Business of Well-being

Beyond Healthcare Costs: Investments in Wellness as Source of Business Value

Human resources and, more specifically, benefits departments, have traditionally been viewed as organizational centers responsible for managing benefits costs. Now, there is increasing recognition that strategic investment in health and well-being can have a meaningful impact on not only healthcare costs, but also workforce performance and the company bottom line.


Until the last decade, the organizational perception of the business impact of healthcare expenditures was effectively limited to the potential for lower healthcare costs. Within the past 15 years, health-related absence and "presenteeism" (at work, but not fully productive) have been recognized as additional sources of health-related business expenses.


Interestingly, while many health management programs have the potential to reduce this lost productivity, this contribution to cost savings hasn't generally been acknowledged by organizational leadership. As a result, employers have continued to focus on healthcare cost containment as the primary and, sometimes, sole outcome as a basis for evaluating health-related programs.


Several reasons may be accountable for this observation. Perhaps, most importantly, many employers don't have measurement or tracking systems to record work-related absence and productivity. Presenteeism is not a standard organizational measure, and has limitations relative to the time period for meaningful employee recall of at-work productivity.


Additionally, increasing numbers of employers have implemented paid time-off programs that challenge attempts to quantify health-related reasons for employee absence. Lastly, despite a growing understanding of the significance of health-related absence and presenteeism, effective translation of data into actionable, business-relevant, financial information for the C-suite continues to be a challenge.

Changing Times

In the past few years, interest in the business value of workforce health and well-being has grown substantially. A cost-based approach to employer benefit management has not been effective, prompting employers to rethink approaches. If employers accept a healthier workforce is likely to be more productive, then improved workforce productivity with the potential for greater business profitability is reasonable to postulate.


Accordingly, if employers refocus efforts toward improving workforce health and well-being, then, perhaps, these investments in organizational human capital can lead to favorable business benefits. Let's take a step back and address the concept of well-being, a broad term encompassing a number of dimensions including physical, emotional, social, and financial well-being.


Impairments in any of these dimensions can lead to declines in on-the-job performance. For example, employees in great health, but with major financial concerns, will likely be preoccupied with financial issues and less attentive to work.


In fact, research indicates individuals may lose as much as 30 percent of work capability - or 1 days -and-a-half each week - due to financial distractions. Employers that offer programs to meaningfully address workforce well-being improve the likelihood that workers will be less occupied with health and financial concerns and be able to competently perform assigned tasks.


Not surprisingly, research from Healthways has shown that higher well-being scores are associated with a higher manager rating of employee performance, providing support for this intuitive relationship. Further research is underway to analyze in greater detail this compelling correlation.


Employees having low levels of well-being may be experiencing issues related to financial stress, health-related concerns, relationship issues, or workplace issues. Effective attention to and management of these sources of stress can help individuals to feel better and lead to less distractions at work and enhanced work performance.


Expanded employer attention to these impactful individual "symptoms" - going beyond the traditional and narrow focus on biometric values - will likely be positively received by employees. From this perspective, employers value financial incentives that achieve biometric targets. The greatest employee well-being priorities may not include physical health.


Rather, health may emerge as an employee priority only following effective attention to other employee well-being issues.If personal well-being is associated with individual performance, then it seems reasonable to assume that aggregate or workforce-level well-being is associated with workforce performance and, therefore, business performance.


There are many assumption that confound this rather simplistic view, not the least of which are the prevailing economic conditions and the market need for the product or service that the employer provides.

Human Capital as Business Investment

When businesses invest in physical capital, the general approach is to determine if the incremental revenue generated exceeds the cost of that investment by a meaningful amount. If so, and working capital is available, a business may well proceed with its investment. Yet, a paradox exists when investing in workforce human capital.


Employers seem to focus more on managing the expense of that human capital investment, rather than the incremental business revenue growth that the investment can generate. Why should investments in human capital be evaluated any differently than other business investments? Arguably, it can be difficult -- if not challenging -- to quantify the business value of these investments, but it does make sense to think beyond the associated cost implications.


After all, an organization's human capital is one of the few business assets that likely increases in value.An organizational shift to view human capital as a business asset - and investment focus - requires more than an expanded measurement approach.


Effective management of workforce health and well-being also requires a clear understanding on how organizational policies and practices impact workforce well-being. For example, a punitive attendance policy, a lack of a performance-based rewards system, or a rigid shift rotation schedule can each adversely impact workforce well-being and limit benefits from other initiatives. Failure to address these issues in a well-being strategy will likely yield less than desirable results.

The Opportunity

Human resources personnel have an opportunity to change the c-suite dialogue by showing how the organization's investments in workforce human capital may favorably impact employee performance. This can shift the discussion from the perception of human resources as a cost and compliance center to a strategic partner to enhance business performance.


For many employers, many of the necessary data elements are likely already available to highlight the relationships between workforce well-being and performance. Most human resources personnel have some level of quantitative performance evaluation for the workforce, and many also have either health risk assessment scores or risk scores from medical claims data.


In support, health risk assessment companies in increasing numbers are expanding offerings to include individual well-being questions. Integration of these datasets can be merged to better understand links between individual health/well-being risk and manager performance evaluation.


Employers can also link reports to business performance data. Every organization collects some type of performance data including quality metrics, customer satisfaction, revenue, or other variables. Human resources personnel can identify which of these are perceived as important by the C-suite, and generate reports to link health/well-being with these business measures.


The results are likely to cast an entirely new light on the business value of employer investments in human workforce capital. But this may not be easy. A 2012 Economist survey of 240 CEOs found managing benefits costs is one of the primary responsibilities that CEOs expect from human resources departments.


In order for the transition for CEOs and the C-suite to appreciate HR as a strategic business partner to occur, objective data linking individual health and well-being to business performance will be necessary. Implications of these steps are certainly not trivial. Employers have an opportunity to better understand the well-being issues within their workforce.


With an understanding of these concerns along with a sense of business impact, human resources personnel can transform thinking to view investments in workforce health and well-being as a business strategy that can ultimately lead to improved company performance. Instead of viewing health benefits as a top-line expense, employers can transform approaches to recognize workforce health and well-being as an important contributor to the company bottom line.

About the Author

Bruce Sherman, M.D., FCCP, FACOEM serves as Medical Director with the Ohio-based Employers Health Coalition, where he brings health management and value-based purchasing strategies to member employer members, and leads the analytics strategy for the Coalition's health data warehouse.

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