One of the reasons why organisations are hesitant to address workplace mental health issues is because of the difficulty coming up with a business case. In other words what are the tangible financial benefits of investing in workplace mental health?
Any investment decision needs to be viewed in a financial context, so putting aside the moral and legal argument for a moment, how do you decide whether investing in workplace mental health is financially viable?
In order to start considering a business case for investment you need to understand:
- The objective, problem or opportunity
- The potential benefits
- The cost / the investment itself
- The impact on day to day operations and resources
These elements are interlinked but must start with an understanding of the objective. Ask yourself the following questions:
- Why are you considering taking measures to support workplace mental health?
- Is there an issue in your organisation?
- How do you understand the problem better?
Once you understand the problem you want to solve or opportunity you want take, you can consider what the benefits will be. The cost of investment should never outweigh the benefits unless you are thinking about it from an efficiency perspective i.e. getting the most for your money. Then there’s the day to day considerations; do you have the capacity and expertise to follow through?
Here is a simple case study to illustrate.
Company M has 1,000 employees and has a staff turnover rate of 15%, which has been increasing each year and cost £1.2m this year. Staff absence has been increasing too and is now costing the company an average of £500 per employee per year.
Objective – Reduce staff turnover and absence rates
Problem – It has been established through surveys and absence records that stress is at an all-time high, management don’t understand how much pressure is being put on staff, so people are leaving and the main reason for absence is stress, caused by workload.
Cost / investment – Educating staff and management will cost £150 per head. Reviewing work processes and implementing improvements to prevent future pressure will cost £50k as a one-off cost. Staff diverted to process improvement work will cost £50k. Providing staff with an Employee Assistance Programme for a trial 2-year period will cost £4 per person per annum (not considering time value of money) total £4k. Outsourced support to gain insight and support the change £15k one off. Total investment £269k in year one.
Potential benefits – Reducing attrition by 5% will save £400k and reducing the average cost of absence by £100 per employee, around £100k. Therefore, putting measures in place to combat workplace stress caused by workload will save around £500k per annum.
Timescales etc – In total the measures will be complete within 4-6 months. Leadership have shown considerable commitment to the plan and as such staff are behind it 100%.
In this basic example, the organisation may see roughly £2 return for every £1 invested.
For this to work, several factors need to be considered, for example:
- There are numerous ways in which to calculate the real cost of attrition and absence. If staff turnover rates and average cost of absence per employee are not calculated accurately, benefits will be misleading. The example shown used a cost of turnover of £8000 per instance (significantly less than the average of £30,000 according to acas.org.uk).
- The time value of money needs to be taken into account for any costs spanning more than one year, especially if they are material.
- Any reduction in absence or other metric, needs to be objectively calculated and conservative estimates used.
- This simple example does not include benefits such as reduction in presenteeism and indirect benefits such as improved productivity and quality.
Although it has shown how a business case might work, promoting workplace mental health should never be treated as a one-off business case. Reducing illness and improving business performance is not a project, it is a mentality and a culture.
