A first-of-its-kind BDO study investigating the link between business performance and mental wellbeing has found that financial challenges have been a key driver of business leaders and owners feeling less mentally healthy than normal over the past six months.
Nearly half (44%) of the business leaders and owners who responded to the inaugural BDO Wellbeing in Business Index - Te Rangahau o ngā hauora pai - stated that they had been feeling less mentally healthy than normal at some time in the past six months. Of these, 36% said business’ financial performance challenges – including cash flow problems – were causing this. This was the leading concern behind general impacts of COVID-19 (45%).
External economic and political factors, workload, employee conflict and performance and a lack of people to rely on for support were also factors causing negative wellbeing to be mentioned by respondents to the survey - conducted among nearly 600 business leaders and owners across Aotearoa during late May 2022.
Tourism, retail and healthcare businesses have the lowest mental wellbeing
Nearly two-thirds (61%) of business leaders and owners said they were feeling better compared to when COVID-19 was at its peak disruption. However, one-third said they felt about the same. There were significant differences across industries, with only 32% of tourism businesses saying they felt better (56% said the same).
The survey adopted the World Health Organisation’s internationally recognised ‘WHO-5’ wellbeing index to take a snapshot of wellbeing among New Zealand business owners. The WHO-5 asks respondents to rate how they have been feeling in the past two weeks across five key statements, and calculates a score ranging from 0 (representing the worst possible wellbeing) to 100 (representing the best possible wellbeing).
The whole-of-business average WHO-5 score was 69 at the time of surveying, suggesting that - while the past two years have been difficult - there was potentially a degree of resilience among business leaders and owners. Again, there were significant industry variations – retail scored the lowest WHO-5 score of 56, while second lowest was healthcare (60), and third lowest was tourism (63). Retail, healthcare and tourism have continued to face significant disruption from COVID-19. Construction scored the highest (82) followed by agriculture (80). Given that the WHO-5 score is a point-in-time measure and wellbeing fluctuates over time, it will be key to track these sector trends in future reports.
Positive future outlook
The survey also asked respondents how they might expect to feel about their business performance and wellbeing in six months’ time. Encouragingly, 71% said that they expect to feel positive about their business performance, while 73% said they expected to feel generally satisfied by life most or all of the time. Again, COVID-19, workload and financial problems were expected to be the main drivers of negative wellbeing. Those citing cash flow problems increased to 22%.
Flexible work and strong financial management key to maintaining wellbeing
When asked what business leaders do in their business to manage their wellbeing, flexible working came top. Second was managing boundaries between work and home, while strong financial management processes came third. This included creating a cash flow management plan, reviewing accounts regularly, and closely following a business plan and strategy. Ranking fourth was delegating tasks when workload is too high, while seeking business advice from trusted people came fifth.
Gina Cook, BDO Advisory Partner, said: “My clients who fared best through COVID-19 were the ones who were the most financially prepared before they went into the pandemic. Having a solid business plan, detailed financial projections, understanding where your cash is coming from, what your monthly expenditure is, what your working capital cycle is – all these things enable businesses to navigate much more easily when unexpected events happen. Owners with strong financial processes will also likely have a much stronger relationship with their lenders, meaning businesses can much more easily access additional resources when needed.”
In their personal life, regular exercise, getting enough sleep and spending time socialising with friends and family all scored highly as key methods to keep wellbeing in a good space.
Doug Haines, BDO Deputy Chair, said: “In working closely with businesses across Aotearoa, we often see first-hand the challenges they’re facing in terms of business performance and their wellbeing. While we’re not the wellbeing experts, we know finances are a key driver here, as was borne out in the survey – and our goal is to combine our insights from this unique study with our financial know-how to help take away some of the stress of running a business.”
To view the report, sector-specific insights and advice, as well as video interviews with reporter Wilhelmina Shrimpton and business and wellbeing experts, go to bdo.nz/wellbeing.