Case Study Paper

Case Study Paper Instructions

The Case Study Paper must be at least 750 words (not including the title and reference pages), double-spaced, and in current APA format. Please note that the stated word count is a minimum. Therefore, you are encouraged to ensure that you have thoroughly researched and responded to each question/prompt provided below. Each assignment must include a title page and a references page. Use at least 4 scholarly sources (published within the last 5 years), the course textbook, and biblical integration.

*Note: The case study to be utilized for this assignment is the SHRM case on Aflac and LLBean.

This case study is focused on how 2 different companies use total rewards to support the organization’s missions and values and achieve strategic outcomes. Select only 1 of the companies as the basis for your case study response. (This is not meant to be a comparison of the companies, but an exploration of how 2 different companies use their compensation and benefits structures to achieve organizational outcomes). The paper must specifically address the following areas:

· How the company uses its own products or services to enhance the total compensation for its employees;

· The internal and external strengths and weaknesses identified and how the company responded to these factors from a total rewards perspective;

· Examples of traditional and non-traditional rewards and how they are used to meet organizational objectives;

· How the company aligns its benefits with its corporate values; and

· Recommendations regarding an expansion of the benefits programs offered at the company that would further align HR with the accomplishment of organizational goals and values.
TOTAL REWARDS Student Workbook

Benefits and Business at Aflac and L.L. Bean

By Sandra M. Reed, SPHR

Project team

Author: Sandra M. Reed, SPHR

SHR M project contributors: Bill Schaefer, SPHR

Nancy A. Woolever, SPHR

External contributor: Sharon H. Leonard

Copy editing: Katya Scanlan, copy editor

Design: Kellyn Lombardi, graphic designer

© 2009 Society for Human Resource Management. Sandra M. Reed, SPHR

Case overview

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 1

In its 2008 annual Job Satisfaction Survey Report, the Society for Human Resource

Management (SHR M) reported that for the past five years, employees rated

compensation and benefits among the top three aspects most important to their

job. But despite the importance of these aspects, employee satisfaction with their

compensation and benefits packages remains low. According to a Conference Board

report, “employees are least satisfied with their companies’ bonus plans, promotion

policies, health plans and pensions”. Employers are missing critical opportunities to

maximize employee job satisfaction and other organizational outcomes through their

total rewards programs.1

In the book Dynamic Compensation for Changing organizations: People, Performance

& Pay, The Hay Group asserts that traditional pay structures no longer keep

pace with the emerging, strategy-focused organizations that exist in today’s

globally competitive market. “What shifted were organizational work values, work

cultures and business strategies. Although they have been largely overlooked,

dramatic changes in the organizational rules have frequently rendered traditional

compensation strategies ineffective. Employees today are expected to work in teams

rather than solely on their own. They are expected to keep learning new skills and

to assume broader roles. They are expected to take more risks and responsibility for

results. As a consequence, we are slowly coming to the realization that we may be

paying for the wrong things, sending inconsistent messages about the company to its

employees, or creating artificial expectations of continued advancement and raises,

no matter how well the company performs.”2

Furthermore, in its publication Implementing Total Rewards Strategies, SHR M

notes that “the right total rewards system—a blend of monetary and non-monetary

rewards offered to employees—can generate valuable business results. These results

range from enhanced individual and organizational performance to improved job

satisfaction, employee loyalty and workforce morale.”3

Today, HR professionals are responsible for programs far beyond the profession’s

administrative personnel roots. They are expected to measure the success or failure of

HR practices based on the achievement of organizational outcomes. Brand identity,

bottom-line profitability, employee job satisfaction and increased management focus

are all outcomes that can be achieved in part through an organization’s total rewards

program. This case examines two very different organizations and how they align

their total rewards programs with their organizational goals and values.

Aflac Insurance

2 © 2009 society for Human Resource Management. sandra M. Reed, sPHR

Company Information

Aflac is a Fortune 500 insurance company founded in 1955 by three brothers, John,

Paul and Bill Amos. Today, Aflac employs more than 4,500 people and has more

than 71,000 licensed independent agents throughout the United States and Japan.

