By Brian Schilling
Not long ago, an unlucky vice president of benefits walked into her CFO's office during contracting season fully prepared to go over the usual issues around vendors, benefits, and wellness programs. She expected the discussion to focus, as usual, on costs. Instead, her CFO threw a curveball and steered the conversation toward what they were getting for their investment. The VP stammered a not-very-convincing answer and left the meeting feeling like a nonessential administrative staffer.
For the unprepared, that scenario may become more and more common, says Tom Parry, Ph.D., president of the Integrated Benefits Institute (IBI), a nonprofit dedicated to proving and quantifying the relationship between worker health and company productivity. "CFOs are a lot more dialed in than they used to be when it comes to making health benefits decisions," he says. "They used to operate on the assumption that health benefits were simply an unavoidable cost of doing business. Now they want a quantifiable way to assess the value of that investment. The old answer that we're spending money on health care because we have to won't fly anymore."
Parry's views are supported in a 2011 survey of CFOs conducted by IBI. That survey was designed to answer one principal question: How can benefits managers best convince financial executives that wellness efforts and other health initiatives are an investment? To that end, the survey looked at a range of related questions: Which data are typically available to CFOs? Which data are deemed reliable? Which missing data might be compelling? Do CFOs fully understand the relationship between workforce health and a company's bottom line?
On the last issue, the survey found a range of understanding. "Don't assume that the path from wellness programs to healthier employees to more productive employees to better financial performance is intuitive," said Parry. "It's now part of the benefits VP's job to lead the CFO down that path and provide metrics that will validate related investments."
In fact, only about 29 percent of CFOs participating in the survey had a truly sophisticated understanding of the link between health and productivity and financial performance. "To a fair number of CFOs, worker health is only relatable to direct health care costs," said Parry. "They're less aware or unable to quantify how worker health affects turnover, replacement worker costs, productivity, or even sick leave."
Parry is quick to note that this isn't always the CFO's fault. Often, they're simply not getting the relevant data. The IBI survey found that two-thirds of CFOs don't receive any sort of data about the impact of health on work performance or about the return on investment from various health interventions. "It's not that they don't want this information," clarifies Parry. "They're just not getting it."
Measuring Productivity
The survey included an open-ended question inviting CFOs to offer their opinions on the best way to quantify health-related lost productivity. By far the most common suggestion was to quantify the cost of absence days either in terms of replacement workers, sick pay, lost productivity, or a combination of all three.
IBI subsequently developed a white paper on measuring worker productivity that includes a list of metrics designed specifically to produce data that will be meaningful for CFOs. For example, the paper proposes tracking the percentage of employees who fall into different health risk categories over time. This metric would show CFOs how wellness programs change worker behavior and reduce health risks and medical claims.
Jeff Tetrick, CFO of Pinnacol Assurance, the largest workers' compensation firm in Colorado, is a strong proponent of measuring productivity, and has been for some time. That makes sense—the entity's profitability rises and falls with the health and productivity of the workers it insures. To demonstrate the importance of this concept to its policyholders, Pinnacol periodically measures its own productivity against the progress of its various wellness initiatives. But how, exactly, does one measure productivity at a workers' compensation firm?
"We use self-reported surveys," Tetrick says. "We ask employees, how productive they were and they respond. We've been doing this for three years and have a lot of data that helps us identify trends and understand if what we're doing for our own population in terms of wellness is working."
Tetrick says that the correlation between investments in wellness and improvements in productivity has been strong. "Every year we've seen the productivity numbers go up and the health risk factors go down." Those self-reported productivity surveys are backed up by other metrics. Over the same period, Pinnacol has seen worker obesity rates drop by 2 percent and the incidence of chronic conditions among its workforce drop by 10 percent.
"We're happy with the investment we're making in wellness," Tetrick says. "It shows me that our efforts are making a difference in our employees' health and enhancing their quality of life. For the company, that translates into spending a lot less money now and in the future on claims."
For more on this subject, view the IBI white paper here.
|
Survey Takeaways
|
|
