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Health Promotion Leads to a Healthy Bottom Line

When we published Heart-Centered Leadership in 2003, we were without question embarking on territory that was relatively new. For some, the use of the words “heart” and “leadership” in the same sentence was counter-intuitive. To suggest that there was any connection between leadership style and the health of the leader, as well as the health of the leader’s associates seemed cutting-edge and controversial. Nonetheless, we felt then, as we do now, that it is essential to share the research that backs up this concept. In fact, demonstrating the link between leadership style, health, and productivity fills a critical and needed gap in the business leadership literature.

There has been a significant increase in the utilization of workplace health promotion and employee relations programs over this past decade, and the research shows such programs improve firm-level financial performance. For example, consider the following studies included in the second edition of Heart-Centered Leadership: Lead Well, Live Well

This is just one study. There are many others. In 2010, a systematic review of over 20 research studies found that medical and pharmacy costs fall by about $3.27 and absenteeism costs fall by about $2.73 for every $1 invested in wellness.2 This results in a return on investment of about $6 for every $1 invested. But the research on the importance of investing in employee health or “human capital” goes even further back. A 1994 study (Lau & May, 1994) of the “100 Best Companies to Work For in America” found that these corporations—compared to a group from the S&P100—had significantly greater sales growth, asset growth, return on equity, and return on assets.3 Importantly, the criteria that distinguished these superior performers were attention to quality of work-life and outstanding employee relations practices.

While there have been criticisms of this 1994 study, more rigorous evaluations continue to show the same, if not stronger, results. In a follow-up study of the “100 Best Firms,” researchers found that 45 firms with stock return information had a total return during 1995-2000 of 376% compared with 193% in the broad market.4 An even more recent analysis took into consideration the financial challenges that businesses have faced during the economic downturn (2008-2011).5 The researchers sought to test the assumption that, even in times of crisis, the best employers maintain their particular concern for employee well-being.

In fact, they found that, even in market downturns, best employers sustain the same level of performance as in periods of growth. Specifically, top ranking companies continue to outperform the market, whereas companies in the bottom half continue to display neutral performance. Furthermore, not only is the financial performance of great workplaces not affected during market decline, but the best among them actually manage to exhibit overperformance relative to standard market benchmarks.

Our research suggests that managers need to understand both their risk profile and their strengths profile as part of their health and wellness journey. Once they understand their profiles, managers benefit from a program that integrates their own leadership development with their health and well-being. Without the support, involvement, and “buy-in” of management from mid-level on up, the return-on-investment from a wellness program will be eroded. The challenge then is to find a way to engage managers.

1. Fabius, R., Thayer, R. D., Konicki, D. L., Yarborough, C. M., Peterson, K. W., Isaac, F., … & Dreger, M. (2013). “The Link Between Workforce Health and Safety and the Health of the Bottom Line: Tracking Market Performance of Companies That Nurture a ‘Culture of Health’.” Journal of Occupational and Environmental Medicine, 55(9), 993-1000., (9), 993-1000.
2. Baicker K, Cutler D, Song Z. “Workplace wellness programs can generate savings.” Health Affairs (Milkwood). 2010;29:304–311.; also see Chapman, L. S. (2012). “Meta-evaluation of worksite health promotion economic return studies: 2012 update.” American Journal of Health Promotion, (4), TAHP-1.
3. Lau, R. S. M., & May, B. E. (1998). “A win‐win paradigm for quality of work life and business performance.” Human Resource Development Quarterly, 9(3), 211-226., (3), 211-226.
4. Fulmer, I. S., Gerhart, B., & Scott, K. S. (2003). “Are the 100 best better? An empirical investigation of the relationship between being a ‘great place to work’ and firm performance.” Personnel Psychology, 56(4), 965-993., (4), 965-993.
5. Brandão da Costa Areal, N., & Carvalho, A. (2012). Great Places to Work®: Resilience in Times of Crisis. Available at SSRN 2186126; also see Brandão da Costa Areal, N., & Carvalho, A. (2012). The Financial Performance of the World’s Most Ethical Companies: Advantage in Times of Crisis. Available at SSRN 2186088.

 

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