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Gini Dietrich

Business Leaders Kill Morale; Threaten Jobs Over ObamaCare

By: Gini Dietrich | November 19, 2012 | 
66

I’m having a hard time with some of my fellow business leaders right now.

On November 4, CEO Matt DeRose sent an email to his 600 employees stating that if Obama won a second term, he would layoff or position most of his team for part-time employment. He stated, “Increasing expenses brought on by recent regulations, taxes, and the stagnant economy” were driving his decision.

On November 12, Papa John’s Pizza CEO, John Schnatter said on a segment of The Ed Show on MSNBC, “ObamaCare is so costly, my employees will pay the price” stating most full-time employees would only be able to work 30 hours a week so the company could avoid paying benefits or a penalty.

He estimates ObamaCare will cost the company an additional $5-$8 million annually.

Schnatter said the additional healthcare costs could be passed to customers, at a price of $0.10 to $0.14 per pizza.

But an even bigger slap in the face is Papa John’s is giving away two million pizzas during the NFL season, which if you’re wondering, is the equivalent of $24-$32 million in retail price or likely half of that in cost. Regardless, giving away $12 million in pizzas is okay, but paying for your employee’s health insurance is not.

And now the CEO of Aetna has said the same: When ObamaCare takes effect, they will find a way to cut costs by laying off employees or taking away some of their hours.

How Much Does it Cost?

For organizations less than 50 employees, the health care reform doesn’t affect you.

But, for those with more than 50 employees, beginning in 2014, you must offer healthcare to all of your team members or pay a $2,000 fine per person (excluding the first 30) and offer it to no one. That means all of your employees are without health insurance (including you!) and must go to state health plan exchanges to buy insurance.

Take, for instance, you have 51 employees and you decided not to offer healthcare benefits. You exclude the first 30 and pay $2,000 per person. Your penalty is $42,000.

I did some quick math on the benefits we provide our employees. We pay approximately $6,000 per year, per employee for healthcare. Employees pay a portion of approximately $3,000 per year.

So, taking the same example as above, for 51 employees, we would pay $306,000 for healthcare benefits.

If we decided not to offer healthcare, we would save $264,000.

And, for our employees to get their own state-issued healthcare, unless they make more than $150,000 per year, they will pay less than they do now.

Morale Killer

But the bigger issue I’m having is how this behavior is likely affected morale.

First of all, ObamaCare doesn’t take affect until 2014. Yes, more than one year from now. The first open enrollment doesn’t begin until September of 2013.

All these business leaders are doing is scaring their employees about whether or not they’re going to have a job. They’re killing morale. They’re creating a hostile work environment.

It will be a full year of people wondering whether or not they have jobs. Not to mention what it could do to the economy and our unemployment rate.

ObamaCare is here to stay. No matter what your politics or who you voted for in this election, this is something we have to work into our business planning.

Rather than lead with fear and threats, why not encourage your employees to participate in the conversation about what they’d like for their healthcare future?

How motivated would you be to go to work if you knew you might have to cut your hours and go without benefits, or worse, lose your job entirely?

I wonder what Jim Collins, Jack Welch, or Ken Blanchard would say about that?

A version of this first appeared in my weekly Crain’s Chicago Business column.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, a Chicago-based integrated marketing communications firm. She is the lead blogger here at Spin Sucks and is the founder of Spin Sucks Pro. She is the co-author of Marketing in the Round and co-host of Inside PR. Her second book, Spin Sucks, is available now.

65 comments
jenzings
jenzings

I agree that this is not the method or the tone that is appropriate for presumed adults and business owners. The Denny's manager that suggested a surcharge is backing down:

 

http://www.huffingtonpost.com/2012/11/20/john-metz-dennys-obamacare-surcharge-_n_2146735.html?utm_hp_ref=mostpopular

 

An important point from the article that every business owner needs to understand is this:

 

"Unfortunately for Mouannes, many consumers don't understand the complex relationship between franchisees and their parent corporations, or that owners of individual outlets within Denny's, Ace Hardware, Applebee's, Papa John's and Jimmy John's may not represent the whole company when speaking against Obamacare."

 

Individual franchise owners are damaging their brands, as is the owner of Papa John's. I really don't care what these business owners think of the law--it's the law, and they need to figure out how to comply. The unfortunate fact of the economy is that hourly workers are seen as expendable by large swaths of the business community.

 

On the voting business--I had always thought it was against the law to attempt to coerce someone to vote one way or the other. Perhaps that is something handled at the state level. If it isn't against the law, it should be. And threatening to fire employees if the vote goes counter to what they want is definitely an attempt to coerce voting behavior.

