If you were investing your hard earned money in a firm’s stock, would your decision depend on knowing details about the company’s financials? What if you got to know that the employees’ of a company are healthier than its peers? Or that every employee of one company went to the gym and had healthy eating habits. Is that information relevant to an investor and how they view their returns on investment? Investors track every bit of information that they can get to know about the firm because everything that impacts a firm’s performance has a bearing on the decision the shareholder makes about the firm’s prospects and hence the returns
Find a single number
Some companies like PepsiCo and Johnson & Johnson are thinking of doing exactly that. After all, if millions of daily financial transactions of a corporation can be reduced to a few financial ratios that investors can glance at to judge the health of the company, it makes perfect sense to find a single number or a few ratios that describes the wellness level of its employees. A firm with healthier employees would spend less money on insurance and medical costs especially on diseases that are termed as lifestyle diseases and can be seen to be preventable. The triple bottom line accounting framework has three parts: social, environmental (or ecological) and financial. Many organizations have adopted this framework to evaluate their performance in a broader perspective to create greater business value. Maybe it is time to include the wellness agenda as well.
Being stress-free matters
A rating of the employees’ health could legitimately be part of a company’s balance sheet. It fits in well with the philosophy of sustainability. Obesity and tobacco usage has been also shown to impact productivity. Knowing that one company has a healthier workforce than its competitors could be a competitive advantage. Investors may also benefit from knowing about the mental health and well-being of a firm’s employees. Occupational health psychologists will point out that stress free employees are less likely to make errors in certain jobs. Once the impact of wellness on financial performance is known it will encourage the employers to evaluate their people managers far more stringently so that the employees remain happy and engaged.Studies published in the Journal of Occupational and Environmental Medicine, found that companies with high-performing health programs for employees outperformed the Standard & Poor’s index by as much as 16% a year.
The last word
A company called ActiveHealth has created an algorithm that boils down complex health data into a single variable. More refinement in the algorithm will happen as employers begin to view this as a competitive advantage. Employers have for decades claimed that “people are the most important assets”. It is time to measure the true business value of the company’s human assets.————-Written for The Economic Times dated March 29, 2016 <click here>