Does Financial Wellness (Still) Need an ROI?

The ROI on financial wellbeing has always been hard to pin down – but a new survey suggests that it may not matter.

When asked, “Why are you creating or expanding your financial wellbeing program?”, Respondents to Alight’s 17th edition of Hot Topics in Retirement & Financial Wellbeing said that not just financial wellbeing was their number one priority, more than half ( 56%) said that the importance of financial well-being in their organization had increased in the past two years, and none said that focus had decreased.

But when asked why they are creating or expanding their financial welfare program, respondents largely ignored traditional ROI metrics. The most common answer was nothing more specific than “improving the overall employee experience (85%) and right after that was the simple statement that we believe it’s the right thing to do (84%). Even the traditional favorite of the HR department – “increasing employee engagement” – was 72% behind these subjective values.

“Commitment” is not exactly a new measure – but even that requires equating employee utilization with an increase in value for the company’s results. It’s not that it has no value, but it’s damn hard to quantify. In fact, some experts argue that we shouldn’t even try.

Goals posts

Far down on the list of these plan sponsors were common goals such as improved pension statistics (e.g. improved adequacy, lower losses, higher participation rate), which were mentioned by less than half (49%), or the traditional “increasing attractiveness and / or “differentiate ourselves as employers”, which was only identified by 47%. The goals that many early advocates of financial wellbeing touted – “reducing the hours employees spend dealing with financial problems (either at work or absenteeism)” were cited by only 43%, which was “reduced medical costs” Anyway – only 14% said this was a justification. It was also not about responding to workers’ interests – only 38% said workers asked for this type of benefit as a factor.

Don’t get me wrong – it’s not that there haven’t been attempts to quantify the return on investment of time and money in these programs, certainly by the companies promoting these services – but to get those results you have to In general, not just the methods, but the calculus that is used to attribute value to these results.

Measure ‘medium’

Despite the well-intentioned efforts of many, Financial Wellness remains one of the concepts that is still (just) a concept anyway – one with different definitions, inconsistent uses, and different vendors – and therefore notoriously frustrating to associate with is a dollar value[i] – apart from the cost of such programs, which we are assured to be done right, cost money.

When asked how they want to measure the results of their financial well-being program, by far the most common answer – cited by 85% – was their use of social benefits. The metrics are certainly important – because if the program is not in use it cannot have any real impact. However, the impacts more commonly associated with a quantifiable ROI – improvements in pension statistics (55%), medical costs (e.g. health care, disability, employee compensation) (12%), and reductions in absenteeism (5%) – followed by a distance. Even employee engagement – a notoriously difficult to quantify aspect, noted earlier – was only mentioned by about half (52%) of plan sponsors – and 6% admitted they did not intend to measure the results of their program.

These survey results now come from a relatively small group of relatively large plan developers: 116 of them, albeit with a median of 19,300 employees (average 47,000). On the other hand, the patterns that can be seen in larger employers have long been viewed as forerunners of what will eventually become established as “downmarket”.

It remains to be seen whether the apparent weakening of the focus on traditional ROI measures among these plan sponsors suggests that these bottom line contributions have always been illusory – or that they may not have been a necessary affirmation of the pursuit of financial wellbeing after all.

[i] However, a few years ago (see Building a Bottom Line of Financial Wellbeing) I was able to put together some kind of formula that looked something like “Projected sales reduction times current turnover rate times estimated cost of replacing one worker times the number of employees . ”That is, even though it is a computation with recognizable variables, these are still tainted with assumptions that fill the space.

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