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Organizational Health: Measuring The Impact Of Employee Value

November 11, 2015 by Natalie Lotzmann 4

In today’s global digital economy, business is more competitive than ever and employees are considered an organization’s most valuable asset. The care and nurturing of these assets is not something that can be treated lightly or taken for granted.

In fact, in people-centric organizations, caring for employees is a fundamental service that has a financial impact – and it’s an impact that can be an important measure of business success.

In healthy work environments that are caring, the concept of “healthy” now extends well beyond fancy onsite fitness rooms and a few extra health care benefits. A healthy work environment embodies a culture that empowers employees’ purpose and well-being and encourages them to perform at their best. And perhaps most importantly, it’s a nurturing environment where employees feel valued.

The Key to Employee Value? Strong Organizational Health

Often the concept of employee value is difficult for companies to grasp and achieve. This is where organizational health, which analysts from McKinsey&Company say is the “ultimate competitive advantage,” comes in.

To see if your company has a foundation of strong organization health, just ask employees how they feel. If they say they feel respected, appreciated, recognized, and connected, it’s a good bet your company’s organizational health ranks high. And if that’s true, then your business is most likely benefiting as a result, because when people feel valued, productivity, innovation, and profitability increase.

The Definitive Impact of Health and Well-Being

As companies become more aware of the impact of a healthy people culture, they are looking for ways to measure organizational health and link it back to sustainable and quantifiable business outcomes. The good news is that the evidence in this area is growing.

For instance, a McKinsey study compared the health metrics of more than 270 publicly traded companies with their financial performance metrics. The study found that the healthiest companies generated up to three times higher returns to shareholders than those in the bottom quartile. These organizations also delivered over 60% higher returns than companies with “middle-of-the-road” health profiles.

The Wellness Imperative, a World Economic Forum publication, published equally impressive data. According to employees, when health and well-being are actively promoted, their organizations are much more likely to encourage creativity and innovation, be considered a best performer, and enjoy high levels of productivity and engagement.

A Good Start, But It Overlooks Employee Value…

This research is a great first step in measuring the impact of the people culture of a company. However, I believe companies need to do more if they want to fully grasp the financial implication of employee value. I’d like to see companies combine financial and non-financial aspects of their organizations in measurements that show the interrelation of social, environmental, and economic performance.

For instance, no one would argue that employee engagement and retention have an impact on business. But wouldn’t it be great to know what kind of effect these have on a company’s operating profit? Wouldn’t it be helpful to have hard data that shows how a strong organizational health strategy can not only enhance the well-being of employees, but also boost business success? And what about purpose, leadership, recognition, empowerment, reward, stress levels, and life-balance conditions? How do those affect the bottom line?

The True Impact of Organizational Health

To find out the answer to the questions above, SAP developed the Business Health Culture Index (BHCI). We now annually survey our employees and ask questions that assess the degree to which our workplace culture supports people’s well-being, work/life balance, and other aspects of organizational health. The questions, which are based on many of the non-financial attributes mentioned above, probe how employees rate not only their well-being, but also the working conditions at SAP and our leadership culture.

The resulting BHCI performance analysis is a key part of our integrated strategic business model. This effort directly supports and contributes to our overall vision and purpose of helping the world run better and improving people’s lives.

Thanks to the BHCI metrics, we now know that a 1% increase in our business health culture improves our bottom line income by between €65 to €75 million. We also know that a 1% increase in employee engagement impacts our operating profit by between €35 to €45 million. Consequently, when the BHCI rose from 67% to 70% in 2014, we could attribute an impact of between €195 and €225 million on our operating profits to our healthy people culture.

With results like these, there is no denying the power of organizational health for individuals and employers. As we learn more about the true value of our employees, we hope to inspire companies around the globe to take a closer look at how they value their employees.

Learn more about our integrated reporting and the BHCI here

Dr. Natalie Lotzmann is Chief Medical Officer, responsible for executing on SAP’s health strategy globally. A seasoned thought leader in the field of linking health metrics to talent management and an innovative people strategy. 15+ years of demonstrated success – from vision to concept to execution, Lotzmann has received numerous awards as Corporate Health Awards (EuPD, Handelsblatt) and Special Awards by Great Place to Work Initiative recognizing her Health and Diversity programs at SAP. She is a member of board of directors at Enterprise for Health (Unternehmen für Gesundheit) and was appointed Ambassador for Health at the Workplace by German Federal Ministry of Labor and Social Affairs for National Initiative for New Quality at Work

This story previously appeared on The Digitalist.

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