What’s the Hard Return on Employee Wellness Programs?

Companies in a variety of industries—including Johnson & Johnson, Lowe’s, H-E-B, and Healthwise—have built their employee wellness programs on all six pillars and have reaped big rewards in the form of lower costs, greater productivity, and higher morale. Those benefits are not easy to achieve, and verifiable paybacks are never a certainty. But the track record inspires emulation, especially when you see the numbers.

To achieve those kinds of results, employers cannot merely offer workers a few passes to a fitness center and nutrition information in the cafeteria. The most successful wellness programs are supported by six essential pillars: engaged leadership at multiple levels; strategic alignment with the company’s identity and aspirations; a design that is broad in scope and high in relevance and quality; broad accessibility; internal and external partnerships; and effective communications.

Employee wellness programs have often been viewed as a nice extra, not a strategic imperative. But the data demonstrate otherwise, according to Berry, of Texas A&M University; Mirabito, of Baylor University; and Baun, of the University of Texas MD Anderson Cancer Center. Their research shows that the ROI on comprehensive, well-run employee wellness programs is impressive, sometimes as high as six to one.

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The Idea in Brief

Employee wellness programs have often been viewed as a nice extra, not a strategic imperative. But the data show otherwise. The ROI on comprehensive, well-run employee wellness programs can be as high as 6 to 1.

The most successful programs have six essential pillars: engaged leadership at multiple levels; strategic alignment with the company’s identity and aspirations; a design that is broad in scope and high in relevance and quality; broad accessibility; internal and external partnerships; and effective communications.

Companies in a variety of industries have included all six pillars in their employee wellness programs and have reaped big rewards in the form of lower health care costs, greater productivity, and higher morale.

Since 1995, the percentage of Johnson & Johnson employees who smoke has dropped by more than two-thirds. The number who have high blood pressure or who are physically inactive also has declined—by more than half. That’s great, obviously, but should it matter to managers? Well, it turns out that a comprehensive, strategically designed investment in employees’ social, mental, and physical health pays off. J&J’s leaders estimate that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent.

Wellness programs have often been viewed as a nice extra, not a strategic imperative. Newer evidence tells a different story. With tax incentives and grants available under recent federal health care legislation, U.S. companies can use wellness programs to chip away at their enormous health care costs, which are only rising with an aging workforce.

Our extensive research on workplace wellness has led us to arrive at this definition of it: an organized, employer-sponsored program that is designed to support employees (and, sometimes, their families) as they adopt and sustain behaviors that reduce health risks, improve quality of life, enhance personal effectiveness, and benefit the organization’s bottom line.

Government incentives or not, healthy employees cost you less. Doctors Richard Milani and Carl Lavie demonstrated that point by studying, at a single employer, a random sample of 185 workers and their spouses. The participants were not heart patients, but they received cardiac rehabilitation and exercise training from an expert team. Of those classified as high risk when the study started (according to body fat, blood pressure, anxiety, and other measures), 57% were converted to low-risk status by the end of the six-month program. Furthermore, medical claim costs had declined by $1,421 per participant, compared with those from the previous year. A control group showed no such improvements. The bottom line: Every dollar invested in the intervention yielded $6 in health care savings.

57% of people with high health risk reached low-risk status by completing a worksite cardiac rehabilitation and exercise program.

We’ve found similar results in our own experience. In 2001 MD Anderson Cancer Center created a workers’ compensation and injury care unit within its employee health and well-being department, staffed by a physician and a nurse case manager. Within six years, lost work days declined by 80% and modified-duty days by 64%. Cost savings, calculated by multiplying the reduction in lost work days by average pay rates, totaled $1.5 million; workers’ comp insurance premiums declined by 50%.

4% is the voluntary turnover rate at SAS Institute, thanks in part to a highly effective employee wellness program.

What’s more, healthy employees stay with your company. A study by Towers Watson and the National Business Group on Health shows that organizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9% vs. 15%). At the software firm SAS Institute, voluntary turnover is just 4%, thanks in part to such a program; at the Biltmore tourism enterprise, the rate was 9% in 2009, down from 19% in 2005. According to Vicki Banks, Biltmore’s director of benefits and compensation, “Employees who participate in our wellness programs do not leave.” Nelnet, an education finance firm, asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program.