The following is an excerpt from the New York Stock Exchange business summary.

“Aflac Incorporated is a general business holding company and acts as a management

company, overseeing the operations of its subsidiaries by providing management

services and making capital available. Its principal business is supplemental health

and life insurance, which is marketed and administered through its subsidiary,

American Family Life Assurance Company of Columbus (Aflac), which operates

in the United States (Aflac U.S.) and as a branch in Japan (Aflac Japan). Aflac’s

insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan

sells cancer plans, care plans, general medical indemnity plans, medical/sickness

riders, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S.

sells cancer plans and various types of health insurance, including accident/disability,

fixed-benefit dental, sickness and hospital indemnity, vision care, hospital intensive

care, long-term care, ordinary life and short-term disability plans.”

AFLAC Corporate Philosophy

“Since its beginning, Aflac has believed that the best way to succeed in our business

is to value people. Treating employees with care, dignity and fairness are founding

principles of Aflac.”

Aflac’s mission

To combine innovative strategic marketing with quality products and services at

competitive prices to provide the best insurance value for consumers.

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 3

Guiding Principles

To offer quality products and services at competitive prices and use new technology

to better serve our policyholders.

n Build better value for our shareholders.

n Supply quality service for our agents.

n Provide an enriching and rewarding workplace for our employees.

The case at AFLAC

With a desire to be an employer of choice, Aflac Insurance is no stranger to the

competition for talent among employers in the United States. In fact, according

to the Bureau of Labor Statistics (BLS), the unemployment rate in the insurance

industry was at 3.3 percent in March 2008, a number consistently below the

National and state levels in other industries (Exhibits A and B). This makes finding

and retaining qualified individuals to deliver positive results to shareholders an

ongoing challenge.

Organizational outcomes related to human resources at Aflac reflect many of the

basic functions, including recruiting, retention, diversity and training. At Aflac, the

company strives to deliver quality service to its 4,500 employees while staying

competitive in the insurance market. Aflac prides itself on being ahead of the curve

From a consumer perspective and desires to mirror that philosophy in its treatment

of employees. How does the company made famous by the duck maintain the

integrity of its brand while delivering results through its people? How important are

benefits and compensation to the company’s ability to compete in a growing


Casey Graves, vice president of human resources in charge of compensation and

benefits at Aflac, says that the needs of the company’s employees continue to be the

driving factor behind Aflac’s total rewards programs. As with most programs, it

begins with an employee needs assessment and continues to be measured through

outcomes, which have been directly influenced through the company’s enhanced

total rewards efforts. The consistent thread throughout this process, according to

Graves, is the quality of communication. Graves explains that Aflac’s total rewards

statements have evolved from a one-page document to an in-depth review of the

true value of the employment compensation and benefits.

Employee satisfaction surveys and focus groups conducted in 2007 with Aflac

employees and managers drove the needs identification process. A key focus of

the survey was to help recruit talent and improve retention in an industry with low

unemployment rates. Although survey results varied, Aflac’s response was consistent:

to give employees what they need from a benefits perspective while balancing the

cost, all within a rapid period of growth.

4 © 2009 society for Human Resource Management. sandra M. Reed, sPHR

Throughout the process, the company focused on providing value-added programs

that would improve employee job satisfaction, support organizational initiatives

and provide opportunities for professional development. Aflac seeks to accomplish

this by:

N Providing Aflac products to employees at little to no cost—for example,

offering employer-paid life insurance, a company-paid cancer policy and company-

subsidized accident protection insurance.

