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Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement

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You'll learn from a 66,000-life Fortune 500 corporation how to make a compelling business case for health and productivity improvement. MGM Mirage, with the support of one of IBI's health and …

You'll learn from a 66,000-life Fortune 500 corporation how to make a compelling business case for health and productivity improvement. MGM Mirage, with the support of one of IBI's health and productivity measurement tools, offers valuable insights on making the business case with senior management for employers of all sizes.

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  • <number>In 2007 MGM MIRAGE and Alere jointly presented a session at an industry conference co-sponsored by the Integrated Benefits Institute (IBI) that focused on their experience working with their C-suite executives to gain support on health and productivity initiatives. Interest in the topic was so strong and relevant for employers of all sizes that IBI, with funding by Novartis, brought the presenters back together for a roundtable discussion that was produced as a DVD. This presentation highlights roundtable discussion key insights and the process this Fortune 500 company went through to secure approval for investment in workforce health and productivity. The DVD is available today at no cost from the Integrated Benefits Institute. Highlights and a request form for the free DVD may be viewed at http://ibiweb.org/do/PublicAccess?documentId=907.<number>
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  • Traditionally, most employer benefits managers and their senior management focus only on direct healthcare costs, only the tip of the iceberg. As employers and their supplier partners grow more sophisticated in their understanding of the full costs of ill health, more emphasis is placed on the results of ill health including:Lost time from absence and presenteeism;Resulting lost productivity associated with replacing that lost time with a replacement worker along with the additional effects of inability to replace the worker exactly when needed;Time value of getting the product out the door when scheduled and the degree to which the employee’s absence affects any team effortStudies consistently show these lost-productivity and lost-time costs are far greater than medical and pharmacy costs alone, averaging 2.3 times as much, with multiples varying from 1-4 times, depending on the condition. (R. Loeppke et al., “Health and Productivity as a Business Strategy: A Multiemployer Study,” Journal of Occupational and Environmental Medicine, Vol. 51, April 2009.)<number>
  • A team comprising internal company benefits managers, a health & productivity supplier partner and the CFO worked together to plan the approach necessary to engage senior management in the bottom-line opportunities of investing in workforce health.The team used the IBI Health & Productivity Snapshot to model lost time and lost productivity costs from absence and presenteeism. The model estimates, based on comparable demographic descriptors from the HPQ database, that the company loses 8 health-related workdays per year, worth $2,598 in lost productivity alone. The ratio of modeled presenteeism to absence lost time for this employer is 3.4:1<number>
  • To begin to convert lost-time/lost-productivity results to the business metrics important to senior executives, the team determined how lost-day savings translated to EBIDTA (Earnings Before Interest, Depreciation, Taxes and Amortization).The team chose an assumption that they could save one lost day through their proposed health and productivity interventions.Using the company’s financial measures, the CFO then converted the one-day in lost-time savings to a $15,000,000 contribution to EBITDA.<number>
  • Based on the company’s ratio of EBIDTA to gross revenue, the CFO estimated that to generate the same impact from saving one day of health-related lost time ($15 million to EBITDA) through increasing “top-line” revenue, sales revenue would have to grow by almost $50 million.For many employers, especially in a down economy, increasing revenue growth of that significance would be very difficult. Picking the low-hanging fruit of employee health improvement can be an easier task, depending on the existing health of the workforce, the corporate culture and the interventions planned and executed.<number>
  • This chart demonstrates how the CFO helped the team converted lost-productivity savings from reduced lost time to important business metrics (language used “on The Street”) that is more relevant to senior management.The CFO started with the estimated $15 million in modeled lost-productivity savings that would flow directly to EBITDA.Wall Street values a company’s earnings beyond cash flow. Using the Wall Street multiple for the company (which at the time of making the business case was 10.7 times earnings) the CFO calculated that the improvement in EBITDA would result in a market cap value improvement of $160.5 million.Dividing the market cap value by the number of outstanding share results in an increase in the stock price value of 56 cents per share for the company.Based on this information and the successful, collaborative presentation, senior management voted to approve the investment in health requested by the health and productivity team.<number>
  • To view the DVD highlights or request a free DVD, view this presentation in “Slide Show” and click on the hyperlinks on the slide.

Transcript

  • 1. Bringing Workforce Health & Productivity to the C-Suite Source: Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement, Integrated Benefits Institute, 2008
  • 2. Bringing Workforce Health & Productivity to the C-Suite Purpose: Share insights relevant to employers of all sizes on how a Fortune 500 company approached its executive management to make health a key business strategy Key Insights:  HR and benefits managers must understand the role and gain/pain points of C-Suite executives to create a compelling story in language relevant to the decision makers  Practical, accessible health and productivity modeling tools like IBI’s Health & Productivity Snapshot guide the demonstration of the full financial impact of poor health on the bottom line  Collaboration among colleagues, the company’s health / disability / absence management partners and the CFO can be key  Effective measurement and results reporting must include simple, scientific and bottom-line-financial metrics  A corporate culture of health starts at the top  Accountability, communication, commitment and preparation are critical to success  A DVD on the process is available. Commentary is available in Notes view.
  • 3. The Real Problem: The Full Cost of Poor Employee Health
  • 4. Starting place: IBI’s Health & Productivity Snapshot 1.8 lost days per Lost worktime = 8 days per FTE/Year FTE/Year or $2,598 in lost productivity per FTE/Year 6.2 lost days per FTE/Year Absence Presenteeism Source: Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement, Integrated Benefits Institute, 2008
  • 5. Impact of Lost-Time Improvements on the Company’s EBIDTA* $45 Saving one lost day/FTE = $15 MM to EBIDTA* from $45 productivity gains $30 $ Millions $30  $15 $15 $0 1 Day 2 Days 3 Days * Earnings Before Interest, Depreciation, Taxes and Amortization Source: Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement, Integrated Benefits Institute, 2008
  • 6. Revenue Equivalent of Lost-Time Improvements Saving one lost day/FTE = same bottom-line impact as Equivalent $50 MM in new revenue $149.7 revenue growth ($ millions) $99.0  $49.9 1 Day 2 Days 3 Days Source: Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement, Integrated Benefits Institute, 2008
  • 7. The Bottom Line One Day of Productivity Improvement Savings $15.0 MM Wall-Street Multiple 10.7X Outstanding Shares 284.3 M Stock Price Value 56 cents/share Principal Owner (56%) $90 MM Source: Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement, Integrated Benefits Institute, 2008
  • 8. Winning Ways: How to Gain C-Suite Support for Health & Productivity Improvement Click below for DVD highlights and to request a free DVD: • DVD Highlights • Request a FREE DVD