Nelnet asks departing employees in exit interviews what they will miss most. The number one answer: the wellness program.

To understand the business case for investing in employee health, we examined existing research and then studied 10 organizations, across a variety of industries, whose wellness programs have systematically achieved measurable results. In group and individual interviews, we met with about 300 people, including many CEOs and CFOs. We asked about what works, what doesn’t, and what overall impact the program had on the organization. Using our findings, we’ve identified six essential pillars of a successful, strategically integrated wellness program, regardless of an organization’s size. Passes to fitness clubs and nutrition information in the cafeteria are not enough, as you’ll see.

Strategically integrated wellness programs have six strong pillars that simultaneously support their success, regardless of the size of the organization. Construct them well, and your institution could see the kinds of big returns that the 10 companies in our sample have garnered.

1. Multilevel Leadership

Creating a culture of health takes passionate, persistent, and persuasive leadership at all levels—from the C-suite to middle managers to the people who have “wellness” in their job descriptions.

2. Alignment

A wellness program should be a natural extension of a firm’s identity and aspirations. Don’t forget that a cultural shift takes time.

3. Scope, Relevance, and Quality

Wellness programs must be comprehensive, engaging, and just plain excellent. Otherwise, employees won’t participate.

4. Accessibility

Aim to make low- or no-cost services a priority. True on-site integration is essential because convenience matters.

5. Partnerships

Active, ongoing collaboration with internal and external partners, including vendors, can provide a program with some of its essential components and many of its desirable enhancements.

6. Communications

Wellness is not just a mission—it’s a message. How you deliver it can make all the difference. Sensitivity, creativity, and media diversity are the cornerstones.

Outcomes

Lower costs

The savings on health care costs alone make for an impressive ROI.

Greater productivity

Participants in wellness programs are absent less often and perform better at work than their nonparticipant counterparts.

Higher morale

Employee pride, trust, and commitment increase, contributing to a vigorous organization.

To learn how companies can support their employees’ well-being in a way that makes good business sense, we conducted field visits with 10 organizations that have financially sound workplace wellness programs.

Biltmore—hospitality and tourism

Chevron—energy

Comporium—communications

Healthwise—health information publishing

H-E-B—grocery retail

Johnson & Johnson—health care products manufacturing

Lowe’s—home-improvement retail

MD Anderson Cancer Center—health care

Nelnet—education planning and finance

SAS Institute—software

During our visits to this diverse array of companies, we conducted interviews, lasting 30 to 60 minutes, with senior executives (including the CEO and CFO in most cases); wellness managers and staff; and managers of related functions such as HR, occupational health, employee assistance services, on-site medical clinics, fitness centers, safety, and food service. We also conducted focus group conversations, lasting 60 to 90 minutes, with middle managers, employees who actively used the programs, and employees who chose not to participate in the programs. In all, about 300 people shared their perspectives.

We tailored our questions to the respondents. Senior executives, for example, discussed lessons they had learned, what they would do differently, the business case for wellness, and their vision for the future. We asked middle managers about the on-the-ground management advantages and challenges of the program. Employee participants spoke about what they considered to be the most successful parts of the program, how it could be improved, and why they thought nonparticipants had opted out. We directly asked nonparticipants why they didn’t use the program, whether they were considering using it in the future, and what might change their minds.

Pillar 1: Multilevel Leadership

It’s easy to find employees who don’t participate in wellness programs. Some cite lack of time, little perceived benefit, or just a distaste for exercise. Others don’t know about available services or blame unsupportive managers. A few think their health is none of the company’s business or mistrust management’s motives. As with any worthwhile initiative, creating a culture of health takes passionate, persistent, and persuasive leadership.

The C-suite.

Although employee health correlates with financial health, workers won’t buy into a program that’s just about money. If the CEO makes time for exercise, for instance, employees will feel less self-conscious about taking a fitness break. When MD Anderson initiated its wellness program, president John Mendelsohn took walks throughout the building with wellness coach Bill Baun. For many, it was the first time the president had been in their work space or had shaken their hand, and he tended to start conversations with “How’s your wellness?”

