Transmittal

To:
From: Daniel Jones
Subject: Workplace Fitness Center Proposal
Sent: May 1st, 2019

Dear Management,

Enclosed is the result of my studies on the feasibility of a workplace fitness center in our
building. Included in the report is an analysis of the benefits and risks introduced by an on-site
fitness center. This includes coverage of its effects on employee happiness, loyalty, and
productivity, and weighs them against the cost of establishing and maintaining the facility.

Also included are charts and other visuals to help convey statistics fetched from on-site fitness
centers that have been established at other companies in the past. The report will strongly
recommend an employee survey to gauge interest in the fitness center, and such a survey will
be included in the report as well, ready to be printed out and distributed to company staff.

This report will give you a better understanding of the implications that come from establishing a
fitness center, and I hope that it will help upper management arrive at a confident decision.

Sincerely,
Daniel Jones
Workplace Fitness Center Analysis Report

Prepared by Daniel Jones

Report distributed May 3rd, 2019

Abstract

An on-site fitness center - including the benefits and risks that come with it - fall under a broader
theory of “workplace wellness.” Originally of little concern to companies, workplace wellness
started being stressed in the 1950s, taking off exponentially in the 70s, when financial
responsibility for common people shifted from government to employer[1]. Since then, on-site
fitness centers have been the most common initiative for workplace wellness.

Many companies have been pleased with the

results of their fitness centers. General
Electric’s fitness programs have saved the
company thousands of dollars annually in
reduced healthcare costs for employees.
Bank of America and Citibank have reported
a $6 and $4.50 return respectively for every
dollar spent on their fitness programs.[2]

With statistics like these in mind, it sounds as

though there’s little reason for any company to not have an on-site fitness center. However,
these benefits must be weighed against the cost of establishing and maintaining these facilities.
This analysis exists to address how to maximize benefits and reduce risks, in order to allow
upper management to come to a decision on whether or not the project is worth pursuing.

Executive Summary

The goal of long-term employee happiness and productivity is best achieved through “workplace
wellness” programs, the most common of which and the one being proposed is an on-site
fitness center. This is a gym exclusively for our company employees that is established in or
near our own building. The purpose of this report is to answer the questions of what the benefits
of such a facility would be to our company, and what risks it poses.

It goes without saying that exercise is a positive influence on the human body and mind.
Workers, no matter their place of employment, are subject to physical and mental toil throughout
their workday can negatively impact the quality and quantity of their work. A strong body and
mind can help them keep up their morale and happiness, in essence, boosting their productivity
and output for the company. Exercise helps them achieves this end by boosting qualities such
such as oxygen intake while reducing stressors like blood pressure or bodily pain. Giving
employees a convenient place within their own workplace to encourage exercise is one of the
best ways to promote these bodily improvements.

The presence of an on-site gymnasium has benefits not directly related to exercise as well; they
have been attributed to decreasing levels of absenteeism among members. Simply having the
option to work out available is a compelling reason for employees to attend work as often as
possible; there is value in knowing that going to work can be a good thing for your body, instead
of simply a stressor. When a company provides it employees with an on-site fitness center, it
sends a message that they are willing to prioritize employee happiness, even when the
measures to do so must come out of the company’s own pocket. This is very likely to increase
employee morale and loyalty, while serving as an attractive prospect for potential new talent.

These benefits make a compelling case for the development of a fitness center, but they must
be weighed against the risks in order to make an intelligent decision. The big topic to address is
the cost-- establishing an entire new facility within your premises is not cheap. Considering the
cost of commissioning the building to be constructed combined with the cost of designing and
populating it with machines, the cost of establishing a new fitness center could arrive at about
$32,000. This is excluding the continued costs of insurance and maintaining the facility.

With the fitness center’s success revolving around the interest of employees, a low turnout of
members also poses a significant risk. An individual person’s interest in exercise can be very
personal and unpredictable, so it is hard to know beforehand exactly how many employees will
make good use of the facility. An interest in exercise may not even result in use of the on-site
gym-- fitness centers are more common now than ever, and employees may find that an outside
gym suits their needs and preferences better. Additionally, use of the on-site gym puts the
company in a position of liability should an accident occur.

These risk factors all have actions that can be taken to minimize them. However, they can not
be erased altogether and must be considered thoughtfully.

My analysis concludes that, while considerable risks do indeed exist, they can be minimized and
studies indicate that the benefits are very likely to outweigh them. The on-site fitness center
comes as a highly recommended project, although starting it recklessly would be a mistake. It is
recommended to collect data on employee interest and ensure that the center starts out small,
but with room for upscaling. With proper caution, I firmly believe that a highly successful on-site
fitness center can be established.
 ON-SITE FITNESS CENTER ANALYSIS

Benefits

The goal of an on-site fitness center is to increase employee happiness, loyalty, and productivity
by offering a convenient means to improve physical health. The benefits of exercise on one’s
physical and psychological well-being are well-documented, and these effects are amplified by
the presence of a gym in the workplace. Compared to those who exercise without a gym in their
building, employees who utilized their company’s fitness center exhibited significant reductions
in blood pressure, body fat percentage, and shoulder and back pain, while observing increases
in muscle strength and oxygen intake.

Workplace wellness programs, the majority of which are on-site fitness centers, are responsible
for a decrease in absenteeism. Health Affairs has estimated that absenteeism costs fall by
about $2.73 for every dollar spent on workplace wellness[3]. An in-house analysis of the cost of
absenteeism on our company could help paint a clearer picture about how absenteeism affects
us and how much investment in workplace wellness would counteract it.

