Focus on wellness ROI ignores programs’ broader effects on business outcomes

Do employer-provided wellness programs yield a return on investment? The past year has yielded as many, if not more, questions than answers. While some programs have shown favorable returns, others have not. Lack of a consistent, rigorous method for quantifying savings associated with wellness programs, along with some selective vendor reporting and overstated outcomes have led to confusion among purchasers.

But what if we’ve only gotten it partially right? What if we’ve overlooked what may be the most significant business-related outcome resulting from wellness programs?

The industry’s focus on health care costs is understandable, given that for many employers, benefits costs are the second largest organizational expenditure after wages. However, most, if not all, recent analyses have had a seemingly myopic focus on the impact of wellness on health care costs to the exclusion of a wellness impact on business outcomes.

Indeed, recent studies from Healthways have shown a correlation between individual well-being and favorable supervisor evaluation of job performance. It makes sense that worker performance goes hand-in-hand with better personal health and well-being, including financial, relationships, and career success.

Healthways also was involved with recent business unit-based analysis of well-being and financial business goals at Caterpillar, again showing a favorable correlation between team well-being scores and overall business performance in relation to projected financial goals.

Data not integrated

Data are instrumental to the transition but employers tend not to integrate HR data sources, including benefits information, with business outcomes for a few reasons. First, the confidentiality concerns of HIPAA-protected data represent a substantial, potential risk exposure for employers. Second, historically HR departments operate in a silo, apart from business performance.

In essence, the two departments are often seen at cross-purposes. HR departments have become spending centers focused on cost management, while business operations personnel generate revenue. The seemingly disparate goals of these functions have led to further separation of both roles and data.

But what if employers could more clearly — and measurably — appreciate and embrace the impact of their human capital investments on business performance? And thinking more broadly, those investments aren’t limited to wellness programs or health benefits — organizational policies regarding training, time off and pay also have a meaningful impact on business results, as does the way employers structure the work environment.

The value of adopting a broader strategic approach to workforce management can transform the role of HR. Instead of functioning as organizational cost center, adoption of a human capital management strategy that incorporates thoughtful implementation of benefits offerings and alignment of HR policies and work structures can position HR as a vital strategic partner to business success. This transformation may not be an easy one, given the long-standing view of HR personnel as narrowly focused, cost center managers.

However, several organizations, including Lincoln Industries, Barry-Wehmiller Companies, Inc., and MasterBrand Cabinets, Inc. have achieved meaningful outcomes with this approach.

While industry sectors have different business performance metrics, within each industry, there is invariably a set of measures that lends itself to linking with HR performance data. Quality measures, output, customer satisfaction, and safety represent just a few of the existing organizational measures that represent relevant data outcomes.

One virtue of this approach is that it doesn’t require that employers devote resources to an additional data collection process, because that information is already monitored. Further, these measures will have de facto initial credibility because from an operations perspective, they have already been deemed important enough to collect.

A growing body of literature and professional expertise supports the link between investments in workforce health and well-being with business performance measures. However, a direct causal effect of improving health and well-being on improved business outcomes has yet to be demonstrated.

And at the same time, it is also important to recognize that employer HR policies, including those addressing performance incentive programs and leave management, can also have a substantial influence on overall workforce performance.

Inexpensive data storage

Integrating these disparate data sources has to be done thoughtfully, but the advent of faster more flexible IT systems, efficient platforms and inexpensive data storage makes the prospect more feasible than ever. It is important to acknowledge and incorporate into the analysis the confounding impact of external market factors on business performance.

For example, a retail company with a smaller customer population at one location will likely have correspondingly lower sales volume at that location. By controlling for population density (and other confounders) it becomes possible to investigate the link between changes in sales volume and workforce characteristics such as health or job performance-related factors. Individuals who understand a company’s market climate can help identify and account for these confounders during the analytic process.

However, getting started need not be particularly difficult. Employers interested in this analytic approach should review and inventory available sources of both HR and business operations data. As part of this process, HR personnel must understand what senior leaders view as the key business performance metrics.

Regarding potential HR data sources, consider including workforce demographics, indicators of individual health status, benefits utilization, absence data, and individual performance evaluations.  

Next, begin connecting the dots by linking the respective HR and business data at an individual, team, or facility level to assess for associations. Subsequent, indepth areas for analysis will likely depend on preliminary findings, as well as ease of access to other data sources. While this approach may appear overly simplistic, it represents a meaningful way to get started.

This approach reframes and more effectively aligns the mutual interests of HR and business operations for employers wanting to improve business performance. This collaborative effort has the potential to identify and make strategic investments in workforce human capital to yield both top-line and bottom-line business value.

And who can argue with that?

Bruce Sherman is medical director with Employers Health Coalition, Inc., based in Canton, Ohio.

Does your organization focus exclusively on a wellness program's effects on health care costs? Share your thoughts in the comments.