Unpacking Employee Wellness Programs | Iwan Barankay

Why Do Employee Wellness Programs Exist?

Dan Loney: The topic of wellness programs at work is discussed quite a bit, but do they actually make a difference improving health outcomes? Pleasure to be joined here in studio by Iwan Barankay, who is an associate professor of business, economics and public policy, as well as an associate professor of management here at the Wharton School. So, what are companies trying to bring forward with wellness programs in the first place?

Iwan Barankay: I thought that you would give me an easier question first, because there’s no single, clearly defined structure or approach to this. There’s an overarching concern and motivation behind these programs, but there’s no single definition. I think what these wellness programs are all about is some form of a programmatic approach, with a focus on prevention, with a focus on coaching, to help people to steer towards more healthy behavior. And that is in contrast to other programs that companies have that are more driven by legislation and administrative rules about workplace safety.

I think the big component here is not just that there’s a program that allows people to follow certain steps that are dedicated towards particular needs of each individual employee, so there’s a back and forth between what employees want and what they need. But also, there’s a big data component to it, which is quite controversial. People’s behavior is being tracked more than before, and the program is tailored towards encouraging them to do that. Sometimes rewards or punishments are attached to that as well.

Loney: For a lot of the companies, there has to be a financial component tied to this, when you’re thinking about the cost of health care. If somebody is not healthier, they’re obviously more likely to be spending money to fix or correct certain health issues.

Barankay: Absolutely. The idea of workplace wellness programs goes back decades, where we wanted to encourage people to really look after themselves. But there has been a big change with the Affordable Care Act that specifically allowed a big component of cost to be dedicated to these wellness programs. That was a big change, where now there was a legislative platform on which these programs could be built.

Over time, the scenario became a bit more complicated when it came to data protection and disability care. But in general, there’s much more foundation where companies can actually use costs and incentives related to these wellness programs, compared to before. And the big question to me still is, when does the wellness program start, and when do amenities in the workplace end? Amenities being tools or technologies or equipment that help people be more productive, help companies to attract and retain people, and increase satisfaction in the workplace.

Loney: Is that something the company believes they can have as an add-on, and it is a benefit on top of traditional benefits that employees would have?

Barankay: Yes. How does this work inside an organization or a company? Often, they invite a consultant to advise them on what to do. If it is more sophisticated, they actually do some surveying among the employees to get a sense of what they are looking for. What are their real needs? And then they build a program around that. People who have to commute quite a bit might find it difficult, [along] with their duties at home, to go to the gym or to go for a run. So, they might want to see whether there’s a gym at the workplace, which by itself, is just an amenity. But then, whether going to the gym is something that the company rewards or fosters.

Here’s an interesting additional component. Many times, these wellness programs are sought by future employees as a signal that the company actually cares about them. They don’t just want to squeeze the maximum productivity out of them, but they really care about whether they’re doing well, whether they’re happy at the workplace.

Mental Health and Remote Work

Loney: When we went through the pandemic, we saw a greater focus on mental health as a component of this.

Barankay: COVID-19 really accelerated the process whereby companies reevaluate what kind of work needs to be done at home and what can be done remotely. We now know that Zoom has become a much more mature platform, where we can do much more work remotely.

Now, with that came an interesting challenge, which is twofold. Before, we could really measure people’s behavior much more clearly because they’re there in the workplace and we can supervise them. Sometimes this is possible with technology. But when we go remotely, many companies now have started to use devices of various sorts, or other ways of tracking people’s behavior. If there’s a program that encouraged people to walk more, than companies could give people pedometers or an app that tracks how much they really walked. But if it is remote work, how can you make sure that they actually did it?

Loney: When COVID was here and we were all working from home every day of the week — I noticed it in my neighborhood, and I’m sure in neighborhoods across the United States and around the world, you saw more people out walking. But it was because they had more time on their hands. Now, we’re kind of back into this normal lifestyle, and I wonder if people will continue to do it as frequently as they did it five years ago.

Barankay: That’s a very interesting question, and I think the data is not quite there yet to tell us what has happened. But yes, it is true. If you didn’t have to commute, you had a lot of time that you could dedicate to walking or exercising. But it may also lead to situations where there’s a strain on mental health. Because you’re always at home, you’re always in the same environment where you live and work, and that is difficult to set boundaries. So there, the shift has become much more towards supporting people with their mental well-being so that they are not burned out or they just get irritated.

