Updated: Oct 14, 2020
When working in organisational development, this is one of the common questions we are asked at the Modern Mind Group,
‘How can I justify the business case for a Mental Health and Wellbeing programme?’
It’s all well and good to want to put something in place, but how do you influence to gain buy in and commitment from the board, that this is the right thing to do?!
Yes, I know that you know mental health is important and as a business leader you want to make a difference to your team. That is the first step. Understanding that there is need and you research different training providers for the costs only to find that when confronted with justifying the business case it can leave you just with the answer that it is the right thing to do.
First of all, it definitely is the right thing to do, so let’s support and arm you with the knowledge you need to put this in place. It is good for people and good for business.
There are reports out there such as the Deloitte report that claim UK businesses are losing 45 billion a year in mental health costs, but we understand that you may be asking well 'what does that mean to me as a business?' or 'How does that work in our industry?' So we wanted to breakdown what it would take and figure this out for you.
Here are the things to consider that will support with making the decision to go ahead with a mental health and wellbeing programme……
Current Sickness Levels – How much is this costing you?
The UK on average has sickness rates of 2.25% in 2018 – this is 8.31 days per person with an average UK salary of £30,420 plus 13.5% PAYE contribution divided by the average sick days works out at £132.80 per day x 8.31 days = £1103.52 per person in a 200 person team this is equal to £220,704
Now, as idealistic as I am, it is unrealistic to think that a mental health and wellbeing programme will ensure no sick days although let us face the facts that this is what it currently costs on average. Not including the added workload for others which will test their own mental health.
So let’s half the figures above for something that is more realistic giving us the figure of around £110,000
High Turnover – What is your cost to recruit a new person?
If you use a recruitment consultant then it will cost you on average £5000 per placement depending on the role complexity or seniority. If done in house this will cost around £400 -£1000 per employee and depending on who you use for in house recruitment this does not include the time it takes for HR or the hiring manager to recruit a new person so that is to be factored on top. Let's also consider the fact that if you do not have someone with singular and laser focus on the recruitment of the business you could end up setting the wrong expectations or choosing the wrong fit.
I'm going to factor in external recruitment as it has proven results and for a business of this size or specialist industry. We are also talking about the culture of a business in this article so it's fair to say that with a streamlined external process it will get the right people through the door, it's then your job to keep them.
Annual voluntary turnover on average in the UK is 13% of staff so again let’s go on the basis of 200 employees. This equals 26 people so costs £130,000 with external recruitment.
Customer Acquisition Vs Retention
To be honest, I’m going to leave you to work this one out. Ultimately, a person with poor emotional wellbeing, going through stress or burnout that insists on presenteeism (being there) is potentially going to affect those around them and could damage customer relationships through poor quality of work or mistakes being made. Every industries customer acquisition price is quite different so work with someone in your team that knows the cost of getting you the new customers or find out what your customer retention score is as well as how much that is affecting the company. And what is the cost on retention of customers? How much does it cost you to get new customers? Furthermore What is the impact to your reputation?
Sales Performance – What is the cost implication to the business?
To try and answer this it really depends on your average customer basket size. Let’s say the average customer spends £100 and this was based on 20 customers per day with a conversion of 20% - if someone was only converting 10% due to low performance then that would be a difference of £1000 per day over a working year this works out at around £240,000 turnover per year per employee. Now if there was just two team members under performing then that makes it £480,000
If we add all of these areas together a potential cost to a company with 200 employees could be……
Just under £800,000.
Surprising isn’t it?! (Remember this does not include customer retention or acquisition costs, so work that out and factor it on top for your company)
The above number works out on average to be around £4000 per employee
You may also be noticing that the biggest impact shown is in sales. Absolutely! Effective empathetic leadership plus effective goal setting has a lot to do with performance and our overall mental health.
Our Mental Health impacts our behaviour and our behaviour impacts our performance.
‘Situation + Our Reaction = The Outcome’
Organisational Development will happen through running initiatives for mental health by looking at learning and performance. We always encourage clients to take a holistic view on the solution as you can see from the article that it does really affect almost every area of the business.
So, now that you know how much is being affected on a company size of 200 employees, as an example, it’s not much to ask to spend on training, consultancy, coaching and a roadmap to success is it?
Remember it’s not what you spend it’s what you keep! And more importantly, let’s create a healthier happier team.
With any business case is is always good to also look at risk. Ask yourself what is the risk of not doing this? I'm sure many of the answers you will find are in this article.
The Modern Mind Group are an accredited personal and organisational development company. To book a discovery call click here today.