Soccer team in a huddle

The Value of Health

June 11, 2015 by Andreas Schmitz 4

In our rapidly changing working environment – where demography, digitalization, and global competition force people to work longer hours and more efficiently – keeping employees fit is becoming a real competitive factor. But it’s not just a question of economic power.

If we take a look at the macroeconomic costs associated with attested sick leave, two trends become evident: 1) the costs are continually increasing, and 2) psychological illness is on the rise in Germany. Latest figures from the Federal Institute for Occupational Safety and Health, for example, show that production downtime costs surged from €46 billion in 2011 to €59 billion in 2013, and that number of working days lost due to burnout, depression, and exhaustion went up from 59 million in 2013 to 79 million today. The facts speak for themselves.

Not included in these statistics, however, are the so-called presenteeism-linked costs, which are currently not recorded in any table. These are the costs resulting from demotivated employees who no longer identify with their company, or colleagues who have long “quit” their jobs mentally but still drag themselves to work every day.

Healthy employees: Three times more productive and creative, eight times more dedicated

Recent studies have shown that these uncaptured employees have a major impact on a company’s results.

In 2010, the World Economic Forum published the results of a global survey of 20,000 people which found that companies that actively supported their employees in staying healthy and motivated had a more efficient and effective workforce. Their employees were two-and-a-half times more likely to be high performers, three times more productive, eight times more dedicated, and three-and-a-half times more creative and innovative than employees who did not receive this support from their employers.

In 2013, the University of St. Gallen surveyed more than 15,500 employees from around 100 medium-sized businesses as part of a Healthy Management study. Findings show that healthy management improves employee well-being (+30%) and engagement (+19%) and thus business performance (+15%). This in turn leads to a lower staff turnover rate (-75%), as employees are less likely to have a negative, destructive attitude (-63%) or feel emotionally detached from their job (-52%). It’s the psychological health of employees that benefits when their boss motivates them in a results-oriented manner. According to the researchers, being able to recognize when employees need a break and allowing them time off to regenerate after stressful periods of work improves the health of the employees (+23%) and increases company productivity (+6%).

“Globalized competition, with its pressure to lower costs and increase efficiency, together with the digital media mean that every single employee has to cope with more and more work at an ever-increasing pace, in a highly dynamic environment that is constantly changing,” says Natalie Lotzmann, Chief Medical Officer at SAP. “Pyschomental stress is on the rise all around the world, and poses significant challenges for one’s health and life balance.”

Freedom to innovate and regenerate, greater appreciation by superiors, a higher tolerance for mistakes, trust-based working models — These are just some of the measures SAP has already introduced to help counteract these increasing burdens.

One thing is certain: The vast majority of employees is able to cope much better with higher workloads when backed by supportive leaders, in other words, when employees feel appreciated as a person, recognized for the work they do, and supported in their efforts to strike the right work-life balance.

Leadership Trust Index rates managers

“Management behavior, especially the ability to motivate, to trust, and to foster cohesion, is the key to a healthy, happy, and productive team”: Natalie Lotzmann, health ambassador of the INQA (Initiative Neue Qualität der Arbeit, or New Quality of Work Initiative) and Chief Medical Officer at SAP.

Natalie Lotzmann, health ambassador of the INQA (Initiative Neue Qualität der Arbeit, or New Quality of Work Initiative) and Chief Medical Officer at SAP.

Good leadership still appears to be major stumbling block for most companies. The Global Human Capital Trends study conducted in 2015 by consulting firm Deloitte shows that the gap between organizations’ expectations and reality in terms of leadership, company culture, employee engagement, learning and personal development, has widened considerably since last year. Of the 3,000 or so HR decision-makers questioned, 78% rated corporate learning and development as important or very important; in reality, however, only 42% of all businesses felt themselves prepared to address this challenge.

That is just one of the reasons why SAP introduced the Leadership Trust Index to measure employee satisfaction with managers. Lotzmann, who is also a health ambassador of the INQA (Initiative Neue Qualität der Arbeit, or New Quality of Work Initiative), is convinced: “Management behavior, especially the ability to motivate, to trust, and to foster cohesion is the key ingredient for a healthy, happy, and productive team.”

SAP: One percentage point in the BHCI represents €65 million to €70 million

To gather even more “hard facts,” SAP created the Business Health Culture Index (BHCI) in 2009. Together with Price Waterhouse Coopers, it uses the index to measure the impact of changes in the company’s health culture on operating profit.

Lotzmann explains: “This index rates a company’s ability to provide holistic health assistance to its employees, in other words, the quality of the company’s organizational health culture.”

SAP provides numerous healthcare offerings aimed at keeping its staff fit, such as discounted “self trackers” that measure daily activity, check-ups and psychological consultation for all employees, health courses, a sabbatical program, the option of taking time off through one’s time account, or the new COPE program for colleagues suffering from cancer, which provides free access to innovative DNA testing and information to determine the optimal therapy in each case. The result is that more employees are doing something good for themselves, taking responsibility for finding their ideal work-life balance and staying happy, healthy, and productive.

Until now, the biggest difficulty associated with these measures to promote organizational health had been to gather “hard facts” and to quantify their financial impact on the company’s performance. The 2014 Integrated Report is the first time SAP has expressed in concrete monetary terms how changes in its employee engagement and employee health indexes affect its operating profits.

“SAP’s operating profit increase €65 million to €70 million when its employee engagement index rises one percentage point,” says Lotzmann. To her, this proves beyond all doubt that “a healthy corporate culture is not a nice-to-have – it’s an economic imperative.”

Lotzmann has long been trying to drive home the fact that organizational health and other “soft” aspects of corporate governance are just as crucial – if not even more so – for company success as the hard factors. SAP compiles the BHCI based the results of its annual employee surveys, in which employees rate their personal well-being and the working conditions at SAP, including its leadership culture and their loyalty to the company, in four leadership and three life-balance sections.

Since 2010, this index has improved 11 percentage points to a value of 70, corresponding to more than €700 million euros in cost avoidance. That’s not a figure to be sneezed at, not even by a leading company like SAP that last year generated €17.5 billion in revenue and a profit of €4.3 billion.

Prevention: “Every euro invested returns at least 10”

Leadership skills may have a major impact on the BHCI, but it is also up to the individual to adopt healthy lifestyle habits, for example by becoming more physically active, taking advantage of wellness programs offered by the company, or seeking help from integrated psychological counseling services in times of crisis. “Every euro invested in individual counseling returns at least 10 euros to the company.”

That being said, there’s still room for improvement where personal initiative is concerned. According to the World Economic Forum, only one in 10 employees does more than pay lip service to the notion of personal health.

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