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David
Lee
Consultant
Speaker
Author |
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For
More Information:
David Lee, Principal
HumanNature@Work
P.O. Box 430
Bar Mills, Maine 04004
Tel: 207-929-3344
E-mail: info@HumanNatureAtWork.com |
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AR
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Employee
Stress: The True Cost |
| By
David Lee |
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| Published
in The John Liner Review, Vol 11(3), pg. 33-38,
1997 |
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Most organizations have no idea
just how much employee stress costs them each
year. A 1990 study by the Princeton, NJ, firm
of Foster Higgins & Co. indicated that
corporate health benefits cost the average
company 45 percent of its after-tax profits.
With research implicating stress in 60 percent
to 90 percent of medical problems, companies
cannot afford to ignore the huge health-care
expense employee stress creates.
Although the relationship between stress and
health care costs has received considerable
attention, the true price tag is far greater
than health care costs alone. Studies show
that stress adds to the cost of doing business
in a number of ways. In this article, we will
explore the depth and breadth to which employee
productivity and well-being is compromised
by stress.
Just How Costly Is Employee Stress? To paint
a complete picture of how stress costs organizations
would require a far longer article than space
permits, but we will address some of the most
serious consequences of employee stress.
Absenteeism
Stressed-out employees are more likely to miss
work both as a coping mechanism and due to
health-related problems. A recent study published
in the American Journal of Health Promotion
found that workers experiencing high stress
were over two times more likely to be absent
more than five times per year. Lost productivity
and replacement costs make absenteeism a costly
consequence.
Workers Compensation Claims Stress-related
claims have skyrocketed. The California Workers'
Compensation Institute (CWCI) reports that
the number of workers compensation claims for
mental stress increased by almost 700 percent
between 1979 and 1988. Nine out of ten stress
claimants ended up receiving compensation benefits. "Job
pressures" account for nearly seven in
ten stress claims, according to the CWCI. In
Maine, stress-related claims have increased
by 1,000 percent since 1985, according to Bureau
of Labor Standards statistics.
Litigation
Litigation is becoming an increasingly more
common occurrence - not just in the workers
compensation system, but in employer-employee
relations. The feeling of powerlessness, a
major contributor to employee stress, also
contributes to the desire for retribution.
When people feel helpless, when they feel they
have no control over their lives, they are
more likely to resort to extreme measures.
In our litigious society, many organizations
are reluctant to identify and address worker
stress, fearing that admitting workers are
stressed would provide "ammunition" for
employee lawsuits. Although understandable,
this approach creates the opposite effect.
Stacey Moran, Ph.D., co-author of St. Paul
Fire and Marine Insurance Company's landmark
report, American Workers Under Pressure Technical
Report, addresses this issue: Discovering specific
stressors and dealing with them is by far the
best course of action for organizations. There
is a better likelihood of litigation if a company
ignores stress-related problems than if it
addresses them up-front.
Grievances
Frequent grievances are both a legitimate warning
sign that organizational problems exist and
a less extreme way of expressing powerlessness,
which in itself indicates organizational problems.
Robert Rosen writes about the connection between
organizational climate, employee stress, and
grievances in The Healthy Company. Rosen tells
the story of a Safeway bakery manager whose
department averaged 75 to 80 grievances a year.
By honestly addressing his managerial style
and cultivating a very different workplace
environment, he saw grievances drop to just
one in a five-year period. The effect of a
grievance goes far beyond the employee and
his or her supervisor. On average, every filed
grievance translates into approximately 80
hours of lost productivity by the worker filing
the complaint and by co-workers due to morale
problems, according to an article published
in the Personnel Journal. Turnover Forty percent
of employee turnover is related to stress,
according to a study by the Bureau of National
Affairs. When companies consider the cost of
lost productivity and of recruiting and training
new employees, stress-induced turnover is a
very expensive problem. In the previous example
of the Safeway bakery manager, his efforts
at creating a more worker-friendly atmosphere
translated into a turnover decrease from as
high as 100 percent in some positions to a
department average of 10 percent.
