Employee Health and the Incomplete Balance Sheet

We humans love tangible things—things we can touch, hold, and feel with our senses. Tangibles allow us to directly perceive, quantify, compare, and recognize patterns with more certainty. It often just feels better to make decisions based on solid, tangible evidence. It’s in our nature.

In today’s business landscape, more and more decisions have to be made based on what we can’t see. In business school, they teach you neat things like learning to measure the “health” of a company or an organization by looking at the balance sheet. You memorize many three letter acronyms for calculations like ROA, ROI, CCC, DPO, etc. in order to understand operating performance. With this knowledge, it’s possible to make comparisons so investors can determine where to invest their capital and resources. Then hit repeat.

The intangible factor

There are vital elements that are not accounted for on the balance sheet, particularly the human element. You can find us in entries called intangible assets. Intangible assets are the ones without physical substance. They include intellectual property such as patents, trademarks and copyrights, as well as market share, customer loyalty and human capital. Human capital is typically designated as the talent and ability of the workforce, such as employee:

  • Skills
  • Knowledge
  • Experience

Here’s where we start having problems. Aside from the accounting definition that implies we don’t have a physical presence, these values can’t be accurately listed as an asset on the balance sheet. In fact, there is still much debate on how to account for intangible assets. Moreover, intangible assets are much more important than they may seem—and their costs are significant and rising.

“Productivity losses related to personal and family health problems cost U.S. employers $1,685 per employee per year, or $225.8 billion annually.”

—Centers for Disease Control and Prevention

Can you have company health without employee health?

Aside from the inherent difficulty of defining and measuring intangible assets (and humanistic reasons like having a healthier population) employee health remains grossly overlooked. Chronic health conditions are on the rise across all age groups, and these conditions create a significant economic burden, costing employers heavily.

  • More than 80% of medical spending goes toward care for chronic illness
  • Nearly 50% of Americans suffer from one or more chronic health conditions
  • Between 2000 and 2030, the number of Americans with chronic conditions will increase by 37%, an increase of 46 million people

An influential paper in the Harvard Business Review noted that the skills and talents of a company’s workforce “are worth far more to many companies than their tangible assets.”

Some employers have taken notice. However, there has been a tendency to focus on medical costs without considering the impact of health on workforce productivity. For example, indirect costs of poor health—lower productivity, higher rates of disability, higher rates of injury, and more workers’ compensation claims—can be double-to-triple the costs of direct medical expenses. In addition, the cost of employee turnover as a result of illness can range from 90%–200% of the departing employee’s annual salary. With employers covering healthcare costs for 160 million nonelderly American workers, preventing disease and improving health outcomes is a financial imperative for many businesses.

Prevention is key

Although chronic diseases are among the most common and costly of all health problems, they are also among the most preventable. Everyone wins when we invest in prevention:

  • Individuals: workers stay productive and healthy—both inside and outside the workplace
  • Businesses and organizations: long‐term healthcare costs decrease, which increases stability, productivity, and global competitiveness
  • Communities: according to one study, a community that offers healthy, productive, even modest improvements in the health status of US workers could increase the nation’s GDP by $905 billion by 2023

What can be done?

A workplace health assessment can be invaluable in order to learn about a workplace and the health of its employees. The key questions that can be answered are:

  • What health issues affect employees?
  • What factors at the workplace influence employee health?
  • What are the employees’ health and safety concerns?

 

Pierre Fosell , MBA
Contributor for BIOKINETIX

 

BIOKINETIX Marketing
Marketing & Strategy Director at BIOKINETIX
Michael applies this expertise to drive BIOKINETIX’s promotional and cross-channel marketing efforts, as well as develop initiatives within new technology and media.
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