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WORKBOOK — THE CORPORATE EXECUTIVE

Chapter V.04 · Care as Infrastructure

For the person who has to put this in a board paper. Applied to a P&L, a balance sheet and a business unit. The language of the firm without apology, and the places where your own numbers already support the move.

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THE PREMISE, STATED COMMERCIALLY

Your firm is already paying for care. It is paying in the separation rate of people in their thirties, in the ramp cost of their replacements, in the absence line, in the roles that take five months to fill, and in the senior women who go part-time two years before they would have been promoted. None of it is labelled, which is the only reason it has never been managed.

This workbook does not ask you to believe anything about families. It asks you to do four pieces of arithmetic your finance function can check:

1. What care-related attrition and absence cost this firm last year.
2. What a quality place costs, and what share of it your own saving justifies.
3. Where that contribution sits on the balance sheet and in the covenant test.
4. What the firm gets that is not on the P&L, and how to say so without weakening the paper.

The number that makes the case is not large and it does not need to be. It needs to be verified, and it needs to be yours.

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PART ONE — DISCOVERY

Days 1–30: find it in your own numbers

Exercise 1.1 — The care exposure line (one week, with HR and finance)

Three fields, on the systems you already have:

• Is this person a primary carer, and for whom — dependent under five, dependent over eighteen requiring care, or both. Voluntary, self-declared, never inferred.
• Separation rate for that population against the firm's baseline.
• Absence days for that population against the firm's baseline.

Run it for the last three years, not one. You are looking for a differential, and a differential needs a series.

What you will probably find, because most firms do: the separation differential is concentrated in a single band — roughly ages 28 to 40 — and in a small number of roles that are expensive to fill. That concentration is the whole commercial case, and it is invisible in the headline turnover number.

Exercise 1.2 — Cost it at your own figures (3 days)

  cost of a separation  =  recruitment + ramp + lost productivity of the team
                           around the vacancy

The published benchmark is 21.4 percent of annual salary as the median cost of replacing an employee. Use your own figure if you have one and the benchmark if you do not, and say which in the paper. On a US$70,000 salary, a 6-point reduction in the annual separation rate is worth US$899 per affected employee per year. Two avoided absence days at a US$269 day rate — US$70,000 ÷ 260 — is US$538.

  verified employer saving  =  899 + 538  =  US$1,437 per affected employee/year

That number is small, unarguable, and it is the entire foundation of everything that follows. Do not inflate it. A board paper that claims a saving the finance function cannot reproduce loses the next three proposals as well as this one.

Exercise 1.3 — Find the five places it is already working (two weeks)

Somewhere in this firm, care is already being accommodated well, informally, by a manager who decided to. Find five instances. Ask the appreciative question, in these words, in a room:

"Think of a time somebody here was able to keep working through a care responsibility when it would have been easy for them to leave. What made that possible?"

Collect the conditions, not the stories. Conditions are what a policy is made of.

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PART TWO — THE ARITHMETIC

Days 31–45: the numbers that go in the paper

Exercise 2.1 — Specify the place, not the building (one day)

The unit is a place, for a year, at a specification. Everything else follows from the staffing line because the staffing line is the cost:

  ratio 1:6, degree-qualified, loaded US$52,000  ->  US$8,667 staff per child
  staff at 65% of total cost                     ->  US$13,333 per place

Sensitivity, so you know what a cheaper bid is actually selling:

  1:10 at US$38,000  ->  US$3,800 per child
  1:12 at US$34,000  ->  US$2,833 per child
  factor between the top and the bottom           3.06 ×

Any bid materially below your specification is a bid to change the ratio. Price it as that, in the paper, in one sentence.

Exercise 2.2 — The three-payer split (one day)

Your firm funds 10.8 percent of a place. That is the number in the paper. It is defensible because it is exactly what the firm gets back and not a cent more, and a contribution capped at its own verified saving is the only kind that survives a cost programme.

Exercise 2.3 — The public partner's arithmetic, so you can speak to it (half a day)

You will be in a room with a local authority or a health board. Know their number before they do.

  fixed recovery per place, regardless of behaviour     US$2,673
  recovery per induced maternal entrant                 US$35,562
  break-even  =  (7,096 − 2,673) ÷ 35,562  =  0.1244 jobs per place

One induced entrant per 8.0 places and their share returns itself. The conservative estimate is 0.078; the one measured programme realised 0.350. The public partner's own case is stronger than they think it is, and you will be the person who tells them.

Exercise 2.4 — The multiplier, for the regional argument (half a day)

If you are negotiating with a public body, this is the sentence that moves them: the same money in care creates 1.73× the jobs it creates in construction in the US total-effect modelling, 2.7× in the later UK work and 2.5× in the Turkish study — and the direct decomposition shows why:

                 labour share   import leak   compensation   direct jobs/US$1m
  care                  0.75          0.02        38,000              19.34
  construction          0.45          0.10        68,000               5.96
  manufacturing         0.20          0.28        82,000               1.76

Quote the total ratio, never the direct one, and be ready to explain the gap: construction pulls a long domestic supply chain, care pulls almost none.

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PART THREE — DESIGN

Days 46–60: the instrument and the accounting

Exercise 3.1 — Structure it as an availability payment (one week, with legal)

You are not building a nursery. You are buying available compliant places from an operator, monthly in arrears, with a deduction regime.

