Why CFOs are taking more notice of staff wellbeing

As more CFOs recognise the potential of employee wellbeing programs as profit drivers rather than nice-to-have staff extras, detailed absence data is in higher demand to help guide wellness investment decisions.

“It’s understandable that some CFOs have not historically viewed employee wellness programs as a strategic imperative, but that needs to change if an organisation’s full performance potential is to be met” says Morag Fitzsimons, head of people advisory at insurance broker, Lockton.

“Organisations often tell us it’s a challenge to quantify not only the cost of their staff absences, but also the return on investment from setting up wellness interventions,” says Fitzsimons, who has specialised in the workplace wellbeing field for some 35 years.

“Without that quantification, it’s not surprising leaders may hesitate to invest in wellbeing programs,” she says.

“But we know that the cost of employee absenteeism is high in Australian businesses, we know people’s expectations of work are changing and the working population is shrinking and ageing – so, if we want to get the best from the people we have, their health and wellbeing are going to be important.”

Indeed, staff wellbeing is an operational lever that should be elevated to receive the same amount of CFO attention as others, says Steve McCullagh, Chief Executive of employee health and wellbeing solution provider Healthy Business.

“CFOs have a strategic approach to any large costs in their business – and people are often an organisation’s biggest cost,” McCullagh says.

“Yet many CFOs still see wellbeing as simply a bit of a perk in the employee value proposition, an HR thing that’s a bit ‘fluffy’. But if you’re constantly recruiting new people, or your existing people are often absent, that’s a big expense that should be strategically measured and addressed like any other.

“If you were losing millions of dollars a year in faulty machinery, you’d be asking questions about what’s causing the problem, never mind the ethical and regulatory imperative to look after your people.” 

Quantifying the problem

Fitzsimons says the root of the challenge often lies in the lack of holistic analysis of employee absence data, which can sometimes sit across different teams of an organisation, from HR, to risk, to workers’ compensation to safety.

By considering the full range of absence data, she says organisations can make a more robust calculation of the true total cost of absence, while also providing an evidence base to determine where to focus wellbeing effort – both of which are the ingredients needed to evaluate return on investment.

“Most finance leaders tend to limit their review to the headline costs of sick leave and workers’ compensation, but the research tells us that for every one day of sick leave there is an average of three days of presenteeism in a workforce,” she says referring to the problem (and additional cost) of workers’ being at work but not fully functioning due to illness or other medical conditions.

“You also need to look for other signs – where there might be pockets of high turnover rates, high levels of overtime or staff taking a lot of leave without pay. It’s only through understanding what your specific data is telling you that you’ll know the cost and the right levers to pull.”  

To help organisations quantify the problem, she says Lockton has developed a diagnostic tool – the Total Cost of Absence Review – and has recently teamed up with McCullagh’s team at Healthy Business, which provides organisations with bespoke health and wellbeing solutions based on the findings.

Better targeted solutions

Fitzsimons says that each of the organisations to have used the Total Cost of Absence Review tool to date, without exception, had exposed unexpected findings, sparking a conversation among senior leaders about the drivers and costs of productivity in the business.

“In one organisation in the health care sector, we calculated the cost of absence totalled $70 million a year,” she says.

“We’d found that although their average turnover rate was on par with the sector, when we broke that down by tenure, turnover was up at about 45 per cent among the people who had joined in the last two years. That meant the organisation was in constant recruit mode, and younger people were leaving while older people were staying and getting injured and unwell.  

“That’s triggered an ‘aha’ moment for the leadership team, who said, ‘If we don’t fix this, we’re haemorrhaging money that we could seek to address’. Having that evidence creates a very different discussion about the nature of the wellbeing program to be rolled out otherwise you’re throwing initiatives at the wall, seeing what people use, and then trying to work out what the benefit is.”  

Measuring returns

Better targeted solutions will also address a common criticism that wellbeing programs often experience low take-up among employees.

Indeed, one research firm has estimated companies around the world spent $US61.2 billion on corporate wellness programs in 2021 – on everything from providing exercise incentives and nutritional counselling to stress-reduction apps and meditation classes – yet adoption of the interventions was relatively low. Another showed Australian businesses spent $1.3 billion each year on wellbeing initiatives that were not focussed on areas of real need.

“Every business, regardless of whether they are in the same industry or not, will have different levers and drivers,” McCullagh says.

“It might mean a different solution is needed at one work site to another site, from one employee group to another. By being strategic and data-led we can introduce programs that benefit particular employees, that will generate a return on investment that makes those programs sustainable long term.

“Over time, CFOs soon see that targeted programs become a ‘need-to-have’ rather than ‘nice-to-have’ from a cost management perspective.”

Fitzsimons & McCullagh’s tips for CFOs  

  • Reframe the issue: Employee wellbeing is not just the remit of HR as has been the traditional view. Rather it’s a whole-of-company issue that has potential to be a profit driver or drag. It should be recognised as an investment, not an expense, that’s managed strategically.
  • Quantify the problem: Spend time to understand what your business’s specific employee absence drivers are, beyond sick leave and workers compensation costs. It’s only through understanding your specific data that you’ll know the cost and the right levers to pull.
  • Don’t count on a one-size fits all approach: Employees are not a homogenous mass of people. Wellbeing programs need to be targeted for each employee’s stage of life and demographics.
  • Set targets: Work out what success looks like and find measurable indicators that help demonstrate the impact of wellbeing.

Download the Wellbeing Reinvented Report and use the cost calculator to estimate how much absenteeism is currently impacting your organisation visit > CLICK HERE