research plan, can measure? (see graphic on page 6)
discussing and adapting roles and responsibilities of team
members, discussing opportunities and challenges, as well STEP 3: DESIGN THE RESEARCH PROCESS
as executing all levels of the “5 Step Plan”. The next step is to determine the information needed
and then create the Methodology and Communication
STEP 2: DETERMINE SUCCESS FACTORS - Plans. Two types of data can be collected: outcome
THE GUIDEPOSTS FOR MEASUREMENT measures and investment/cost measures.
The first responsibilities of the advisory team are to
1) Identify the key business drivers of the organization, Outcome Measures:
2) Identify the outcome variables linked to the key Outcome measures refer to data that are outcomes
business drivers that need to be studied and 3) Specify of the new or newly studied human capital initiative.
the objectives and expected outcomes of the research Outcome measures can be qualitative, quantitative
project. or both. There are many different sources of data for
outcome measures:
The team must decide what success will look like and
how this success will link to the organizational business • self–disclosed (employee survey, interview, and/or
drivers. The “links” should be clear and compelling. The focus group data),
team must then 4) Create measurable standards by which • behavioral (i.e. decreased absenteeism),
to gauge success. Again, these measurable standards must • financial (increased revenue, cost savings),
be linked to the key business drivers. For example, if • non-financial outcomes that can be translated
the team decides that “employee commitment” is a key into financial equivalents (i.e. turnover).
outcome variable then the group must also define what
success of that variable would look like (measurable In addition, will the team collect baseline data (data
standard). before the study or intervention begins), such as current
employee survey data on employee satisfaction levels and
current turnover rates? Will the team collect formative
data (data collected during the project)? For example,
employee satisfaction data could be collected from focus

http://economicdevelopment.cce.cornell.edu 5
 Potential Outcome Variables

has or will collect

this data? Is it
important to
collect baseline,
formative and/or
summative data to
make your case? Can
such data be collected?
It is important to remember
that sometimes “opportunity”
costs can be included as an
overall cost measure. An
opportunity cost is the price
of investing resources in one
objective versus another that
groups three
might have been more advantageous.
months into
Investment/cost measures (as well as outcome
implementation
measures) can be found in the following company
of a new initiative.
information systems listed in the chart below.
Furthermore, will the team
collect summative data (data collected at the close of a
Create the Methodology Plan:
project or research timeframe)? This could include next
This component is the simplest to describe but the most
year’s employee survey data and next year’s turnover
labor intensive of all the steps. It involves planning the
rates.
W3H (who, what, when, and how of the entire process).
The team must decide and create a project plan for each
Collecting all three temporal levels of data allows the
of the following components:
research team to view changes over time. Did employee
satisfaction levels increase over time? Did the level
• selecting/creating data collection instruments
of turnover decrease over time possibly signaling an
(surveys, interviews, focus groups, document/
increase in employee commitment? In addition, collecting
records review, etc.),
the different types of outcome measures, such as self
• organizing data currently collected/data planned
disclosed, behavioral and financial indicators allows for
for collection,
triangulation – a method which “validates” data if the
• selecting population samples (if necessary).
research team finds consistent changes across many
different data sources and methods.
How each organization does this depends on the
needs, business drivers, and measurement plans of each
Investment/Cost Measures:
organization. Some organizations feel comfortable
The team must also delineate the investment/cost
executing this step using internal resources, however,
measures of current initiatives studied. What are the
many organizations contract some or all of this work
development, training, travel, program implementation
to academic institutions, research organizations,
and operational costs of the work/life initiative? Who

Sources of Company ROI Information:

HR Information Systems Business Unit Revenue Annual Reports
Health Insurance Information Recruitment Data Government Filings
Work/Life Vendor Information Survey Data External Research
Salary Records Performance Data Facilities Reports

