“How does that translate into numbers? How do I see if our investments in wellbeing have paid off?” A pair of steely eyes meet mine through Teams. I’m on a call about employee wellbeing with a senior executive and he’s posed the question many clients hesitate to ask. But it is valid: budget constraints and competing internal priorities demand a compelling business case for employee wellbeing.
My initial thoughts circle around rational arguments, research, and Hintsa’s experience. Instead, I ask “What would you like to see – or not see – in your organisation?” This gets to the heart of the matter: key people have left due to high workload; employee scores on mental health and engagement are declining; an internal initiative on purpose has achieved little so far; and leaders see the problems but need support in addressing them. As we talk through the details, we also get closer to answering the initial question: how do we quantify the success?
Wellbeing: from a ‘perk’ to a ‘must’
In the last decade, organisations have implemented ‘healthy measures’: sports vouchers, fitness trackers, burnout counselling, quiet rooms, coaching, medical check-ups, stress resilience training, health days, step counting, ergonomics, vegetarian menus… just to name a few. Supporting wellbeing has gone from a “nice to have” to a “must have”.
The question arises, is it worth it? And how much is worth it: where do we draw the line between individual responsibility and the employer’s responsibility? The measurability of employee wellbeing is complex and there’s no one right answer. In this post, however, we attempt to outline a systematic approach to addressing it.
The business case of employee wellbeing – history and considerations
Measuring the success of health and wellbeing initiatives – or ‘The Business Case of Employee Wellbeing‘ – is not new. Already in 2010, the WHO presented a framework for a healthy workplace: considering ethics, the law, and the business case. In a 2013 report on workplace wellbeing, the World Economic Forum noted that “there is a lack of standardisation of workplace wellness metrics and methods for calculating ROI” and “the ROI of workplace wellness programmes goes beyond mere savings.”
Since then we have seen some progress:
Few companies have published the financial success of their health initiatives. For example, Johnson & Johnson started measuring the benefits of its health program “Live for Life” already two decades ago: “J&J’s leaders estimate that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent.”
In 2018 respectively 2021 the International Organization for Standardization (ISO) has launched dedicated certifications for Employee Wellbeing, e.g. on mental health.
The problem is not solved, however. And there is also the question of correlation versus causality. Do organisations that invest in health have better output? Clearly, as e.g. the J&J case shows. But the reverse might also be true: companies with an attractive health program might attract healthier employees. From a business case perspective, both drivers are relevant, but clearly different. This raises a number of considerations for measuring the success of wellbeing initiatives. We outline six critical steps below.
1. Clarify terminology and put employee ‘health’ and ‘wellbeing’ into context
The starting point is defining the nomenclature. Why? Because the multi-faceted nature of health and wellbeing may lead to different expectations and interpretations of wellbeing results. Consider the following example: A 2019 study on “Employee Wellbeing, Productivity and Firm Performance” found that “Ultimately, higher wellbeing at work is positively correlated with more business-unit level profitability”. Encouraging findings! But wait, how was ‘employee wellbeing’ defined and measured? It was based on job-specific questions from Gallup on “Employee Satisfaction” and “Employee Engagement”. The questions included appreciation, development opportunities, trusting relationships with superiors, etc. “Wellbeing” in this study was focused on important workplace-related topics such as talent development, culture and leadership – but not on individual wellbeing in a broader context.
“Health“ is clinically defined as the absence of disease. The focus is on pathogenesis: prevention of disease. The WHO defines ‘health’ more broadly: “Health is a state of complete mental, physical and social well-being, and not merely freedom from disease and infirmity“. This has led to the concept of health promotion and salutogenesis.
“Wellbeing“ has a broader connotation. For example, the American Psychological Association (APA) defines it as “a state of happiness and contentment, with low levels of distress, overall good physical and mental health and outlook, or good quality of life“. In a business context, it often includes – as we saw above – also derived workplace-related HR topics.
So, what is ‘health’ and ‘wellbeing’ in the context of your organisation?
Clarity about the nomenclature sets the basis for any strategic employee health and wellbeing measurement. It allows a clear separation from – or respectively – an integration into any other HR activities and results.
2. Define what you want to achieve – and consequently measure
Then answer: What drives your business and what does ‘better wellbeing’ mean for you? Typically, the outcomes can be measured as:
- Reduced costs (or reduced rate of cost increases), e.g. less absenteeism, fewer cases of disability, lower health insurance cost
- Higher productivity and work engagement
- Better product quality or customer service
- More talent attraction and retention
For an industrial organisation, the main driver might be medical cost savings through fewer sick days. For a professional services firm the crucial driver might be engagement and performance of a more creative workforce. This helps you prioritise what to measure: If sick days are driven by musculoskeletal issues, then we need to measure total sick days by reason, and the take-up and effectiveness of interventions. If creativity is ultimately desired, then we might need to measure workload, engagement, and turnover intent – but also wellbeing behaviors, e.g. how well mental recovery is built into the rhythm of work.
