Investors can factor in this data as an input when developing an outlook on a company’s business, and whether employee dissatisfaction and turnover could be a threat. Employees may want to move to similar firms in the upper right of the plot, which offer better pay and better benefits. To combat this, firms should strive to improve their wellness in cost-effective ways.
Big data analysis can help frame developing wellness trends in sectors, industries and individual companies. Of course, to interpret the results of this type of analysis, investors must factor in different industry conditions. For both employees and companies, the trade-offs between compensation and work-life balance are likely to be much different in high-paying technology or finance jobs versus low-paying jobs in industries such as retail or manufacturing. And evaluating individual companies requires fundamental research and informed engagement. By including wellness questions in a stock-selection process and engagement efforts, investors can gain insights into how companies are developing innovative approaches to creating a comfortable environment for workers to thrive.
How Are Companies Evaluating Wellness?
As our big data analysis indicated, many companies are discovering that compensation is not the most important value for employees. For example, a major US pharmaceutical company held in one of our portfolios conducted a compensation analysis of its workforce and discovered that employee development and career path visibility and support outweighed increased compensation and benefits. For many of the company’s staff, work-life balance, development opportunities and childcare were ranked as important as pay-related issues.
Studies like this illuminate potential growth paths for employees. And they allow a company to conduct a more thoughtful assessment of the value added by each compensation dollar in comparison to money spent on efforts to increase retention and attraction. In turn, this can help companies reduce costly hires of external talent.
Proactive wellness monitoring is taking root across sectors. At a major fintech firm, management conducts an annual compensation, benefit and wellness stress test. The goal is to determine whether employees are paid a thriving wage, working in optimal environments and receiving the support needed to promote a positive culture that maximizes staff retention. And at another giant consumer company, employee sentiment is measured every day. Taking the wellness pulse aims to identify trouble spots that deserve management’s attention. To be sure, companies must strike the right balance between monitoring wellness and making employees feel overly monitored, which would risk a backlash in employee sentiment.
Wellness assessment is becoming ingrained in the day-to-day operations of many companies. At one major US healthcare provider, an assessment tool is used to identify employees for leadership roles and development and to monitor work-life balance. The talent index draws on demographic, background and peer information to develop succession and mobility paths for key roles. And an employee engagement index helps measure staff sentiment in real time. The company reports that in its inaugural year, the information generated by these indices helped reduce turnover, increase productivity and cut human capital costs. While every company will have different methods of measuring wellness, tailored to the business and corporate culture, we believe investors should verify that portfolio companies are taking clear action to monitor staff sentiment.
Where does the responsibility for wellness begin and end? That’s a tricky question for large corporations with multinational supply chains. Is a supermarket responsible for the forced labor conditions that may be used in producing the cocoa for its chocolate bars?
One large US retail chain has risen to the challenge by educating its buyers, suppliers and transportation providers on best practices and audit procedures. The company is engaging with regulators, governments and local officials on effective legislation and enforcement. There is a clear business imperative for companies to keep tabs on its supply chain ecosystem, as it reduces the risks of business disruption from vigilant regulators or a disgruntled workforce.
Mental Health: The Unspoken Scourge
Within a company’s workforce, mental health is finally being talked about. Mental health issues are perhaps the most sensitive of all wellness issues, as they carry a stigma that deters employees from speaking up. According to the World Health Organization, only half of American workers are comfortable talking about mental health in the workplace, and more than a third are worried about job consequences if they seek mental health care.
That is a big challenge for companies. As the WHO reports, depression and anxiety costs $1 trillion a year globally in lost productivity. So companies have a clear incentive to address mental health issues. Yet how do you create an inclusive culture where people are comfortable seeking help—and taking time to recover—rather than resign?
For many employees around the world, growing pressure to stay connected to the workplace is adding acute pressure. In the work-from-home era, expectations of responding to emails around the clock have further blurred the boundaries between work and home.
In Australia, these trends have led labor unions to campaign for the “right to disconnect” from calls, texts and emails outside work hours. "If work invades all hours of your life and you cannot disconnect, it is a recipe for serious problems for both the worker and the employer," said Australian Council of Trade Unions secretary Sally McManus, in a report on ABC News in Australia. Being constantly connected presents a “high risk” of mental health problems, she said.
The growing frequency of mental health problems had been creating challenges for the insurance industry well before the pandemic. In 2017, Craig Drummond, the former CEO of Australian insurer Medibank, said private health insurers in the country fund 50% of all mental health admissions, and 90% of day admissions for mental health. Claims costs are growing with little upward movement in health insurance premiums, creating a serious challenge for insurers, he said.
CCLA, one of the largest UK charity fund managers, has put mental health at the center of efforts to assess how listed companies address employee wellbeing. “In the corporate world, stigma still exists,” says CCLA, “and whilst there are pockets of great practice within organizations, there is an absence of a serious structural attempt to treat corporate responsibility for mental health as seriously as physical health and safety.”
In an effort to promote awareness and action on mental health, the firm is developing the CCLA Mental Health Benchmark, which aims to show how listed companies are addressing employee well-being. Initiatives like this will make it easier for investors to evaluate wellness in holdings, while pressuring companies to demonstrate that they are creating an environment that is conducive to addressing mental health issues.
Striking the Right Balance
Balancing mental health, work-life balance and productivity will be key questions as the corporate world gradually returns to normal after the pandemic. Flexible working arrangements are likely to continue at many companies, but the debate is still raging. In the financial sector, some companies are pressing to get workers back in the office quickly, while others have said that they will provide staff much more flexible working arrangements post-pandemic.
Getting the wellness formula right will take time—and solutions will differ by the unique circumstances of industries and individual companies. But it’s not too soon for investors to start including wellness as an integral component in research, stock selection and engagement. Big data and quantitative tools must be creatively applied to gauge the efficacy of corporate wellness programs. Fundamental research should proactively incorporate an awareness of how investing in wellness can generate tangible competitive advantages. Armed with quantitative and qualitative insights, investors will be better equipped to ask management informed and candid questions about whether they are treating employees right to sharpen their business edge.
