Weary Workers Learn to Count Sheep Using Special Lighting, Office Nap Pods

Turns out a good night's rest is good for business.

One-third of American workers aren't sleeping enough to function at peak levels, and that chronic exhaustion is costing billions of dollars in lost productivity, according to researchers from Harvard Medical School.

Sleep-deprived American workers ultimately cost their employers $63 billion in lost productivity, according to a 2011 Harvard Medical School study. Lauren Weber joins The News Hub with a look at some companies making a business case for a better-rested workforce. Photo: Reuters.

Managers at a growing number of companies, among them Procter & Gamble Co., PG +0.71%and Goldman Sachs Group Inc., GS -0.21%are waking up to the problem, investing in programs from sleep-hygiene courses to melatonin-regulating lighting to help employees improve their slumber.

The Centers for Disease Control and Prevention estimates 40.6 million American workers, or 30% of the civilian workforce, don't get enough rest. And the Harvard scientists estimated in 2011 that sleep deprivation costs U.S. companies $63.2 billion in lost productivity per year, mainly because of "presenteeism," people showing up for work but operating at subpar levels. One example, from a separate team at Singapore Management University: Workers waste an extra 8.4 minutes online—checking email, refreshing the TMZ.com home page, and so on—for every hour of interrupted sleep the previous night.

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Managers struggle to motivate exhausted workers. During busy holiday periods at the Park Hyatt Beaver Creek resort in Avon, Colo., long hours sometimes lead to short fuses among staff. "You have to try to figure out who's feeling frustrated and help them cut loose to get some rest," said Scott Gubrud, director of sales and marketing at the hotel, which last week began a series of better-sleep initiatives for both employees and guests.

"If we treated machinery like we treat the human body, there would be breakdowns all the time," said James Maas, a former Cornell University psychologist and author of "Sleep for Success."

Companies have been slow to grasp the effects of sleep deprivation on productivity, but it is now a hot topic even in hard-driving industries, such as finance, where pulling all-nighters is often viewed as crucial to getting ahead.

Mr. Maas, who says he coined the phrase "power nap" 36 years ago, gave a talk about sleep hygiene at Goldman Sachs in 2011 that was so oversubscribed it had to be broadcast via conference call to accommodate the 1,000 or so people who wanted to attend. He spoke last year at hedge-fund firm D.E. Shaw & Co., which has nap pods sprinkled around its offices.

Yet perceptions linger that sleep is for sissies and loafers, and neither Goldman nor Shaw would comment directly about why they're addressing employees' sleep habits. A 2012 University of Southern California study of young investment bankers suggests that punishing hours, and resulting sleep deprivation, contributed to physical and emotional ailments within four years on the job.

"People in investment banking have been my main clients for the last few years because they're so exhausted and under so much pressure," said Mr. Maas, adding that bankers usually don't want to hear about how to get more sleep. Instead, they want tips for performing well on five or six hours' rest.

The risks of fatigue are especially acute in professions like health care and manufacturing, which involve overnight shifts and where a single careless error can put lives in danger.

At Aurora Health Care, the largest hospital system in Wisconsin, more than 2,600 employees in 2012 took a six-week online course for insomnia sufferers after managers surmised that sleep deprivation was likely a problem among its workforce. The course, one of several health-coaching sessions offered at Aurora and developed by Johnson & Johnson's JNJ -0.41%Wellness & Prevention unit, requires participants to keep a sleep diary, and then makes recommendations based on individual sleep patterns.

Barb Stollenwork, age 53 and a wellness program coordinator at Aurora, kicked her nightly Tylenol PM habit after finishing the program at the end of 2011. For years, she said, she woke at 4 a.m., then lay in bed worrying about how she'd function that day. By changing her behavior—for instance, going to bed later—she began sleeping until her alarm rang at 5:30 a.m.

Based on follow-up surveys that asked about both sleep and work habits, Aurora sees an average of $672 in productivity savings per participant in the insomnia module, said Dr. David Smith, an Aurora vice president.

Procter & Gamble is talking with sleep expert Nancy Rothstein about creating a multiweek pilot program for two of its plants, one in Belleville, Ontario, that makes Always feminine-hygiene products, and the other in Lima, Ohio, that makes liquid laundry detergents. Paul DeLuca, North American learning and development manager, said he hopes to have both courses running by June, starting with a group of 15 to 20 workers in Lima and up to 300 in Belleville.

The plants operate day and night, so many employees work unconventional hours, a known risk for poor sleep and overall bad health. If the program helps workers get better rest, with resulting gains in productivity and concentration, Mr. DeLuca will argue for a broader rollout of the initiative.

P&G brought Ms. Rothstein to its headquarters in Cincinnati last year to give a 50-minute presentation emphasizing, among other things, the importance of shutting off screen devices an hour before bed because the blue light emitted by the screens interferes with production of the sleep hormone melatonin.

That's no easy order in the age of smartphones, laptops and late-night conference calls with the Beijing or London office. "The line between work and what's outside of work is graying," Mr. DeLuca said.

At the more extreme end of the intervention scale, some are calling upon Litebook Company Ltd., a Canadian maker of lights that help regulate the body's melatonin levels. The company, which supplies devices to the Philadelphia Flyers and Ottawa Senators to help athletes cope with jet lag and game schedules, said it is getting calls from corporations interested in making the lights available at workstations and desks.

Write to Lauren Weber at Lauren.Weber@wsj.com

A version of this article appeared January 23, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Go Ahead, Hit the Snooze Button.