Then there’s Johnson & Johnson, which has about 250 distinct businesses around the world. J&J has only a few companywide mandates. Two concern health: Any employee with HIV/AIDS will have access to antiretroviral treatment, and all J&J facilities will be tobacco free. The latter mandate was implemented in 2007 after several years of intense internal discussion. Both decisions demonstrated serious commitment from the top.

Middle managers.

Except in tiny companies, most employees report to a middle manager. By shaping minicultures in the workplace, middle managers can support employees’ wellness efforts. Some companies even ask managers to adopt a personal health goal as one of their unit’s business goals.

Wellness program managers.

Every organization in our study has an expert who develops and coordinates a clear, comprehensive wellness program, continuously sells it throughout the organization, and measures its effectiveness. The best wellness managers connect their expertise to the culture and strategy of the organization. These people are collaborative by nature, and analytical and credible by background and performance. It’s no ordinary management job.

Wellness champions.

Volunteer health ambassadors offer local, on-the-ground encouragement, education, and mentoring—in addition to organizing and promoting local health events. No company in our study embodies this concept better than supermarket chain H-E-B, which has more than 70,000 employees at about 350 stores and other facilities. With more than 500 site-specific and nine regional wellness champions, the company hosts monthly conference calls for the wellness leaders, sponsors training webinars, and maintains an online wellness-resource center.

Pillar 2: Alignment

It’s not unusual for firms to enter the wellness space with a big splash that subsides to a ripple. As management priorities shift, the opportunity to integrate a culture of health can pass. Ideally, a wellness program should be a natural extension of a firm’s identity and aspirations. But many executives forget that the cultural shift takes time.

Planning and patience.

At Healthwise, CEO Don Kemper’s personal commitment has allowed wellness to permeate the culture from day one. The company holds monthly all-staff meetings that always include a wellness team report on current wellness activities and resources. It sponsors an annual Wellness Day, featuring speakers and health-related activities, when employees are encouraged to reflect on the question “How can I be well?” In addition, every other Wednesday afternoon, workers are invited to share a healthy snack and connect with others. One executive calls it “adult recess,” an investment that “pays back in spades” by creating opportunities for cross-team connections.

In contrast, Nelnet’s early investment in wellness rankled employees. Senior management unexpectedly required health screenings to educate workers about their health risk factors. Not ready to address such personal topics and confused about the company’s motives, employees pushed back. The company then hired professional wellness staff and developed a comprehensive, long-term wellness strategy. It now emphasizes early communication and clear explanations to give employees time to ask questions and prepare for change. Today employees embrace Nelnet’s wellness culture: 90% participate in health risk assessments (HRAs); about three quarters of those engage in wellness activities.

Carrots, not sticks.

The organizations in our sample favor positive incentives because employees lose trust when they feel they’re being forced to act against their wishes. There are, for example, many horror stories about managers who suddenly mandated smoke-free work sites, with violators risking termination. That just sends the behavior underground instead of providing support in beating an addiction.

Lowe’s takes a measured approach by initially introducing a concept then eventually making it mandatory, if necessary. Before instituting its tobacco-free policy in 2005, the company gave advance notice and offered assistance to employees who were trying to quit smoking. Starting in January 2011, Lowe’s will offer employees a monthly $50 discount on medical insurance if they pledge that they and covered dependents will not use any tobacco products.

A complement to business priorities.

If a program doesn’t make business sense, it’s automatically vulnerable. Take Chevron, where 60% to 70% of all jobs are considered safety-sensitive, in that employees put themselves or others at risk. Fitness for duty is a central concern on oil platforms and rigs, in refineries, and during the transport of fuel. To reinforce the mantra that healthy workers are safer workers, Chevron has developed a strong wellness program that includes a comprehensive cardiovascular health component, a 10K-a-day walking activity, fitness centers, a repetitive-stress-injury prevention program, and work/life services.

Where Chevron does business in countries that lack basic health care resources, it plays a leadership role by partnering with local health ministries, NGOs, and other private sector firms to build infrastructure that helps to combat diseases such as HIV, malaria, and tuberculosis. It’s a matter of both corporate responsibility and business necessity for a company that wants to sustain a healthy, talented, satisfied labor pool. For example, Chevron employees staff two hospitals and four clinics in Nigeria, including a riverboat clinic that sends health care providers to riverside communities.

