We know there is a link between employee health, productivity and bottom line results. The problem lies in convincing others that it exists and that it is a viable investment for your workplace.
A recent review of the cost effectiveness of a selection of U.S. workplace health promotion initiatives showed a positive return on investment values up to $8.81 per dollar spent[1].
WatsonWyatt reports that companies with the most effective health and productivity programs experienced[2]:
The Buffet & Company National Wellness Survey reports that while 90.3% of employers are offering health promotion or wellness initiatives, fewer than 33% have a budget, only 15% have an operating plan, and less than 30% are evaluating[3]. Clearly, most businesses are not treating health and wellness as a strategic imperative. Nor are they adopting best practice, which undermines their efficacy.
Under these less-than-ideal circumstances, it would be difficult to capture a positive ROI, particularly if the person or department trying to prove the value of workplace health doesn’t have a financial or research background, nor the funds to hire a relevant consultant.
Even when ROI measurements are made, the targets may not be meaningful to the decision-makers in the workplace. For example, the Integrated Benefits Institute (IBI) and CFO Research Services/CFO Publishing conducted a national survey of senior financial executives[4] and discovered that most of them didn’t see a strong link between benefits programs and financial performance drivers because benefits programs generally define success in a different way. The good news is that senior financial executives do see a connection between productivity and financial outcomes, so the objective is to demonstrate how changes in benefits can affect productivity. But productivity has many measures and benefit programs along with other employee health indicators are only one component of productivity. A senior financial executive may view things like technology and equipment as more productive. (Read more for suggestions on how to position health and productivity initiatives in terms a Chief Financial Officer can understand.)
The other problem is the time in which ROI can be actualized. Unrealistic expectations concerning financial return-on-investment are common. Cost containment or reductions evolve slowly over a period of time-- perhaps five or ten years[5]. However, benefits such as employee participation and satisfaction are generally realized in the short-term and provide the foundation for financial return-on-investment down the road. More typically, results for workplace health programs include:
Few months-- positive changes in workplace usually seen (e.g. employees engaging in healthy activities at work).
Within one year-- front-line managers see evidence of increased job satisfaction, commitment to work and improved productivity among workers. An increase in customer satisfaction should also be seen.
Three or more years-- quantitative improvements in health-related costs.
A recent study[6] conducted among Canadian senior general managers and human resource managers in the manufacturing sector underscores the importance of demonstrating ROI. By far the most important driver to invest in workplace health promotion programs, for both groups of managers, is their belief that such programs would impact productivity, morale, absenteeism and employee turnover. The managers identified these outcomes as having much greater influence than either any sense of moral responsibility to employees’ well-being or their actual ability to increase spending on health promotion programs. Moreover, the managers reported that no social expectations exist within their industry that organizations should invest in such programs.
It’s clear – the more we can link health promotion program outcomes to cost-savings, the more likely managers are to support such initiatives.
Here are some tools to assist you in dealing with ROI of your healthy workplace initiatives in your workplace:
-
The ROI Calculator
PROS: It’s free, simple to use, based on scientific journals and provides great visuals you can save as a PDF, email to a colleague or print. It will project how much your costs will increase if you do nothing, and project your savings on employee costs if you do implement healthy workplace initiatives—and quickly. All you need to enter is the cost of your benefits program, the number of employees that receive benefits, the percentage by which your benefits have been increasing, and the rates of obesity and smoking. For Hamilton, smoking is 22% and obesity is 35%.
- CONS: This tool doesn’t capture absenteeism or productivity, and may not apply to every company in every situation.
- NOTE: Bill Tufts, Employee Benefits Specialist with WB Benefits Solutions, states that despite the fact that the ROI Calculator is a tool developed in the US, the basic concepts would apply in terms of cost savings here in Canada, “In the US the additional costs would be for doctors and hospitals. However, a lot of the costs associated with smoking and obesity would be drug or therapy related. Many of these costs would come onto a benefits plan in Canada.”
-
Health and Productivity Toolkit
PROS: Looks at health-related productivity elements like absenteeism, presenteeism, employee turnover, and replacement costs. Provides a basic understanding of health and productivity management and is designed to help you develop a strategy and business case. The toolkit is online because it will be updated with new research and evidence.
- CONS: Since the one-line toolkit is managed by the American College of Occupational and Environmental Medicine, it may not be specific to Canadian workplaces. Additionally, the toolkit requires an annual fee ($189 for the first year, $89 for subsequent years), and it will take time to read the content and apply it to your workplace.
Business Case Resources
- PROS: Provides a few examples of typical outcomes other companies have realized. If you can’t calculate ROI, point to other companies that already have.
- CONS: Won’t be specific to your company’s situation.
Last updated March 3, 2011
[3] Buffet, E. The Role of Prevention. Canadian Healthcare Manager, December 2006.
[5] Sloan, R., Gruman, J., & Allegrante, J. Investing in Employee Health: A Guide to Effective Health Promotion in the Workplace. San Franciso, CA (USA): Jossey-Bass Publishers, 1987.
[6] Downey, A.M. and Sharp, D.J. (2007). Why do managers allocate resources to workplace health promotion programmes in countries with national health coverage? Health Promotion International, 22(2): 102-111).