The Business Case for Well-Being

Many organizations think that employee well-being is, well, none of their business. And there's some sense to that -- well-being does seem ill-defined, private, and ultimately unmanageable. According to Tom Rath, leader of Gallup's workplace research and leadership consulting practice, and Jim Harter, Gallup's chief scientist for workplace management and well-being, it's not. But well-being is gravely misunderstood.

Rath, Harter, and teams of Gallup researchers spent years studying well-being to find out what it is and how to increase it. They surveyed people in more than 150 countries; partnered with leading economists, psychologists, sociologists, and physicians; and conducted and studied in-depth well-being research. Ultimately, as Rath and Harter wrote in their New York Times and Wall Street Journal bestseller Wellbeing: The Five Essential Elements -- well-being is the fulfillment of five distinct factors. (See sidebar "The Five Essential Elements of Well-Being.")

Rath and Harter discovered these core dimensions to be "universal and interconnected elements of well-being, or how we think about and experience our lives." When those factors are fully realized, people thrive -- and so do businesses.

In the U.S., the average sick day costs a business about $348 in lost productivity, according to the Bureau of Labor Statistics and a study published in 2003 in the Journal of Occupational and Environmental Medicine. When we adjust this number because people are sick on weekends and non-working days and because some work does get done on sick days, the cost is still approximately $200 per sick day. But people with high levels of well-being get sick less often; as a result, they cost their organizations less.

Among the most "suffering" employees -- those with the lowest well-being scores -- the annual per-person cost of lost productivity due to sick days is $28,800. For workers who are at the midpoint of the "struggling" zone, the cost is $6,168. But for employees with the highest levels of well-being -- those with the highest scores in the "thriving" category -- the cost of lost productivity is only $840 a year.

Another recent study compared the disease burden -- or the incidence of high blood pressure, high cholesterol, heart disease, back pain, diabetes, depression/anxiety, and sleep apnea/insomnia -- of 662 people with varying levels of well-being. For each disease, Gallup entered the average annual cost into its database -- and after adjusting for demographic differences -- found that respondents in the thriving category averaged $4,929 per person annually in disease burden cost versus $6,763 a year for respondents in the struggling and suffering categories. That's a 37% per-person cost differential. In other words, for an organization with 1,000 workers, thriving employees cost their employers $1.8 million less every year.

And if that weren't startling enough, Gallup tracked changes in disease burden from 2008 to 2009 for the same group of 662 people. Gallup studied the relationship between well-being and recent changes in disease burden and found that the average annual new disease burden cost for people who are thriving is $723, compared with $1,488 for those who are struggling or suffering.

Clearly, it's in an organization's best interest to keep its employees healthy. But well-being is comprised of five interrelated elements. Pushing one dimension of well-being at the expense of the other elements won't improve well-being very much. To reap the most benefits from thriving employees, organizations should pay attention to all five elements.

Career and engagement

Career Well-Being is a natural place to begin -- and it might be the best place to start too. "Most people don't realize how closely intertwined their Career Well-Being is with their overall evaluation of their life and daily experiences," says Harter. "Our research suggests that this may be the single most important element of one's well-being."

Career Well-Being doesn't necessarily refer to paid work. Rath and Harter note that stay-at-home parents and devoted volunteers can have high levels of Career Well-Being. But to be engaging, work does have to provide "interest and purpose and the chance to use your strengths regularly," as Harter says. "We spend more of our waking hours at work than anywhere else, so work really needs to provide that outlet." That's why, Rath and Harter suggest, it's a seminal element of well-being. And that might also be why they found a strong connection between employee engagement and well-being. Engaged employees have a sense of purpose and get to do what they do best every day. (See "Feedback for Real" in the "See Also" area on this page.)

Whether or not engaged employees have high levels of well-being -- though it's realistic to expect that engagement naturally promotes well-being -- these workers are an organization's best asset. Workgroups with many engaged employees realize substantially higher levels of customer engagement, productivity, and profitability compared to teams with less engaged employees. And engaged teams have less absenteeism, lower turnover, fewer accidents on the job, less theft or unaccounted for merchandise, and fewer quality defects.

Engaged employees who are thriving in Career Well-Being are twice as likely as actively disengaged employees to be thriving in their lives overall. In contrast, people in disengaged workgroups are nearly twice as likely to be diagnosed with depression, have higher stress levels, and are at greater risk for heart disease. And perhaps not coincidentally, engaged employees are 21% more likely than actively disengaged employees to get involved in a wellness program offered by their employers. This relationship between engagement at work and involvement in wellness programs is consistent across body mass index (BMI) groups (normal, overweight, and obese) and people with and without disease burden. In other words, even among people who are classified as obese and those who have pre-existing disease burden, those with higher Career Well-Being are more likely to become involved in wellness programs that are offered.

There are many ways organizations can improve Career Well-Being. Leaders and managers can help employees connect their work to a higher purpose and focus on employee strengths, which can reduce active disengagement. Even simple but powerful motivational techniques, such as recognition for goal achievement, go a long way toward enhancing Career Well-Being.

Socializing is good for business

While considering the performance boost inherent in higher Career Well-Being, employers should also think about employees' Social Well-Being. Even though socializing may sound antithetical to workplace productivity, Gallup found that socializing at work is actually good for business. "Among those with thriving Social Well-Being," says Rath, "49% were thriving in their careers." Moreover, Gallup has found that employees who say they have a best friend at work are seven times more likely to be engaged in their work. Those who don't feel that way have a mere 1 in 12 chance of being engaged. Yet only 5% of workers strongly agree that their organization helps them build stronger personal relationships. (See graphic "The Benefits of the Water Cooler.")

