The Clear Financial Returns On Investing In Employee Wellbeing

Keywords: Employee Wellbeing, Mental Wellbeing, ROI, Sustainable Business, Bottom Line

Author: Lisa Munro

Date 15 February 2024, Worklife Digital

Investment in employee wellbeing is increasingly recognised as a critical factor in the global competition for talent and driving staff retention, and a key ingredient in achieving sustainable business productivity. But what exactly is the relationship between employee wellbeing and business performance? Is there solid evidence to support the notion that investments in employee wellbeing pay off in terms of financial returns? And should managers and executives prioritise measuring, monitoring, and promoting the wellbeing of their employees?

The Bottom Line on Well-being

A 2023 study by the University of Oxford Wellbeing Research Centre* paints the scene vividly. Analysing 1,600 US companies and drawing from a data set of more than 15 million surveys on wellbeing, it revealed a clear correlation: higher employee wellbeing equals higher financial performance. Companies with higher average levels of wellbeing are more valuable, have greater returns on assets, and report higher annual profits. They are more likely than their competitors to experience subsequent sales growth, greater profitability, higher market valuations, and more frequent earnings surprises.

Similarly, studies examining the stock returns of companies recognized as "Best Places to Work" by Glassdoor found that these companies consistently outperformed the market by significant margins over several years. This suggests that investing in employee wellbeing not only contributes to business success but may also be undervalued by the market.

The link between individual well-being and performance is equally impressive. Happier workers not only tend to be more productive but also exhibit lower rates of absenteeism, higher levels of collaboration, creativity, commitment, and motivation at work. These findings are supported by a wealth of correlational, longitudinal, and experimental evidence. Research conducted in 2019 based on data from over 1.8 million employees and 82,000 business units across 73 countries, found significant associations between job satisfaction, customer satisfaction, productivity, profitability, and staff turnover**.

Overcoming the hesitation

However, despite the clear benefits of promoting employee wellbeing, many businesses remain hesitant to invest in this area, citing concerns about cost-effectiveness and feasibility. Perfunctory efforts are made to create the impression of investing in wellbeing, with random initiatives such as meditation apps or yoga classes thrown at the wall to ‘see what sticks’. Developing strategic, sustainable, and cost-effective policies and programs to support high levels of employee wellbeing may indeed present challenges. Yet, the evidence suggests that the potential benefits far outweigh the costs.

A recent survey of executives and managers in the United States revealed that the majority recognise the importance of improving workplace wellbeing for gaining a competitive advantage, attracting and retaining talent, and enhancing productivity.*** However, positive attitudes have not always translated into concrete action, with only a fraction of organisations reporting that wellbeing is a strategic priority and even fewer having a comprehensive strategy in place to address it.

Despite the historical underinvestment in employee wellbeing, the evidence is clear: companies that prioritise the wellbeing of their employees tend to perform better across a wide range of metrics. Investing in wellbeing is not just a moral imperative but also a strategic business decision. It's time for businesses to recognise the strong financial returns on investment that come from nurturing a culture of wellbeing in the workplace.

WorkLife Digital is a global mental-wellbeing consultancy driven by the mission to improve the sustainability of businesses. Our psychological wellbeing tool, Worklife Quotient (WL-Q), is modelled on cutting-edge scientific research and provides organisation-wide measurement and intelligence on the mental wellbeing levels and psychological resilience of staff. WL-Q also assesses the impact of organisational practices (i.e. people and culture, leadership styles, organisational purpose and values, social impact) that have a direct influence on staff wellbeing and provides strategic recommendations on addressing risks and promoting strengths.

For more information, get in touch at lisa@worklife.digital

References

*De Neve, J.-E., Kaats, M., & Ward, G. (2023). Workplace wellbeing and firm performance. Wellbeing Research Centre.

**Krekel, Christian and Ward, George and De Neve, Jan-Emmanuel (2019). Employee Wellbeing, Productivity, and Firm Performance. Saïd Business School

***HBR Analytical Services (2020). Cultivating workforce well-being to drive business value.