How personal well-being directly affects a company's bottom line
Companies that ignore their employees' well-being are losing money. Here's one big example: Employees with high well-being have 41% lower health-related costs compared with employees who have lower well-being. In a firm that has 10,000 employees, this difference amounts to nearly $30 million.
The healthcare costs of a 60-year-old with high well-being are lower than those for a 30-year-old with low well-being -- which is alarming.
But the cost of healthcare is only one area that should concern business leaders. Well-being encompasses five distinct elements -- not just Physical Well-Being, but also Career, Social, Financial, and Community Well-Being. All these elements have an impact on a company's bottom line.
In the following interview, the two experts who coauthored Wellbeing: The Five Essential Elements -- Tom Rath, who leads Gallup's workplace research and leadership consulting practice, and Jim Harter, Ph.D., Gallup's chief scientist for workplace management and well-being -- show how well-being affects business performance.
Gallup Business Journal: Why is employee well-being relevant to executives?
Tom Rath: Executives must place a priority on well-being if they want to attract the right people, keep their best people, and drive their company's financial performance.
How does well-being affect the bottom line?
Rath: Something I've heard repeatedly is that during the toughest periods of the recent financial crisis, people would spend 10 or 20 hours a month worrying and stressing about their finances while they were at work. If you tried to quantify all the productivity that organizations lost because of how stressed out people were about their personal finances, I think you would arrive at a pretty astounding number.
Jim Harter, Ph.D.: Well-being affects a number of different financial outcomes beyond what we have understood over the years through employee engagement. Well-being reflects the whole person. The whole person comes to work, not just the worker. So how you manage that person affects key outcomes like new disease burden, sick days, and obesity, which have direct implications on annual health-related costs.
We've also discovered that there are differences based on a person's level of well-being -- whether they are thriving, struggling, or suffering. Inevitably, that will affect insurance costs for everyone. So what each employee does affects everybody else.
Rath: Well-being also affects turnover, productivity, and accidents. People who have thriving well-being have a 35% lower turnover rate than those who are struggling; in a 10,000-person company, this represents $19.5 million. If you think about that in the United States in particular, where our healthcare system is essentially built by and paid for by large employers, employee well-being is very much an employer's issue.
Most mid-size to large employers are self-insured, meaning they bear the burden of those costs. If I have a colleague down the hall who is going out to take a smoke break every 30 minutes and bringing donuts in every morning, I may not be the one inhaling the cigarette smoke or eating the donut, but cigarettes and bad food have just as much impact on my healthcare costs as his.
So a focus on well-being helps employers reduce healthcare costs?
Rath: I think maybe the biggest opportunity for decreasing healthcare costs in the United States overall is well-being in the workplace. It may be a really quick way to turn the tide on the epidemics of obesity, diabetes, and heart disease because of the potential of the big social networks that are organizations and employers.
Dr. Harter: Overall well-being relates to illness, which is associated with lower productivity and missed work. We've found that the healthcare costs of a 60-year-old with high well-being are lower than those for a 30-year-old with low well-being -- which is alarming when you think about it.
But people rarely make difficult life-altering changes, like achieving a significant weight loss, because it will save someone else money.
Rath: No, but they might if they have a support network. Let's say I go out on my own and try to lose weight with no support from a peer group or an employer or from a group like Weight Watchers or a Jenny Craig program. I'm not that likely to stick with the program three, six, or 12 months down the line. But if I go to a program like that and I'm assigned a random group of people to work with in trying to take off weight, my chances of sticking with it increase dramatically.
But the best condition is when you embark on some type of change -- whether you're trying to manage your finances better, whether you're trying to lose weight, or whether you're trying to get more involved in the community -- with an existing peer group or social network, such as coworkers. We're already starting to see this change occur when companies have conversations among local work teams about boosting well-being, being more active, and what they can do for the community.
Dr. Harter: And companies have an opportunity to have an impact on multiple elements, which is the key to what Tom is saying. When you have an impact on multiple elements simultaneously -- not only Physical Well-Being, for example, but Physical Well-Being combined with Career or Social Well-Being -- then your chances of improving the trend on healthcare costs increase dramatically. These support networks become reinforcing mechanisms in our workplaces and in our social lives that keep us on the right track.
If companies take care of the whole person, they build more loyalty over time.
The Five Essential Elements of Well-Being
For more than 50 years, Gallup scientists have been exploring the demands of a life well-lived. More recently, in partnership with leading economists, psychologists, and other acclaimed scientists, Gallup has uncovered the common elements of well-being that transcend countries and cultures. This research revealed the universal elements of well-being that differentiate a thriving life from one spent suffering. They represent five broad categories that are essential to most people:
So do all the aspects of well-being support one another? If you can reinforce one, do you have a better opportunity of supporting the others?
Dr. Harter: Yes, the elements of well-being reinforce one another. If you try to do things in a linear or an isolated way -- by focusing on an exercise program or focusing on a diet -- we all know what happens. You start on your goal with all the right intentions, but your interest drops off after a while and you lose your incentive. If you see people at work or at a community outreach meeting who know your goals and intentions, it provides another reminder or source of motivation to keep up your Physical Well-Being.
If you get physically healthier, are you more likely to become financially healthy too? Or have greater well-being in other areas?
Rath: Having fewer unhealthy days and, in turn, more days when you have the energy to get things done is probably the global constant through which businesses and individuals can think about the quantifiable upside of increasing well-being. We know from our earliest research that on a scale of 1 to 100, for every 10 points you increase your overall well-being score, you cut your number of unhealthy days in half. If your score goes from 70 to 80 or from 80 to 90, even if you're already thriving, your overall well-being can still get a lot better if you work on it across all five dimensions.
We found that a 5-point increase in well-being on the same scale was associated with a 6% decline in the probability of being classified as obese. If you improve well-being by 10 or more points, you realize an additional 9% lower rate of new disease compared with those whose well-being dropped by 10 points or more.
Are many companies working on well-being? Is this becoming more common?
Dr. Harter: Many companies have some type of employee health risk or wellness program in place. Companies are starting to do that because they are faced with such an insurmountable challenge on healthcare costs. But organizations that are approaching well-being more broadly and thinking about it more holistically -- beyond the physical health component -- that's in its infancy right now.
Is the economy holding these efforts back? Are companies waiting for things to improve before they put money or energy into employee well-being?
Dr. Harter: If so, that's a bad idea. If companies take care of the whole person, they build more loyalty over time, and that affects their brand in many different ways. The people with the highest levels of well-being are the ones who are more likely to be loyal to their company. The people with the lowest levels -- the ones who are struggling or suffering -- are more likely to say, "If the economy changes, I'll switch employers."
What that also means is that if people feel like they're being held hostage by the company, they're not doing everything they could now to help the organization improve. They're not making the best decisions for the employer; they're basically waiting it out. That's not good for a company or a person.
-- Interviewed by Jennifer Robison