The ROI of Improving Wellbeing – A Financial Focus
Author: Angela Vale, Life Coach
Angela Vale is a life coach of nearly 20 years with a degree in business transformation. She is an experienced people leader who has spent the last eight years in the financial services sector. She is the former CEO of Footprint Connect, and recently developed a unique employee wellbeing coaching framework, ADAPT™. She is also co-author of a newly released white paper, ‘Getting Under the Hood of Employee Financial Wellbeing’, which includes articles from Umbrella Wellbeing and the Institute of Directors.
When I started work at the age of 16 in a little factory in rural Auckland, I recall being told to leave my personal life at the door. These days, thankfully, most employers agree that old way of thinking is outdated and fundamentally flawed. It is now widely understood that our most basic needs (physiological and safety needs) are intrinsically linked to our wellbeing, including our financial wellbeing.
Footprint Connect’s white paper, Getting Under the Hood of Employee Financial Wellbeing, talks about the ROI for wellbeing initiatives being $12 for every $1 spent over a 12-month period. A survey reported in the paper shows that nearly 50 percent of the workforce is anxious, stressed or concerned about money.
It stands to reason that if we believe our basic needs are not being met, or are in jeopardy, then our fear response can be triggered and we go into survival mode.
This state of existence is almost primitive; it is likely to dominate our thoughts and behaviours. When we are living in this mindset, observers may notice a lack of being fully present (also known as presenteeism) as we go about our work day – we’re just not “with it”, we are tense and distracted, perhaps more prone to mistakes. In this state, emotions can be volatile and our perception of events or situations can be skewed and viewed through a different lens than what might otherwise be our norm.
What does this mean for managers and leaders in companies? They can misinterpret these changes in attitude and behaviour as performance issues, which may trigger an approach that perpetuates, and fails to resolve, the very problem they are trying to address.
Issues affecting wellbeing, financial or otherwise, don’t just affect the person who is struggling; managers, team members, internal and external customers and others in the organisation are also affected, directly or indirectly. And the business itself will experience some or all of these (and more besides):
· Increased absenteeism / illness
· Reduced morale and productivity (presenteeism)
· Declining customer service quality
· Declining work quality
· Decrease in collaboration and teamwork
The cost of even one person in survival mode is significant. While we currently lack substantial data in New Zealand, according to the Southern Cross Health Insurance Business NZ Workplace Wellness Report an absent employee has typically cost their employer $600 to $1,000 per year since it started capturing this data within its survey. According to a 2020 Forbes report, research by HR specialist SHRM found that 80 percent of employers report that financial stress is lowering their employees’ performance level, at an annual cost of nearly half a trillion dollars. Inarguably, it makes good business sense to incorporate financial wellbeing into today’s business strategies and employee benefits programmes.
A lack of financial preparedness contributes to the circumstances that lead to poor financial resilience and wellbeing. Reserve Bank data shows New Zealanders’ collective household debt climbed to $250 billion in 2020 – an increase on pre-COVID levels – while a 2021 Finder survey of 1,501 New Zealanders aged 18+ found around 41 percent of Kiwis are carrying credit card debt, owing $3,776 each on average. Seventeen percent of respondents cited credit card repayments as their leading cause of financial stress.
Compounding this financial stress is our overall lack of protection against risk; the Reserve Bank’s 2020 overview of life insurance (which may be linked with dropping home ownership rates) in New Zealand identified that life insurance penetration (the ratio of gross premiums to GDP) and density (gross premiums per capita) are both well below the OECD average.
A series of barometer surveys by the Commission for Financial Capability revealed that only 29 percent of respondents could access three months’ worth of income (the minimum amount money experts say you should have socked away) in case of an emergency, such as a sudden job loss or significant reduction in income.
Information is certainly part of the solution, which employers and financial providers can play a big part in. It shouldn’t stop there – providing information may tick a box, but if there is going to be sustainable change, we need to tackle the beliefs that are influencing our financial behaviours.
A recognised approach to change is to create awareness, grow knowledge and enable action. Helping to improve employee financial wellbeing doesn’t have to be increasing pay rates; it can involve supporting further education by giving access to information, tools and resources that empower through self-driven learning, with guidance for action-based next steps.
This approach can lift confidence, which in turn helps with decision-making, leading to better outcomes. Moreover, this cycle of change can help with the transference of knowledge through to other family members and into our communities.
The work is being done to support employers to get it right: a longitudinal study of financial literacy by Massey University’s Fin-Ed Centre found plenty of bright spots – very high participation in KiwiSaver (which employers can support), wariness about credit cards, and general confidence in their ability to manage their money – and identified the financial attitudes, behaviour and tools for wellbeing that are increasing levels of literacy in the community.
Crucially, it showed that many young people continue to rely heavily on their parents for financial advice and a “learning by doing” approach instead of traditional financial literacy interventions in formal settings as a source of learning – meaning there is a huge opportunity for employers to fill the gap by offering more fit-for-purpose education and literacy solutions.
While the evidence supports financial wellbeing becoming a key pillar in all employer wellbeing programmes, I am not suggesting that improving New Zealand’s financial literacy and capability gaps is a simple one. There are recognised challenges for employers, including managing a diverse range of needs and expectations, finite budgets, tangible ROI and the view that solutions need to be tailored and individualised. However, having seen some of the impacts that come with poor resilience, financial or otherwise, I do believe employers have a great opportunity to help move the dial.
Practical questions for employers to consider in 2022:
What have you observed during the past year? Have you seen employees struggle to maintain focus? Have you identified some of the main drivers of low productivity and stress as opposed to simply addressing the perceived performance issue? Has there been an increase in absenteeism? Has social chatter in the office turned more to shared experiences of life and general affordability seeming harder?
Review your existing employee benefits programme and see if it is still fit for purpose in the context of your industry and rising rates of employees suffering from burnout and the effects of financial stress. Is it delivering an acceptable ROI?
What is the present state of your workforce’s financial confidence, resilience and preparedness, and what does success look like?
Financial wellbeing is twofold, the relationship with money and the outputs, e.g. How you feel about spending and how much money you have saved. Does your approach to financial wellbeing capture both?
Does your benefits programme address both long- and short-term wants or needs and how does this align with your short and long-term talent and retention approach?
How well are your leaders equipped to manage their own fear response, and that of their teams, when it comes to financial preparedness and resilience?
How much does your employee benefits programme give vs. enable and empower? (i.e. does it simply cover things like gym memberships, insurance, wills, etc., or could it offer courses on money management instead?)
