Editorials

We encourage our readers to submit relevant articles of interest to be published on this web site. Students, members, and companies are invited to take advantage of this opportunity! Please send your editorial to: Dick Forrest, CPIM dforrest@charter.net

Ira Smolowitz, Ph.D. Professor of Finance and Dean, Bureau of Business Research and Program Development at the American International College, Springfield, MA.

Some of Ira's past articles of interest:

• A View of Education From Both Sides: An Assessment of the American Education System
• Ramifications of the 24/7 Economy
• A Half-'DUH’zen Examples of Poor Organizational Practices
• Work-place Gossip: A Reassessment
• The Disappearance of Courtesy in America: Implications for Business
• Dynamics of Corporate Assumptions
• The Outlook for American Competitiveness
• Consumer Marketing: A Flawed Strategy

A Healthy Workforce: The Driver of Corporate Financial Performance

By Ira Smolowitz, Ph.D.

I am a member of the Springfield, Massachusetts, chapter of FEI – (Financial Executives International). At the October 14, 2004, chapter meeting – the associated meeting topic was healthcare: current status, benchmarks, trends, and viable alternatives.

The program leader was Peter J. Tavolacci, Senior Vice President, Employee Benefits Services – Marsh and McLennan Companies.

Two of his observations have been the impetus for my own research and this article. The two observations are: (a) Body Mass Index (BMI) of 30 or greater is a good predictor of lost time and injury rate and (b) employees with a BMI of 30 or greater had the highest rate of injuries, and the longest time off.

Let’s begin by determining how BMI is determined. In a news release issued 07/01/2003 – and authored by James J. Doyle, Chilton Memorial Hospital President and CEO – BMI can be determined by dividing your weight in pounds by your height in inches squared. The resulting figure is multiplied by 703.

“Typically, a BMI of 19 is regarded as ideal. If your BMI is less than 19, you may be underweight. A BMI of 19 – 24.9 is considered normal. A BMI of 25 – 29.9 is overweight. Anyone with a BMI of 30 or more is considered obsese.1 “Obesity costs U.S. companies an estimated $12.7 billion annually, reports the National Business Group on Health (NBGH), a consortium of major employers working to control health care costs. The higher an individual’s body mass index, or BMI, the higher the costs.”2

On average, health care for obese workers costs 36 percent more than for normal weight workers, and medication costs 77 percent more, according to Roland Sturm, senior economist at RAND in Santa Monica, Calif., where he directs the Economic and Policy Research Program.

Direct costs of obesity include medical insurance, hospitalization, physician visits, outpatient testing/treatment, laboratory, radiology and pharmaceutical. Health insurance is responsible for $7.7 billion, followed by life insurance ($1.8 billion) and disability insurance ($800 million), according to the study “Estimated Economic Costs of Obesity to U.S. Business,” published in the American Journal of Health Promotion in 1998.

Indirect costs include decreased productivity and increased absenteeism. Obese employees are twice as likely to be absent 14 or more times per year. Paid sick leave associated with obesity costs employers an estimated $2.4 billion per year.

Even when they are on the job, a quarter of obese workers under-perform because of infirmities related to their weight, estimates Dr. Eve Olson, director of St. Francis Medical and Surgical Weight Loss Center, and author of “Obesity in the Workplace: A Case for Treatment,” (American Journal of Bariatric Medicine, 2003). Overall, NBGH reports that obesity is associated with 39 million lost work days, 239 million restricted-activity days, 90 million bed days and 63 million physician visits.

More important, obesity significantly affects the health and quality of life of employees. The condition is a risk factor for a large number of chronic diseases, such as diabetes, heart disease, hypertension, musculoskeletal conditions, depression, stroke, poor female reproductive health, as well as endometrial, breast, prostate and colon cancers. It can contribute to the onset of these disorders and worsen them.3

It seems to me, that if efficiency is defined as output/input – then employee obesity serves to reduce organizational efficiency. Employee obesity and its associated direct and indirect costs adversely effect both the numerator and denominator of the above definition of efficiency. In a subsequent article, in this publication, I will indicate how corporations are responding to employee obesity.

References
1. Doyle, James J. “Weight Loss At The Work Site” Chilton Memorial Hospital News and Publications – Released: 07/10/2003 [downloaded 10/15/2004 from [http://www.chiltonmemorial.org/cgi-bin/pr.cgi? id PressRelease =202] p.1.

2. 2. Grossman, Robert J. “Countering A Weight Crisis”] HR Magazine – March 2004] – Downloaded 10/15/2004 from http://www.shrm.org/hrmagazine/articles/0304/0304covstory.asp]. p.1. 3.

3. Ibid, pp 1-2.

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Articles printed with the permission of Dr. Ira Smolowitz, Professor of Finance and Dean, Bureau of Business Research and Program Development at American International College, Springfield, MA.