Until relatively recently employee well-being has often been viewed as a subfield of health and safety that is primarily concerned with minimising company health care costs and liabilities. Effective well-being strategies can certainly fulfil these objectives, but they also have the potential make businesses much more competitive, and therefore much more profitable.
It is an obvious truism that the success of any business is ultimately reliant on the people working within that business. After all, that is why companies invest so much time, money and effort in developing the skills and potential of their employees. We all know from our own experience that healthy and happy people tend to work more effectively and this means that employee health and well-being can have the potential to boost productivity. However, a series of large-scale scientific studies have now shown that doing the right things to increase employee well-being can be a very powerful and strategic business investment that can make any company more competitive and profitable.
A recent study in New Zealand found that for every dollar invested in staff well-being there was a return of between five and 12 dollars over the course of a year. Many of the measures taken to increase well-being were relatively simple and included things like ensuring plenty of natural lighting, making work stations comfortable, and maintaining good air quality, along with support for physical activity and general fitness. Encouraging employees to be more physically active was directly linked with increases in productivity, reductions in staff absenteeism, and decreases in employee turnover which resulted in lower overheads and higher profits. However, introducing an effective well-being strategy can have much more dramatic impacts on profitability and overall competitiveness than this.
In what has now become viewed as a classic study a team of US researchers compared the stock market performance of companies which had won the C. Everett Koop National Health Award for “outstanding worksite health promotion and improvement programs” with the average performance of other companies listed in the S&P 500 Index. The researchers looked at the performance of 26 companies which had won the award and assessed the long-term impact of their corporate well-being initiatives by examining the period between 2000 and 2014 and comparing the growth in the value of the award winning companies’ shares with the average growth in share values over the same period. Over the fourteen years the average share price of companies in the S&P 500 index rose by an impressive 105%, but the share price of companies which had won the C. Everett Koop National Health Award for outstanding well-being initiatives rose by an amazing 325%. The share price of any company captures all of the historical information available about that company and also reflects how the financial markets believe that company will perform in the future. This means the share price summarises past and projected future performance, so it is the best possible measure of any company’s competitiveness and profitability. This study suggests that companies with effective well-being strategies are three times more competitive than the ‘average’ company, and that this competitive edge is sustained over years.
Now, you might quite reasonably point out that these phenomenal gains in competitiveness might only apply to those companies with the very best employee well-being strategies, and that such high
quality well-being initiatives might be beyond the resources of the typical company. However, there is evidence that even modest improvements in employee well-being can lead to significant improvements in competitiveness. A team at the Said Business School, Oxford University, carried out a huge piece of research which reviewed the results from 339 separate studies of the relationship between well-being and company competitiveness. The studies which were reviewed looked at the well-being of over 1.8 million employees working across 49 different industries in 230 separate organisations and companies, and examined the relationship between well-being and the performance of 82,248 distinct business units. The researchers examined the impact of employee well-being across businesses operating in the large market segments of finance, retail, services and manufacturing, and in every type of business they found that higher well-being at work was positively associated with higher levels of business-unit profitability.
The strongest relationship between profitability and well-being was found among the manufacturing companies, suggesting that employee well-being accounts for approximately 20% of profitability. The research also looked at how well-being might impact other areas of business activity and found that alongside profitability, higher levels of employee well-being were associated with higher levels of productivity and customer loyalty, and lower levels of staff turnover.
So, the scientific evidence is clear: higher levels of workforce well-being are associated with higher levels of business competitiveness and profitability, and this relationship is true for all types and sizes of business. It seems that relatively modest investments in employee well-being can bring big returns and that developing a culture which promotes staff well-being may be a key element of what makes the most successful companies so profitable. If you want to take your company to the next level, maybe you should put implementing an effective well-being strategy at the top of your to-do list.
By Prof Hew Gill, Associate Provost, Sunway University
