When contemplating a financial wellness program one of the first questions people ask is “What will the ROI be?” It’s an important question, but it’s not the first question that should be asked.
Instead, it should be “What outcomes are we trying to achieve?” It’s impossible to establish a meaningful ROI without a clear understanding of the outcomes. When those are clearly defined, accurate ROI becomes easier to formulate.
The terms ROI and outcomes are sometimes used interchangeably, which can be misleading when trying to measure the value of a program. Individuals interested in offering a financial wellness program to their employees, customers, or other stakeholders are often required to justify the investment with a return measured in dollars. And why not? ROI is a critical metric that any financial wellness program sponsor must consider prior to an investment decision, since the bottom line is, after all, the bottom line.
Consider a participant in a financial wellness program who substantially increases their savings and pays down considerable debt. There is no tangible dollar-for-dollar ROI to the wellness provider or employer. This example suggests that the impact on individual participants must be considered in the calculus of ROI–even if there is no direct monetary benefit to the sponsor organization.
The Miscalculation of ROI
Measuring ROI dollar-for-dollar measure might fail to include other relevant outcomes that are possible with these programs. Long-term behavior change, for example, doesn’t immediately appear on a balance sheet, despite its tangible and enduring benefits.
Many financial wellness companies cite studies that assert financial wellness programs achieve a 3:1 ROI. For every dollar spent implementing a financial wellness program, the return will be three dollars, which would make any organization take notice. This impressive return is not wholly misguided, as it addresses vital factors that can affect any organization:
- Increased productivity
- Reduced absenteeism
- Lowered garnishment costs
It’s not surprising that the wellness industry actively promotes financial wellness programs as silver bullets for eliminating employee-generated costs. But a quick examination of ROI findings reveals the fallible nature of this claim.
Productive employees are valuable assets but might not be the best metric for gauging the effectiveness of financial wellness programs. A myriad of variables influence employee productivity levels:
- Sleep deprivation
- Managerial policies
- Or even, according to Forbes, office temperature
As a result, isolating lost productivity as solely indicative of financial stressors is statistically challenging. Additionally, reduced absenteeism, much like increased productivity, is not determined by any one factor, calling into question the accuracy of the 3:1 ROI calculation.