 

Having tantrums solves nothing. Ask any toddler.

dbvickery
dbvickery

It sucks, and I agree with Gini's post...but it will be cost-prohibitive for some businesses | @dvyo @ginidietrich

golfnovels
golfnovels

It doesn't have anything to do about caring about employees. It has everything to do about who is going to pay for it and being forced to do it by the government. The new "employee" will become an independent contractor for a year. The employer / employee relationship will become a dinosaur. I hate to say it but the "haves" are not going to sit around and have the "have-nots" dictate to them what to do.

samfiorella
samfiorella

@bschorr Entrepreneurship is alive and well! Love it! :) @ginidietrich

mmangen
mmangen

@mikepayne_srq and with that the uber-expense we pay as self-employed :(

AmyVernon
AmyVernon

@MikePayne_SRQ @mmangen @ginidietrich (2/2) in part because benefits (primarily healthcare) were so horrid and they were treated so poorly.

AmyVernon
AmyVernon

@MikePayne_SRQ @mmangen That has nothing to do with the point @ginidietrich is making in her piece. I've seen many people unsatisfied

rdopping
rdopping

You know, in good ole Canada corporate taxes are fairly robust. Rightly so. Canada also has robust healthcare for its people of which we pay dearly each year. It depends on what your company offers as extended health but it can be upwards of  $2,000 per annum. Not much considering our higher taxes (personally at approx 38% of my income) partially offset the healthcare system we so generously enjoy.

 

I don't know what I would do if I was in the US.

 

Taxing corporations for the benefit of its employees seems like a good thing to me. It's about time that corporate America starts to see its workforce as something other than chattel. Strong opinion. Yes. But it surely seems that way when the current administration has to force the issue with penalties if you don' get health insurance.

 

I don't know all the issues but it seems like having healthcare is a no brainer to me especially when you look at how much it costs to replace an employee vs keeping one happy and healthy.

 

C_Pappas
C_Pappas

This is yet another way to show how pissed off people are by the election. I too am completely grossed out by the manners of these business leaders and they clearly are taking advantage of their position to prove a point.

 

I was traveling last week and one of the people I was with mentioned that nobody should ever speak the president's name in front of him and he was completely distraught over the whole thing. Im wondering aloud if the perception is different if it were called something other than 'Obama'Care ? Im not too sure how this will affect me yet but we clearly dont have a choice in the matter. But... if it's going to be around longer than the next 4 years, clearly we can come up with a better name right? But that's an entirely different topic.

kmskala
kmskala

First, let's clear up a little bit of confusion here. Papa John's is a franchise-based business. So Papa John's isn't paying anything, it's local business owners, like you, that are paying this expense. An employer in Iowa, for example, has indicated Obamacare is going to cost him an extra $500,000 a year. How many small businesses have an extra $500,000 laying around?

 

Second, the 2 million free pizzas is not a good comparison. This is likely covered by the franchisee's local/regional ad fund, which most franchise-based businesses have. Each location pays a certain percentage into this fund to cover marketing campaigns. These free pizzas equate to about 660 free pizzas per location. They'll likely get reimbursed by corporate. Regardless, 660 free pizzas is not on the same level as an extra $500,000 in healthcare expenses.

 

Third, I think it's good that businesses are speaking up. Regardless of your political affiliation (I am conservative and strongly oppose Obamacare), your employees need to know what impact this has on their jobs. Would you rather work for a company that says "we're likely going to lay some people off or drastically reduce hours" or have executives hush-hush and then spring this on them? We complain when executives don't communicate enough and then we complain when they come out and are honest with us.

ginidietrich
ginidietrich

@denas It's really awful. Why anyone would threaten to fire people because they don't agree with policy is beyond me

MikeSchaffer
MikeSchaffer

Reading through the comments, it appears you've started a heated debate on healthcare systems. So I will avoid that entirely and focus on the more relevant topic: internal communications and the fallout thereof.

 

I can't image what the voting booth experience was like for someone who's boss told them if Obama wins, they will likely lose their job. As an internal memo, it has to be frightening enough, but to take those claims public as so many business leaders did is...icky, at best.

 

Whenever companies announce a political position, they are taking a calculated risk. I know people that will never eat Chik-Fil-A ever again...and I know people that go out of their way to support them...based on the recent equal marriage fiasco. Already, I know many people that will take their pizza business elsewhere in a crowded market based on the Papa's Politics.

 

What shocked me about his statement is how disconnected it seemed from the chain's tagline: Better Ingredients, Better Pizza. Their brand was built on a sense of quality and family. And while the company has every right to compensate their employees as they see fit within the law, this seemed out of character. 

 

Also, it could have been a major win for them, if they had announced a small price hike that would go to ensure their employees received the best healthcare possible. Who wants a sick person sneezing on their pizza?