Accidents
Stress causes a narrowing of attention, preoccupation,
and fatigue - a sure recipe for workplace injuries.
Stressed-out employees trying to do more with
less are also likely to take shortcuts which
lead to accidents. "With increasing work
demands and time pressures, people are less
likely to take safety precautions, use proper
equipment, and implement appropriate body mechanics," states
Jonathon Torres, M.D., of Workmed Occupational
Health Services, a Maine-based company. Workers
who report high stress are 30 percent more
likely to have accidents than those with low
stress. Stress-related accident claims are,
on average, two times more costly than non-stress-related
cases, reports the Harvard Business Review.
Accident claims also have a psychological component.
The connection between stress, employee satisfaction,
and claim filing cannot be ignored. A study
of 3,020 aircraft employees showed that employees
who "hardly ever" enjoyed their job
were two and one-half times more likely to
report a back injury than those who reported "almost
always" enjoying their job.
Errors of Judgment and Action
When people are under stress, they become preoccupied
with the issues troubling them. Stress also
causes attention to narrow, creating a sort
of "tunnel vision." This makes the
stressed-out employee more susceptible to missing
environmental cues and information required
to make both effective and safe decisions.
Stress also dulls the thinking process. This
is because endorphins - nature's painkillers
- are released under stressful situations.
Besides killing pain, these natural chemicals
also dull our ability to think and feel. Under
extreme or unremitting stress, people become
intellectually, emotionally, and interpersonally
dull. This can result in costly - and sometimes
life-threatening - mistakes.
Conflict and Interpersonal Problems
With a more diverse work force, the increased
use of teams, and our increasingly more service-based
economy, interpersonal demands on employees
are increasing. This in itself creates tremendous
stress. In fact, St. Paul's report indicated
that interpersonal demands due to working with
team members and supervisors were the most
significant cause of burnout. Thus, in today's
workplace, we have people who are already under
stress from a variety of causes put into an
interpersonal context that, by its nature,
is very stressful. Being already stressed-out,
they are less likely to respond appropriately
and constructively, further heightening the
likelihood they will find such a demanding
interpersonal context even more difficult and
depleting.
Violence
More than half of 500 managers from both large
and small companies surveyed in 1994 reported
incidents and threats of violence in the previous
four years, according to a study by the American
Management Association. Homicide accounted
for 17 percent of all deaths in the workplace.
A study by Northwestern National Life showed
that workers who feel unsafe suffer the same
level of stress as the actual victims. Violence
is both a cause and a consequence of employee
stress. The stress brought on by interpersonal
challenges and conflicts, combined with the
fact that many people are operating just below
their "boiling point," creates a
potentially volatile situation. Conversely,
the threat of violence or an actual violent
episode in the workplace creates tremendous
stress. Although the roots of violence cannot
be traced to a single factor, stress is clearly
a significant contributor. This is especially
true in cases where powerlessness and helplessness
play a central role in a person's stress. The
more powerless people feel, the more likely
they are to resort to violence.
Customer Service Problems
Having stressed-out and depleted employees
serve the public virtually guarantees alienated
customers. This can have very serious effects
on the bottom line. According to a study of
over 100 companies by Frederick Reichheld and
W. Earl Sasser, published in the Harvard Business
Review, a 5 percent reduction in customer defection
translates into anywhere from a 30 percent
to an 85 percent increase in corporate profitability.
Thus, even a relatively small percentage of
customers who aren't completely satisfied with
a company's service can result in a huge loss
in profitability. The connection between happy
employees and satisfied customers is obvious,
yet so often ignored. In recognizing this connection,
Daniel Steininger, CEO of Catholic Knights
Insurance Company, cuts to the chase: Would
companies have to train their employees to
smile and be friendly to customers if their
employees felt good about - and loyal to -
their organizations?