Providing total rewards in line with philanthropic goals. Aflac dedicates

resources to efforts that support the community in four areas: health,

education, youth and the arts. One benefit offered to Aflac employees is the

recognition of a “Volunteer of the Month,” in which an employee is awarded

for the time spent volunteering at his or her charity of choice.

n Developing employees for their next career level through extensive

employee training and leadership programs to keep pace with the strategic

growth goals being executed company- wide. More than 91 percent of Aflac’s

employees at the senior vice president level and above have been promoted through

the ranks. Aflac’s corporate training department hosts two employee learning

initiatives. The first is a leadership development program with on-site courses for

all employees from entry level to senior management. There are three levels of

classes; some classes require employees to have taken prerequisite courses that are

a part of the offered curriculum. Instructor-led classes offer a variety of subjects

for workers seeking both career and personal development and are designed to

help employees achieve a quality work/life balance. Course topics range from

“Managing Your Career” to “Preventing Diabetes.”

Cost-containment is on every HR professional’s mind when discussing employee

benefits. According to the National Coalition on Healthcare, the cost of offering

health insurance continues to outpace inflation. In fact, “in 2007, employer health

insurance premiums increased by 6.1 percent, which was two times the rate of

inflation. The annual premium for an employer health plan covering a family of four

averaged nearly $12,100. The annual premium for single coverage averaged over

$4,400.” And, as Graves points out, that is added to the cost of steadily growing the

business each year, which includes adding staff. Suddenly, employee benefits become

a conspicuous line item on profit and loss statements and must therefore enhance the

achievement of organizational outcomes in order to be justified. An important

theme in Aflac’s communication to its employees is that the health care cost

containment is an employer and employee shared responsibility.

Aflac seeks to administer benefits in a cost-effective manner while staying

true to the concept of employee service. Aflac recognizes the actual value of

employee benefits, and as a result, its overall philosophy is that “it’s all about the

employee.” For Aflac, in addition to competitive salaries, it includes designing

benefits packages that reflect the needs of a multi-generational workforce—some

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 5

seeking portability, others seeking stability. It is about creating a positive work

environment that is conducive to productivity—by offering one of the largest on-site

child care facilities in the United States. Aflac sponsors outdoor adventure days,

on-site fitness centers and service discounts. It pays 100 percent of the employee

premium for its ground-breaking cancer insurance, in line with the company’s

philanthropic commitments as a socially responsible organization, positioning

Aflac to lead its industry to enhanced service levels. These benefits, according to

Graves, send the message to employees that they and their lifestyles are important

to the organization. The proof continues to be demonstrated in recent employee

survey results:

n Approximately 90 percent of employees were attracted to and remain at Aflac

because of company reputation.

n Employees are happy with the profit-sharing bonus, with 81 percent of employees

saying they believe it is better than that of other companies.

n Eighty-nine percent of employees consider Aflac’s total rewards statement an

effective communication tool.

Perhaps most telling of all in the competitive world of insurance—employee turnover

fell below 10 percent in the first quarter of 2008.

6 © 2009 society for Human Resource Management. sandra M. Reed, sPHR

data series dec. 2007 jan. 2008 feb. 2008 mar. 2008

Employment (in thousands)

Employment, all employees

(seasonally adjusted)

2,316.8 2,313.9 (P) 2,310.2 (P) 2,314.1

Initial claimants for unemployment 514


1,022 468

Footnotes (P) Preliminary

exhibit a: the bureau of labor statistics April 2008

Insurance carriers and related activities: NALCS 524

employment, Unemployment & Layoffs:

Employment, nonsupervisory workers 1,848.0 1,836.0 (P) 1,839.7


Unemployment rate 2.3% 2.9% 2.6% 3.3%


Mass layoff events 9 13 7

(Source: Current Employment Statistics, Current Population Survey, Mass Layoff Statistics)