6 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
consulting firms and independent evaluators. Creating STEP 4: IMPLEMENT THE RESEARCH PROCESS
measurement instruments, collecting, analyzing, calculating This step involves implementing the process according to
and presenting user-friendly data is both an art and the overall Methodology and Communication Plans. The
science and this article does not aim to delineate all the following accounting models/calculations can be used in
requirements of executing valid and reliable research. “ROI” analysis once appropriate quantitative data have
been collected.
Create the Communication Plan:
The overall project plan must also contain a comprehensive Costing Out the Problem
marketing/communication plan so that the project team The cost of absenteeism due to child care conflicts has
adequately shares expectations with all stakeholders been estimated at eight to nine days per year (Emlen
and key constituencies. Thorough communication and Koren 1984; Carillo 2004). The calculations below
is the foundation for success. No matter how big or are examples a corporation can use to calculate work/
small, an effective research/evaluation project must C3 life related absenteeism and turnover costs. These
(communicate, communicate, communicate). real corporate examples include data collected from
employee surveys, however other data from appropriate
internal sources can be substituted.

Absenteeism Calculation: Related to Employee Child Care Conflicts

Of Company XYZ survey respondents with children under age 13 (483), approximately 34.64% report
missing 1-3 full workdays within the last three months due to child care conflicts. National statistics
indicate that an average employee misses 8 - 9 days of work per year due to the breakdown of child care
arrangements (Emlen & Koren, 1984; Carillo, 2004).

Assuming these employees miss an average total of 8 full days per year (conservative estimate), the estimated
annual absenteeism costs due to child care conflicts for this 34.64% of XYZ survey respondents with children
is approximately $282,276.00.

Calculation:
Assumption: avg. salary (exempt) = $70,000
Assumption: avg. salary (non-exempt) = $33,000
Assumption: 59% of the population is exempt, 41% are non-exempt

8 days of pay per exempt employee ($70,000) = $2,153.84

8 days of pay per non-exempt employee ($33,000) = $1,015.38
34.64% of 483 employees = 167 employees
99 exempt employees x $2,153.84 = $213,230.16
68 non-exempt employees x $1,015.38 = $69,045.00

Total Cost: $282,276.00 for the 167 survey respondents above (who report missing 1-3 work days each
quarter due to child care conflicts).

Since the stratified random sample conducted in this survey is representative of all XYZ employees, the
absenteeism costs of 34.64% of the entire XYZ employee population with child care responsibilities is
$3,413,435.00 (based on the above “days missed” and salary, % exempt and % non-exempt, assumptions.)

The above calculations do not estimate lost productivity costs due to additional hours (beyond full-days)
needed by employees to resolve child care conflicts. The above calculations also do not include opportunity
costs associated with employee absenteeism.

http://economicdevelopment.cce.cornell.edu 7
 The cost of turnover is even more important. A 1992 validated in numerous national studies over the past
study found replacement costs to be one and a half times decade and is considered the standard rate, although
the annual salary of an exempt employee and three- some studies argue that, for exempt employees, the cost
quarters of the wages of a non-exempt employee (Phillips can be as high as 250% of annual salary (Carillo, 2004).
and Reisman, 1992). This estimate has been replicated/

Costs of Work/Life Related Turnover

Of 2,727 survey respondents at ABC Company, 42.4% report actively looking or considering looking
for a more flexible job at a different company to manage work and personal life.

Assuming 1/3 of those looking or considering looking actually leave ABC Company, the estimated
replacement cost of work/life related turnover for these survey respondents at ABC Company is
$22,440,000.

Calculation:
Assumption: avg. salary (exempt) = $50,000
Assumption: avg. salary (non-exempt) = $28,000
Assumption: 70% of the population is exempt, 30% are non-exempt

42.4% of 2,727 employees = 1,156 employees

33% of the 1,156 employees looking to leave actually leave = 382 employees
Replacement cost per exempt employee ($50,000 x 1.5) = $75,000
Replacement cost per non-exempt employee ($28,000 x .75) = $21,000
267 separated exempt employees x $75,000 = $20,025,000.00
115 separated non-exempt employees x $21,000 = $2,415,000.00

Total Cost: $22,440,000 out of a payroll of over $118 million. (includes only survey population estimates)

8 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
 Costing Out the Solution or at least break even. Four methods for determining
Once the costs of the problem are known, the benefits financial return (Cohen, 1999; Cascio, 1999) are described
of work/life policies can be calculated as well. Businesses below: 1) Cost/Benefit Analysis, 2) Return on Investment,
want to be sure their investments provide a return… 3) Break Even Point, and 4) Payback.