The presence of a fitness center can

benefit the company’s image, and
improve employees’ outlooks without the
need to even visit. The mere presence of
a fitness center in a company’s building
suggests compassion towards its workers,
signalling that it is not content to only do
the bare minimum for its workers. This
message can even be sent to prospective
talent to get them interested in a position
at the company. For this reason, it is
recommended to advertise the presence
of the fitness center on the company’s
website and other media.

The fitness center may even be an

expected aspect of the company from some employees. In 2015, 52% of all workers in North
America had access to workplace wellness programs. A form of workplace wellness may be
necessary in order to be seen by job-searchers as a competitive employer.

Risks & How to Minimize Them

A new building, or significant modifications to an existing one, will be necessary to serve as the
setting for the fitness center. The cost of establishing this building (detailed under the next
heading) demands a certain return on investment to be a worthwhile venture. There are several
reasons why a fitness center may not be able to achieve this return.

Employee interest will be the lifeblood of the fitness center. Interest can vary greatly for reasons
that can be unique and unpredictable for each person. A significant risk is that not enough
employees will use the fitness center to justify its cost of upkeep. A way to avoid this is to gauge
employee interest before deciding whether or not to begin the project; this can easily be done by
sending out physical or electronic surveys asking about each employee’s interest in physical
fitness, their stress levels during work, how much free time they have, etc. This is a fantastic
way to assess the risk level of the investment, however the information collected may later
become useless as old employees leave and new ones arrive. If established, fitness center
usage may also change during this process, for better or for worse. Some outlets recommend
the use of rewards to incentivize gym attendance. This can include merchandise or extra
vacation days.

Even if employee interest in fitness is high, it must be noted that the on-site fitness center will
exist as a competitive entity. That is to say, it will be competing for attendance with other gyms
in the area. The number of fitness centers has been on the rise for decades, with an even
sharper increase since 2013. The on-site
fitness center will offer employees the
benefit of being able to exercise during
lunch breaks or directly after work. However,
some employees will prefer to exercise after
work or on weekends, and might find that
they prefer a different gym that’s closer to
their home or offers cheaper membership. If
there is expected to be significant
competition from other gyms, it comes even
more recommended to use a rewards
system.

Risk of injury in the fitness center

necessitates that the company takes liability
for it. These injuries can be very costly for the company and, for the affected employee, the
injury is more than enough to undo any benefits gained through exercise. Premises insurance to
circumvent this will cost $600 per month. Preventative methods, such as posters detailing good
safety practices and how to use each machine, are strongly recommended and carry little to no
downside. Safety measures AND premises insurance are both recommended.

Costs

The cost of constructing a building for the fitness center comes in at anywhere between $30-60
per square foot. An average fitness center is around 1000 sq ft, however, this assumes an
average membership of 1,600. Given our company's population of 200, it would be cost-
effective to reduce this size to about 300 sq ft. Under the assumption that each square foot will
cost $60, the building alone is estimated to cost $16,000.00.

Populating the building with fitness machines will vary greatly in cost depending on which-- and
how many-- machines are desired. On average, one treadmill will cost $900.00. Many other
machines, such as exercise bikes, are similarly priced. It is unlikely that a large percentage of
our staff will be using the fitness center at one time, so it is wise to start out with a small number
of machines and observe whether or not it is meeting employee needs. The proposed number
of machines to start with is 20, resulting in a $18000.00 total.

Premises insurance to cover liability will cost at least $12,000 in premiums.

Not counting payment for employees to maintain the facility, the INITIAL cost of establishing the
fitness center should arrive at around $44,000.00. However, even more than that will have to be
spent annually to pay for electricity, insurance, upkeep, and certified trainers.[4]

Conclusion & Recommendations

All studies that I found suggested that an on-site fitness center is an all-around great investment
for a company. It is likely to turn profit in the cleanest way possible-- through healthier, more
productive, and more present employees. A project to begin the establishment of a fitness
center is highly recommended.

However, this is no reason to start the project recklessly. It is wise to first collect data from
employees using the supplied survey. From there, it can be decided whether or not there is
enough interest to justify starting the project. It should also be ascertained that approximately
1000 sq ft are vacant near the main building. Premises insurance for this new building is a must
in the case of an employee injury.

With caution, the benefits of a new fitness center can be maximized while keeping the risks to a
minimum. Previous studies suggest that on-site fitness centers have been very successful in the
past, and, after collecting data via surveys, we can safely ensure that ours will be the same.

References

1. The Interesting History of Workplace Wellness • Mike Rucker, Ph.D. (n.d.). Retrieved
from https://michaelrucker.com/well-being/the-history-of-workplace-wellness
2. Staff, A. (n.d.). On-Site Corporate Fitness Facilities Give Companies Competitive Edge.
Retrieved from https://www.athleticbusiness.com/Fitness-Training/on-site-corporate-
fitness-facilities-give-companies-competitive-edge.html
3. (published online January 14, 2010; 10.1377/hlthaff.2009.0626) Health Affairs, 29, no.2
(2010):304-311 Workplace Wellness Programs Can Generate Savings Katherine
Baicker, David Cutler and Zirui Song C
4. https://www.sage.com/en-us/accounting-software/startup-costs/gym/