 

 

magriebler
magriebler

Amen, sister. It's the responsibility of business owners to figure out how to work rising costs into their business model, whether it's the price of postage, paper, utilities, rent or health care. These guys know it. What they're doing is deliberately political or, to be more blunt, apolitical, since I'm not sure they're happy with the whole democracy thing.

 

Jim Collins would not deign to call a single one of these men a leader.

 

And I won't be eating Papa John's pizza any time soon.

susansilver
susansilver

When I hear CEO's talk like that, I can only think one thing-- They wanted to make the layoffs anyway, but now they have an excuse.  A business that gives a darn about its employees, even in the face of cuts, works with them instead of making statements to the press.

 

With things the way they are, I can only see a future of people who are self-employed  working with others in collaboration.

 

The comments below are amazing. Recently, I had a reality check from a friend that works for a hospital in their billing department. She says that when Obamacare takes effect they will fix costs, which will be way below what it actually costs the hospital for the services they provide. For example, something like an MRI.  It really puts them in danger of not being able to cover their operating costs.

 

I still support the changes, but there is a loooooooot to work out. 

Latest blog post: Critical Thinking is Sexy

thefarmerslife
thefarmerslife

Several of the new regulations in the healthcare law go into effect in January 2013.  That's why we are seeing so much about this after the election into the end of the year.

Howie Goldfarb
Howie Goldfarb

Sorry the Reply button isn't working for me Livefyre seems glitchy. Anyway yes I rubber stamp/agree your premise i just had to add the 4th dimension as is what I do. 8) Also ironic most of the complaintees tend to be big GOP supporters even before Obama was elected.

Howie Goldfarb
Howie Goldfarb

Being fairly expert on this crap going on, the more companies that jetison giving healthcare (de-coupling) the better for the US in the long run. Healthcare never should of been a perk of employment because mostly big businesses offer it. And if everyone had to shop for healthcare and pay out of pocket there would be true competition and maybe less obesity. Secondly who says Papa Johns or another business won't still be paying. They will have to pay more in wages to compensate for employees paying for it on their own and they lose a Government tax break.

As for Papa John's? The guy is responsible for selling crap to American's made up of GMO processed fake food for cheap causing an increase in obesity causing our healthcare costs to explode. Oh and he is an Evangelical Christian. There you go another f-n hypocrite. BTW it isn't pizza he makes. Papa Johns makes Domino's and Pizza Hut seem gourmet.

Joshua Wilner/A Writer Writes
Joshua Wilner/A Writer Writes

 @golfnovels That is a narrow provincial view that comes across as being petulant. The "haves" are not a single minded bloc nor are they all the modern incarnation of robber barons.

 

Smart businesses grow because they attract top talent and part of that is done by providing benefits that people want and need.

 

The marketplace won't always remain as it is now with a surplus of workers making it easier to pick and choose. Things will swing and then those who find ways to buck the system to save a buck will likely find themselves feeling pennywise and pound foolish.

ginidietrich
ginidietrich moderator

 @rdopping But it's not even about the healthcare, Ralph. It's about how leaders are reacting to something they don't want to pay for. And, in some cases, they're going to end up saving money. We off healthcare to our employees. The math is up there in the blog post. I just don't understand why/how you would threaten to let your employees go so you can game the system and not pay your share.

ginidietrich
ginidietrich moderator

 @kmskala I totally disagree. I think it's really bad leadership to threaten to fire people if the election doesn't go your way. The Papa John's CEO came out and said ObamaCare will cost the corporate offices $5-$8MM more...that doesn't compare to it affecting franchisees. And, if the costs are handed down to the franchisees, most don't have 51 or more employees so it doesn't affect them at all. The only franchisees who will be affected at the ones, like Peyton Manning, who own multiple locations.

 

The right leadership message is to say, "We don't know how this is going to affect us and we're gathering as much information as we can right now in order to bring you the best recommendation. When we have everything we need to make an educated decision, we'll let you know how this will affect your benefits."

 

But to say they're going to be fired or moved to part-time status is demoralizing and just plain wrong.

ginidietrich
ginidietrich moderator

 @MikeSchaffer The internal communications and lack of leadership is what kills me. I just cannot imagine saying to my team: Alright, when our open enrollment comes around in November, we're going to fire half of you. But don't worry. You might be in the lucky half so keep working hard and we'll see where it ends. Riiiiiiight.

ginidietrich
ginidietrich moderator

 @susansilver I agree there is a lot to work out. And, as fiscally conservative as I am, some of it scares me too. But I would never put that on my team. If it's something that affects all of us, I will have a conversation with them and be honest and transparent about the changes. But mouthing off to national media that we'll have to fire half of them? Totally ridiculous.

