A new corporate performance metric: Framing the intersection between mental health, operations and organizational sustainability risk

It’s safe to assume that profitability and budget efficiency are top priorities for most CEOs and boards. However, what is often overlooked is the economic value generated by employees through their daily behaviours and decisions, and how mental health directly influences that value.

A thriving workforce that fosters employee well-being is more likely to maximize its potential for productivity, organizational resilience and profitability per full-time equivalent. In 2020, a study reported that companies with the highest workforce treatment scores in rankings outperformed the Russell 1000 by 4.7 per cent.

A languishing workforce can lead to inefficiencies, disengagement and financial losses. Unlocking the full potential of human capital requires accepting that all employees have a defined limit. Going beyond that limit can result in mental harm, injury and illness.

It is estimated that poor mental health costs Canadian employers approximately $220 billion annually in indirect and direct expenses, affecting productivity, retention and overall organizational performance. However, the relationship between employee well-being and financial performance goes beyond reducing costs to protect employees.

Employers benefit from considering their workforces as strategic assets that require a work environment to promote and protect employees’ mental health (i.e., emotional well-being).

The challenge of getting mental health on the CEO’s or board’s radar

Visible and invisible mental health risk factors are pervasive, but without a clear link to organizational performance, they may not garner immediate attention. CEOs tend to prioritize metrics related to operational and financial performance.

Getting a CEO’s attention on employees’ mental health requires understanding the risk to their organization. General population statistics, such as one in five employees coming to the workplace each day with a mental health issue, may not capture a CEO’s attention until they have evidence of how mental health may be a risk factor to their organization’s sustainability.

However, it is advantageous to note external factors, such as geopolitics, economic uncertainty, civil unrest, and industry disruptions, before measuring internal workforce health and performance. These factors shape employees’ perceptions and behaviours and can mask deeper concerns that increase stigma and create a false sense of stability within an organization.

Job security has a direct impact on employees who are experiencing personal or workplace challenges, including mental and physical health concerns, as well as their comfort in requesting support. In a volatile, uncertain, complex, ambiguous world, employees facing financial instability may suppress signs of burnout or illness, fearing that taking time off could jeopardize their jobs.

Research indicates a direct correlation between job security and sick leave patterns:

• When employees feel secure, they are more likely to take sick leave when needed, prioritizing their well-being.
• When job security declines, employees may avoid taking time off, not because they are healthier, but because they fear that absences could make them vulnerable to layoffs.

This holds true for employees in precarious job situations. Employees facing organizational restructuring or working in temporary roles are more likely to work through illness rather than take leave, a phenomenon known as presenteeism. While presenteeism may appear to maintain productivity, it often leads to reduced efficiency, long-term health risks and hidden declines in workforce performance. Ignoring external pressures can distort internal performance metrics, resulting in a false positive.

Introduction to the model: Understanding employees’ economic value in a complex business environment

Employee well-being is not just a human resources concern. It’s a fundamental economic driver that influences organizational performance, financial health and long-term sustainability. The following section illustrates a strategic economic value that can help decision-makers invest in psychological health and safety.

The three-step model outlined below can help CEOs and decision-makers understand the intersection between workplace mental health and operational risk, enabling them to predict an organization’s risk in terms of productivity, retention and financial exposure.

Step 1: Quantify the likelihood of mental health risk

General facts accepted by most workplace mental health researchers include:

• One in five employees shows up each day experiencing a mental health concern that distracts their potential, representing a significant risk to productivity and costs.
• Insurance (i.e., short- and long-term disability) and workers’ compensation claims related to mental health are on the rise, indicating escalating financial exposure.
• Workplace mental health can negatively impact employees’ capacity related to discretionary effort, presenteeism and attendance.
• Increased regulations emphasizing psychological safety and workplace psychosocial factors increase employers’ obligations to demonstrate duty of care and due diligence.
• External pressures may create job insecurity strain on employees.

Actual organizational mental health risk baseline:

• Hard costs and current workplace mental health data can be obtained by analyzing insurance and HR data, determining the utilization and perceived value of the current mental health support program (i.e., net promoter scores) and understanding workplace psychosocial risk assessment data by leveraging tools like the workplace psychological safety assessment (i.e., psychosocial risk factors, hazards, leadership, stigma, etc.).
• Design and select assessment: Determine whether a quantitative or qualitative approach will be used to understand the psychosocial risk factors, employee general stress levels and mental health (i.e., percentage languishing versus flourishing) and outcome data such as absenteeism, presenteeism, disability claims, turnover and behavioural incidents that can predict risk.
• Data review: The data collected will provide senior leadership with an understanding of the organization’s current mental health risk. The following is an example template that can be used as a part of the organizational workplace mental health scorecard. It can help inform the likelihood and risk of mental health concerns having a positive or negative impact on the organization’s potential.

