Life presents us with a whole series of health-related choices. Finish that tube of Pringles, or have a healthy snack? Stay up bingeing on Netflix, or get a full night’s sleep? Take the car to work, or brave the bike?
On top of these personal decisions, business leaders are faced with another health-related ‘choice’ — should they spend on staff health or wellbeing, or focus on the company bottom line?
You’ll have noticed the inverted commas around the word choice. That’s because investing in healthier, happier staff is one of those rare have-your-cake-and-eat-it scenarios. You don’t have to choose.
The changing cost of people.
In fact, we would argue that the whole idea of either having happier, healthier staff or having a great balance sheet is based on assumptions from a different era.
It all comes down to the shifting costs of human capital. Just a few decades ago, a typical company’s value lay mainly in its tangible assets, such as machinery or stock. The workforce itself was usually cheap to train and easy to replace. From a coldly financial point of view, there was little point in investing in employee health and wellbeing.
That situation has well and truly disappeared. One analysis looked at how much tangible assets contribute to a company’s market value. For top US companies, this has fallen from 83% in 1975 to just 13% in 2015. Their intangible assets have grown correspondingly, and a huge chunk of these is human capital.
In short, people have become very, very expensive. The groan-inducing cliché that our most valuable asset is our people is a literal financial truth. And it follows that employee health and wellbeing now has a direct, substantial effect on a company’s finances.
Health, wellbeing and retention.
Staff retention is a great example of how health and wellbeing investments can contribute to a company’s bottom line.
Every employer knows that losing a worker can be eye-wateringly expensive. There are the costs associated with finding a replacement (plus any inducements), training, and mentoring. Then there’s lost productivity as the new person gets up to speed. No wonder that the total cost of losing an employee is estimated at between 90% and 200% of the lost employee’s salary. For UK employees, an average replacement cost of £30k is commonly cited.
Not surprisingly, health and wellbeing are intimately connected with retention. One survey found that 57% of employees were more likely to stay longer if they felt their employer valued their health and wellness. That figure is only likely to rise as the proportion of job-hopping millennials in the workforce increases.
Adding it all up
Of course, the business case for better health and wellbeing goes well beyond staff retention. An emerging body of evidence links improved employee health and wellbeing with improved absenteeism, presenteeism, engagement and productivity. Each of these can have significant financial impacts: absenteeism and presenteeism alone cost companies, on average, 33 days per staff member per year.
Putting a precise figure on all this is notoriously difficult, but that hasn’t stopped experts from trying. One well-respected study looked at just one factor impacting health and wellbeing – the employee’s physical environment. Drawing on extensive research, the authors estimate that an optimised physical environment could increase productivity by 1 – 9%, increase retention by 5%, and reduce absenteeism by 30%. Taken together, their results suggest a 6.29% rise in annual profit for their model company.
Although this is a projection for a specific scenario, we think it’s a credible illustration of how just one health and wellbeing intervention can benefit a business.
Full steam ahead with the wellbeing programme?
So, the financial upsides of optimising employee wellbeing are, in our view, uncontroversial. In a modern business, employee wellbeing and company financial health aren’t in competition, but go together like steak and red wine.
But what’s less straightforward is how to optimise health and wellbeing. With an Aladdin’s cave of programmes available, how can business leaders choose one that genuinely delivers? A poorly targeted programme that results in minimal improvements pushes the wellbeing balance sheet in the wrong direction.
As usual, the answer is old-fashioned due diligence. At ART Health, we advise that any owner or manager considering a wellbeing programme does plenty of digging into what their potential providers are offering. As we’ve argued before, the most successful — and in the long-term, most cost-effective — are those based on rigorous collection of employees’ own data.
ART Health Solutions is a wellbeing consultancy, providing effective, science-based wellbeing recommendations. Our bespoke solutions are generated by gathering data directly from the organisation and its employees. Having proven our methods working with large, multinational corporations, we’re excited to bring our expertise to small and medium-size UK businesses.
To learn how we can benefit your company, please contact our friendly team.