Putnam Work@Home Case

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Cost and Benefit Analysis of work@home
One of the primary advantages of the work@home program is that it creates a cost advantage. Having employees work at home as opposed to in-facility is significantly less costly. According to Table A in the case, annual recurring costs for each individual working in-facility is around $10,650. That is over twice the recurring cost of the average work@home employee with an ISDN connection and over 20 times the annual recurring cost of a work@home employee with a cable modem connection. Given the large quantity work@home employees at Putnam, this program provides a method of greatly reducing recurring costs in the short and long term.

Additionally, the e-learning program costs less than half of what the traditional training process costs. It even better prepares employees for the job because the quality of the training is higher and individuals can complete the training at their own pace. Moreover, work@home employees feel that Putnam has made a sizeable investment in them, and feeling is supported by high productivity rates and decreased turnover. The turnover rate among work@home employees is around 8% which is significantly lower than the Putnam average of 30%. By training employees for less and retaining them for longer, Putnam decreases both recruiting and training costs by a significant margin. Furthermore, the work@home program allows Putnam to expand their business into new areas without having to invest in additional real estate. And because the majority of these work@home employees are from rural areas where the cost of living is lower than locations near Putnam’s office facilities, Putnam can get away with paying work@home employees less than their in-facility counterparts. All these factors contribute to the low cost advantage that the work@home program creates.

Because Putnam only allows high productivity workers the option of working at home, the work@home program can provide an incentive for employees to increase their productivity. According to a Putnam manager, anyone who is eligible to work from home and who wants to can work at home as long as he has higher than average productivity. Anyone at Putnam who desires to work from home will have the incentive to increase productivity above the mean so that they will have the option of working from home. However, this incentive only applies to workers who have jobs that allow them to work from home. Also, many people like the social experience that the office brings and have no desire to work from home. One of the pitfalls of using this program as an incentive is that there is no reason for employees to produce anything higher than the company average. However, all things considered, this program does incentivize a select group of individuals to boost their productivity levels.

Various costs arise from the work@home program as well. It takes a special type of person to succeed in a work@home position. Employees must be willing to sacrifice the social aspect of work and must be good at solving problems on their own because immediate help cannot always be obtained. Unfortunately the workers who fit the work@home criteria do not necessarily bring about optimal production for Putnam. The most qualified and potentially productive candidates may find the work@home program to be unfulfilling. Consequently Putnam is forced to accept candidates who while still productive, may not produce optimally. In fact, overqualified candidates in Vermont and Mane tended to have higher turnover rates due to the unfulfilling nature of the work. One of the other primary costs of the program is the communication barrier. By not being in-facility, work@home employees cannot as easily talk to co-workers or supervisors about work-related problems. Also they are not exposed to the culture and are unable to get as good of a sense of how the company operates compared to in-facility workers. Putnam has tried to mitigate...
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