If you are working remotely, you are isolated from others. So, for a while you can perhaps tolerate the antics of a supervisor because you think this is still a good company or good career to pursue. But when you reach a burning point or a tipping point, then you may no longer be willing to do that, and then you might quit.

Loney: Do enough companies look at and invest in the types of wellness programs so that you’re getting the greatest benefit? Or is it kind of thrown out there as a bonus, as a benefit to the employee?

Barankay: When I read the literature and also look at what companies do, it is often not quite clear what their rationale behind these programs are. If you wanted to step back and be more academic about it, clearly one component is just a human capital theory idea. “I invest in their health. People are then healthier. They are not absent. And if they’re healthier, then health care costs go down.” That’s the rationale behind it.

But if you think about employee satisfaction, then companies offer it because they want to make sure that people are happy and that they want to come there. Many times, we see that employees, when they consider which companies to work for, they highlight, “Oh, this company has these programs as well.” But when we survey them later whether they actually use it, they often don’t have time to use the gym or to make use of their wellness programs, because they’re too busy working on their careers.

Loney: It mixes in the component of the company wanting to do whatever they can to keep the best employees.

Barankay: Yes. This has been not just a fad, but there was really a horse race in the market, where companies offered more and more elaborate programs that signal [to employees] in what comprehensive ways they can really pay attention to them and help them with their careers. But then when we come to the data and look at who used what and whether it actually made a difference, it becomes a much more nuanced picture.

How Can Companies Improve Employee Wellness Programs?

Loney: What do you think needs to occur to make sure that we maximize the best components for the employees and for the companies as well?

Barankay: I think with this question, we are starting to talk a little bit more about what lessons can we draw from what companies have offered, and whether these programs actually work? And here, I think it is clear that we need to learn much more about what we can actually do that makes a difference to employees.

There have been a number of rigorous studies, randomized control trials that tested with a control group, to see whether those who were offered a program actually changed their behavior and had different outcomes. Changing their behavior, meaning whether they said that they eat better or exercised more or took part in preventative care. And outcomes, meaning whether they actually have lost weight or stopped smoking, had a lower risk for a heart attack — which is a core target of these programs. Also, whether they report less absenteeism, higher productivity, and lower health costs.

When we look at the two biggest, most prominent studies from these randomized control trials, we see that there is slight evidence that people report and have been shown to change their behavior somewhat. But there’s no compelling evidence, or no significant evidence, in terms of outcomes that we care about. Absenteeism, productivity, health care costs and health risks. These were for quite comprehensive programs.

Given that the broad program does not work, are components of them working better? This is where there has been a shift towards identifying specific approaches. One was to work on people’s fitness, specifically encouraging them more. Either finding the financial incentives, or through peer pressure or workplace norms, to go to the gym. And we see that those programs increased musculoskeletal strength, and sometimes that translates into productivity. But you can imagine that this is really, really work-specific.

Another key component of these programs, which is something that I’ve studied a lot in my own research, was about using financial incentives to specifically target self behaviors. You know, Econ 101 says that people are lazy and they don’t want to do stuff unless you give them an additional reward for doing it. We have to overcome the inconvenience or the displeasure of doing something. I’ve studied whether offering people financial incentives to take their statin medication, which is meant for people who are at risk of a heart attack, whether this actually has an impact. I’ve done two large, NIH-funded, randomized control trials, and have replicably shown that those incentives actually have no impact on cholesterol levels.

Now, there are some studies that show some benefits. But even the studies that show benefits, the interventions are not cost-effective. We are still out on the quest to identify, what are the components that work well? The latest candidate for these are really the wellness programs that focus on mental health. Because this is what people really say. That they struggle with the stress, they struggle with their motivation. This is a clear candidate where more research has to come about. But again, we lack the evidence that it is actually effective at this stage.

Loney: But it is still a topic that will continue to be researched so that we can try and get better in terms of understanding what are the best types of programs to have for that stronger relationship between work and personal life, and so the employee feels like they are getting the most from their benefits packages?

Barankay: Absolutely. The big challenge that many employees face is to understand, how can I manage my life and achieve all the goals that I have for myself? With the remote work, and also with the experience of COVID, many people have not been able to develop a structure that allows them to identify goals and pursue them and manage their life in an effective way. They still look towards the company to help them in this process. Sometimes it’s a simple task like optimally designing how you should spend your time during the week, which is the routine task that everybody has to do. But evidence shows that most people do not have a good way of structuring their week to get the most out of the time that they want to allocate to the company.