3. Go from ROI to VOI
From a company’s point of view, investments must pay off over time. A tried-and-tested financial indicator is the Return on Investment (ROI). In the context of health and wellbeing programs, the ROI is usually calculated as the ratio of healthcare cost savings to the cost of the intervention, for example, reduced insurance premiums or sick pay.
ROI is a great measure to use for cost-driven programmes that are easily measured – sick days, accidents, insurance premiums. It is more difficult for productivity and talent driven programmes – the ‘creativity index’ of an advertising campaign is hard to pin down, and the link to a single intervention is elusive at best (unless you have enough teams and patience to setup a control group to measure against).
Value on Investment (VOI) is an alternative way of thinking. It considers not only direct monetary aspects but broader value.
The Health Enhancement Research Organization (HERO) suggests a ‘Health and Wellbeing Best Practices Scorecard’ with different areas to measure VOI, including qualitative and quantitative, subjective and objective as well as leading (progress) and lagging (impact) measures.
We highlight especially the last one – leading and lagging indicators – and build on the framework by adding a further dimension: external and internal effects.
4. Include both leading and lagging indicators
We can measure the results of our activities (lagging indicators) and the activities that should lead to a desired result (leading indicators).
Impact – a lagging indicator: Ultimately, we want to know the (hopefully) positive results: improvement in KPIs, cost savings, productivity changes, observation of healthy behaviours and leadership skills, how many percent of coaching clients reached their goal, improvements in engagement or retention, employee brand perception, etc. These need to be in place, but are not enough.
Process – a leading indicator: In large health and wellbeing programmes progress measurements are crucial: How many employees participated in the global health day? What is the participation rate in stress management workshops? How satisfied were participants with a training? What have we learned works and does not? Leading indicators tell us if we are on-track towards our goals, and can help us adjust the approach along the way. In that sense, they are often equally important than impact measures.
5. Balance internal and external measures
We need to consider and balance inward-looking and outward-looking measures.
Inward-looking measures: The inward-looking view is obvious: how are employees, managers and the organisation as a whole doing? You need three levels:
- Individuals: Every employer wants measurably happy, healthy, loyal, engaged, creative employees. Metrics can be healthy behavioural changes, development of medical biomarkers, personal assessment of stress levels, sick leave, etc.
- Leaders: Are leaders self-aware, authentic, and able to create an environment where their teams are empowered to engage in healthy behaviours? Metrics can include employee surveys on empathy and psychological safety, or ‘leading wellbeing’ behaviours.
- The organisation: Is there a culture of care? Is there a healthy climate where employees and managers feel trusted to balance personal needs and wellbeing with the needs of the organisation?
Outward-looking measures: In times characterised by “the great resignation” this view is becoming increasingly important. Measures may include:
- Employer Branding: Employer branding can be measured in many ways, but specifically for wellbeing there are also health awards, like the KOOP National Health Award. Global organisations also often monitor their ratings on open sites like Glassdoor, where employees can leave anonymous ratings on their employers.
- Sustainability: Sustainability efforts are mostly focused on environmental issues, but also includes human resources. Forward-looking companies include this in their ESG reporting, linking it to the United Nations Sustainability Goal number 3: “Good Health and Well-being“.
- Investor Relations: Ultimately, investment in employee wellbeing may be reflected in capital market valuations. A 2015 study suggested a positive correlation between stock market performance and investments in employee health: the stock value of Koop Health Award recipients outperformed the S&P 500 Index over the period studied (2000-2014) – 325% versus 105% increase in value.
6. “Garbage in, garbage out”: ensure data quality
Good measurability starts with good data:
- What? What types of measures support your objectives? Consider the paragraphs above and match your objectives with the right measures
- Who? Which target groups do you consider? E.g. all executives, all managers, specific business units with high burnout rates, or perhaps all employees?
- From where? What data is readily available? E.g., sick days, insurance premiums, enrolment, employee surveys, NPS. What data can you start gathering, e.g. aggregated data from a health app, aggregated results of coaching programmes
- How often? What is a suitable frequency of data collection? E.g. bi-annual employee engagement, a 90-day step count campaign, monthly check-ins on stress, etc.
- Compared to what? How can the data be compared, e.g., with employees who do not participate in an intervention (control group), with external benchmarks, with the previous year’s or quarter’s result, etc.
- Interdependencies: To what extent might these KPIs be influenced by other circumstances unrelated to the wellbeing programme, e.g. change in workload or job role, manager relationship, personal circumstances or world events such as a global pandemic.
A need for a systematic approach
History and current considerations show that there is a business case of employee wellbeing. Though, given the complexity of humans’ wellbeing and its interrelation to workplace related topics a systematic approach is needed to measure impact of employee wellbeing initiatives.
Six critical steps allow for high quality measurement results:
Clarity about the nomenclature; definition of how success looks like; a focus on VOI instead of ROI; inclusion of leading and lagging indicators; balancing of inward- versus outward-looking measures; and ensurance of high data quality.
If you want to hear more about the business case of employee wellbeing and how to measure success; or if you plan to launch wellbeing services with measurable success in your organisation and would like to know more about the Hintsa methodology, please contact us.