ginidietrich
ginidietrich moderator

 @HowieG Yes...and I was accused of writing liberal trash when I wrote this. But it's not about Republican or Democrat. It's about leadership. I like Papa John's pizza more than Domino's or Pizza Hut. But I sure wouldn't want to work there.

ginidietrich
ginidietrich moderator

 @HowieG But that's not really the point. The point is these business leaders are threatening their employees because of something that won't take effect for more than a year. They're using scare tactics to run their businesses. It's bad, bad leadership.

golfnovels
golfnovels

 @Joshua Wilner/A Writer Writes  @golfnovels Then I'll pose a scenario. There is one entity that spends $100 when there is only $20 in the bank. That entity does it over and over and over again, year after year with no budget (now) and no controls. It has no fiscal responsibility. It is known as the federal government and to some degree, many state governments.

 

Corporate businessmen do understand the bottom line and I don't think that too many of them will continue to operate when expenses excessively exceed revenues. They will trim fat. They will get lean. They will act with fiscal responsibility. If you own your own business you will understand that principle. If you work for someone then it might be harder for you to grasp. It takes a lot of effort to sell a product or service. It just doesn't appear --- like some in government obviously think.

 

I think the scenario that you describe more adequately describes a bigger government that makes people dependent upon them, thus increasing their power base.

rdopping
rdopping

 @ginidietrich You're right and I recognize the issues with gaming the system.

 

I would have fully expected that because as I mentioned the $$$ always seem to over-ride the "right thing to do". Not many firms are like yours who actually care about people and not only making as much money as possible.

 

I am sure you agree that healthcare is an extremely important issue and it costs. People don't want to pay for it because it's not in inherent in the culture like it is in Canada or the UK where it is part of doing business. We have to find other ways to make profit.

kmskala
kmskala

 @ginidietrich  "We don't know how this is going to affect us and we're gathering as much information as we can right now in order to bring you the best recommendation. When we have everything we need to make an educated decision, we'll let you know how this will affect your benefits."

 

But they do know how it's going to affect them. And that's what they are informing people. This type of action happens every day for a number of reasons -- decreased sales, increased cost of goods, etc. The only reason this is different is because of the politics behind it.

 

We'll have to agree to disagree on this.

wgmccoll
wgmccoll

 @ginidietrich  @kmskala Gini:  You hit upon an excellent point about leadership communication.  A leader can't be the "boy who cried wolf" if he/she wants the team to trust him/her.  A healthcare cost crisis isn't upon the company yet, so it makes sense to wait a bit before declaring there are no options but layoffs.  Compare that to the situation at Hostess, where the CEO said flat out everyone would be out of a job unless striking bakers came back to work.  That was no idle threat, and we saw what happened. That's hardly the case at Papa John's.  

TaraGeissinger
TaraGeissinger

 @ginidietrich  @HowieG I agree, the scare tactics are uncalled for and really leave a sour taste in my mouth as a consumer. Given the choice, I am not going to buy pizza from them if they treat their employees that way. As for Obamacare, I am personally very worried about it. The chiropractors and doctors that I know are very fearful of what it is going to look like when it rolls out. Yes, stage one looks appealing enough....that's kind of the point. I think we'll find, however, that it is going to cost us a lot in the long run, and not just in dollars.

ginidietrich
ginidietrich moderator

 @rdopping I guess that's where it rubs me wrong. If you don't care about your employees, you have turnover. When you have turnover, your margins decrease. When you decrease, you have to find new ways to make money. So why not just be good to your employees?

ginidietrich
ginidietrich moderator

 @kmskala But why say we're going to lay you off or put you to part-time hours? All that does is incite panic. And the part-time hours is only to beat not having to pay the penalty for not offering health care. So you're inciting panic and you're showing your team you are going to game the system. It's bad leadership, no matter how you dice it.

debdobson62
debdobson62

 @ginidietrich  @wgmccoll  @kmskala I so agree.  Leadership is not about threatening your employees about a vote or something they can't control.  Leadership is about figuring out how to manage and lead the company.

belllindsay
belllindsay

 @ginidietrich  @TaraGeissinger  @HowieG However, if we're talking about dental and prescription, etc., then yes, to go private (i.e. Blue Cross or whatever) is ridiculous - and god forbid if you've had any major illnesses, in fact forget about it altogether if you have anything chronic like diabetes or asthma! I'm pretty sure no private insurance company would even take me on. ;) #sicko

belllindsay
belllindsay

 @ginidietrich  @TaraGeissinger  @HowieG What do I know? I just hand over 3/4 of my pay to the government every year and they take care of me. ;)  Our taxes are insane, but it's been that way for so long now that it just feels normal. 

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