SWOT Analysis: WageWorks, Inc

Abstract

Corporate planning incorporates a number of tactics in its ultimate goal of growth, development, and profitability; the SWOT analysis is one of those tactics. Assessing a combination of the variables strengths, weaknesses, opportunities, threats, often lead to a deeper understanding and awareness of the company and their position in the applicable market. Sustainability is an important consideration to examine, as well as the corporation/organization’s niche. SWOT analysis is a formidable tool in assessing market position and sustainability. The American management consultant Albert Humphrey is credited, at least in part, with developing this analytical tool during a research project he worked on as the prestigious Stanford University in the 1960’s and 1970’s (Thakur 2010).

Keywords: Strengths, Weaknesses, Opportunities, Threats, Management, Crisis Management, Organizational Planning, Change Management

WageWorks, Inc.

The SWOT analysis takes into consideration a company’s strengths, weaknesses, opportunities and threats. Identifying key variables in the organization, both externally and internally, is an invaluable tool for corporate planning and understanding. SWOT analysis is also an integral part of crisis planning and preventative crisis management. The elements of strengths, weaknesses, opportunities and threats are not only useful when studied individually; when they are studied in various combinations a plethora of information reveals itself. For example in the pairing strengths and opportunities competitive advantages present themselves. Understanding competitive advantages means finding keys to organization successes that will help that company stand apart from the competition. Common strategy pairs that are often seen include SO (strengths-opportunities) Strategies, WO (weaknesses-opportunities) Strategies, ST (strengths-threats) Strategies, and WT (weaknesses-threats) Strategies (Dyson 2004).

Background on WageWorks, Inc.

WageWorks, founded in the year 2000, is a corporation that administers consumer-directed benefits (CDBs) for many major companies, and even entire states, across the United States (WageWorks 2018). These benefits reduce their employee’s taxable income and potentially provide the employees with substantial tax savings which is usually assessed the corresponding tax year. CDBs are also beneficial for the employers who profit from the corporate tax advantages that US tax laws provide. Consumer directed benefits can take the form of health savings accounts (HSAs), flexible spending accounts (FSA’s), and commuter benefits, just to name a few. Simply put, these programs allow for a pre-tax deduction to be taken from employees’ payrolls. They claim the funds, usually within the same taxable year or within a given grace period, by providing proof of eligible expenses in the form of a claim. WageWorks then pays out the pre-tax deductions via check or direct deposit to the participants’ personal bank account, or sometimes directly to a service provider at the employee’s request.

S: Strengths

WageWorks, Inc. is a management services industry leader (FFU 2018). WageWorks effectively uses SWOT analyses at the highest levels to coordinate their multiple departments to work toward the common goal of company betterment. Strength is an internal characteristic to be evaluated, similar to weakness. Pairing strengths with opportunities gives leaders in the company insight to possible strategies to continue profit and growth while strength and threat comparisons make leaders aware of the potential obstacles they may face and better prepare them for eventuality that will require action. The central drive of SWOT is to ascertain the strategies that a corporation can use to take advantage of external opportunities, counter threats, and eliminate flaws (Dress 2018).

Customer Service

WageWorks possesses many strengths as an industry leader. The dedicated customer service team makes customer relations a priority. WageWorks’ creates custom contracts made to suit their clients’ individual needs (Jones 2018). These custom contracts also ensure that performance standards and guarantees (PS&Gs) retain brand equity. Service levels are consistently met and penalties for mot meeting standards are rare outside of the notoriously busy time of Open Enrollment. Open Enrollment is the time, usually once a year, that employees have the opportunity to elect benefits and/or make changes to existing benefits. Call volume is generally very high during this time and answering 80 percent of calls within 30 seconds or less, for example, can be very challenging with thousands of customers calling in during these times (Jones 2018).

Technological Integrations

WageWorks also boasts a sophisticated website with various “self-serve” options available for participants. This does reduce the need, in many cases, for callers to need to dial into Customer Service call centers. However, there will always be some participants who would rather speak to a live representative as compared to navigating the website regardless of how user friendly it may be. Technology continues to be an essential part of the corporate strategic plan. During critical crisis planning and management the website would be a primary point of contact both internally (the WageWorks Intranet) and externally (the public company website).

Mobile Devices and Apps

Other recent technological developments include the mobile device applications. This is closely related to the software updates, but specific to the handheld app specifically designed for mobile devices. What this means to participants is that they can file a claim with substantially less effort if they take an image of their document and submit it electronically. As with the callers that wish to speak to a live person, there will always be participants that choose to mail in their claims as opposed to using any sort of technology. However, a growing number of participants are taking advantage of the ability to submit their claims electronically. During high volume times, for example the last day of Open Enrollment, the system can become too overloaded. This is a potential crisis for WageWorks’ Customer Service department. There are plans set in place to ensure that, should such an event occur, that clients are still serviced properly. For example, rejection letters give an additional 15 days to resubmit even after the final deadline as a counter measure against these types of events.

