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Dear SB Vanguard:
How Can Companies Measure ROI of Investments in Worker Well-Being?

This is the latest in a series of posts in which we will poll our global community of business leaders and practitioners — what we call the “SB Vanguard” — on a variety of issues pertinent to the evolving sustainable business landscape.IKEA and GAP have both raised their minimum wage; Starbucks is now subsidizing employee education; and H&M is fighting for higher worker wages in both Cambodia and Bangladesh ... Despite the expected added brand value, it must be a challenge to justify such a dramatic and costly shift.So we asked the SB Vanguard: How can more companies make the business case internally for prioritizing such investments in employee and worker well-being? And how could companies go about measuring the ROI?

By Sustainable Brands | Published 10 years ago | About a 6 minute read

IKEA and GAP have both raised their minimum wage; Starbucks is now subsidizing employee education; and H&M is fighting for higher worker wages in both Cambodia and Bangladesh ... Despite the expected added brand value, it must be a challenge to justify such a dramatic and costly shift.

So we asked the SB Vanguard: How can more companies make the business case internally for prioritizing such investments in employee and worker well-being? And how could companies go about measuring the ROI?

Here are a few of the responses ...

“A few thoughts come immediately to mind in terms of justifying such a move:
If the higher wages are paired with other investments, like training and development, companies stand to gain from this investment in their human capital (per Paul Herman's work with HIP Investor on valuing human capital, a tool Interface has used to look at our business from another perspective).

For jobs where high skill and experience makes a difference, paying more could result in improving employee retention, recruitment and competence over time, which could result in more efficient use of materials and energy in manufacturing (less mistakes, fewer accidents, less waste, easier to implement continuous improvement and other management programs, including sustainability programs).

The value of continuity and avoiding the loss of tacit knowledge in manufacturing is particularly important. Turnover in manufacturing environments can lead to loss of valuable "tacit knowledge" that only people who do a job everyday understand. You can train a new person to operate a piece of machinery, but an experienced worker will know how to get the most out of that machine and troubleshoot a much broader range of problems that could arise. Interface Americas enjoys less than 5 percent annual turnover in our Troup County, GA manufacturing operations, in spite of operating in an area full of alternative manufacturing jobs (including a new KIA Motors plant). Industry averages for turnover in manufacturing are typically tend over 20 percent. We consider this to be a valuable competitive advantage that better enables us to pursue our longer-term goals in sustainability and manufacturing innovation.”

— Mikhail Davis
Director of Restorative Enterprise, Interface
@mikhaildavis

"I believe it's not how can you afford to invest in people... The question is, how can you NOT afford to invest in your people?

Our mission has always driven the Plum team to be extremely driven and dedicated to our business. We recognize the hard work of our employees and believe it’s critical to equally match the level of commitment they bring to work each day.

For example, we’re currently undergoing a major building renovation — the entire design was centered around the well-being and happiness of our employees. Currently, we subsidize gym memberships — once our new building remodel is complete, we’ll have a gym inside the office. Beyond getting active, we provide quarterly massages, communal bikes, endless free snacks and beverages, among other benefits.

Our mission of getting the very best food to little ones extends into our grown-up employees, too! Part of our remodel includes a large family-style kitchen that will allow our employees to cook fresh meals together, and we’re hiring a chef to come create homemade lunches for our team members, at least once a week.

Plum’s culture isn’t just about what happens inside the office. We support a work/life balance and that means something a little bit different to everyone that works here. For some employees, a better balance means working from home and for others, it might be a part-time schedule — however that gets defined for a particular individual, we’ve always found that flexibility equals happiness, which ultimately means better results for the Plum Organics business.

Finally, in order to make sure we’re always thinking about our employees, we recently created a new position for a “People and Environments Manager.” This new role will focus on employee engagement and well-being, with our mission driving everything that we do."— Neil Grimmer
CEO & co-founder, Plum Organics @NeilGrimmerCEO

"It’s great to see some companies focusing more on the value of their workers. Markets are increasingly dynamic, and if a company is doing their work to keep up, it only stands to reason that their employees are increasing their contribution. One would think that the increasing value of a competitive workforce must outpace the rate of inflation.”— Aly Khalifa
Founder, Lyf Shoes
@alygkhalifa

"Prioritizing and investing in worker health and well-being helps companies avoid the risk of an unstable and unpredictable workforce and can also result in positive returns in productivity. Plus, as we know, it’s also the “right thing to do.” Tracking the return on wage increases and employee education doesn’t have to be overly difficult. Typical HR metrics such as employee retention, sick days used and average days between promotions can all be used to justify the employer’s investment. Additionally, replacing a good employee because they are being offered a higher wage or better job quality somewhere else with a new, untrained employee is much more costly than investing in and retaining the workforce we have at hand.”— J. Renee Morin
President, PRé Sustainability NA
@JReneeMorin

“Many companies measure employee engagement rates through surveys run by Gallup — in fact, the latest numbers from Gallup suggest that disengagement is a $550B problem facing most companies. Plenty of research exists showing the financial benefits of increasing engagement rates. So if businesses are diligent about measuring not only the direct programmatic benefits, but also the impact of positive impact programs more broadly on that key employee engagement metric, they can likely make the business case extremely easily.

[Full caveat, WeSpire helps companies do exactly this type of correlation related to sustainability/CSR programs … so I’m clearly a bit biased. But fortunately, there is a great body of third-party research emerging that connects the dots between these programs and that core engagement metric improving].”— Susan Hunt Stevens
Founder & CEO, WeSpire @HuntStevens