Most of us, when we think of yoga, envision those implausible poses shown in magazines and videos being performed by gurus in India or super-flexible models in athletic wear. In fact, the poses, or “asanas,” are only a small part of yoga.
The Free Dictionary says, “Yoga is derived from a Sanskrit word which means ‘union.’ The goal of classical yoga is to bring self-transcendence, or enlightenment, through physical, mental and spiritual health. Yoga was developed in ancient India as far back as 5,000 years ago; sculptures detailing yoga positions have been found in India which date back to 3000 B.C.”
Yoga, health and mindfulness for employees and leaders are topics I have mentioned in earlier columns, yet they are very nontraditional. For example, health-improvement programs are often presented as Internet games. Blue Shield, for one, is using a mobile-enabled platform to link elements of competition, team accountability and incentives to employees’ physical activity. Shape Up Shield has 130 teams made up of 1,200 employees. The American Heart Association awarded Blue Shield with the Worksite Fitness Innovation Award for the platform.
Such programs pass before CFOs’ eyes because they cost money, time and other resources. It is fair to ask whether they pay off. In other words, can it possibly make financial sense to spend money and time building video games to get employees to embrace personal fitness? However, it is also fair to ask whether existing financial systems can evaluate that question properly.
Such programs present a paradox: Their effects are quite vivid at the individual level yet difficult to measure at the organizational level. Individual employees and leaders frequently say that such programs change their lives and make them far more productive and creative, but the connection between those effects and the corporate bottom line is often obscure. CFOs may feel that personal endorsements are not the kind of “hard data” they can use to make such an investment decision.
So, financial analyses often track health-care treatment or insurance costs, or reductions in absence, sick leave or injuries (see “Investing in People” by Boudreau and Cascio for examples). But the greatest effect of such programs may occur in subtle ways, through small individual changes in productivity, decisions, creativity and performance, across thousands of employees. Financial systems will miss such effects if they fixate on only the most tangible outcomes, which could lead to missed opportunities.
That brings us back to the metaphor of yoga and the idea of “union.” In yoga if you see only the poses, you miss the bigger idea, which requires that you see how everything is connected through a union of mind-body-spirit. If you evaluate investments in employee health and wellness simply with reduced health-care spending, you can miss opportunities for payoffs that were not obvious because financial systems currently don’t connect the dots.
I have always found Tobin’s Q an intriguing measure of financial performance, because it is an elegant union of the elements of market performance and the balance sheet. This measure was devised by James Tobin of Yale University, a Nobel laureate in economics. The Q ratio is calculated as the market value of a company divided by the replacement value of its assets.
Do investments in people affect Tobin’s Q, and if so, how does that happen? An article in the Academy of Management Journal by researchers at Rutgers and Notre Dame Universities summarizes decades of research, combining findings from 116 articles representing more than 31,000 organizations. They found that financial and operational outcomes are affected by HR practices indirectly, through enhanced capability, opportunity and motivation, which in turn affects employee turnover and operational outcomes, which then affect financial outcomes. They also found that the impact of HR practices is more significant than many CFOs might imagine. Using Tobin’s Q, the authors found, “a one-standard-deviation increase in motivation-enhancing HR practices is associated with 64 percent improvement in Tobin’s Q.” (See p. 1278.)
The message is that financial systems can fully capture the effects of human capital investments only if they capture the union of capability, opportunity and motivation. This union will require that leaders in human resources, who have expertise in measuring things like capability, opportunity and motivation, collaborate closely with leaders from finance, with expertise in connecting those “soft” elements to the outcomes that investors and others can see.
The next time you encounter a proposal to invest in health, mindfulness or even “yoga,” perhaps consider the idea of “union” before reacting too quickly. The key to its value may lie beneath the surface.
John Boudreau is a professor at the University of Southern California’s Marshall School of Business and research director at the school’s Center for Effective Organizations.