Cost/Benefit Analysis

Formula: Cost/Benefit Analysis = Savings or Profits (Direct and Indirect) - Costs (Direct + Indirect)

This formula does not measure relative return on investment, but instead measures overall profitability.
Although this calculation can be complex, it is most accurate when all appropriate direct and indirect costs
and savings are included.

ROI (Return on Investment)

Change in Operating Revenue Total Benefits - Total Costs
Formula: ROI = or
Investment in Program Total Costs

This formula compares the relative profitability of a program with the investment required to implement and
maintain it.

Example: Change in Operating Revenue ($500,000) of a Back-up Child Care Center after investment
of School – Age Summer Camp component ($200,000).

Formula Example: $500,000/$200,000 = Return of 2.5 (Positive ROI)

Return of $2.50 for every $1 invested.

Break Even Point

Fixed Costs
Formula: Break Even Point =
Cost Savings per Unit

This formula helps one understand the usage rate needed in order to re-coup costs.
Example: Fixed annual costs to operate an On-site Corporate Child Care Center with large Infant Care component
= $800,000 per year. Cost savings (avg. retention savings for a new parent based on avg. turnover costs per exempt
professional = $40,000 salary x 1.5 (Phillips and Reisman, 1992) = $60,000.)

Formula Example: $800,000/60,000 = Must retain 13.3 new parents per year to re-coup costs.

Payback
Net Initial Investment
Formula: Payback =
Expected Net Annual Related Profits and/or Savings

This formula measures how long it will take to re-coup an investment.

Example: Initial investment costs to build an On-site Corporate Child Care Center = $800,000. Net Annual Savings
= $570,000. (Net annual savings can come from decreased employee absenteeism and/or turnover costs, increased
productivity, savings from consolidating child program administration, and possibly other outcome variables as
depicted on page 8. )
Formula Example: $800,000/570,000 = 1.4 Years

http://economicdevelopment.cce.cornell.edu 9
 STEP 5: USE AND COMMUNICATE FINDINGS TO a format that is applicable, practical and in a way that
ENHANCE BUSINESS PRACTICES trains supervisors to make use of new management
The final step requires communicating findings to enhance opportunities. Each constituency will apply the data
business practices. Sharing the results with those inside in different ways depending on the lenses they utilize,
and outside the organization who can affect the desired and some individuals will understand the data and its
change is the critical “final” step in the process. However, implications in multiple ways depending on the multiple
effective research requires a cyclical evaluative cycle roles they play (for example: an executive, who is also a
to re-examine results and assumptions, so the results manager, employee, parent and caregiver.)
should never be considered truly “final”. It is essential
to continue to monitor progress, opportunities and In conclusion, this paper has outlined that continuous and
challenges and… when business drivers change…so will comprehensive measurement of human capital initiatives
the research foci and outcomes. in organizations is an essential practice of resilient and
financially successful organizations.While more and more
In addition, communication methods and messages organizations have realized that measurement is critical,
regarding the results need to be adapted for different many do not know where to start. This article has
audiences; the CEO, Board of Directors, and shareholders presented current research, as well as a comprehensive
may need the information in a different format and “spin” “5 Step Plan” with example calculations to help those
from what is presented to employees. Furthermore, interested in collecting data on the effectiveness of work/
managers need this critical information presented in life initiatives.

Notes
1
The “100 Best” list for Fortune Magazine is selected primarily on the basis of employees’ responses to the Great
Place to Work® Trust Index©, a proprietary employee survey developed by the Great Place to Work® Institute. In
addition, the Great Place to Work Institute evaluates materials submitted by the company, including the company’s
response to the Great Place to Work® Culture Audit© (demographics, finances and revenue, overall culture, benefits
and perks - such as child care and onsite fitness centers), any accompanying materials submitted by the company
for consideration, as well as information gathered from other reputable sources such as media stories about the
company.

2
Refers to the Fortune/Great Place to Work: “100 Best Companies to Work For” and Working Mother Magazine:
“100 Best Companies for Working Mothers” lists.

3
Lingle, Kathy. (2001). Term “regretted loss” refers to those individuals who have left the organization whom the
organization wished to retain (personal communication).

