The High Cost of Mental Disorders to Business: by Michael Koscec - Entec Corporation - Articles

The High Cost of Mental Disorders to Business: by Michael Koscec - Entec Corporation - Friday, November 21 2008

The need to understand organization health flows from a dramatic turn of events, where research has shown that the performance of employees is directly tied to the mental health of employees. Comprehensive analysis of mental health and productivity issues were drawn out by Dr. Edgardo Pérez, CEO, the Homewood Health Centre and Bill Wilkerson, Co-director of the Homewood Health Centre, in their book, Mindsets .

A significant shift has been taking place in the workplace, where the amount of employees in the service and high technology sectors has been outgrowing employment in traditional manufacturing jobs. According to Thomas Stewart, a member of the Board of Fortune Magazine, in 1991, capital spending in America, in machinery and equipment and other technologies for manufacturing was $107 billion and for information technology, it was $112 billion. This marked the first time in history when information technology spending outstripped spending on production technology. This highlighted the change in the nature of jobs which is being accompanied by a shift in the causes of employee absenteeism and employee health. Dr. Neva Hilliard, a former director of the British Columbia Workers' Compensation Board, noted that today most injured workers are absent from work longer and the cost of caring for them has risen dramatically. Reported WCB claims in British Columbia were down 35% over a five year period, while cost of claims soared 264%. She cited workplace stress as a rising contributor to disability as we enter the era of the white-collar knowledge worker.

Recognizing stress related disorders has been difficult to quantify and it is becoming increasingly evident that this has become a major issue for insurers. According to the U.S. Health Care Financing Administration, companies are projected to spend more than 60% of their after-tax profits on the provision of medical care for their employees by the year 2000, due to stress related illnesses.

Currently, the workplace is the source of 30% of people seeking psychiatric help. When treatment is completed and the individual is deemed healthy enough to return to work, they return to the same environment which created the illness in the first place. This situation is no different than treating a person with a breathing problem created by toxic fumes in a poorly ventilated paint shop, and after recovering, returning the individual to the same paint shop to continue to work. The negative outcome of reoccurring illnesses is predictable. Similarly, non-manufacturing workplaces may be "toxic" and one can expect comparable outcomes when recovered persons return to their "toxic" workplaces.

The American Institute of Stress estimates that job stress now costs the US economy about $300 billion per year. This is a composite figure representing lost production due to absences, medical expenses, Workers' Compensation, and disability costs.

A 1991 survey on employee stress by Northwestern National Life Insurance Co. of Minneapolis, MN, found a 200% increase in stress-related disability claims between 1982 and 1990. In addition, the stress-related disabilities had become more severe and were less responsive to rehabilitation (i.e., the success rate decreased from 88% in 1982 to 33% in 1990).

Stress claims are the fastest rising category of Workers' Compensation payouts. The incidence of people suffering from severe anxiety is rapidly increasing due to the higher levels of stress in modern society. About 25 million American adults currently suffer from this condition, and it is projected that about 65 million people (nearly 25% of the population) will suffer from an anxiety disorder at some point in their lifetimes. In Canada depression currently represents 14 percent of all disabilities, greater than the world average. Mental anxiety and stress were cited by Canadian workers in 1997, as reasons for growing levels of absenteeism more often than physical illness in a study by the Homewood Centre for Organizational Health. More people seek relief from depression each year than from any other medical condition, including the common cold. A Medical Outcomes Study found that depression is associated with as much or more disabilities than major medical conditions, including heart disease.

Forty percent of Canadians identified worry and anxiety as their principal demotivators at work.

Twenty percent of individual trips to the family doctor are prompted by stress, depression and anxiety disorder. In The Global Burden of Disease and Injury Study , conducted by the Harvard School of Public Health and the World Health Organization, they found that in the developing regions where four-fifths of the planet's people live, non-communicable diseases such as depression and heart disease are fast replacing traditional enemies, such as infectious diseases and malnutrition as the leading causes of disability. By the year 2020, non-communicable diseases are expected to account for seven out of every ten deaths in developing regions compared with less than half today, and heart disease and depression will be the two leading causes of disease burden.