Resistance to Change
Many attempts at organizational change and
improvement fail because of employees' resistance
to change. Well-intentioned attempts at improvement
are sabotaged because would-be change-agents
ignore, to their peril, the connection between
stress and the fear of change. Human beings,
just like other mammals, are "hardwired" to
revert to familiar routines and behavior patterns
when stressed. This makes sense in an ancestral
survival context. In such a context, if you
were being chased and had to seek shelter,
you wouldn't want to be thinking about all
the possible escape routes. You don't want
to spend time thinking and deciding in this
situation. You want to go on "autopilot" and
follow the familiar route that has proven successful
(i.e., it enabled you to survive) in the past.
This hardwired survival mechanism wreaks havoc
in today's climate of rapid organizational
change. As a person's stress level increases,
that person is more likely to operate out of
this primitive, hardwired response - clinging
to the old ways, the tried and true, even if
they are no longer effective. Research shows
that stress is also connected with "neophobia" -
fear of novelty. Animals, which are naturally
curious and motivated to explore new environments,
avoid new objects and places when stressed.
We see this throughout organizations everyday.
As people become more stressed, the new and
the different triggers fear. Millions of dollars
are wasted on organizational change efforts
that end up being sabotaged and on program
implementation delays caused by this innate
resistance to change and novelty triggered
by stress.
No Time to Do It Right
Although the tangible costs of employee stress
are staggering, it is probably the less definable
costs which are most serious. Perhaps the biggest
and most unrecognized loss of all is the sense
of not having the time to do it right. It's
difficult to measure "what might have
been" in terms of lost opportunity and
unrealized potential. But the price is still
there. Stress costs organizations dearly in
terms of decreased quality and productivity.
Says Jack Quirk, training and development director
for Blue Cross/Blue Shield of Maine: The major
price a company pays for stress in the workplace,
along with the human price, is that their ability
to make process improvements nearly always
stops. With overwhelming workloads, you have
people going so fast, they don't have the time
to make the process better. It creates a terrible
cycle of trying to work harder and harder because
the volume you have to put out is increasing,
but you aren't doing anything to make the process
more effective and efficient.
Quirk likens this pervasive problem to Stephen
Covey's "sharpening the saw" analogy.
In his book, Seven Habits of Highly Effective
People, Dr. Covey describes a woodsman feverishly
trying to saw down a tree. When asked how long
he had been working, he tells the onlooker
that it's been about five hours. When the onlooker
suggests stopping, resting, and sharpening
his saw, the woodsman informs the onlooker
he can't do that, he's too busy sawing. He's
so busy working hard, he doesn't have time
to work smart. Too many companies get caught
up in this "fool's cycle," as Quirk
calls it. By pushing employees harder and trying
to increase output, without taking the time
to examine and improve the process, companies
create a cycle of diminishing returns.
Companies "don't sharpen the saw" in
two ways: First, the people who are most likely
to have process improvement ideas - the people
who actually do the job - are so busy trying
to "saw" that they don't have time
to think about how to make the process more
efficient. Thus, value-improvement ideas, which
can only come through reflection, are never
generated. Second, because they are so harried
and taxed, workers don't have the energy or
motivation to do this important "thought
work." Their depleting intellectual and
emotional resources are focused on survival,
not on improvement. They work harder and harder,
but with diminishing gains. They end up burned
out, continuing on like the living dead; they
exit the organization through a disability;
or they find another job.
The Loss of Intellectual Capital
Besides the lost opportunity of continuous
process improvement, organizations pay for
stress in terms of overall loss of intellectual
capital appreciation. Intellectual capital
is defined as the combined knowledge, know-how,
proprietary expertise, and wisdom of a work
force. Experts identify intellectual capital
as the key competitive advantage in the 21st
century marketplace. Only organizations that
are perceptive, nimble, and responsive to market
demands and customer needs will thrive. Unfortunately
for most companies, their work force is under
such stress, they are none of these. At the
most basic level, the more stressed-out and
depleted a person is, the less that person
cares about excellence and innovation. As mentioned
earlier, he or she is just trying to survive.
But the roots of the problem go far deeper.
At the most fundamental psychological and neurobiological
levels, stress compromises a person's intellectual
and emotional capacity. Stress makes people
less intellectually and interpersonally intelligent.