10 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
 Annotated Bibliography
ABT Associates (Cambridge MA). (2000). National report on work and family. Retrieved September 21, 2004, from
http://www.abcdependentcare.com/docs/archived_news.shtml.
Among 1,483 employees surveyed at American Business Collaboration (ABC) companies in 10 communities across the
country, 63 percent reported an improvement in productivity because of Collaboration programs.The study looked at
productivity measures among employees and found:
• 40 percent felt less stressed by family responsibilities and spent less time at work worrying about their family.
• 35 percent were better able to concentrate on work.
• 30 percent had to leave work less often to deal with family situations.
• Employees felt that use of ABC-supported child care had improved their productivity at work.

Becker, B.E., Huselid, M.A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy and performance, Boston, MA:
Harvard Business School Press.

Bond, J., Galinsky, E., and Swanberg, J. (1998). The 1997 national study of the changing workforce. New York, NY: The
Families and Work Institute. (versions 1993 and 2003 also available.) 29 percent of employed parents experienced some
kind of child care breakdown in the past three months, and those child care breakdowns were associated with absenteeism,
tardiness, and reduced concentration at work.

Breen, B. (2003). Profiting from people. The advantages of people power. Based on PwC HR Benchmarking
Research Report. Accessed November 24, 2004. http://www.pwc.com/Extweb/service.nsf/docid/
1CA4A57F50CA577B80256D320032629B and http://www.pwc.com/extweb/service.nsf/docid/F54FFD50D2E7275A
80256D51004AB0E4

Bright Horizons – Family Solutions Website http://www.brighthorizons.com/site/pages/benefits_employer.aspx

Accessed March 1, 2004. Provides various statistics on the impact of employer sponsored child care on employee recruitment,
retention, turnover, absenteeism, productivity, satisfaction and performance. (See website for details.)

Bright Horizons Inc. (2004). The real savings from employer-sponsored child care. Watertown MA: Bright Horizons Inc.
Accessed March 2004. http://www.brighthorizons.com/investstuduies/Investment%20Impact.FINAL.pdf

Carillo, C. (March 2004). A totally new way to think about back-up care. Work & Family Connection. Guest Column
http://www.workfamily.com/Open/work-Life-Guest-Column.asp Accessed March 10, 2004. Reduced Absenteeism:
Breakdowns in care giving arrangements translate directly into missed time from work.The average American working parent
misses nine days of work per year. As their children move through daycare and into elementary school, the number of days
increases to thirteen. As the employee ages, they miss an average of ten days per year due to a myriad of adult and elder care
situations that arise with the problems associated with aging parents and spouses.This level of absenteeism across all age
groups, for problems associated with breakdowns in childcare and eldercare, translates to over three billion dollars annually to
American business every year.

Research conducted by Work Options Group indicates that the true cost of absenteeism equals a minimum of two times the
actual hourly wage of workers. Christopher Gatti, our president, says “An employer must take into account the actual wage,
benefits, supervisors’ time and lost opportunities resulting from absenteeism, when calculating the true cost to a company.
In some cases, as in the case of employees responsible for direct revenue for a company, this might even be a conservative
number.The average employee really wants to try to figure out the best way to meet the needs of their family – and meet the
needs of their job. If a reliable, affordable and trustworthy option is available to do both, they’re open to trying it.”