Pillar 3: Scope, Relevance, and Quality

It’s not unusual for a company to think about employee health narrowly. Exercise is exercise, right? But employees’ wellness needs vary tremendously.

More than cholesterol.

Wellness isn’t just about physical fitness. Depression and stress, in particular, have proved to be major sources of lost productivity. Wellness program administrators need to think beyond diet and exercise. Biltmore, for example, offers a nondenominational chaplain service—on call 24 hours—to assist employees and immediate family members with divorce, serious illness, death and grief recovery, child rearing, and the care of aging parents. The services are confidential, free, and voluntary. The chaplains meet their clients at sites ranging from the family residence to a funeral home to Starbucks.

Individualization.

Many organizations use online employee HRAs to guide investment in wellness. An HRA combines a lifestyle survey and biometric tests such as blood pressure, cholesterol, glucose, and body mass index. The lifestyle responses (stress levels, physical activity, eating patterns, tobacco and alcohol use, and other health behavior information) are often combined with the biometric data to calculate a health-risk status, or “real age.” This information is shared confidentially with each participant to help him or her track wellness progress and, when appropriate, receive company-provided assistance in an area such as nutrition counseling. Employees can often complete their biometric tests at company health fairs or on-site medical clinics.

Companies are required by law to protect individual health information, but managers can receive aggregated data that identify categories of greatest need and document changes in workforce health status. H-E-B, for example, tracks the percentage of employees in each retail territory and business unit who are at risk in areas such as high blood pressure, physical inactivity, and smoking against benchmark goals. The information helps management decide where to allocate resources.

Persuading employees to complete HRAs is a challenge, of course, for reasons ranging from privacy, to limited self-awareness about biometric numbers such as blood pressure, to lack of computer access. J&J, however, has managed to achieve an HRA participation rate above 80%. That’s in part because employees who complete an HRA and receive the recommended health counseling have their personal health insurance contributions reduced by $500 annually. High participation plus a comprehensive HRA instrument enables J&J to tailor its wellness programs from business to business: One may focus more on cancer prevention, another on diabetes, and so on.

A signature program.

A high-profile, high-quality initiative within a broader wellness program can foster employee pride and involvement. Consider, for instance, when MD Anderson became the first health care organization to earn gold-standard accreditation from the CEO Roundtable on Cancer. Earning the accreditation is no small task: It requires tobacco-free work sites, benefit plans that cover recommended cancer screenings, assistance to employees with cancer in entering appropriate clinical trials, and investment in workers’ physical activity and nutrition. Many people throughout the organization view this commitment as a badge of honor.

Fun.

Never forget the pleasure principle in wellness initiatives. For example, Healthwise’s 2009 Wellness Day—with the theme Joy, Play, Spirit—featured square dancing. Lowe’s sponsors Step It Up, a 10-week walking challenge in which employees are given a pedometer and a step log. The first year’s campaign pitted employees against senior management. And SAS’s recreation center features a large swimming pool, where director Jack Poll says people can do anything that they do on land, including play basketball, lacrosse, and Ultimate Frisbee. It’s a gymnasium on water.

High standards.

Health-related services are, by nature, personal. Employees who perceive them as substandard won’t use them. Communication services provider Comporium, for example, has an on-site health and wellness center staffed by an independent medical practice including nurse-practitioners (NPs), with a physician available as needed. It offers useful services such as hypertension management and treatment for strep throat and sinus infections. Initially, the program faltered because quality was not perceived as high. But the company turned that around, and now the experienced NPs enjoy a loyal following of employees, spouses, and eligible retirees. Program participation exceeds Comporium’s 2010 goal.

Nearly three-quarters of the employees at SAS’s Cary, North Carolina, campus choose the on-site health services for their primary care.

At SAS’s Cary, North Carolina, campus, 90% of employees used the on-site health services in 2009, and 73% currently choose the center for their primary care. In the words of Gale Adcock, the director of corporate health services, “Everyone will come for free and good; no one will come for free and lousy.”

