The Bottom Line | Published in December 2013

Sending the Right Message

Targeting employee communications     Also in this article: "Data Visualization" 

By John Manganaro | December 2013
John Hersey

When developing an employee communications and education calendar for a defined contribution (DC) retirement plan, experts say it is best for plan sponsors to think small. In fact, casting too wide a net is one of the most common mistakes committed by retirement plan sponsors during internal communications campaigns, says Linda Pophal, owner and CEO of Strategic Communications LLC, a communications consulting firm, headquartered in Wisconsin.

“Most often, organizations, regardless of their size, tend to take a very broad perspective in terms of the audience they’re hoping to reach,” Pophal says. “I see clients coming to us with goals as broad as ‘We want to communicate better with our employees.’”

Effective Messaging

Defining smaller target groups allows plan sponsors to select not only the right message content but also the right delivery pathways and follow-up schedules to ensure a campaign does not fall flat. This is especially true when it comes to a subject as convoluted as 401(k) plans and retirement readiness more generally, Pophal says. “The messages you deliver for Generation Y employees entering the work force are going to be very different from the messaging you use with late-career Baby Boomers. Messaging might also vary in terms of hourly, salaried and executive-level employees. Are there differences in terms of the departments or positions they work in? These are just some of the considerations plan sponsors must make.”

For example, whether a plan sponsor is engaged in raising awareness around the start of a whole new defined contribution plan or simply the addition of a target-date fund (TDF) to a plan’s investment options, it is crucial to consider what participants already know about a subject. Provide too much information to an uninformed group and you can cause confusion and frustration, Pophal says. Provide too little to well-informed employees and you risk future messages being ignored. 

Benchmark Your Results

Once a subset of plan participants has been identified for a messaging campaign, there exist myriad tools and strategies to get a handle on what participants already know—from the latest data-tracking software to pencil and paper employee surveys.

The important factor is finding a way to set accurate benchmarks against which campaign progress can be planned, executed and measured, says Ben Acquario, director of communications, education and advice for Newkirk, a DST company specializing in retirement plan communications, in Albany, New York. Benchmarks of this type serve a dual function, Acquario says.

First, when set at the beginning of a campaign, benchmarks provide a sense of where the most effort and energy should be expended. Second, setting benchmarks can give plan sponsors a way to generate buy-in among executives who must approve spending on more formal internal communications. “Before you put forward any sort of strategy, you want to get a pulse on the health of a plan,” Acquario says. “We first analyze a whole list of statistics, such as participation rates, deferral rates, income replacement ratios, asset diversification rates. All of these are important.”

Pophal says she often sees a tendency to avoid this type of quantification, mainly out of clients’ fear of failing to meet predefined targets shared with company executives. Her advice is to not be so concerned over missed targets, but instead to use the results to identify and address challenges that persist for a firm or company. “I think communications folks can improve their credibility quite a bit within an organization if they’re willing to come forward with data that may not be as good as what they hoped for,” Pophal says. “The key is pitching the data in a way that shows that you’ve identified problems for the organization and that you’re the one with a solution.”

Carol Waddell, managing director and head of product and marketing at J.P. Morgan Asset Management in New York, echoes many of those sentiments. Waddell says she has seen the focus of internal communications shifting in recent years from increasing general awareness around a retirement plan to actually moving the dial on important retirement readiness metrics. These can include a plan’s average 401(k) contribution percentage, income replacement ratios and click-through rates on digital communications materials. “Obviously, retirement income is a core component of any goal of any retirement benefit, so what we do out of the gate is sit plan sponsors down and talk about their goal for generating income in the plan at the participant level,” Waddell says. “Then we identify what communications programs will enable them to plan for and pursue that success.”

Participant Profiles

J.P. Morgan encourages plan sponsors to tailor communications materials not only for general factors such as age or gender. Instead, develop a full investor profile for each plan participant that also factors in current investing behavior, asset levels and a participant’s understanding of the investment process, Waddell explains.

In the past, the development of accurate investor profiles for all participants in a large, employer-sponsored retirement plan would have been a monumental task, Waddell says. However, new technologies have radically simplified the process.

By Waddell’s account, plan sponsors that have taken advantage of J.P. Morgan’s Audience of One engagement program have seen their plan participants’ income replacement ratios grow by 35% between 2005 and this year.

“Those are the kind of figures that retirement committees get really excited about—when you can see that you’re implementing a campaign that’s actually driving the changes you want,” Waddell says.

Data Visualization

Seeing participant data clearly

The biggest developments in retirement planning communications strategies have come with evolving technology, experts say. Strategic Communications LLC, for instance, frequently engages with clients on improving employee engagement through social media and digital communication pathways. These approaches change the equation from a one-way effort by plan sponsors to a two-way conversation on retirement readiness that would be impossible through physical mail, says Linda Pophal, the firm’s owner and CEO.

Ben Acquario, of DST company Newkirk, stressed the importance of new automated reporting technologies that can compile external data from recordkeeping and custodian systems for comparison within a specific employer-sponsored plan. “We’re giving sponsors a chance to see the macro-level data,” he says. “They get to see how many of their employees are falling behind the wider averages. We have the ability now to break out each participant for a sponsor and tell them exactly what each participant has to do to close the gap.”

According to Bruce Focht, a research manager and vice president of business intelligence at J.P. Morgan, new data visualization technologies, in particular, are changing the way plan sponsors design and target communications materials.

A new visualization platform J.P. Morgan released earlier this year allows plan sponsors to review participant data that is automatically collected and presented graphically. Sponsors can interact with the data to identify trends and benchmarks on such factors as individualized rates of return and asset allocations—all broken down by age, salary range and a list of other characteristics.

“The new technologies have really given plan sponsors a chance to generate more insights into what’s happening in a plan than ever before,” Focht says. “Based on what a participant’s behavior is, we can automatically group him into a category and see how the different categories stack up in terms of the retirement outcomes.” That data, in turn, can be used directly during the planning of communications campaigns to identify what information needs to be communicated to which participants.

According to Waddell, data-tracking technologies also support another important point in internal communications: It is less about sending a message every single month and more about having a message that is relevant to an individual and comes with a follow-up plan. Take, for example, a plan sponsor that wants to encourage participants to contribute to their 401(k) accounts at the maximum company match level; it sends out a piece of messaging that highlights the benefits such behavior can have on improving retirement readiness.

In the past, that was likely the end of the story. But today’s technologies allow sponsors to determine, with very little effort, whether a participant’s investing behavior has actually changed following the message. They can then develop and send follow-up information on an individual-participant basis.

“We can now see their data instantly, and if they haven’t made a change, we can follow up with another tailored message that builds on the original,” Waddell says. “So it’s an iterative, response-based, sequential strategy that is most effective.”