http://economicdevelopment.cce.cornell.edu 11
 Cascio, W. (2002). Managing human resources: Productivity, quality of work life, profits. McGraw-Hill/Irwin; 6th edition.
Book description from Amazon.com: Wayne Cascio’s Managing Human Resources, is perfect for the general management
student whose job inevitably will involve responsibility for managing people. It explicitly links the relationship between
productivity, quality of work life, and profits to various human resource management activities and, as such, strengthens the
students’ perception of human resource management as an important function, which affects individuals, organizations,
and society. It is research-based and contains strong links to the applicability of this research to real business situations.
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• The average per-employee cost of absenteeism climbed to an all-time high of $789 per year in 2002, up from $755
in 2001.
• This higher cost comes despite a slight decline in absenteeism rates from 2.2 percent in 2001 to 2.1 percent in 2002
and reflects a price tag of as much as $60,000 a year for small companies, while the largest employers ante up more
than $3.6 million.
• Personal Illness accounted for 33 percent of no-shows. However, reasons other than illness accounted for 67 percent
of unscheduled absences. Specifically, these reasons were: Family Issues (24 percent); Personal Needs (21 percent);
Stress (12 percent); and Entitlement Mentality (10 percent).
• Morale seems to make a difference: companies that reported Very Good / Good morale had a lower absenteeism rate
(1.9) compared to those reporting Fair/ Poor morale (2.4).The effects of September 11 also were much more likely to
contribute to a change in unscheduled absenteeism rates among organizations with lower morale.
• When it comes to combating unscheduled absenteeism, the two work-life programs rated as most effective were
Alternative Work Arrangements and Compressed Work Week. Other programs receiving high ratings included: Leave for
School Functions, On-Site Child Care, Employee Assistance Plans and Telecommuting.
• Paid Leave Banks (also known as paid time off) continued to be ranked as the most effective absence control program.
However, fewer than one-half of organizations have adopted Paid Leave Banks, while nearly all organizations report
using Disciplinary Action.
• Reducing employee no-shows doesn't appear to be likely in the near future: 83 percent of companies surveyed believe
that unscheduled absenteeism is likely to stay the same or get worse in the next two years.

The 2002 CCH® Unscheduled Absence Survey surveyed 333 human resource executives in U.S. companies and
organizations of all sizes and across major industry segments in 43 states and the District of Columbia. The survey
reflects experiences of randomly polled organizations with an estimated total of nearly two million employees.

The 2002 CCH® Unscheduled Absence Survey, conducted for CCH® by Harris InteractiveSM and now in its 12th year, is
the definitive survey on absenteeism in the workplace and the only one that measures costs associated with unscheduled
absences. It contains detailed findings including additional press releases and charts depicting survey data.

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Elswick, J. (2003). More employers offer back-up child care. Employee Benefit News, 17 (7) June 15, 2003. http://www.
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• Freddie Mac witnessed 1,607 visits to its backup daycare center in 2002. Employees contributed a copay of $15 for
each visit. Cost-benefit analysis shows the company saved $40,000 in productivity and $73,000 in turnover costs.
• For every $1 invested in backup child care, employers can expect a return of $3 to $4 in productivity and reduced
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http://economicdevelopment.cce.cornell.edu 15
 Acknowledgements:

This research was conducted by Karen Shellenback, work/life policy consultant, while she was
working with the Cornell Linking Economic Development and Child Care Research Project.
In her prior work as a consultant with PricewaterhouseCoopers L.L.P. and LifeCare Inc., Karen
worked with numerous Fortune 500, government and small businesses on implementing
work/life and child care initiatives to increase employee productivity, reduce absenteeism and
turnover, as well as create ‘great place to work’ environments. This paper is based on Karen’s
presentation to corporate executives and human resource managers on how to measure the
economic/financial impact of work/life and child care initiatives. Please feel free to contact her
at klr4@cornell.edu or (315) 364- 3582.

The Cornell University Linking Economic Development and Child Care Research Project,
directed by Dr. Mildred Warner, is supported by the US Department of Health and Human
Services, Administration for Children and Families, Child Care Bureau research funds, and
by the US Department of Agriculture Hatch Research Program administered by Cornell
Agricultural Experiment Station. Funding for outreach is provided by the W.K. Kellogg
Foundation in collaboration with Smart Start’s National Technical Assistance Center.

16 Shellenback, 2004 Child Care and Parent Productivity: Making the Business Case
http://economicdevelopment.cce.cornell.edu
LINKING ECONOMIC DEVELOPMENT AND CHILD CARE RESEARCH PROJECT
DEPARTMENT OF CITY AND REGIONAL PLANNING
CORNELL COOPERATIVE EXTENSION
W. SIBLEY HALL CORNELL UNIVERSITY ITHACA, NY 14853-6701
EMAIL: childcare_econ@cornell.edu WEBSITE: http://economicdevelopment.cce.cornell.edu

1100 Wake Forest Road

Raleigh, NC 27502
www.ncsmartstart.org