exhibit b: the Bureau of Labor Statistics, United States

Civilian Unemployment rate, all Industries

Labor Force statistics from the Current Population survey

year jan feb mar apr may jun jul aug sep oct nov dec

1998 4.6 4.6 4.7 4.3 4.4 4.5 4.5 4.5 4.6 4.5 4.4 4.4

1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0

2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9

2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.5 5.7

2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0

2003 5.8 5.9 5.9 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.8 5.7

2004 5.7 5.6 5.8 5.6 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4

2005 5.2 5.4 5.2 5.1 5.1 5.0 5.0 4.9 5.1 5.0 5.0 4.8

2006 4.7 4.7 4.7 4.7 4.7 4.6 4.7 4.7 4.5 4.4 4.5 4.4

2007 4.6 4.5 4.4 4.5 4.5 4.6 4.7 4.7 4.7 4.8 4.7 5.0

2008 4.9 4.8 5.1 5.0 5.5 5.6 5.8 6.2. 6.2 6.6 6.8 7.2

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 7

L.L. Bean company Information

L.L. Bean is a privately held outdoor apparel specialty catalog and retail store

founded in 1912 by Leon Leonwood Bean, an outdoor enthusiast and entrepreneur.

In his autobiography, My Story, Bean wrote that nothing eventful occurred before

his 40th year when he created a leather-topped, rubber-bottomed hunting shoe.

As the legend goes, he sold his first 100 pairs by mail order with a 100 percent

satisfaction guarantee. When 90 pairs were returned defective, he kept his promise

and made the refunds. Bean borrowed $400 from his brother to perfect the design

and went on to become a clothing consultant for the military during World War II,

an author and, of course, the president and founder of a retail giant. As described by

Yahoo finance online:

“With L.L.Bean, you can tame the great outdoors—or just look as if you could.

The outdoor apparel and gear maker mails more than 200 million catalogs per year.

L.L.Bean’s library includes about 10 specialty catalogs offering products in categories

such as children’s clothing, fly-fishing, outerwear, sportswear, housewares, footwear,

camping and hiking gear, and the Maine hunting shoe upon which the company

was built. L.L.Bean also operates about a dozen retail stores and some 15 factory

outlets throughout the Northeast. In addition, it sells online through English- and

Japanese-language Web sites.”

L.L.Bean’s annual sales grew from $616.8 million in 1990 to $1.169 billion in

2000, with an average annual growth rate of 6.8 percent. In 2000, L.L.Bean paid a

10 percent company-wide bonus.

More than 11,000 people worked for the company during the 2006 holiday

season, and in 2007 the company reported $1.5 billion in sales, with approximately

80 percent of those sales coming from Internet and catalog sales. The company

continues to evolve into a multi-channel sales giant through mail order, telephone,

Internet and in-store sales.

the brand

L.L.Bean has always been a marketing professionals’ dream of creating a brand into

an institution. Strategists, marketing specialists and other business professionals

(including the competition) have tried to duplicate the company’s achievements

with varying degrees of success. A brand is built on perceptions about quality,

service and status created by using a particular product or working with a specific

8 © 2009 society for Human Resource Management. sandra M. Reed, sPHR

company. A brand can be built using marketing techniques such as visual imagery,

wording that identifies what the organization does, and advertising campaigns

targeted to a desired demographic. Strong brand identity can build a relationship

with the consumer. In L.L.Bean’s case, this is a relationship with Maine and the

great outdoors. The company operates on the belief that the brand should reflect

Bean’s values, not just the products it sells. This case examines how L.L.Bean built

the brand by using employees as the critical channel through which to accomplish

strategic directives.

When Leon Gorman, grandson of Leon Leonwood Bean, assumed the presidency of

the company in 1960, he sent a message to employees defining their stakeholders—

those to whom L.L.Bean was ultimately accountable in a values-driven business.

L.L.Bean’s stakeholders were its customers, employees, vendors, communities and

the natural environment.

