Common Doubts when Converting Wellbeing Benefits into Investments
In my quest to explain how to convert wellbeing benefits into investments, let´s start with a basic question:
What is the difference between a benefit and an investment?
A benefit is a program offered to employees for competitive reasons (“other employers offer it so we also have to”) or because there is a common-sense feeling that it will be good for the physical or behavioral wellbeing of employees and, consequently, result in some type of cost savings.
However, in comparison, an investment is an outlay of cash that will result in a predicted flow of income or cost savings in the future, based on a set of assumptions, resulting in an Internal Rate of Return.
It is obviously easier to obtain approval of wellbeing programs if they are presented as investments, rather than benefits, utilizing the same financial calculations utilized by other departments in seeking approval of budgets.
Some of the Most Common Doubts You Might Have
But let´s face the facts: When one thinks of converting wellbeing benefits into investments, several uncomfortable feelings run through one´s veins:
- How do I convert the improvements in wellbeing into financial terms? For example, how do I convert reductions of physical risk and behavioral factors, like blood pressure and stress, into monetary terms?
- How do I calculate how many employees with high-risk factors will incur conditions such as CHD and Diabetes or will develop behavioral issues?
- How many employees at risk must participate in programs and what is the minimum effectiveness rate that I need to attain to break even on the investment?
- Do I have the right tools to measure productivity gains in presenteeism and absenteeism?
- How do I convert future savings into today´s money?
- How do I apply the formula for Internal Rate of Return?
- Do I rely on some promise of estimated medical cost or premium savings, when I know there is always some reason that these costs increase no matter what I do?
- How do I convert the conclusions of the seemingly endless studies of National improvements in absenteeism and presenteeism, promising billions of dollars in savings, down to the level of my company?
- How do I present the assumptions and results to financial personnel using their own language?
Follow My Blog to Find the Answers to These Questions
My next blogs will start answering these questions on how to convert wellbeing benefits into investments. For a sneak preview, visit our website, www.wellcastroi.com which explains how we perform our magic.
Of course, please invite other benefits, HR, medical directors, procurement, and financial administrators to read my blogs.