Nevertheless, it can still be galling for managers to watch employees chatting around the coffee pot when they should be working. The research, however, indicates that office chit-chat serves a productive purpose. "We cite an interesting finding in the book that came from a team at MIT," says Harter. "They studied people who were just walking around different office settings and found that the social cohesiveness created by conversations that weren't at all work-related actually helped boost workplace productivity." (See "News Flash: Workplace Socializing Is Productive" in the "See Also" area on this page.)

Furthermore, Gallup's research shows that to have a thriving day, people need six hours of social time. Few organizations would condone six hours of surfing Facebook on the company dime, but employers can promote Social Well-Being and organizational goals through social activities -- such as mentoring programs and development opportunities -- that can produce important business results.

The money issue

It's logical to assume that organizations are central to employees' Financial Well-Being -- employers issue paychecks, after all, and people rely on those paychecks to meet their needs. But Financial Well-Being is more about financial security than monetary compensation. In fact, Gallup's studies show that financial security has nearly three times the impact of income alone on employees' overall well-being.

That's why pay itself doesn't necessarily correlate to engagement or well-being -- and neither do pay raises. However, if employees don't "perceive their pay to be fair and equitable," says Rath, "it can lead to disengagement and cause them to leave when a better job comes along." There's also the impact of financial worries on employees' mental and physical health. Low Financial Well-Being can lead to stress, anxiety, insomnia, headaches, and depression. And those are costly problems.

Ironically, most organizations don't seem to promote their employees' Financial Well-Being very well. Only 6% of employees strongly agree that their organization does things to help them manage their finances more effectively. But business might be uniquely -- perhaps perfectly -- situated to improve employees' Financial Well-Being. Financial security is integral to well-being, and most organizations offer investment, profit sharing, or savings opportunities.

One way organizations can improve their employees' Financial Well-Being is to make the default setting of savings programs opt-out rather than opt-in. For example, most employees won't participate in a retirement plan if they have to consciously opt in. But when the default is for employees to be automatically enrolled, more than 80% participate in the retirement plan.

Furthermore, according to Rath and Harter, spending money on experiences or on others does more to increase people's Financial Well-Being than spending on things or on themselves. "With experiences, you get a lot of value. There's the anticipation of the experience beforehand, for months beforehand sometimes," says Rath. "Then you get the actual experience itself. And then you usually have fond memories of the experience afterward." For that reason, it might be wise to encourage workers to use their vacation time for actual vacations.

Physical effects

Clearly, doing things like encouraging vacations offers psychic benefits. But Physical Well-Being matters too. As insurance costs have increased, many organizations have made efforts toward improving health in the workplace, and that's wise. Those efforts will be even more effective, however, if the organization reinforces healthy behaviors by making healthy choices easy and unhealthy choices hard. Gallup found that only 9% of U.S. employees say it is very easy to find healthy food at their workplace, and fewer than 5% say their organizations offer financial incentives for leading a healthier lifestyle.

While many leaders focus on the direct costs associated with paying for their employees' medical care -- such as prescription drugs, doctor visits, hospital stays, and insurance premiums -- employees with low Physical Well-Being could be taking an even larger economic toll. When someone with struggling Physical Well-Being shows up for work, it is highly unlikely that he or she has the energy to achieve as much as an employee with thriving Physical Well-Being can. And employees with high Physical Well-Being simply have more energy and get more done in less time. They are also more likely to be in a good mood, thus boosting the engagement of their colleagues and customers.

Offering incentives for lowered cholesterol and providing more vegetables in the cafeteria is a good place to start. But subtler changes can help too -- and can be as simple as designing workspace layouts so people have to walk a little farther every day, sponsoring workgroup athletic events, or hiring a chef for a monthly demonstration of healthy cooking. Organizations can't mandate health, but they can direct employees to changes that outlast the workday.

Community outreach

Organizations can also direct employees to look outward into the larger community. That's because having employees who are thriving in Community Well-Being improves an organization's image and increases its positive impact on the community. On the other hand, when organizations run their business in isolation, they miss out on potential gains in Community Well-Being for their employees and organization.

This aspect of well-being may be the most familiar to business: Organizational leaders have a long history of service in their communities, and many organizations actively support local philanthropic projects -- and sometimes their employees' chosen charities as well. When organizations invest in employees, employees contribute more to their communities. In one study, Gallup found that people in the most engaged workgroups (those in the top quartile of Gallup's employee engagement database) were 56% more likely to give money to the community, and they gave 2.6 times more money than people on less engaged teams (those in the bottom quartile).

Corporate support for community initiatives can result in positive customer relations and recruiting outcomes. Such behaviors can also improve employee well-being by creating the opportunity for social connections and local involvement.

Improving well-being

Some organizations offer health promotion programs. Others actively encourage giving back to the community through donating time or money. And a few take a hand in encouraging employee Financial Well-Being. But for the most part, the crucial activities that promote well-being are left to employees.

Because employee well-being has such a large impact on organizational well-being, businesses would be wise to measure and manage it. Fortunately, many organizations do have programs in place that affect well-being. But the well-being factor -- if it's recognized at all -- isn't leveraged as well as it could be. Businesses that manage well-being consciously, consistently, and with an eye toward improving key outcomes are more likely to have a profound influence on organizational and employee well-being.