by Cyndy Nayer, President and CEO and
Chris McSwain, Vice President,
Center for Health Value Innovation
Costly investments in employee health have yielded unacceptable results, dampening the enthusiasm of employers to continually deploy old-line tactics—from negotiating provider prices to raising employee deductibles. Many companies have launched wellness programs, only to watch them fail as workforce health continued to be problematic. It has become evident that simply trying to manage health care costs rather than health or chronic disease is not a success formula.
After assessing their options, many forward-thinking employers discovered a way to fix the problem: The introduction of value-based health benefits. This enabled companies to personalize and integrate programs, starting with assessments to identify individual health risks. Once risks were identified, employees utilized wellness coaching and disease management programs to manage chronic conditions.
This year will bring a shift into the next phase of value-based health. In order to get up to speed and control health care costs, without compromising the health of their workforce, more companies need to focus on the value of strategies that keep employees out of the hospital and productive at work. It’s simple: Employers remove barriers to access, use incentives for care selection, and offer certain medications and supporting services free to employees who agree to participate in disease management programs.
This innovative approach includes a larger value-based portfolio that incorporates all of the business segments (finance, human resources, operations, and more) into building the most important asset: Human capital.
Investment in Human Capital
In uncertain economic times, employees serve as the ultimate differentiator in an employer’s strategies for success—no matter what industry. This year, instead of employers challenging their investments, they need to invest in resources to manage across all internal silos of health, wealth, and performance. It’s not enough to think of managing the benefits spend down to the penny.
Employers must consider all the areas of investment made in their workers—and how outcomes are inextricably linked. The HR department generally has limited options for managing these investments. Additionally, business operations, finance, and HR may be at cross-purposes—the classic left hand not knowing what the right hand is doing—and fall short of coming up with data to support important decisions.
Start with Meaningful Data
Most benefit teams that have invested in data collection have not considered the advantages of a more holistic view of their people by including HR data that incorporates compensation, training, and development. Data warehouses for HR costs and consumption do contain a lot of information—mostly health information—but this information does not relate to the total investments in performance, nor is it “actionable.” Few companies know what they invest annually in their employees’ performance.
It doesn’t have to be this way. If employers are strategically managing those investments the same way they track classic capital, or even information technology investments, investment in human capital would survive budget cuts. Without sufficient data, decisions on spending can yield poorer return on investment for the employer and lower value of investment as perceived by employees.
A holistic approach to data collection and use helps drive a broader range of questions and potential solutions that, in turn, drive real value for everyone. For instance:
- Engagement. Asking the question, “Who is or is not engaged in personal success and corporate success?” will drive the questions of how to engage, what interests will engage those who are not engaged, and how those interests will drive the success of the company.
- Support. Employers need to ask the right questions of their vendors and consultants. If these questions center on costs alone, the answers will be cost-driven, which doesn’t always lead to the best results. Cuts in health benefits can actually cause unscheduled absences, which then raise total expenses.
- Planning. When getting advice on training programs to fuel productivity, employers should avoid questions centered only on the costs of the programs to avoid missing an opportunity to build the kind of assets that influence other business segments. As an example, safety training may actually yield new safety recommendations that decrease disability days and the need to hire replacement workers required to cover unscheduled absences.
Personal Value Represents Each Employee’s Health-Wealth-Performance Portfolio
Health, wealth, and performance are assets in which both employer and employee make investments annually, and from which both employee and employer benefit. For the employee, the result is portable, transferable skills, talent, and assets; for the employer, it’s increased productivity and applied resources.
To move forward—and escape the health care cost quagmire—employers need to instill a broader sense of accountability that will improve outcomes for both the company and the individual.
For employees, the sum of their health, wealth, and performance assets reflects their personal value. In other words, Health + Wealth + Performance = Personal Value (PV). For employers, the sum of all employees’ PV represents the human capital of the enterprise. Higher levels of personal accountability for these PV assets increase employee engagement in the employer’s programs invested to improve the human capital of the enterprise. Health, wealth, and performance are linked—decisions in one area often affect the other two. Those assets—like gears—drive each other, with both employers and employees owning a stake in their management.
For example, an employee can’t save enough to pay for poor health in retirement. If an employee chooses not to manage his or her health well and does not manage the investments that the employer makes into his or her health, then the costs of poor health will escalate, reducing wealth and performance.
A successful company will guide employees toward sharing in this investment opportunity through health savings, education, and wealth management. Improved health is the front line of improved productivity. Investments that improve health also directly affect wealth and performance. Employers and employees must broaden their collective vision to see how to improve efficiency. To do this, employers must use data to optimize resources without compromising quality or service.
Progressive employers are finding ways to produce meaningful data that enable employees to optimize their personal value. These employers utilize conjoint analysis, employee engagement surveys, or other means to determine what employees value at each stage of their life. This is important information because a dollar of investment by employers may not be worth a dollar of value to employees.
The reality is that the needs of a 25-year-old employee are different from those of a 55-year-old. Employers must understand that and use appropriate rewards so that each employee can increase his or her personal value.
Opportunity to Improve ROI
To begin implementing this holistic approach, employers need to strategically take a step back and ask, “What is my ROI for investments in human capital?” The answer will depend on how skillfully an employer ensures that employees can make the right choices based on each person’s individual needs and goals.
Employers can make immediate improvements in the ROI of these significant capital investments by simply helping employees better understand how to use what is available—a move toward personalization of rewards. Through personalization, employers can manage their human capital assets while increasing the value perceived by employees, without adding cost.
Personalization provides the opportunity to meet the evolving needs of employees. It strengthens the employer’s value proposition by helping employees increase their PV with options that make sense for them. Increased PV means improved engagement, productivity, and retention—all of which lead to the total rewards strategy of competitive organizations.
Personalization can be as simple as providing core offerings in the three areas of health, wealth, and performance. Beyond this, an employee can choose a specific number of options covering these three areas—as determined by personal needs relative to the needs of the employee’s health-wealth-performance portfolio. By tailoring the selections, the employer may spend less or at least remain cost-neutral because benefits are used appropriately.
Final Thoughts
Employers must answer to shareholders and stakeholders alike, including the employees, to drive the value of every dollar spent. Likewise, employees must take responsibility and make decisions that drive their Personal Value and enhance the economic viability of the enterprise.
Once employees begin to manage their own Personal Value, they will begin to understand that their investments in performance, wealth, and health will accompany them from job to job within or outside their current employer.
Given the confluence of the economic and health care crisis, the time is perfect for every company, large and small, public and private, to examine the dollars spent on investment, development, and production. Top decision-makers, from CEOs to CFOs to HR executives, need to define how they manage the population’s human capital as an investment in the company. Equally, employees must examine how they can maximize the value of their health-wealth-performance portfolio through the investment offered by the employer.
Cyndy Nayer is president and CEO of the Center for Health Value Innovation, the nation’s leading information exchange for value-based design. A futurist and health improvement expert, Nayer co-authored Leveraging Health. She can be reached at 314-422-4385 or info[at]vbhealth.org.
Chris McSwain is vice president of the center. He serves as the director of global benefits at the Whirlpool Corp. Chris can be reached at info[at]vbhealth.org.