How Wellthy is Your Company?
By Robert Atkinson | Project Manager, Associate
From being a niche enterprise that used to be the preserve of free-spirit practitioners, wellness is fast becoming a significant factor in corporate design. For some, the term readily references staff fitness and nutrition, mental health, air quality, and biophilia, for others, it brings up a company’s environmental credentials. While these are different aspects of wellness, what’s needed for each workplace design is a holistic approach that aligns a company’s wellness strategy and core business goals.
With McKinsey reporting in business publications that health and wellness is becoming the next trillion-dollar industry, it’s easy to understand why wellness has become a corporate concern. Furthermore, consumers, as well as employees, are now better informed about the benefits of sustainability, wellbeing, and nutrition, expanding the market for things that make people healthier, happier, and more connected to their environments. Aligned with this is an awareness of where and how people spend their time.
A London School of Economics study on work trends in the developed world concluded what we already know—that people are working longer hours under increased workloads and stress than in previous eras. This is particularly true for the most highly skilled staff. In fact, the Centre for Disease Control (CDC) concluded in a 2017 US survey that work-related stress is the leading workplace health problem and a major occupational health risk, ranking above physical inactivity and obesity.
Similarly in Europe, statistics from the UK’s Health and Safety Executive and the European Agency for Safety and Health at Work have observed that the changing world of work—from downsizing and outsourcing, to flexibility of function and skills, as well as the increased use of temporary contracts, job insecurity, the threat of AI, and poor work-life balance—creates factors that contribute to work related stress. It suggests that stress is a factor in 50 to 60 percent of all lost workdays, a huge cost in terms of both human health and impaired economic performance. Add that to the findings of a 2017 American Psychological Association (APA) workplace wellness survey that shows only 48 percent of employees believe their employers provide the resources necessary for them to meet their mental wellness requirements, and only 42 percent feel they have adequate support from their employer to manage mental stress.
Little wonder that companies are increasingly looking to counter these negative consequences through wellness programs that align with their broader HR and sustainability policies. Aimed at optimizing staffs’ physical, mental, and social well-being, wellness programs claim to deliver the added benefits of increased staff engagement and company profitability, as well as lower health care costs according to The Wall Street Journal. These are big claims. How can we gauge their effectiveness? What hard evidence is available?
For companies that invest in their employee’s physical and mental health, there are demonstrable strategic and financial benefits. But knowing your objectives for deploying a program is fundamental to understanding which investment areas to focus on. What do you want to accomplish?
Three Key Considerations When Defining Your Wellness Program
First, employee engagement is critical.
Studies indicate that under the right circumstances, employee wellness programs lead to higher employee productivity and increased happiness. But the 2018 Deloitte Global Human Capital Trends Report states that only 49% of companies are ready to meet wellbeing concerns. “More than 50 percent of survey respondents view a variety of such programs as “valuable” or “highly valuable” to employees, but big gaps remain between what employees value and what companies are delivering.” Clearly, there is work to be done. The level of employer engagement has as much to do with creating a nurturing, supportive workplace culture and allowing for individual empowerment as it does with leadership and a good communications strategy.
Take Zappo’s for example. Their success as a customer service leader has largely been attributed to their focus on employee happiness. A regular on Fortune’s list of “100 Best Companies to Work For,” for the past decade Zappo’s CEO Tony Hsieh has emphasized corporate structures that listen to employees’ needs as the basis for employee engagement and continuous improvement. Zappo’s results reflect studies that found that happiness made people around 12 percent more productive. For Zappos, this has translated into real business growth from $1.6 million in gross sales in footwear in its first year (1999) to eclipsing $1 billion today and expanding its offerings from shoes to clothing and accessories.
Senior leadership support, as demonstrated by Hsieh, is crucial to a program’s success. A 2016 work and wellbeing survey conducted by Harris Poll on behalf of the APA found widespread links between support from senior leaders and a variety of employee and organizational outcomes. More than 91 percent of workers with leadership support said they felt motivated to do their best and were satisfied with their job when they had a positive relationship with their boss and co-workers. Tellingly, those employees are also more likely to recommend their company to job seekers, with few actively seeking to leave. Employee engagement is more than a buzz word. Disengaged employees can negatively affect customer service, impact employee retention, and diminish profits; engaged employees drive innovation and move an organization forward.
Second, there is a positive correlation between engagement and better health that affect employers’ costs.
Amongst employees involved in company wellness programs, 21 percent described themselves as “actively engaged.” These employees tended to exercise more frequently and eat healthier, lowering the risk of lifestyle-related disease and associated healthcare costs. By comparison, unhealthy workers cost employers an average of $11,176 per employee in medical coverage.
A 2016 publication by the Center for Disease Control (CDC) indicates that productivity losses related to personal and family health problems cost U.S. employers $1,685 per employee per year or $225.8 billion annually. And specifically, those who are overweight with other chronic health problems miss about 450 million more days of work each year than healthy workers. The result is an estimated cost of more than $153 billion in lost productivity annually. The CDC study showed how a simple 1% annual reduction in the level of four health risks—weight, blood pressure, glucose, and cholesterol—can save between $83 to $103 yearly in medical costs per person.
Beyond preventative measures that put employee health among the top requirements of a company’ workplace strategy, wellness programs are an excellent way to let employees know they are valued. In fact, a Workplace Wellness 2017 Survey Report by the International Foundation of Employee Benefit Plans found that 75 percent of employers have offered wellness initiatives primarily to improve overall worker health and well-being. Only one in four employers said the main reason for offering wellness initiatives was to control/reduce health-related costs.
