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Testing the Limits on PTO

Unlimited paid time-off policies are attracting some passionate supporters, though experts advise employers making the move to tread carefully.

Thursday, December 20, 2012
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OutcomesMTM CEO Tom Halterman recalls that a March Fast Company article, titled "Unlimited Vacation Doesn't Create Slackers -- It Ensures Productivity," first planted the idea in his head to eliminate the company's traditional time-off policy. But it was the real-world experiences of employees like Molly Hittenmiller that prompted him to finally pull the trigger on this approach.

Earlier in the year, a benefits professional at the 52-person provider of medication therapy management programs approached Halterman about Hittenmiller's request for time-off, even though she had used up all of her PTO.

A software developer in her 20s, Hittenmiller worked "crazy, off-the-chart hours," Halterman says. But the company's policy prevented her from taking the additional time-off, because she had already used up her allotted PTO attending a number of weddings during the year.

For a company like OutcomesMTM, Halterman says, limiting her time-off didn't seem to make any sense. "If you looked at the work Hittenmiller did for us, I think we owed her more than she owed the company," he says.

So beginning in October 1, OutcomesMTA officially launched "MyTime," an unlimited time-off program, and Hittenmiller's deficit went away. http://www.hreonline.com/images/90206467TestingtheLimitsofPTOM.jpg(Details of the program were featured last month in the Des Moines Register.)

Halterman says the company is interested in outcomes and results, not artificially tracking employees' time. "It seemed to make sense to free them from that," he says.

So far, he says, the program has been extremely well-received by both managers and employees alike.

OutcomesMTM is one of a number of companies that has embraced the concept of unlimited time-off. While extremely rare -- a 2010 study by WorldatWork found that only 1 percent of companies embrace such an approach – the concept is being tested in certain sectors, especially in high tech.

Netflix is another company that hasn't had a vacation policy since 2004.

In an article he wrote for Businessweek in April, CEO Reed Hastings said that Netflix wants people who are self-motivated and self-disciplined.

To that end, he said, Netflix's vacation policy is "simple and understandable: We don't have one. We focus on what people get done, not how many days they worked."

Most work/life experts aren't suprised to see companies begin to experiment with different models that give employees greater flexibility.

Along with OutcomesMTM and Netflix, TIBCO Software, Zynga and Gilt Group reportedly offer such programs.

"The one-size-fits-all career path is now the single greatest obstacle to reliable staffing because the best people simply won't work for you if they can't get their personal needs met," says Bruce Tulgan, author and president of RainmakerThinking Inc., a management training and consulting firm based in New Haven, Conn. "When employers give more scheduling freedom to employees -- regardless of how many hours the employees must work -- the result is greater productivity and increased morale."

Tulgan notes that scheduling flexibility is the single greatest non-financial tool at the disposal of managers for incentivizing and rewarding performance.

"People are so thrilled, usually, to customize their work arrangements that they become very protective of the deal they've created for themselves," he says. "In a results-based relationship, where engagement and accountability are high, that self-protection almost always manifests itself in exceptional performance."

Employees often perform better in flexible arrangements because they don't want questions to arise that could jeopardize that flexibility, he adds.

Still, experts say, companies that decide to trash their vacation-time policies need to be aware of the risks involved.

Companies want dedicated workers, but being dedicated often means being on the job, says Joan C. Williams, distinguished professor of the law and founding director of the Center for WorkLife Law at the University of California/Hastings in San Francisco.

"So I'd be apprehensive that the unspoken and unintended cultural message [of approaches like this] might be that a truly dedicated employee takes very little time-off or vacation," she says.

Williams says companies with unlimited vacation policies should make it very clear how much vacation employees are expected to take.

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To be sure, such programs aren't for everyone, which no doubt explains why companies aren't rushing to introduce them.

"You need an environment where the culture supports this approach, where there's trust and deliverables can be measured," says Lenny Sanicola, senior practice leader of professional development for WorldatWork in Scottsdale, Ariz.

Sanicola notes unlimited leave policies have both an upside and downside.

"The upside is there's less administration, people feel appreciated and trusted, there's greater productivity and people are more efficient," he says. "The downside is you need to make sure you have your i's dotted and t's crossed from the standpoint of state law . . . and, if you're converting to a new [approach], people with high tenure feel they're not being slighted because those coming in the door can take-off whatever they want, whenever they want."

Like Williams, Sanicola is also concerned that doing away with time-off might create the expectation that work is 24/7.

Because technology has blurred the lines between work and personal, he says, some employees feel compelled to pick up their smartphone while they're vacationing the beach. "Companies need to make it clear they want their employees to come back [from their time away] recharged and rejuvenated … ," he says.

(Benefits columnist Carol Harnett addressed the importance of culture when it comes to unlimited paid time-off programs in her September column.)

Employers also need to make sure managers are equipped with the tools and capabilities to manage in this environment.

"One pushback we often hear from managers is the fear of losing control," says Kenneth Matos, senior director of employment research and practice at the Families and Work Institute in New York. "But the reality is most employees don't go crazy when flexibility is given to them. In fact, we typically see them being relatively conservative."

Matos points out that managing in a flexible environment can be much more difficult than managing in a structured environment.

If you're going define success by results, Matos says, then you better be good at defining what the results need to be. "People need to be clear what they're being judged on," he says, adding that this is an area where many companies stumble.

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