Wages Concept CFOs are required to think about allocating capital to generate revenue, reduce costs or increase margins. How does a wellness plan accomplish this? (Photo: Shutterstock)

Workplace wellness programs are not a new concept, and many companies now consider these programs a “must-have” rather than a “nice-to-have” initiative. However, it is not always easy to convince CFOs of this. CFO support is crucial because, at the end of the day, they are the ones setting financial priorities.

Workplace wellness is so much more than just an added employee perk. The right program can help employees make positive, long-lasting lifestyle changes, leading to millions in cost savings for businesses.

Related: Is your wellness program full of tricks or treats?

How can HR managers help their CFO look beyond current fiscal year savings and consider future payoff? What does it take to help your CFO understand how programs can tangibly reduce health insurance claims? Why do certain programs generate ROI more effectively than others?

One way to do this is to emphasize the features and benefits of individual programs. One program design that sticks out in particular is a chronic condition management program, which targets employees who sit between “healthy” and “sick.” These employees in the “middle” are not yet suffering from chronic conditions but most likely will reach that point.

For example, metabolic syndrome (MetS) is one of the largest health care cost drivers for employers. MetS is a combination of risk factors, like obesity and elevated high blood pressure, that could potentially increase the likelihood of costly chronic conditions including diabetes, heart disease and cancer-–conditions that can make up 70 percent of the average organization’s annual health care spend.

Chronic condition management programs help CFO’s achieve short- and long-term objectives. Not only will employees feel valued and that their company cares about their well-being, but the company itself can reach its profitability goals creating greater market valuation and sustained loyalty among its employees.

Understanding the CFO priorities

For HR managers, convincing CFOs of the value of a wellness program starts with understanding their priorities.

Rising health care costs is a big one. According to a survey by the National Business Group on Health, the total cost of providing health care benefits is expected to rise 5 percent for the sixth consecutive year in 2019, and employers will cover roughly 70 percent of health care costs. Most employers will have no choice but to absorb the increase or lose their employees to firms with better health care benefits.

Employee retention and avoiding turnover are also typically high on CFOs’ priorities list, and while the right salary will obviously be a driving factor, a robust benefits portfolio – including health and wellness benefits – will also be key. For example, a 2018 Gallagher survey found that there is an increasing desire for chronic disease management programs. Thirty-eight percent of surveyed organizations said that they offer disease management programs that can help employees with chronic conditions like chronic obstructive pulmonary disease and diabetes. That is a 9-point increase from 2017 survey results, with 17 percent adding that they plan to add such programs by 2020.

Companies today are being asked to do more than just generate profit–-they need to be engines of change, while providing a community and social support. As a result, they must consider their employees’ health as a critical element to that system.

When employee wellness is done right, it can have a current period impact and generate multiples upon its investment in one year. That will surpass any hurdle rate required for capital allocation.

How the evolving CFO role can generate real ROI

CFOs are required to think about allocating capital to generate revenue, reduce costs or increase margins. This means that wellness programs must be able to prove that costs were reduced due to the outcomes generated. This currently is not happening enough, and yet, the industry continues to survive due to the concept of cost avoidance and soft ROI.

Addressing the cost issue head-on means that it will be critical for companies to tap programs that have compelling pricing models, including money-back guarantees, outcome-based pricing, or pricing based on eligible employees only (rather than all employees).

CFOs also need to get more involved in the vendor selection process, so they can be the honest brokers of real versus imaginary savings. HR managers may be too quick to push the productivity or absenteeism button to validate a new program; however, CFO’s know there is a line item in the cost structure that continues to grow at least twice the rate of inflation with no revenue benefit – and they should not be satisfied with these soft ROI or avoidance claims. CFOs need to be the balance between what a vendor claims, and what they can see on the bottom line.

CFOs understand the concept of net present value (NPV) and do not require a one-year payoff. However, HR managers have to show that outcomes are sustainable and, therefore, the savings are sustainable.

For instance, a CFO might think that a “fad diet” or an exercise program will only impact the current year and not future years. So, if the HR manager can show CFOs that behaviors are impacted in the long run, they can make a case for continued savings over time. Even so, CFOs should be on the hunt for programs that can generate savings in the current year due to the unhealthy state of their employee population – especially those in the “middle.” They can be affected in the current time period.

This is why companies need to focus on chronic condition management programs to truly keep employees motivated to stick to healthy behaviors. Traditional workplace wellness programs are critical investments, but often do not go far enough to guarantee both short- and long-term success.

Investing in the right program can ensure that existing unhealthy habits do not prevail down the road. From there, businesses will also be better able to pivot their approach to wellness and keep employees healthy while generating real ROI.

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Brent Wilkinson is CEO of Zillion.

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