Some companies have long understood the value of a healthy workforce. The Johnson & Johnson Family of Companies introduced its worksite health promotion program in 1979. Measured against similar large companies, Johnson & Johnson experienced an average annual growth in total medical spending that was 3.7 percentage points lower. This translated to a return on investment equal to a range of $1.88—$3.92 saved for every dollar spent on the program.
For companies wanting to introduce a new program, nudging employee’s to improve their health can take a variety of forms. Making staircases and corridors more accessible to encourage movement rather than relying on elevators/lifts, ensuring that fitness trackers are freely available, offering weekly yoga classes, or installing gym equipment are real draws for social interaction and healthy competition within the office. In the US, about 70 percent of employers with wellness programs offer some form of reward to employees who participate in programs to improve their health.
A successful example of this was at BBVA, when it added Virgin Pulse to its suite of employee well-being efforts in 2010. With a range of incentives and a tailored communications strategy, the HR department led healthy initiatives through a website that simplified the experience for employees by providing every user with their own unique portal. From an initial low enrollment, participation grew as the company identified champions within their teams to promote its benefits. Now, more than 70 percent of employees are enrolled, with 74 percent of staff meeting or exceeding the recommended levels of physical activity for good health. The results can be measured against the company’s financial performance, and by 2018, the BBVA Group earned 6 billion dollars, a 51.3 percent increase over the previous year.
Third, what are the business opportunities?
Many brands that manufacture consumer goods want to be able to show a commitment to environmental and social objectives in their products either through their packaging, work conditions, or offsetting the greenhouse-gas impact of their operations. Being identified as a responsible agent of change is fundamental to counter not only negative environmental consequences but also the rising tide of greenwashing—whereby vague or unsubstantiated green credentials are used to lure new customers. It’s not hard to see why. According to a Nielsen report, 66 percent of global consumers say they’re willing to pay more for sustainable brands. But to what extent is this true in a corporate environment? Can there be an alignment between customer and corporate interests that drives innovation for sustainability in products while impacting financial performance in the short- and medium-term?
In 2015, McKinsey conducted a sustainability-assessment survey with 340 respondents from almost 40 companies. What they explored was why and how companies were addressing sustainability and to what extent they believed it could affect their companies’ bottom line. They found that nearly half the companies surveyed saw sustainability programs as a means of driving growth. The largest example of this, Unilever’s Sustainable Living Plan (USLP), looks to grow their business and create a positive social impact while separating their environmental footprint from growth. Its programs include the ambitious goals of improving the health and well-being of more than 1 billion people through its health, hygiene, and nutrition programs, reducing its environmental impact by 50 percent and enhancing the livelihoods of people in the developing world through the UN Sustainable Development Goals. However, it also has an eye on future business opportunities within these regions, with some estimates in 2017 projecting the creation of market opportunities of at least $12 trillion a year.
One example of this approach is in Unilever’s development of a brand of dishwashing liquid that uses much less water than other brands. Apart from the obvious benefit in limiting the use of precious water resources from an environmental perspective, the sale of this product is already outpacing its competitors by more than 20 percent in certain water-scarce markets.
Other brands with a consumer focus are developing similar initiatives that are equally ambitious. IKEA, with a long-term sustainability goal to be energy independent by 2020, allocated $2.5 billion globally to invest in renewable energy. A visible expression of this is the installation of more than 750,000 solar panels on its buildings across the world, alongside over 400 wind turbines. This initiative has positioned it perfectly to introduce IKEA Home Solar, a domestic photovoltaic system launched across five European markets in partnership with other suppliers. Designed to work alongside its Smart Home system to save consumers money and limit energy consumption, it allows IKEA to tangibly represent its environmental credentials while growing as the world’s largest retail furniture supplier.
But you need not be a global customer-facing brand with deep pockets to address these issues. With environmental legislation at the forefront of driving change, companies should be proactive in addressing waste management and pollution as well as energy efficiency within their own properties. Compliance is one of the most important ways that companies can mitigate risk, and it is also an issue that concerns investors. According to recent BCG/MIT data, 44 percent of investors say that they divest from companies with poor sustainability performance, while an overwhelming 75 percent of senior executives in mainstream investment firms believe that sustainability performance is materially important to their investment decisions. Starting small but soon, and scaling up as growth aligns with strategic goals is key to mitigating risk.
Finally, for the future, having a robust sustainable strategy as well as an employee wellness program enhances an employer’s brand and makes it easier to attract and retain top talent. The often-quoted 2018 Deloitte Global Human Capital Trends Report (a global survey of more than 11,000 business and HR leaders) indicates that “organizations are no longer judged only for their financial performance, or even the quality of their products or services. Rather, they are being evaluated on the basis of their impact on society at large—transforming them from business enterprises into social enterprises.”
With a new generation at work that supports strong social and environmental principles and is also the largest segment in the workplace (and growing daily), corporate behavior, and the economic and social principles that guide it, are increasingly coming under question. Within the next two years, it is expected that 50 percent of the U.S. workforce will be millennials. By 2030, the number should rise to 75 percent according to the U.S. Bureau of Labor Statistics. This is the generation that will have to bear the full brunt of automation and AI, as well as the consequences of climate change, without any of the relative financial security enjoyed by earlier generations. It’s no wonder sustainability is a major concern for millennials.
The work environment any employee joins needs to reflect not just sustainable values within the company’s culture but must address stress management and wellbeing. The design of healthy work environments has to encourage social interaction and creativity yet provide some privacy. The atmosphere should be welcoming and friendly so that even new employees feel a sense of belonging. And a requirement for flexibility to accommodate frequent changes in technology or organization changes to take advantage of new technologies goes without saying. All of these demands on the workplace materially affect a company’s productivity, profitability, viability, and ultimate success. How wellthy is your company?