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"Is Stress Nibbling Away at your Bottom Line?"
(Part 1) by Steven Alper
How do you and your business handle stress? Do you employ stress reduction best
practices or something less than the best? Most likely you don't settle for less than
best practices with regards to management, process design, sales, marketing,
customer service, training, human resources, and other key components of business
operations. So what about stress reduction? Do you even consider it a business
practice? If not, then consider the following:
In a 1989 study, Donatelle and Hawkins estimated that stress on the job costs
businesses over 150 billion dollars per year. In 1994, Scott and Jaffe reported that
stress-related disability claims had doubled over the past ten years. In California, the
average cost of each claim, according to a 1990 study, was $73,270.
The influence of stress on physical and psychological health is well documented.
Stress has been implicated as a causal factor in heart disease, stroke, insomnia,
ulcers, accident proneness, cancer, compromised immune function, chronic headache,
diabetes, depression, anxiety disorders, substance abuse, chronic pain, irritable bowel
syndrome, and chronic fatigue. It is estimated that 50 to 80 percent of all physical
disorders have some psychosomatic or stress component, and that 70-90 percent of
outpatient physician visits are stress related. Seven of the top ten best selling drugs
are prescribed primarily for stress-related illnesses.
According to a 1992 Northwestern Life Insurance Company Study, seven in ten
American workers indicated that job stress is causing frequent health problems and
has made them less productive. Among those same employees, 46 percent reported
that their job was very stressful, 34 percent thought about quitting their jobs because
of workplace stress, and 14 percent did leave their job because of stress. In a 1984
Metropolitan Life Insurance Company study, it was estimated that approximately one
million workers are absent on any given day, largely due to stress disorders.
According to the Northwestern Life study mentioned previously, workers who report
high stress are three times more likely than workers reporting low stress to suffer from
frequent illness. However, studies have shown that heart patients, for example, who
attend stress management programs have 42% lower health care costs. Other studies
have documented 50% reduction in medical services utilization with stress
management programs.
In today's high pressured, fast paced business environment, effective stress reduction
has become a mission-critical ingredient for running a successful enterprise. When
human capital, particularly for knowledge-based enterprises, is the key ingredient for
success, then "frictionless capitalism" necessarily involves more than integrated CRM
and ELP systems. Potentially the most damaging, and often the least acknowledged
sources of friction are stress and its immediate consequences, in the form of
absenteeism, reduced productivity, poor morale, employee turnover costs, insurance
and medical costs, and sick leave and disability claims.
It's no mystery why stress in the workplace poses an ever-increasing health and
economic threat. New technologies (the PC and cellular phone, for instance) have
revolutionized and intensified the nature of work. Productivity expectations have risen
apace. The pace of change itself has dramatically accelerated, and is likely to continue
to do so into the foreseeable future. Dual income families are now the norm rather
than the exception. Nonetheless, family economic stresses have increased, as have
psychological strains. Globalization and the shifts from an industrial to a knowledgebased economy have resulted in increasing competitive pressures and far less job
security.
Although the economic impact of stress has been widely discussed for almost twenty
years, many companies have yet to develop comprehensive strategies to combat
stress in the workplace. Personally I have presented numerous "brown bag" lunchtime
stress management talks and stress management seminars without follow-up, varying
from an hour to a full day. Although fulfilling the human resources mandate to provide
some stress management training, I have grave doubts about the long-term (and even
short-term) efficacy of such training. An effective, comprehensive stress reduction
strategy involves not only ongoing training and practice in effective individual coping
skills, but also identifying and addressing sources of stress in business practices and
processes, organizational structure, and in the organizational culture.
Ultimately, stress is less about what happens to us than about how we relate to what
happens to us. This holds true both on individual and organizational levels. Stress
levels are determined by how we perceive, process and respond to information, and
how we engage in relationships. If stress reduction programs are aimed solely at the
individual employee without addressing business practices, processes, and the
organizational structure and culture as a whole, they risk generating resentment with
a "blame the victim" implication.
How can one estimate the ROI for Workplace Stress Reduction Programs? Let's define
the Benefit of the solution as simply the reduction in direct health care costs (leaving
out sick leave, disability claims, employee retention costs and the like), and the Cost
of the solution as the cost of training per employee plus consulting for the system.
ROI = Benefit of solution - Cost of solution x 100 / Cost of Solution
Example:
Cost of Health Care
~ $5500 per employee
Number of Employees
= 1000
Cost of Health Care for 1000 Employees
= $5,500,000
Estimate (conservatively) a 10% reduction in health costs for employees who are
trained in an effective stress reduction program. (Remember 50% reduction in costs
has been documented.)
Cost of Training
=
$175 per
employee
Cost of the Solution:
$175 per employee x 1000 employees
=
$175,000
Executive coaching and system consulting
fees
=
$10,000
Total Cost of Solution
=
$185,000
Benefit of Solution:
Cost of Health Care
~
$5500.00 per
employee
Total Employees
=
1000
Total Health Care Cost for 1000 employees = $5,500,000.00
10 percent reduction in health care costs = $550,000 savings
Benefit of Solution:
ROI =
550,000 - 185,000 x 100
=
197%
185,000
This calculation does not take into consideration costs of absenteeism for sickness and
doctor visits, disability claims, recruiting and training costs associated with high
employee turnover, and more difficult to measure variables associated with high
stress, including decreased productivity and other effects of low morale. So the actual
ROI is likely to be much higher.
The best stress reduction programs also positively develop managers, employees,
teams, and organizational culture. Return on investment is then not limited to savings
on health care costs, but also derives from leadership and team development, better
communications and relationships, and enhanced performance and productivity.
This concludes part 1 of this multi-part article. Part 2 of "Is Stress Nibbling Away at
your Bottom Line?" will be published in an upcoming issue of Link&Learn
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Steven Alper is the Director of the Mindfulness-Based Stress Reduction Program at
the Scripps Center for Integrative Medicine in La Jolla, California. He also consults with
the Scripps Center for Executive Health on Stress Management and Mind/Body issues.
Through his consulting firm, M.E.T.T.A. Training and Consulting, he provides training
and executive coaching based on mindfulness practices and perspectives to a broad
range of corporations and organizations.