This study showed that of the ten leading causes of disability worldwide in 1990, five were psychiatric conditions: unipolar depression, alcohol use, bipolar affective disorder (manic depression) schizophrenia and obsessive-compulsive disorder. It is interesting to note that unipolar major depression was the leading cause of disease burden for women between the ages of 15-44 in both developed regions at 20% and developing regions at 13%.

The statistical evidence describing the seriousness of the mental health problem generally and as it relates to the workplace specifically is overwhelming. However, there are few specific insights and solutions to ameliorating the problem. Anecdotal and qualitative information abounds about best practices among excellent companies which have demonstrated superior performance. However, this literature has failed to suggest ways to specifically measure and quantify best practices and to quantify the cause and effect impact of the various organizational components. The anecdotal research seems to have had little impact on management generally, as the slash and burn mentally is still alive and well, despite ten years of downsizing, right-sizing, restructuring, mergers and acquisitions. There is lip service paid to the importance of people, but current management practices show little evidence of "real" care for their employees.

Therefore, there is a need for quantitative data that will demonstrate the relationship between a people friendly workplace and superior organizational performance. There is a need for an organizational health diagnostic methodology which will statistically show the relationship between organizational best practices, management behaviours, employee health and organizational performance. Senior managers, must be presented with hard statistics which will show them the many benefits that will accrue to their organizations from a people friendly workplace environment. This is the ultimate objective of this research project.

The current project which Entec Corporation is conducting in association with the Homewood Health Centre and staff form the Medical Faculty, at the University of Toronto, is of a high priority because of the significant changes which have occurred and will continue to occur in the nature of work and in the nature of work related disabilities. Diagnostic tools and preventative programs are lagging behind these changes and this project will significantly close this gap.

In the October/November 1999, issue of Employee Health & Productivity publication, the Hon. Michael Wilson, former Federal Minister of Finance, is quoted as saying that "mental health is a business issue". He goes on to say that, "Corporations are expecting and demanding too much work in too little time from their employees, whether they know it or not. This is a plea to management to take a serious look at the business issues and costs of poor mental health.

In the same article Mr. Tim Price, Chairman of Trilon Financial Corporation said, "Mental health and stress-related disorders are a business issue we must get our arms around before, like the great grizzly, it gets its arms around us and suffocates the competitive energies of Canadian industry." This was followed by a quote from Bob Lord, Vice-Chairman, Ernst & Young, "Mental disability much of it triggered in the first place by stress, is emerging as the most significant health issue of the 21st century."

Maria Gonzalez, Vice-President, Strategic Alliances, Bank of Montreal, believes that business leaders must have a greater understanding of the impact of mental health issues on business performance. Ms. Gonzalez and the Bank of Montreal have performed internal studies and implemented policies that have gone a considerable distance in linking financial performance to organizational health. They indicate that, invariably, climate and culture of an organization are factors in stress levels and ultimately, in employee health and ability to function. The next steps, Ms. Gonzalez says, is "to connect individual health risks to corporate financial performance, through specific measurements. This will establish and prove that organizational, individual and financial health are interrelated."

Dr. Marten Devries, Secretary-General of the World Federation for Mental Health, says that initiatives which display the connection between mental health and business and economic performance are exactly on time.

Statistics released in March, 2000, at one of the largest blue chip companies in Canada, show that between 1994 -1999, the cost of disability for short term absences have risen by 70% of payroll cost, and the cost of disability for long term absences have risen 143% of payroll cost. Absences due to emotional reasons outdistanced all four categories of physical disabilities being measured by a factor of about 3:1.

It is for these reasons that Entec Corporation assembled a multidisciplinary research team comprising expertise from psychiatry, medical sciences, management and organizational development to conduct this applied research project The outcomes of this research can be used to prevent or minimize work related illness. This can be accomplished by offering the Employee Engagement Survey© tool, which was developed and used for this research, for use by others. The application by companies, agencies and institutions, of this organizational health diagnostic tool, will allow these organizations to begin the process of identifying factors which are contributing to mental disabilities in their workplace. The output of the diagnostic tool will also provide specific recommendations on improving the workplace environment, organizational policies, practices and management behaviours, in order to reduce current mental disabilities and prevent or minimize future mental disabilities. In turn this will benefit organization profitability and shareholder value.