In addition to a strong customer focus, the company sought to solidify the brand

through social responsibility. Social responsibility is a business concept driven by

the principles of ethically sound practices, awareness of the business imprint on the

environment, and improvement of the quality of life of the company’s employees and

the communities in which it operates. Social responsibility at L.L.Bean is divided

into four categories:

n The environment

With company products geared for outdoor use, L.L.Bean focuses its

philanthropic efforts on preserving the environment. Examples include green

building, charitable giving and employee participation in preservation activities.

n Paper procurement

L.L. Bean is committed to sustainable, responsible paper procurement, an

important consideration because the company mails more than 200 million

catalogs each year. It uses recycled fiber, and suppliers are required to have

programs in place to support sustainable management of natural resources.

n Labor rights

When the company decided to move some operations offshore, it made a

commitment to labor rights, including human rights monitoring. In fact, the

company terminated at least three offshore vendor relationships that did not meet

its human rights standards. Included in Bean’s Vendor Code of Conduct are

standards for safety, non-discriminatory practices, and fair compensation

and benefits. This code of conduct includes processes for auditing and

investigating complaints.

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 9

n Charitable giving

Charitable giving at L.L.Bean is based on Gorman’s concept of the stakeholder

and the company’s heritage in the outdoors. The company has donated more than

$5 million toward environmental conservation efforts to groups like The National

Park Foundation and Ducks Unlimited. It sponsored the Peace Climb up Mt.

Everest, during which more than three tons of trash was collected. In addition,

quality of life of the Bean employee and customer is reflected in the company’s

charitable giving efforts to groups such as United Way and the Portland Symphony


the Problem

The company spent the 1970s and 1980s developing the brand into an American

institution. L.L.Bean operated on the premise that profits are an outcome of strong

customer service. Profits, therefore, were a byproduct rather than a corporate

focus. Growth was strong, particularly in mail order. By 1990, however, sales were

stagnating, productivity was declining and the mailing list was not growing. The

U.S. economy slipped into a recession, and as a result, 1990 was the worst year for

L.L.Bean in a decade. Sales growth improved in 1992 when the company expanded

into the Japanese market. In 1995, Bean launched their e-commerce web site.

There was significant upper-management turnover, though, and Gorman believed

that because of the rapidly changing external environment, the company had lost

direction. In 1996, sales flattened again, and for the first time under Gorman’s

leadership, the company reported a decline in sales. It was the first time the board of

directors voted to not award annual bonuses to employees.

the case at LL.bean

L.L.Bean launched a strategic review. The 80+-year-old company had been through

decades of change, yet its core business model had consistently provided excellent

growth and profit. This was no longer the case by the 1990s when the competitive

landscape reflected a more technically savvy and cost-conscious customer and global

employee market. The need to reorganize became obvious to Gorman.

The strategic review process began in 1996 and included analyses of both

strategic and operational processes, including brand identity, target markets and

operational competencies (employees). HR was one of the strategic business units

(SBUs) developed as an outcome of the review process. The SBUs were part of

a decentralization process in which each unit had responsibility for its profit and

loss and was held accountable to a balanced scorecard approach in performance

metrics. This designation for the HR department allowed it to develop operational

tasks such as compensation and benefits into a strategic process with measurable

outcomes—for example, linking pay to performance and increasing employee job

satisfaction. In addition, total rewards were used as strategic solutions to many of the

10 © 2009 society for Human Resource Management. sandra M. Reed, sPHR

issues identified in the review process, including global outsourcing, multi-channel

marketing initiatives, employee recognition and the redefining of the brand.

Multi-channel marketing was another outcome of L.L.Bean’s strategic review.

Multi-channel marketing is the ability to offer customers more than one way to

purchase a product. The company decided to expand their brick-and-mortar stores

and capitalize on the opportunity presented by the Internet (Exhibit A). According

to Gorman, Internet retail sales doubled each year since 1996.

A weakness identified in the strategic review was that the company’s financial and

human resources were geared to grow the catalog business but not retail expansion

or Internet sales. The diversification initiative took staffing to another level. For

example, the decentralization of the management team to other locations required

concentrated efforts by the company to infuse the non-corporate facilities with

L.L.Bean values. The development of new jobs required thorough market research,

including a comprehensive job analysis process. The lack of technical skills such as

data processing threatened to topple the organization if it didn’t acquire the staff

with the required knowledge, skills and abilities to perform in a highly competitive

market at an organization that was used to setting the standards for quality.