Each year more modifications are made to facilitate the self-serve aspect of the applications and online environment. Customer input on ease of access and desired additions influences the WageWorks IT team greatly. Customer Service representatives serve as liaisons between the decision makers in WageWorks executive management team and the customers themselves. The management of the Customer Service and Claims departments has a huge impact on the company because these are the departments that most often have contact with the employees themselves. If Customer Service can effectively interpret the needs of the customers and communicate those needs with executives who have the authority to make needed changes, the company is likely to continue to grow and expand.

Superior Learning and Development

WageWorks University

WageWorks takes implementation of new projects and return on investments extremely seriously. It is no surprise that the team of implementation mangers are exceptionally successful at executing new plans which generate more revenue for the company. WageWorks University is a learning portal offering electronic classes on anything related in any way to business and/or CDBs. Employees set goals yearly that primarily include meeting some sort of metric for the department, but does have a personal component built in as well. Employees may select as many classes as they would like as part of their yearly goals. This type of learning environment provides WageWorks with an effective way to distribute new training to a large group of employees. In a crisis the entire company could be briefed on a process or procedure, if necessary.

Required learning

There are mandatory classes to take each year as a WageWorks employee. HIPAA compliance training and security training is mandatory each year as a way to avoid potential fines that could be catastrophic if they occur in high volumes. Other classes are required at times such as sexual harassment training. Depending on the employee’s duties they are likely to refer to WageWorks University at any point in the year for necessary education. The classes are usually video and audio with quizzes built in to ensure the material is understood. The length of the classes varies as greatly as the subject matter. It is necessary for corporations to properly train their employees and WageWorks University facilitates learning for crisis planning and management flawlessly.

Mergers and Acquisitions

WageWorks, Inc. has acquired a number of companies in the past few year, and will likely continue this strategy. In 2011 a large percentage of Fringe Benefits Management Company was acquired before WageWorks, Inc. even become publicly traded (Jones 2018). Acquisitions provide a renewed vision and company flow which can be both a strength and/or a weakness. If management can properly pluck the aspects of the acquisition that work and integrate them with the present corporate model the overall strategy will be improved. On the other hand, with too any systems and processes improperly integrated the whole organizational strategy can quickly become a convoluted mess. Too many systems contributing to the corporation also makes crisis management more challenging.

W: Weaknesses

WageWorks, Inc. product line is somewhat small. Consumer directed benefits which include pre-tax benefits are limited. The relatively small range of products leave room for competition to wedge into their market (Jones 2018). While technology is a strength, in as much as the website interface for users. It is also somewhat of a weakness internally. The utilization of dated internal software is a weakness for a variety of reasons. Firstly, dated software lends itself to malicious vulnerability that could be avoided with newer software, updates, and patches. Secondly, employee morale may suffer somewhat when having to use ten year old software when competitors are using state of the art software. Dated software is not the only problem, WageWorks has multiple CRM (Customer Relationship Management) platforms that only specific groups have access to. Even within the same department access to the systems needed are limited. With so many acquisitions there are limitations on the licensing and certifications that can be dealt out to employees (Jones 2018).

Marketing?

Over the last several years the marketing strategy has left employees and customers alike wondering about the inconsistency in the way that WageWorks projects its image. The WageWorks name/brand itself is strong, but the marketing imagery/logos seem to be under constant changes. These changes subject participants to an unsettling sense that WageWorks is not stable. The confidence of the company is questioned when its image is changed from year to year. Perhaps this is due to the influx of acquisitions and influence decision makers but onlookers must wonder if WageWorks is still trying to accurately find its image or not.

Costly Violations

When WageWorks is hired by a new client, a contract is generated that is specific to the needs of the client and outlines what is expected from WageWorks as an administrator. These contracts are subject laws pertaining to contract enforcement. There are many ways that WageWorks may be subject to fine or penalties. Many of the consumer-directed benefits deal with health information which is protected under the Health Portability and Accountability Act of 1996, better known as HIPAA. The consequences for HIPAA violations can be very costly, with penalties costing as much as $50,000 per violation if not corrected within the proper time frame (AMA 2018). Needless to say that an employee is not permitted to make many, if any, mistakes when dealing with client’s personal health information. WageWorks goes to great lengths to ensure their employees are properly educated on the law and how to avoid these costly errors.

In addition to costly HIPAA violation fines, WageWorks may be subject to penalties related to obligatory performance standards and guarantees in their contracts, as aforementioned. So, for example, in Customer Service, the requirement may be to answer 80 percent of calls in 30 seconds or less with a specified penalty if these terms are not met, usually in the thousands of dollars, evaluated quarterly. The penalties for PS&Gs are client specific but are in the range of thousands to tens of thousands of dollars depending on the client.

