By Jeffrey Pfeffer
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 2, 2019).
Every employer is in the health care business, like it or not. Employee health benefits cost Starbucks more annually than coffee beans; General Motors spends more on them than on steel. But beyond that giant budget item, every company's business practices affect the physical and mental health of its employees. That can put another big, if less visible, hit on the bottom line.
Over the years, businesses have substantially reduced the risk of workplace injuries and accidents. But the harm to employees from stressful working conditions hasn't gotten nearly the same attention. The Centers for Disease Control and Prevention reported in 2016 that stress is the leading workplace health problem, ahead of physical inactivity and obesity. It affects both blue- and white-collar jobs, across a wide range of incomes, and is a leading contributor to turnover, absenteeism and productivity losses.
Those indirect costs to companies can be even larger than the direct costs of workers' compensation and health benefits. Take absenteeism: According to U.K. government figures, more than half of the country's working days lost to ill health in 2017-2018 were caused by stress, depression or anxiety. Then there is "presenteeism" -- employees who, though at work, are not at their physical or psychological best. In a 2016 survey of some 2,000 employees conducted by a unit of the Virgin Group, participants acknowledged being unproductive an average of 57.5 days a year, or nearly a quarter of their work time.
My colleagues and I reviewed more than 200 studies on workplace stress in an article published in 2015 in Behavioral Science & Policy. We found that some stresses raise the risks of illness and morbidity more than secondhand smoke. We also developed a mathematical model to estimate the aggregate annual health effects, published in a 2015 paper in the journal Management Science. It attributed $190 billion in excess costs to workplace stress and 120,000 annual deaths -- enough to place it sixth amid causes of death in the U.S., ahead of diabetes and kidney disease.
What can be done to avoid these costs to employees and employers? A number of companies have improved their employees' health and productivity by using some straightforward strategies.
Regular, limited work hours: It's important for schedules to be stable and, when possible, to give employees some say over when they work. In 2015, after retail staff for The Gap clothing chain protested the rising frequency of last-minute changes in their schedules, the company tried a pilot project in 28 stores in an effort to stabilize work hours. The results, according to a report published last year, included a 7% increase in sales and a 5% in increase in productivity.
Zillow Group, the online real-estate database, has encouraged its workers to limit their own work hours to have a healthy work-life balance. One employee told me, "It's not until you're part of the company, and not until you realize that a lot of people don't take their laptops home, or they are able to drop their child off at day care and come in at 9:45, that it hits home."
Long work hours are not necessarily as good for employers as they may think. Data from the Organization for Economic Cooperation and Development, published in the Economist in 2014, shows per-hour productivity declining with hours worked. A 2017 article in the journal Occupational Medicine noted that extended work hours have "a pervasive influence on both physical and mental health."
One New Zealand firm, Perpetual Guardian, which manages will, trusts and estates, found last year that an experiment with a four-day, 32-hour workweek for the same pay resulted in a 20% productivity boost and lowered stress among its 240 employees, who must meet productivity targets to continue participating. The company announced that it would make the change permanent.
Researchers at the University of Auckland studied the experiment and said participation by the staff in designing the plan was pivotal to its success. Because employees were satisfied that they could take care of personal business in off-hours, "The reduced hours meant that employees could sustain a more intensive work pattern, and they were more motivated upon returning to work," said Prof. Helen Delaney in her report. In their off-time, she added, "Many reported feeling 'less psychologically rushed.'"
Greater autonomy: Decades of research show that workers who have more control over their jobs, and are subject to less micromanagement, are more motivated and engaged with their work. A study of more than 10,000 British civil servants published in the British Medical Journal in 1997 found that men and women with little autonomy at work had almost twice the risk of developing coronary artery disease over a five-year follow-up period.
It is possible to give more control even to employees in seemingly simple, routine jobs. San Francisco-based Collective Health Inc., a technology startup, designed jobs for people answering phone queries to give them more variety and control in their work life. This included rotating them into other jobs to widen their experience. The company says that customer issues are now resolved with fewer phone calls and that productivity and service have been improved by tapping into the knowledge of people doing the work. Outdoor apparel maker Patagonia uses a flat organizational structure to ensure that each manager has too many people to oversee to micromanage them, human resources chief Dean Carter told me; the company calls it '"management by absence."
More economic security: The most effective anti-stress measure, but also the one most difficult to implement, is to reduce employees' anxiety about losing their jobs. When the St. Louis-based international manufacturing company Barry-Wehmiller confronted the economic downturn of 2007-2009, it decided not to lay anyone off. According to a 2016 Harvard Business School case study, the company implemented a program of shared sacrifice. CEO Bob Chapman reduced his salary by some 90%, and workers took unpaid furloughs. Barry-Wehmiller also temporarily stopped matching employees' contributions to the retirement plan and offered generous early retirement incentives. "The company rallied from the Great Recession faster than expected and reported record financial results in 2010," with a workforce that was grateful for the effort to preserve their jobs, the case study concluded.
The Cleveland-based arc welding manufacturer Lincoln Electric offers a similar lesson in economic security. The company is known for having a profit-sharing plan that avoids layoffs. Employees agree to make less money during downturns, and the lower wage costs allow the company to maintain more of its profitability.
It is possible to build a working culture that drives down direct and indirect health costs while also increasing employee well-being, engagement and performance. Decades ago, companies learned that good stewardship of the physical environment of the workplace benefited both their employees and their bottom line, reducing costs by reducing injuries and time away from the job. The same holds true for good stewardship of the human environment.
--Mr. Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at Stanford Graduate School of Business. His latest book is "Dying for a Paycheck: How Modern Management Harms Employee Health and Company Performance."