#21 Quantifying the ROI of Staff Wellbeing

Edition #20 looked at the Financial Times' special report on the link between staff wellbeing and financial performance.

'Companies reap bigger dividends from happier staff'

This headline followed the publication of the "most comprehensive study to date" on the topic, which found that companies with happier staff are more profitable over time.

What explains this relationship?

And how can you ensure that the wellbeing of your staff translates into higher profits?

4 min read

The Boardroom Divide

In Edition #7, we looked at the boardroom debates around ESG.

Finance and HR are often to be found on opposite sides of the table in these discussions. 

HR knows that sustainability and social impact are increasingly important factors for attracting and retaining the best people. 

And that a strong sense of purpose is also a powerful way of increasing employee engagement. 

But the CFO may only see the cost of implementing these initiatives: there is no quantifiable benefit, nowhere that staff wellbeing features in their spreadsheets. 

Six Pathways to Bridge the Divide

The key to bridging this boardroom divide lies in translating the intangible benefits (like employee engagement and wellbeing) into quantifiable metrics, and ultimately financials.

There are six pathways for linking staff wellbeing to financial performance.

So that we can explore each of them in depth, including worked examples and calculations, we will look at Productivity and Relationships this week and the other pathways in future editions.

1. Productivity

When people are happier, they perform better at work.

Productivity will mean different things for different businesses - and even from one department to another.

It may be the quantity of work that is completed in a given time (efficiency), or the quality of the output (effectiveness).

It can also be a combination of the two: in a manufacturing environment for example, we can look at the impact of wellbeing on the quantities produced per unit of time, as well as wastage or QC pass rates.

Case Study

As covered in Edition #6, I helped Rem3dy Health improve margins by 32% as a result of greater productivity in the Operations department.

Our aim was to create smaller teams of highly engaged and more productive staff.

We increased hourly rates, provided more comprehensive onboarding and training, and conducted regular team briefings.

By improving communication and helping production staff feel more connected to the rest of the company and the wider vision, there was a marked improvement across the four components of wellbeing:

• Job satisfaction (indicates long term wellbeing)

• Happiness (indicates present state)

• Sense of purpose

• Stress

This accompanied a significant increase in productivity: output rates increased, and wastage dropped, resulting in substantial savings, both in terms of the material cost per unit and staff cost per unit.

An illustration of how this impacted staff cost per unit is shown below.

Measure What Matters

All these things were being measured anyway, and this is true for most businesses: the metrics and KPIs relating to productivity will already be in place.

What is important is to also measure wellbeing at regular intervals, alongside productivity metrics.

This helps to better understand the relationships between them, and ensure that the financial upside is being realised.

2. Relationships

Happier people have better social interactions, and this is especially true at work - whether that is collaboration with colleagues or serving customers more effectively.

Many studies have shown the strong impact of staff wellbeing on customer service: customers that interact with happier staff are happier themselves, which translates into higher sales and loyalty.

Worked Example

Let's illustrate this using the example of a Customer Service team in a DTC company.

Every day, they work through inbound queries and complaints from customers ('tickets') and their performance can be judged in terms of:

• Efficiency: the number of tickets completed per hour or day.

• Effectiveness: the customer outcome, which may be measured through reviews or by tracking the retention and spend of that customer over time.

Let's say the company receives 250 tickets per day and the eight-person Customer Service team completes an average of 33 tickets per person per day.

As part of its social impact commitments, the company has implemented a new volunteering scheme.

It seeks to measure its impact on staff wellbeing, and how this translates to financial performance.

Metrics show the number of tickets completed has increased to 40 tickets/person/day.

Quantifying the Cost Saving

This is important for the company's HR planning: with revenue growing quickly, it expects to be receiving 375 tickets per day in the next 12 months.

If the higher rate of 40 tickets/person/day can be maintained, they will only need to hire two extra staff, rather than four.

At an average salary of £30k, this will save the company £60k pa.

Quantifying Impact on Customer Value

We can also consider the revenue and margin gains that come from higher customer value and retention.

Let's say that more effective interactions with customers leads to them:

I) Spending more money, as measured by average order value (AOV), and;

II) Sticking around for longer, as measured by a lower churn rate (the proportion of subscribers that cancel each month).

A 10% increase in AOV and a 5 percentage point drop in churn rate would see lifetime value increase from £150 to £220, an increase of 47%.

Across the 20,000 subscribers the company currently has, this equates to a £1.4m uplift in total customer value.

Happy People -> Higher Profits

The connection between staff wellbeing and financial performance is no longer just a theory—it’s measurable, actionable, and impactful.

Whether it’s through greater productivity or stronger relationships, the benefits are clear: happier employees perform better, creating efficiencies and increasing customer value.

But Productivity and Relationships are just two of the six pathways identified in the groundbreaking study behind the FT special report we explored last week.

The remaining pathways—Creativity, Health, Recruitment, and Retention—offer equally powerful opportunities for translating wellbeing into financial gains.

In next week’s edition, we’ll dive into Creativity and Health, exploring how they drive innovation, reduce costs, and enhance long-term performance. 

The journey towards a better way of doing business

We are on the cusp of a new paradigm of responsible business, and helping impactful companies pair purpose with profit will accelerate the shift.

I believe this holds the key to solving many of our greatest challenges and inspiring positive change throughout society.

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