Pillar 4: Accessibility

Our sample companies make low- or no-cost services a priority, and they know that convenience matters. On the SAS main campus, 70% of employees use the recreation center at least twice a week. Director Jack Poll’s explanation: “Our high participation rates are because, when we opened, we thought of all the reasons people wouldn’t use the facility and we worked to eliminate every one of them.” The center is open before and after work and on weekends, and the staff develops a variety of fresh, engaging programs.

True on-site integration.

On-site fitness centers are sometimes criticized for attracting people who would exercise anyway. But employees at companies who have them love them, and employees at other companies want them. As one Healthwise employee put it, “You see coworkers working out every day. That makes me realize I can do it, too.” And Chevron conducts daily “stretch breaks” within certain units at set times. In Houston, for example, professional trainers go to the trading floor each day at 2:30 for a 10-minute stretch series.

Biltmore’s two-day health fairs twice a year focus on physical, financial, and spiritual wellness. A wide variety of screenings are offered, including bone scans, cholesterol, blood sugar, lung capacity, and hearing. Women can make appointments for mammograms. Chiropractors are available. The local fire department demonstrates how to install a smoke detector, and the police conduct sessions on home safety and give children a chance to be fingerprinted for safety. Yoga instructors, chaplains, and many others lead seminars. Local bank representatives provide private consultations. Vendors for health and dental insurance and 401K plans are available.

Employees typically consume one or several meals plus snacks during work hours. Healthful food at work has to be tasty, convenient, and affordable. Chevron’s food service vendor has a “stealth health” philosophy: It uses quality ingredients and few highly processed foods to offer menu items that delight rather than require sacrifice. Instead of seeing a daily “healthy entrée,” employees choose from an array of appetizing healthful options, such as meatloaf made with whole grains and low-sodium soups made from scratch.

Going mobile.

Organizations increasingly use online resources to deliver wellness messages and to let individuals input information such as HRA data and activity reports. Companies can also make wellness websites available on smartphones to increase portability. For decentralized companies such as Lowe’s and J&J, online access is critical, although high-tech tools must be complemented by high-touch programs that unite individuals in a culture of health.

Pillar 5: Partnerships

Internal partnerships help wellness programs gain credibility. At Biltmore, for example, wellness professionals partner with the company’s finance division to vet the cost-effectiveness of various programs. External partnerships with specialized vendors enable wellness staffs to benefit from vendor competencies and infrastructure without extra internal investment. Lowe’s has contracted with a partner to drive custom-built laboratory buses to stores, distribution centers, and corporate offices so that employees can conveniently receive biometric health screenings and complete their HRAs in private kiosks.

The smallest companies in our study have developed comprehensive wellness programs in part by leveraging the resources of vendor partners. Comporium worked with the YMCA and a local medical practice to design a “metabolic makeover” program for willing at-risk employees. Described by one participant as “pure torture” but “a great thing,” it is a low-investment way for the company, which has just over 1,000 employees, to enhance its wellness program.

Pillar 6: Communications

Wellness communications must overcome individual apathy, the sensitivity of personal health issues, and the geographic, demographic, and cultural heterogeneity of employees. The range and complexity of wellness services also can pose challenges.

Our sample companies have honed effective practices over time. For one, they tailor their messages to fit the intended audience. H-E-B’s culture, for example, is highly competitive, so the company created internally public wellness scorecards for geographic and other company units. Intranet videos featuring employees’ health-success stories are especially popular at H-E-B, which recognizes that not all employees read a lot.

Media diversity also helps. Nelnet, for example, includes information about wellness in its regular corporate e-mail on Wednesdays, features health-related messages on its intranet portal, advertises specific wellness benefits, posts flyers about health in elevators and stairwells, and distributes wellness stickers and magnets. At health screening time, employees are greeted with an attention-getting “desk drop” such as a piece of fruit.

Wellness “clues” can be embedded throughout the workplace. According to Dr. Martin Gabica, the chief medical officer at Healthwise, “Wellness is a viral thing. When I meet with a new employee, I say, ‘Let’s go for a walking meeting.’” MD Anderson provides bicycle racks in parking garages with showers nearby, and it places elliptical trainers in work areas throughout its campus to encourage five-minute stress breaks. At Lowe’s headquarters, an arresting spiral staircase in the lobby makes climbing the stairs more appealing than riding the elevator.