• Deduction at risk: 8 percent of the availability payment — US$1,067 per place per year — against ratio, staff qualification and staff turnover.
• The formula is published and has no discretion in it. Discretion is where quality standards go to die, and your counterparty knows it.
• Step-in rights on quality failure, not only on payment failure. In this asset class the thing that fails first is the ratio.
• Term ten years, specification fixed for the full term, fee cap indexed.

Exercise 3.2 — Settle the accounting before you draft (one meeting)

Have this conversation with your auditors early and in these words.

Where you buy places from an operator you do not control, the availability payment is a service contract in operating expense. It is not a lease: you direct neither the asset nor the staff. Confirm it against IFRS 16 and its US counterpart on the control tests, in writing, before heads of terms.

Where you build and operate on site, it is a right-of-use asset and a lease liability, and the depreciation schedule should be written against the facility's regenerated life rather than a default fit-out life. This is a conversation about useful economic life, which your auditors have every year.

Covenant test. An operating-expense contribution of US$1,437 per affected employee moves EBITDA by a figure most firms cannot see at two decimal places. Model it anyway, in the paper, so nobody has to ask.

Exercise 3.3 — The consortium (three weeks)

Do not do this alone. Find two other anchor employers in the same labour market — a hospital, a university, a large public employer. You share a workforce, you lose the same people for the same reason, and between you a setting fills without a demand forecast.

The consortium is also the risk transfer. One employer contracting one operator carries concentration risk on both sides. Three employers contracting one operator carries almost none, and the operator will price that.

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PART FOUR — DESTINY AND DELIGHT

Days 61–90: make it hold, and sign

Exercise 4.1 — Get it in the reporting pack (one meeting)

The care exposure line — carers, differential separation rate, differential absence — goes into the standing monthly pack beside headcount. Anything reviewed monthly persists; anything reviewed by exception does not. This is worth more than any presentation you will give about it.

Exercise 4.2 — Put the ratio somewhere it can be defended (one day)

Write into the agreement that the specification is fixed for the term and that any variation requires the same signature as the original. The ratio is the first thing a bad year attacks and it is the only input the evidence says carries the effect. Whoever holds that signature is the programme's real owner.

Exercise 4.3 — Measure the induced employment (from year two)

Agree in advance, with the public partner, how induced maternal employment will be measured, by whom, and on what date it is published. Publish it whether it is good or not. A number nobody publishes is a number the next administration assumes, and they will assume the low end.

Exercise 4.4 — The paper (one day)

One page to the person who controls the next allocation. Not the board deck, not the town hall.

  BASELINE      carer population, separation differential, absence differential
  INTERVENTION  N places at US$13,333; firm's share US$1,437 each
  RETURN        verified saving, at the firm's own cost-of-separation figure
  RISK          8% of the availability payment at risk against the specification
  THE NUMBER    firm's share ≤ firm's verified saving — the inequality holds
  AT SCALE      what this implies at ten times the places

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THE FAILURE MODES, NAMED

So you can see them coming

The places expand faster than the workforce. There is no way to staff rapid expansion at ratio, so the ratio gives, and the effect goes with it. Rate-limit expansion to the training pipeline, in the contract, explicitly.

The saving is assumed rather than verified. If the separation differential was never measured before the intervention, the result can be argued away by anybody who wants to. Baseline first, signed by finance, before deployment.

The contribution becomes a benefit. The moment this is presented as a wellbeing perk it is priced as discretionary spend and it dies in the first cost programme. It is a contribution against a verified saving. Say it in that order, every time.

It is evaluated on take-up. Places filled is an input. Separation differential, absence differential and staff turnover at the setting are the outputs. Only one of the four is easy to collect, and it is the one that tells you nothing.

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THE NINETY DAYS ON ONE PAGE

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BOARD PAPER TEMPLATE

Proposal. The firm contributes US$1,437 per affected employee per year toward N childcare places procured through an anchor consortium, under a ten-year availability agreement with 8 percent of the payment at risk against a fixed quality specification.

Basis. The contribution equals the firm's own verified saving from a measured reduction of 6 points in the separation rate among parents of under-fives at a replacement cost of 21.4 percent of salary, plus 2 avoided absence days. The firm does not fund above its verified saving.

Accounting. Operating expense under a service contract; the control tests have been confirmed in writing with the auditors. Covenant impact modelled and immaterial.

Risk. Quality failure is mitigated by formulaic deduction and step-in rights. Counterparty concentration is mitigated by the consortium structure. Expansion is rate-limited to the operator's training pipeline.

What is not in this paper. The child-development return and the regional employment effect are real, are cited in the appendix, and are not claimed as benefits to this firm. The proposal clears on the firm's own numbers alone, which is why it is in front of you.

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APPRECIATIVE QUESTIONS FOR YOUR LEADERSHIP TEAM

1. When has this firm kept someone through a care responsibility who could easily have left? What did we do, and who arranged it?
2. Which of our hardest-to-fill roles are held by people in the care-exposed band, and what would it be worth to lose one fewer a year?
3. If the care exposure line were in the monthly pack, what would we do differently in the first quarter we saw it?
4. Which two other employers in our labour market lose the same people we do, and what could we commission together?
5. What ratio would we be willing to put money at risk against, and who would sign the deduction formula?
6. Who would defend the specification in a bad year, and what do they need from us now so that they can?