Employee Stress: The True Cost
By David Lee
published
in The John Liner Review, Vol 11(3), pg. 33-38,
1997
Most organizations have no idea just how
much employee stress costs them each year. A 1990 study by the
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
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,
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
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
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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by David Lee
About the
Author: David Lee is a consultant, speaker, and executive coach.
The founder of HumanNature@Work, he has worked with
organizations and presented at conferences throughout
For More Information:
David Lee, President
HumanNature@Work
P.O. Box 430
Bar Mills, Maine 04004
Tel: 207-929-3344
E-mail: info@HumanNatureAtWork.com