O: Opportunities

Combining strengths with good timing and/or positioning can create opportunities. One important aspect of planning is allowing the proper time for action to present itself. Markets are in state of perpetual change and having the vision to recognize an opportunity can be an invaluable skill or an individual or an organization.

Consumer directed benefits deal heavily in pre-tax benefits which means that changes in tax policy can be an opportunity or a threat for companies like WageWorks. Since WageWorks is a well-established player in the pre-tax arena it is more likely that they will be at an advantage when tax changes come about, rather than a disadvantage.

In the United States, all full time employees are required to have social security deductions/credits, unemployment insurance, worker’s compensation insurance, paid at least minimum wage, and overtime pay at a rate of time and a half (Morgan 2018). WageWorks absolutely abides by these requirement. In addition to these, there are voluntary benefits which are the basis of most of WageWork’s business. In addition to administering pre-tax accounts like the flexible spending account, WageWorks is often hired to administer the deduction of voluntary benefits, both pre-tax and post-tax benefits.

Politics and Government

The political arena determines what is considered allowable for pre-tax and what must be deducted only after the salary has been taxed. In other words a pre-tax deduction will reduce the overall taxable income, and a post- tax deduction will not affect taxable wages or taxes owed. Life insurance and Roth 401-K accounts are examples of post-tax deductions while flexible spending accounts and health savings accounts are pre-tax. IRS Section 125 defines rules that allow employers to offer what is referred to as “cafeteria style” benefits plans to their employees. The imagery of employees passing through a cafeteria and choosing such benefits as health insurance, dental insurance, life insurance etc. for their tray is not lost on the Internal Revenue Service. After all who doesn’t like having a little choice in their benefits? The catch comes with not properly understanding the overwhelming amount of material involved with seemingly anything IRS in nature. Companies would rather hire an administrator like WageWorks which specializes in these things, rather than learn the tedious material themselves. WageWorks is happy to oblige!

T: Threats

When discussing the threats to the company, one may be quick to survey potential external factors first. While many potential threats do come from outside the company some of the strongest threats can start internally. Poor management and/or organization of a company can lead to serious problems.

Corruption

WageWorks was in the news earlier this year with scandalous headlines related to high level financial reporting issues. There are still high level changes being made within the company. Ensuring that corruption is kept to as minimal a level as possible is a continued concern for the political arena in general, but is also applicable to WageWorks specifically. Recently, WageWorks presented in the news with the CEO, CFO, and General Counsel resigning due to so called “material weaknesses” in their financial reporting (Armental 2018). Essentially, WageWorks showed inflated earnings for 2016 and 2017 plan years (Peterson 2018). These types of errors can tarnish a company’s reputation and make investors nervous.

Material weaknesses in financial reporting are admittedly suspicious but not necessarily corruption in the sense that people think about such things as insider trading or bribery. Still, WageWorks must be careful not to tarnish its image in the eyes of the American people. Arguably the company caught mistakes in the reporting and are effectively reviewing and updating their reports. A company that boasts of key values that include accountability, respect, and customer centricity must tread lightly when these types of errors present themselves.

Tax Policy

The threat of changes in health care on the federal level can threaten to completely obliterate the pre-tax products. Tax policies, controlled by the US government Office of Tax Policy, have to do with what taxes to impose, the tax rate, and who will be taxed. This office implements policies, reviews Internal Revenue Code, and much more. The policies having to do with what is permissible to be considered a pre-tax deduction, or not, are of primary concern for WageWorks. For example, while Botox injections for cosmetic reasons is not considered a tax-favored expense, if the Botox is medically necessary (as it is for the treatment of migraines under a doctor’s supervision) the expense would be allowable (FSAFEDS 2018). These sort of gray areas require fine distinctions and loopholes. A letter of medical necessity, or prescription, can make an otherwise unallowable expenses considerable. If an expense is found to be ineligible after the item has already been purchased on the account card, if it is not substituted with an eligible transaction, the amount of that transaction would be reclassified as taxable income after the plan year ends.

The federal government determines many factors having to do with pre-tax benefits. One factor that changes every year, for example, is the mileage rate that a participant can claim with their eligible expenses. This rate went from $.17 per mile in 2017 to $.18 per mile this in 2018 (FSAFEDS 2018). While mileage rate has a small impact on claims overall, it is a factor that potential customers take into account about claims which is out of WageWorks’ control. Another limitation imposed by the federal government would be the end age of eligibility for dependent care accounts. Child care expenses, up to $5000.00 per year for those who file married/jointly are tax favored but only children 12 and under are eligible (FSAFEDS 2018). The dependent care account does make allowances for disabled care (with a letter of medical need) or elder care. For the most part, dependent care FSAs are largely used for child care expenses but are available for the aforementioned reasons as well (IRS 2018). Many participants argue that children over the age of 12 still need to be cared for while the parent is working (FSAFEDS 2018). Apparently the federal government disagrees. Participants that are looking for a change in the laws are asked to petition their congress man.

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