Mental health risk scale (0-100)

Step 2: Establish the operational risk index score

To engage a CEO, it can be beneficial to go beyond step one and fully understand the current operational factors that can directly impact organizational performance. The operational risk index score considers the intersection between key operational metrics that can be directly linked to human capital potential. (The mental health risk scale presented in step one is an independent variable that can partially explain operational risk.)

What can get a CEO’s attention quickly is clear evidence that key operational metrics are slipping, such as:

• Percentage of vacancies due to turnover or burnout: Higher percentages increase risk.
• Workforce skills and capacity: Skills gaps or declining capacity elevate risk.
• Employee productivity: Decreasing productivity scores indicate a higher risk.
• Labour market dynamics: Shortages or high competition raise risk.
• Compliance and regulatory risk: Non-compliance or upcoming changes increase risk.
• Time to fill a role: Longer times indicate operational strain.
• Turnover rates: Higher voluntary/involuntary turnover increases risk.
• Percentage of workforce on short-term disability: Higher rates suggest operational strain.
• Average sick days per employee: Rising sick days elevate risk.
• Behavioural challenges: More challenges suggest cultural or operational issues.
• Revenue per full-time equivalent: Declining revenue per employee signals operational risk.
• Budget per full-time equivalent: Increasing costs or budget strain indicate risk.

These are a few examples of operational metrics that influence the capacity and output of a workforce. The higher the operational risk index, the greater the risk to the organization’s sustainability, which can threaten short- and long-term success. Much like the above metrics for mental health, they can be put into one of five operational risk level buckets, based on the key metrics and scores.

The following is an example of an operational risk index that an employer can use to predict their current operational risk index, which can be monitored over time.

Operational risk index scale (0-100)

Step 3: Determine the organizational severity risk index (OSRI)

Getting a CEO or board to focus attention on workplace mental health can easier when there is a framework that provides decision-makers with the context of the current risks to the organization’s sustainability. The OSRI provides a new metric for decision-makers to consider when evaluating the organization’s current risk by showing the combination of the mental health and operational risk indexes. The higher the OSRI, the greater the risk of adverse effects, including reduced productivity, higher costs, and potential damage to organizational sustainability.

Calculating the OSRI requires completing the first two steps. These provide flexibility for decision-makers to select their method of measurement and metrics, and assign them to a risk index level using the above example tables. The following steps can be used to calculate an OSRI risk index score that can be put on the corporate scorecard.

1. Get your mental health score (out of 100).
2. Get your operational risk score (out of 100).
3. Divide each score by 20 to convert to a scale of one to five.
4. Add these two numbers together.
5. Divide by 2 — the result is your OSRI (1-5).

Interpretation of OSRI

The higher the OSRI, the more urgent it is to address mental health and operational risks to avoid severe negative impacts on your organization. A high severity risk index correlates with diminished organizational sustainability, profitability and growth potential. Mental health risks are not merely HR issues. They are strategic operational risks with measurable financial implications.

Once employers understand their OSRI score, the cost of inaction becomes clear. Recognizing the interdependency between workforce capacity and operational health is crucial to predicting long-term business performance. However, awareness alone is not enough. Leaders must move beyond observation and actively build controls using a structured approach, such as Plan-Do-Check-Act.

Mental health is an operational imperative for organizational sustainability

Mental health must be seen as a core operational risk factor, not just an HR or wellness concern. By embedding mental health within the risk severity index, leaders can quantify its direct impact on financial performance and operational efficiency. This shift positions mental health as a business-critical metric that drives strategic investment, reduces disruptions and enhances organizational potential.

Employees are value creators, fuelling innovation, problem-solving and productivity. A mentally healthy workforce is more engaged, efficient and committed to driving profitability. Neglecting employee well-being leads to lost potential, higher turnover and reduced sustainability, eroding business resilience over time. Investing in mental health is not a discretionary benefit; it is a strategic necessity for long-term success.

Investing in workplace mental health and psychological health and safety programs should be viewed as a strategic investment rather than a cost. A mentally healthy workforce drives organizational success by delivering:

• Higher productivity: Employees perform at optimal levels, minimizing inefficiencies and errors.
• Reduced workforce risks: Lower rates of absenteeism, disability claims and turnover.
• Enhanced innovation: Mental well-being fosters creativity and problem-solving.
• Stronger knowledge retention: Supports the transfer of tacit knowledge, maintaining workforce capability.
• Improved employer brand: A commitment to well-being strengthens recruitment and retention efforts.
• Sustainable business performance: Protects long-term investments for shareholders, stakeholders and taxpayers.

By integrating psychological health and safety principles into workplace strategy, organizations create environments where employees thrive, ultimately driving profitability, resilience and competitive advantage. Organizations that prioritize employee well-being and psychological health and safety position themselves for competitive advantage and long-term resilience.

In today’s evolving business landscape, mentally healthy employees are not just beneficial; they are fundamental to sustaining innovation, productivity and growth. Consider the benefit of tracking your organization’s year-over-year OSRI as a part of its performance scorecard.