The Fruits of Workplace Wellness

Although some health risk factors, such as heredity, cannot be modified, focused education and personal discipline can change others such as smoking, physical inactivity, weight gain, and alcohol use—and, by extension, hypertension, high cholesterol, and even depression. The results are worth the effort.

Companies in our sample of 10 adopted wellness programs because, as Biltmore executive VP Steve Miller said, “It’s the right thing to do for our people.” Managers also have a responsibility to invest resources wisely, and all the companies in our study emphasized the importance of measuring a wellness program’s success.

By capturing key metrics, a wellness dashboard helps to connect investments in a program with short- and long-term results. Sophisticated companies set metrics-related goals and examine trends closely, just as they do for other facets of the business.

Our example dashboard (below) is based on our work in the wellness field. This rubric of the most useful metrics incorporates (1) employee measures of participation, satisfaction, and well-being; and (2) organizational measures of financial, productivity, and cultural outcomes. Items are typically measured monthly, quarterly, or yearly, depending on the metric, and are tracked over time.

Employee Metrics

Employee participation

Utilization—the total number of employees involved in specific program activities

Penetration—the percentage of employees who have participated in at least one wellness activity

Depth—the percentage breakdown of employees who are light or heavy users of wellness activities

Sustainability—the number of employees who continue to engage in a specific risk-reducing behavior

Satisfaction with the program’s scope, relevance, quality, and accessibility (from survey data)

Health-risk status identifying the percentages of employees at high, moderate, or low health risk (from HRAs)

Organizational Metrics

Health care

Medical care and pharmaceutical costs and utilization (from claims analysis)

Disability costs

Workers’ compensation costs

Safety

Safety incident rates by category or type

Lost and modified work days related to safety incidents

Productivity

Absenteeism

Presenteeism

Organizational culture

Trust in management (from anonymous survey data)

Voluntary turnover

Willingness to recommend the firm as an employer

Lower costs.

H-E-B’s internal analyses show that annual health care claims are about $1,500 higher among nonparticipants in its workplace wellness program than among participants with a high-risk health status. The company estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.

H-E-B estimates that moving 10% of its employees from high- and medium-risk to low-risk status yields an ROI of 6 to 1.

For every dollar SAS spent to operate its on-site health care center in 2009, it generated $1.41 in health plan savings, for a total of $6.6 million in 2009 alone. SAS’s team-based delivery of health care is less expensive than external care. Not included in the $6.6 million figure is the benefit of employees missing an estimated average of two fewer hours per visit by receiving on-campus care. As one manager noted, “I used to have to take a half-day leave for an appointment. Now I’m in and out without missing a beat.”

Greater productivity.

Illness-related absenteeism is an obvious factor in productivity. Less obvious but probably more significant is presenteeism—when people come to work but underperform because of illness or stress. Research consistently shows that the costs to employers from health-related lost productivity dwarf those of health insurance.

A 2009 study by Dr. Ronald Loeppke and colleagues of absenteeism and presenteeism among 50,000 workers at 10 employers showed that lost productivity costs are 2.3 times higher than medical and pharmacy costs. In a seminal Dow Chemical study from 2002, of the average annual health costs for a Dow employee an estimated $6,721 were attributable to presenteeism, $2,278 to direct health care, and $661 to absenteeism. A variety of studies confirm the health conditions that contribute most to lost productivity: depression, anxiety, migraines, respiratory illnesses, arthritis, diabetes, and back and neck pain. Employees with multiple chronic health conditions are especially vulnerable to productivity loss.

Higher morale.

Most analyses of workplace wellness programs focus on hard-dollar returns: money invested versus money saved. Often overlooked is the potential to strengthen an organization’s culture and to build employee pride, trust, and commitment. The inherent nature of workplace wellness—a partnership between employee and employer—requires trust. Because personal health is such an intimate issue, investment in wellness can, when executed appropriately, create deep bonds.

Health care is a monumental issue for employers, and too much is at stake to be reactive. It’s time for companies to play offense rather than defense. A verifiable payback isn’t certain, and the journey can be arduous. But what is the alternative?

A version of this article appeared in the December 2010 issue of Harvard Business Review.