Developing job descriptions and conducting salary surveys allowed the company

to develop a comprehensive compensation and benefits framework to manage this

period of rapid growth and diversification.

As a result of the strategic review process, total rewards at L.L.Bean became a core

business practice critical to the accomplishment of organizational goals. Traditional

benefits offered at L.L. Bean include performance-based bonuses and cafeteria-

style health care. Non-traditional benefits include store discounts, on-site fitness

programs and the use of company-owned outdoor gear such as tents and canoes.

The company continues the tradition of outdoor adventure days and trips as a way

to connect employees with the L.L.Bean values—the love of the outdoors. L. L.

Bean himself believed in profit-sharing with employees long before it became a

strategic compensation practice. Back in the days when pay was 18 cents an hour,

paid in brown envelopes of cash, Bean surprised employees with bonuses calculated

as a percentage of profits—Bean’s employees were paid when the company

performed. These practices reflect the L.L.Bean philosophy that the employees’

passion for the company and its products will translate to the customer. As far as

Bean was concerned, the company had an obligation to stakeholders, and it began

with employee satisfaction. As Leon Gorman put it:

“Our stakeholders have invested their patronage, careers, finances, social services

and outdoor values in our enterprise. They trust us to tell the truth, to sell quality

products, to guarantee satisfaction, to pay fair wages and provide opportunities

for growth, to secure their investment, to participate in society, and to sustain our

natural environment. They trust us to grow to the extent that we can enhance our

benefits to them. They trust us to go the extra mile in everything we do.”4

© 2009 society for Human Resource Management. sandra M. Reed, sPHR 11

Global outsourcing of operations brought intense scrutiny to the function of

compensation and benefits. This resulted in Gorman leading the challenge for fair

wages at the company’s global subsidiaries and vendors and, in some cases, firing

those who failed to comply.5 In addition, global benefits were markedly different

from U.S. benefits because they were infused with cultural purpose. For example,

among Japan’s official holidays are Respect for the Aged Day, a Cultural Day,

the Emperor’s Birthday and Physical Fitness Day. In addition, although Japan’s

retirement system was similar to the United States (a combination of Social Security

and employer-sponsored plans), Japanese employees typically collect one lump-sum

severance payment at the time of retirement based on years of service. Commuter

costs and housing subsidies are also common fringe employment benefits in Japan.6

Did the 1996 strategic review work? Were employees rewarded for their continued

excellence, loyalty and dedication to the corporate objectives? Let’s look at

L.L.Bean’s 2006 Year in Review press release, as reported by PR Newswire:

LL Bean Inc. reports 2006 net sales results

“For the 2006 fiscal year ending February 25, 2007, L.L.Bean reported record

annual net sales of $1.54 billion, a 4.6 % increase over 2005. The company also

announced that its Board of Directors approved a cash award of 7.5% of annual pay

to eligible employees, a payout of approximately $25.5 million. An additional $8.8

million will be allocated to the pension plan, keeping the plan fully funded.

“It’s a well-deserved bonus,” said Leon Gorman, L.L.Bean’s Chairman of the Board.

“2006 was a year in which we made excellent progress on a variety of strategic

initiatives important to the future of our business. We are pleased to be in the

position of rewarding Bean employees for their achievements.”

Chris McCormick, L.L.Bean’s President and CEO, expanded on the year-end

results for 2006. “We had a strong start and strong finish to the fall and winter

selling season,” he said. “Although unseasonably warm weather had an impact

on sales in December and early January, our business performed very well and

the product line continues to hit the right mark with our customers. I am very

proud of all that we accomplished in 2006 through our employees’ hard work

and dedication,” he continued. “It was an exciting year with a lot of energy and

growth, including the opening of three additional stores, launching $90 million

in investments in our hometown of Freeport, and making further progress on the

international side of our business.”

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