Why workplace wellness makes commercial sense
A recent study of almost 32,000 workers across all UK industries has revealed that employees lose, on average, the equivalent of 30 days of productive time annually due to sick days, or underperformance in the office as a result of ill-health.
This is equivalent to each worker losing six working weeks of productive time annually.
In the manufacturing industry, if a manufacturing plant had downtime and failures equivalent to 6 weeks of non-production in a year, you can be sure that there would be a major focus on how to get it back to running at its specified efficiency. Downtime cannot be recovered. it's like empty airline seats or empty hotel rooms. They need to be used to generate revenue.
Well, according to a study conducted by VitalityHealth, a UK -based consulting company, this is pretty much what happens in the UK’s workforce. About 6 weeks a year are lost to either absenteeism or to presenteeism, which is when an employee should not be at work but does so, and ends up operating below par because of ill health, whether it be physical or mental.
Incorporating a wellbeing program of some sort would seem an obvious choice for companies to get their employees back to feeling well and working efficiently.
But another study by the consulting group Buck, shows that only 26 per cent of UK businesses ,versus the international average of 42 per cent, have a wellbeing programme in place,
That is despite the fact that fully 97 percent of employers recognise that wellbeing programmes could help employees manage stress, depression, anxiety and work-life balance issues.
One area that companies always look at is the cost of developing a wellness program. Despite well documented examples of other companies benefitting from such programmes, there seems to be a continued reticence to invest in a program where the return is not “ initially measurable."
So, we’ve developed a short and simple wellness management program tool to allow managers of companies considering the implementation of a wellness program to better evaluate the cost – benefit ratio for wellness.
The tool is very straightforward and addresses the two principle issues around business performance- reducing unwanted costs and improving sales and margins. It’s not much different than a plant manager in a factory developing a program to get their equipment back to specified performance.
How to use the tool.
It is simple. There are only 9 variables that are needed.
Company size- the number of employees. The entire program is based around employee participation.
The company annual turnover in your currency of choice
The company operating margin %
The total annual payroll
The estimated number of hours per month allocated to wellness management by the company. This could be a one day per week for someone assigned to manage the program.
The target adoption rate of the wellness program. While 100 per cent will be the target the realistic uptake may be lower. This variable permits you to conduct a sensitivity analysis.
The target reduction in absenteeism that the company would like to achieve. It would be a reasonable target to consider that absenteeism would be reduced by at least 50 per cent
The current level of lost productivity. Lost productively caused by the effects of presenteeism can easily be 10 times more than impact of absenteeism. With the average UK company losing about 40 days a year per employee to lost productivity, a positive impact on productivity can have a significant effect on business. A good start for this ratio will be 85 per cent as this is the equivalent of 40 days per annum.
The target increase in productivity that the company would like to achieve in %. If company is working at, for example, 85 per cent efficiency, the model will establish the potential revenue increase that would result in improving the non-productive time. It would not be unreasonable to consider that a 25% improvement in potential incremental revenue could be achieved. This number can be changed to demonstrate sensitivity.
Incremental revenues are always very valuable because they are in addition to budgeted revenue to which all fixed costs have already been allocated. Incremental revenues therefore generate much higher margins. In this case the model computes that the incremental margin is four times the company base margin percentage. This will have a significant effect on business performance.
Use the tool to establish various scenarios and to develop a more focused understanding of how wellness program can be quantified and evaluated objectively.
The use of advanced analytics to measure the beneficial effects on a wellness program are another set of tools that permit a measured and informed business decision to be made. These tools will be the subject of the next issue of making the case for a wellness program.