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Hidden Benefits of Corporate Wellness Programs

August 3, 2017
Nearly 90 percent of companies in the United States use some form of employee wellness program – from gym memberships to health screenings to flu shots – all designed to improve health. Past research has primarily focused on measuring cost benefits for companies via lower insurance and absentee rates.

In this new research from Olin Business School, Professor Lamar Pierce examines the effect of employee wellness programs on employee productivity. The research paired individual medical data from employees taking part in a work-based wellness program to their productivity rates over time.

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Corporate wellness programs demonstrably improve productivity.

“We provide the first causal evidence based on objective data that wellness programs and their related health improvements can improve individual productivity.” – Lamar Pierce

Pierce and co-authors Timothy Gubler, assistant professor of management at the University of California-Riverside, and Ian Larkin, assistant professor of strategy at the Andersen School of Management at UCLA, used data from an industrial laundry company that provides a free, voluntary wellness program each year to its employees.

The new mathematical model takes into account what the researchers call “regime changes” or past customer behavior changes that were influenced by new firm policies, government regulations, economic factors, competitors’ actions, or unknown drivers of change.

The researchers utilized a three-year panel of medical data for 111 employees and compared that data to employees’ work productivity, which was accurately measurable by the number of pieces or tasks completed in a factory setting. The researchers also used self-reported data from the employees, as well as evaluations from physicians who examined each employee’s medical progress as the program continued. All information was kept confidential and anonymous.

“What it allowed us to see were the changes in their actual productivity, as a function not only of participation but of their existing health conditions and their improvements in health conditions and other lifestyle factors,” Pierce said. “Conditions included obesity, diabetes, cholesterol, heart conditions, and also a number of self-reported behaviors that they gave us on diet, exercise, anxiety, and depression.”

“When you give people the tools and the opportunity to be physically and mentally healthier, it’s not just that they’re more likely to be at work, those employees are also more likely to be productive.” – Lamar Pierce

KEY TAKEAWAYS for Managers

  1. The value of employee wellness programs is being undercounted. There are productivity gains from basic participation in programs and potential for larger ROI for the company as more employees participate and improve their health.
  2. Wellness programs can increase job motivation through improved satisfaction for all workers and gratitude or reciprocity from those who discover a previously undiagnosed illness.
  3. Wellness programs increase employees’ capabilities by spurring them to take actions that improve health, well-being, and ultimately productivity.
  4. Employee buy-in is a must for wellness programs to succeed.

The researchers compared data for employees that participated in the health plan to employees at the same company who opted out of the program or were in plants that weren’t offered the full program.

The results were striking and significant: the researchers found wellness programs boosted employees’ health and productivity. Productivity jumped by between 6 and 11 percent compared to employees who didn’t participate in the program, with the largest gains for those who improved their health. When further quantified, that figure equaled a 76 percent return on investment for the company after introducing its wellness program.

“The value of these programs is being undercounted,” Pierce said. “The gains to productivity might vary across jobs, tasks, and employees, but they are very real. Our results show gains just simply from participation. We can see somebody who participates and doesn’t get better, and that person still seems to get more productive.

“The biggest gains are to people who participated, but also improved their health,” he said. “There are multiple mechanisms through which productivity improves from the program, and they each accumulate on top of one another.”

Pierce offers a caveat to companies who might be interested in putting an employee wellness program into place and practice. There are definite factors that can make or break the program and the resulting ROI. Employee buy-in is a must.

“The company we studied didn’t try to force people into it; the firm respected employee privacy and has a long relationship and tradition of treating their employees with respect and maintaining that trust,” Pierce said. “So the company could tell employees, ‘Look, we’re offering this. You can do this, it’s free choice, we respect your privacy,’ and employees believed them.”

Pierce will present his research to alumni and friends in the business community on September 12, 2017.

“Doing Well by Making Well: The Impact of Corporate Wellness Programs on Employee Productivity”

Authors:

Lamar Pierce, Professor of Organization and Strategy at Olin Business School, Washington University in St. Louis;
Timothy Gubler (Olin PhD), Assistant Professor of Management at the University of California-Riverside; and
Ian Larkin, Assistant Professor of Strategy at the Andersen School of Management at UCLA

Publication:

Forthcoming, Management Science