The Right Way to Look at the ROI of Wellness in the Workplace

07/12/2016 03:09 pm ET Updated Jul 13, 2017

You see the world in terms of ROI - because you are in business, and that's the language of business. But if you're approaching corporate wellness programs with a simple, short-term payback outlook, you're probably having a difficult time.

There's a debate brewing over corporate wellness programs. Do they have real ROI? The short answer is yes. So why is there so much debate on the topic? Well, because ROI in wellness is a bear to measure.

So most companies don't even try. Only 28 percent of organizations surveyed by the International Foundation of Employee Benefit Plans (IFEBP) measure the success of their wellness programs with traditional ROI. What's more, only six percent of CFOs surveyed by the Integrated Benefits Institute said that their companies assess the ROI of their health benefits in general.

So why is measuring the ROI of wellness so hard? Here are a few reasons:

It's expensive
Analyzing health risks, insurance claims, biometric values, sick time, productivity and more is a big undertaking - a project most employers can't handle themselves. They need the help of analytics companies to make sense of the data and to keep employee health data private. And that help comes at a price. Most companies don't make the extra room in their budget to get the analytics they need.

It's complicated
Wellness programs create a wealth of outcomes. Employees benefit from improved health and employers benefit from fewer sick days and better productivity. And these benefits can be measured in a handful of ways. Employers can look at weight loss, reduction of disease risk factors, sick days, completed work, company profits or customer satisfaction.

And even when they do look at all of these factors, they can't really pinpoint the actual cause of improvements. Wellness programs may be correlated with better well-being, productivity and profits - but correlation and causation are different things. An employer can't say with certainty that the program caused these benefits, any more than they can say "our new CEO caused our turnaround." Common sense and causal certainty occupy different realms in the business world. Outside factors like inflation, health plan choices, a few high-cost claims, industry demographic shifts, hiring and firing and more can all confound your bean counters.

It's difficult to measure specific initiatives
Even if employers could say that wellness programs caused certain benefits, pointing to which initiatives or challenges specifically caused the positive outcomes may be a challenge. Was it the mix of relevant activities or fun team challenges or even the simple tracking of progress that helped improve an employee's well-being? What was the role of that tear-jerker story of a life saved or the inspirational (or threatening) message from the CEO? What did a wellness vendor do versus the employer? It's often hard to say for sure which components of a wellness program drove improved outcomes.

It's not always immediate
Some results take longer than others to see. For example, exercising for 20 minutes every day may give employees an immediate bump in energy and productivity. But other benefits, like improving immune systems and decreasing the chances of certain diseases and conditions, could take years to present themselves. If an employee quite smoking, then quits the company, where is the ROI?

So, can ROI be measured?
Even with all these barriers, the ROI of wellness programs can still be measured - it just takes more than actuarial science and a health-cost-centric worldview. So how do you find the real benefits of your wellness program? Start by forgetting healthcare costs and how to reduce them. Instead, focus on the benefits that impact your most important asset -- your people.

Here are few tips to get you started:

Engagement is the secret sauce
Focusing on employee well-being leads to an engaged workforce. In fact, 51 percent of organizations surveyed by IFEBP said their wellness efforts improved employee satisfaction and engagement. In addition, a 2015 survey published by Quantum Workplace and my company, Limeade found that respondents were 38 percent more engaged and 18 percent more likely to go the extra mile when they felt their employers cared about their well-being.

They were also 17 percent less likely to quit that year. Every company I've met with would take a 10 percent reduction in unwanted turnover over a 10 percent reduction in health costs any day.

Instead of focusing on the cost of wellness programs and initiatives, look at employee engagement as a measure of ROI. An engaged workforce brings many other compelling outcomes - which link directly to overall business outcomes.

Powered productivity
When employees are engaged, improved productivity naturally follows. And investing in employee well-being amplifies that effect.

Consider that lack of sleep, financial concerns and caregiving all put a dent in productivity, according to a study published by Rand in 2015.

But when employers invest in the well-being of their employees and support healthy lifestyle changes, employees become high performers. In fact, a recent report from Gallup on well-being and engagement found that those who were engaged and reported good well-being were 27 percent more likely to report that their performance at work was excellent. Now we have all the data to see if the CFO agrees.

The bottom line
What happens when employees feel great, feel valued, are engaged and do their best work? The business wins.

A study published in the January issue of the Journal of Occupational and Environmental Medicine tracked the stock performance of 45 publicly-traded companies that earned top scores on employee health and wellness scorecards.The study found the high scorers outperformed the 500 largest U.S. companies listed on the S&P 500 index by 235 percent over a six-year period.

This research suggests that investing in and supporting employee health brings substantial benefits to both employers and employees. These benefits look very different from the health care cost savings employers tend to focus on. And stock price growth is a language business people understand.

Wellness programs are so much more than a way to save money on insurance. When employers focus only on health care costs, they're blind to the much bigger impacts that happen when they support employee well-being. Forget cost-savings and start thinking about the ROI of wellness programs in terms of engagement, productivity and improved business performance. Your employees and your bottom line will thank you.

What main benefits does your business see from wellness programs and initiatives? Share in the comments below!

Henry Albrecht is the CEO of Limeade, the corporate wellness technology company that measurably improves employee health, well-being and performance. Connect with Henry and the Limeade team on Twitter, Facebook and LinkedIn.