Why is Corporate Health Management so Important?

Why is Corporate Health Management so Important? Social trends are creating new and increased health risks in the work environment. This topic has powerful ethical considerations and includes a term that barely existed a decade ago: “presenteeism” – the practice of working while unwell or persistently working longer hours and/or taking fewer holidays than the terms of one's employment allow, especially as a result of fear of losing one's position or even employment. Employers that proactively use corporate health management to address potential issues can create significant competitive advantage.

Why is Corporate Health Management so Important? Edited by Prof. Edward Yagi, from a speech made by Dr. Axel Baur, Senior Partner, McKinsey and Company, Tokyo Office

Key studies demonstrate a worrying trend in the relationship between employee healthcare and negative financial impact. Indeed, healthcare costs are shown to be increasing faster than other cost factors with presenteeism currently representing the biggest cost driver in many industries.

Statistics show that just the top three problem classifications (psychiatric conditions, respiratory conditions, and musculoskeletal conditions) cause annual presenteeism costs of roughly US$8.4 billion for the German car manufacturing industry alone. Furthermore, compound annual growth rates of German employer healthcare costs were 4% between 2005 and 2010, while during the same period the comparable growth of wages and GDP was only 1%.

In parallel, it has been estimated that UK employer failure to adequately invest in the health and wellbeing of their employees, costs the UK economy £57 billion a year in lost productivity.

This data points to the conclusion that companies can achieve high return on investment through appropriate healthcare measures. The primary reasons for offering health and wellness programs are to improve the health of employees and reduce absenteeism, and therefore in turn reduce healthcare costs.

Moreover, investments in the health and vitality of employees are mostly long-term oriented and a meta-analysis of more than twenty studies on health plan cost savings – and an equivalent number of studies that examined sick leave absenteeism savings – both found significant ROI in both medical cost savings and absenteeism reduction.

Research suggests that behavioral changes can also drive down illness costs, but behavioral change requires the consideration of many factors including incentives, education, training, awareness raising, and other promotional techniques.

Corporate Health Management: A win-win for the company and employees

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There is recognition among those who benefit the most from employee healthcare – employees themselves – that such initiatives are effective. Employees recognize, acknowledge, appreciate, and reciprocate when their employer cares for their well-being.

In recent years, employee wellness programs have become “the new standard” in many companies, with a majority of firms generally recognized as “best in class” now engaging in employee health and wellness initiatives, compared to almost none as little as five years ago. These include such companies as Walmart, Exxon-Mobil, Chevron and Ford in the USA and Johnson & Johnson and Adidas UK in Britain.

A positive effect on company culture

Moreover, employees feel that health and wellness programmes positively impact the overall work culture at their place of employment. They are linked to raising morale and maintaining people on a positive track during negative and/or seismic change like downsizing, offshoring, downturns in the overall economy, and temporary business slowdowns.

To conclude, however, there is no one-size-fits-all solution. Companies need to find the right solutions that fit their business model and culture. Moreover, illness patterns vary by industry region and employment category and the choice of measures taken must be essentially industry-driven as well as results-oriented.

Dr Axel Baur McKinsey and Company
Axel Bauer

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