Steve Jobs once said, “Design is not just what it looks like and feels like. Design is how it works.” When considering how well something works, first look at the desired outcome. Jerry Ripperger of The Principal outlines a useful framework for creating plan designs that produce desirable outcomes, based on the “Four B’s”:
• Behaviors
• Benefit Structure
• Budget
• Benefit Levels
While many companies tend to look at the budget first, it is critical to first consider desired outcomes — that is, behaviors. Specifically, identifying what behaviors the company wants from employees as a result of the benefit program. Ripperger notes: “Having a good understanding of the actions the company wants employees to take, helps the company design benefit structures that motivate and reinforce the desired behaviors.”
Another way to approach plan design is to have desired behaviors drive benefit structure decisions and let the budget drive benefit level decisions — ensuring that the programs are tied to the desired behaviors. A plan sponsor may also target desired behaviors that go beyond the benefits program, such as encouraging employees to participate in ESOPs, which establish a direct link between employees’ actions and their personal financial situations.
The bottom line: Effective plan design starts at the end, not the beginning.
