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Show Me the Money: Why a Healthy Culture Matters

There has been growing interest in the topic of a healthy work culture and we had a previous blog post that discussed the importance of influencing (nudging) others to participate in wellness as part of building a healthy culture. In addition, our fourth champion training on “Gaining Support” also discussed the importance of influencing decision-makers to support the wellness program.  From these previous ideas, it is clear that leadership support is not only important to the success of a wellness program, both support AND wellness make a difference in financial firm performance.  Indeed, in the “Gaining Support” training we discussed return on investment and gave you some tools for calculating such a return or at least getting educated on what ROI means.

The Designed Wellness program is interested in learning lessons from other firms who have financially benefitted from investing in a healthy workplace. We believe that these lessons can apply to even the smaller engineering firm. Indeed, research on entrepreneurial success of small firms suggest that investing in human capital (e.g., employee training, involving employees in decisions) relates to firm success. If you are a champion in an engineering firm who is trying to convince your leaders that a healthy work culture matters…. you may need look no further than this BLOG!

Wellness Culture Now Linked to Stock Value

Just last week a new study was published showing that a “culture of health” across nearly 30 different companies was positively associated with stock performance[1].  Since 1996, 29 companies have achieved distinction as recipients of the Corporate Health Achievement Award (CHAA) from the American Council of Occupational and Environmental Medicine (ACOEM).  Award winners are selected according to stringent criteria, with Leadership and Management receiving strong weighting along with the presence of health and safety programs. The study compared different CHAA portfolios to the S&P 500 for 13 annual periods. Regardless of the portfolio used (e.g., different weighting), all CHAA portfolios outperformed the S&P 500 in the majority of the 13 annual periods included in the analysis. For example, in the most basic portfolio, an initial $10,000 investment grew to $19,404.12, a cumulative return of 94.04% for the research portfolio. During the same period, the S&P 500 had a cumulative return of −0.77% and the final investment value of $9923.14

Many Studies Show Wellness Adds Value

This is just one study. There are many others. In 2010, a systematic review of over 20 research studies  (meta-analysis) found that medical and pharmacy costs fall by about $3.27 and absenteeism costs fall by about $2.73 for every $1 invested in wellness.  This results in a return on investment of about $6 to for every $1 invested, finding similar to other reviews. Some believe that a recent government study, conducted by the RAND corporation, indicates that wellness investments are not necessarily cost effective. However, even that study and a careful assessment of it points to the importance of culture and context: It is not just the wellness program itself that matters but, again, the combination of support, healthy culture, and program elements.

Culture Makes Financial Sense: 20 Years of Research on “Best Companies”

But the research on the importance of investing in employee health or “human capital” goes even further back. A 1994 study of the “100 Best Companies to Work For in America” found that these corporations—compared to a group from the S&P100–had significantly greater sales growth, asset growth, return on equity, and return on assets. Importantly, the criteria that distinguished these superior performers were attention to quality of work-life and outstanding employee relations practices.

While there have been criticism of this 1994 study, more rigorous evaluations continue to show the same if not stronger results. In a 2003 follow-up study of the 100 Best Firms, researchers found that 45 firms with stock return information had a total return during 1995-2000 of 376% compared with 193% in the broad market.

Cultural Resilience Pays Off as Well

An even more recent, 2012 analysis took into consideration the financial challenges that businesses have faced during the economic downturn (2008-2011). The researchers sought to test the assumption that even in times of crises, best employers are expected to maintain their particular concern for employee well-being.

In fact, they found despite market downturns, best employers sustain the same level of performance as in periods of growth.  Specifically, top ranking companies continue to outperform the market, whereas companies on the bottom half carry on displaying neutral performance. Furthermore, not only are great workplaces’ financial performance not affected during market decline, the best among them actually manage to exhibit over-performance relative to standard market benchmarks.

Healthy Regards,

Dr. Bennett

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[1] Fabius, R., Thayer, R. D., Konicki, D. L., Yarborough, C. M., Peterson, K. W., Isaac, F., … & Dreger, M. (2013). The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking Market Performance of Companies That Nurture a “Culture of Health”. Journal of Occupational and Environmental Medicine55(9), 993-1000.

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