Date: 20th: Feb: 2012

To: Zachary Evans, Vice President, Operations

From: Joe Mirola; claims manager.

Subject: Recommendation for Keeping the Fitness Center Open

With references to our conversations about the closure of the Rocky Mountains mutual fitness centre, these are my analyses and recommendations.

Benefits of the fitness centre to the company

The fitness centre is part of the company’s culture and principles when it comes to leveraging our benefits to new talents in the field. Most of our competitors have the same benefits and compensation packages that Rocky Mountains Mutual has. However, the only competitive advantage that Rocky Mountains Mutual has which it can use to leverage positively its skill acquisition is the fitness centre. Most of the talents that the company acquires are young and upwardly mobile and would prefer going to the fitness centre. In addition, the productivity of the claims department is improving, and the company can only attribute this to enthusiasm and the health of the employees.

User acceptance

While it is agreeable that the number of users of the fitness centre does not justify such expenses, it is advisable to assess the rate of acceptance of the fitness centre. No company can gain that the acceptance rate whether it is about technology or fitness, but the company has registered 36% of its employees in three years, this translates to 72% give or take employees in 6 years time. This means that, if the health and fitness centre is eliminated, the company will lose its critical mass.

Cost cutting

The company has had relatively less number of medical cases since it established the fitness centre. This can be attributed partly to the company’s welfare program and fitness centre. However, the general argument is that with the nature of our work and location of the company’s offices, the fitness centre is the only rescue from monotony, boredom and burnout. The company can realize an increase save on the medical expenses. From the initial calculation, we realized that there is a large disparity in the cost benefits analysis of the fitness centre. Moreover, that the fitness centre is not breaking eve. It is also imperative to consider the fact that the company is just three years into its operations at the new offices. Despite of this, company has registered an enormous reduction I the medial expenses by $81000, [per annum ], this is also most 8.1% of the cost of the cost centre, meaning the fitness centre will have paid back in 8n years time.

Long-term consideration

The fitness centre may not be used by many employees of the rocky mountain mutual’s, but considering the rate of user acceptance and the newly implemented well program, it is likely that the management will have to either look for an alternative fitness centre for the current members who frequent the fitness centre or phase resistance from the fitness group. Seeking an alternative fitness centre might cont then companies a lot of money. I would like to request you to work out the make or buy cost analysis and make a fair decision.

Bottom line

While it is not my call to make judgment, I would like you to make both qualitative and qualitative analysis of the benefits of the fitness centre to the company. You will realize that eliminating one cost driver within the company, may results into loss of enthusiasm, which is already established. I hope my humble request shall meet your kindest consideration.