Research shows that when people are in high-stress
situations over which they have no control,
their thought process becomes more rigid, simplistic,
and superficial. This is hardly the mind-set
for innovation. Decades of research on "Learned
Helplessness" has shown that the more
helpless and disempowered a person (or any
animal, for that matter) feels, the less likely
that person is to come up with effective coping
responses. Studies with humans shows that in
high-stress situations in which they have no
control, their ability to perform mental tasks
and solve problems is diminished.
Intelligence isn't just about "figuring
things out." It's also about "figuring
people out" or, more accurately, understanding
how to bring out the best in others. Strong
interpersonal skills and the kind of organizational
synergy and customer loyalty they create are
a tremendous source of intellectual capital.
Again, many organizations fail miserably in
this category also - and at a very steep price.
In high-stress, disempowering environments,
people are less capable of empathy and interpersonal
sensitivity. As their feelings are numbed by
the psychological and biochemical consequences
of stress - as their attention becomes focused
on their own problems - people become increasingly
more insensitive to the needs of others. We
see this in the dull, disinterested eyes of
the clerk staring at us from across the counter.
We see this in the amazing acts of interpersonal "cluelessness" we
have all experienced at the hands of people
who were supposed to be serving us. This lack
of interpersonal intelligence - or "Emotional
Intelligence," as Daniel Goleman, author
of the book Emotional Intelligence, calls it
- is rampant in today's organizations. It also
costs organizations dearly in terms of lost
customers and lost productivity due to organizational
conflict and morale problems.
In a high-stress, disempowering environment,
what is rapidly becoming recognized as an organization's
most important asset - it's intellectual capital
- not only becomes illiquid, it also depreciates.
The downward spiral of high stress, diminished
performance, and negative consequences creating
more stress results in a gradual erosion of
an organization's intellectual and interpersonal
capacity.
The Benefits of Doing It Right
Although we can't measure the "what if," we
do have compelling evidence about the opportunity
loss when we see the "before and after
pictures" of companies that have instituted
management and compensation systems more favorable
to employee well-being.
Kevin Paulsen, a consultant from W.M. Jackson
and Company, a gain-sharing firm in Marion,
IN, reports that gain-sharing programs, which
link employee effort to rewards, often result
in productivity improvements of more than 20
percent in the first year. Interestingly, three
serendipitous by-products of these programs
are reduced absenteeism, lower workers compensation
costs, and fewer grievances.
This makes common sense, but seems to be ignored
by so many organizations. Creating an organizational
climate that encourages and supports people
to perform at their best - and rewards them
accordingly - not surprisingly creates a happier,
healthier work force. Companies included in
Robert Levering's book, The 100 Best Companies
to Work For in America, have more than twice
the earnings per share and more than twice
the rate of stock appreciation as the average
Standard & Poor's 500 company. These companies
offer a glimpse at both opportunities lost
by not addressing how worker well-being affects
the bottom line as well as guidance about how
to "do things right."
What Can We Do?
The first step for risk managers - or any professional
seeking to help their organization minimize
the cost of stress - is to learn more about
how stress affects people. By understanding
this, risk managers can more clearly and compellingly
communicate the depth and breadth to which
stress compromises employee performance. Successfully
addressing stress is not a simple or an easy
task. It requires more than a one-day stress
management seminar. It requires nothing less
than brutal honesty about one's management
practices and policies and a commitment to
do the hard work necessary to change course.
For any company to undertake willingly the
grueling work required to address employee
stress effectively, the benefits must be compelling
enough to warrant the effort.
By helping their employers recognize the cost
of employee stress, risk managers can help
their organizations take the first step in
dramatically reducing their exposures and operating
costs, while at the same time cultivating a
happy, healthy, productive work force. |
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About the Author: David Lee is an internationally recognized authority on organizational and managerial practices that optimize employee performance. He is the author of Managing Employee Stress and Safety, as well as dozens of articles on employee and organizational performance that have been published in trade journals and books in North America, Asia, Europe, and Australia. For information on his programs and service, click here.
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