The rising star (from left): featured in the IBM 2000 annual report; at an IBM facility in 2002; talking with clients at the CIO-CMO event in June

Rometty (from left): watching the Masters golf tournament in Augusta, Ga., in April; giving a speech in Beijing last year; with businessman David Koch at the Time 100 Gala this year

Jeopardy! champ Ken Jennings competes against IBM's Watson supercomputer.

He has influenced more executives - and more nations - than any other business professor on earth. Now, at 65, he and an all-star team aim to rescue the U.S. economy.

By Geoff Colvin, senior editor-at-large

"We've never done this before, and shame on us, frankly": Porter in his Harvard office.

FORTUNE -- Right this minute, in offices around the world, business-people are holding high-level meetings to talk about strategy. They're trying to figure out if they can really achieve the lowest costs, or if they should focus on differentiating their product or try to dominate a niche in the business, and someone is suggesting they try to do a little bit of each, and someone else is replying they'd be doomed. "Should we really be doing all the activities in the value chain?" "No! We need to outsource!" The meetings are getting heated because everyone realizes the decisions could mean life or death.

If you interrupted one of these meetings and asked the participants why they're discussing these questions, they'd look at you funny. It's perfectly obvious, after all, that these are the most crucial issues. We talk about them because we have to, and everyone has been talking about them since the dawn of time, they would tell you. But they would be mistaken.

Generally without knowing it, they -- we -- are speaking the language of Harvard's Michael Porter, the most famous and influential business professor who has ever lived. Incredible as it seems, there was a time when these concepts were not the foundation of most business thinking. Says Roger Martin, the longtime dean of the University of Toronto's Rotman School of Business and a former colleague of Porter's: "Everyone who talks about sustainable competitive advantage and how they're going to get it -- they don't say, 'This meeting is occurring because Mike Porter said it's important.' But that is why."

Businesspeople aren't the only ones who speak Porter's language. Leaders of nations, regions, and cities use his "diamond model" to frame their plans for becoming more competitive. Environmental policymakers apply the Porter hypothesis. Health care reformers study his work on transforming that broken industry.

MORE: What business should do to restore competitiveness

Now Porter aims to change the conversation on another vast topic: America's competitiveness. The Harvard Business School's U.S. Competitiveness Project, led by Porter and professor Jan Rivkin, is unlike anything the school has attempted: recruiting scholars from inside and outside the school to achieve a specific goal -- making the U.S. more competitive. "We've never done this before, and shame on us, frankly," Porter says. "Look at the tremendous goodwill and influence we have. People listen, and we have to take advantage of that." Porter takes pains to point out that dozens of people besides him are working on the project. But it's clear that if he hadn't agreed to be involved -- to be "the tip of the spear," as Rivkin puts it -- the project might not have happened.

One of the project's central theses is that most debates about U.S. competitiveness are wrong to focus almost entirely on federal government action. That's why Porter and Rivkin have written this article describing how companies can make America more competitive while also advancing their own interests. In this, as in everything he does, Porter wants to exert influence: "We want every businessperson to read that article and put it down and say, 'You know what? Damn it, we're gonna do this!'"

Team HBS: Porter (far right) with Jan Rivkin (left) and dean Nitin Nohria

You might suppose that Porter, at 65 and having exerted a career's worth of influence, might be ready to hang it up. He isn't. He looks 55 and has more energy than the average 35-year-old. "What I'm particularly fortunate about," he says -- he talks a lot about how lucky he has been -- "is that I really love doing this stuff. I mean, I'm not tired of it. I'm not fatigued. So many academics get tired."

In a recent typical week, he wrote during a flight back to Boston from London, met editors at the Wall Street Journal, did a video interview at the Huffington Post, and appeared on CNBC; he held several meetings or conferences at Harvard, spoke twice at a large conference of the Initiative for a Competitive Inner City, a nonprofit he founded in 1994, and advised Kohlberg Kravis Roberts, Newark Mayor Cory Booker, a Fortune 500 CEO, and the government of Rwanda. He seems to subsist on air. Joan Magretta, a former consultant who became a Harvard Business Review editor and wrote a book called Understanding Michael Porter, says, "I've worked with Mike for 30 years and have never seen him eat a meal."

A book on understanding Porter is worthwhile because he's often misunderstood. He is widely and rightly regarded as the all-time greatest strategy guru, but that view gets the emphasis wrong. His first important book, published in 1980, was Competitive Strategy. Next came Competitive Advantage, followed by The Competitive Advantage of Nations and On Competition; there's his Initiative for a Competitive Inner City, and of course he's now working on the U.S. Competitiveness Project. Are you noticing a theme?

MORE: Business's real problem: Uncertainty, uncertainty, uncertainty

Competition and winning have defined Porter's work and in large part his life. He has said that sports were the center of his existence as a kid, and at Monmouth Regional High School in New Jersey he was an all-state football and baseball player. At Princeton, where he majored in aeronautical engineering, he made the NCAA All-America golf team and graduated Phi Beta Kappa. He went directly to the Harvard Business School, where he realized he wanted to teach and where he became a Baker Scholar, a distinction reserved for the top 5% of the class. He then made the unorthodox move of crossing the Charles River to get a Ph.D. in Harvard's economics department; he won the prize for the year's best thesis. Then he recrossed the river to teach at HBS.

Eight years after graduating from high school, he was teaching at the world's No. 1 business school.

He already knew what the focus of his research would be. As an HBS student, he had absorbed "the practitioner view of competition," but back then it didn't include many general insights; each case was unique. As an economist, he understood "the more abstract view of competition that one saw in industrial economics," and it was the opposite: Individual firms were all pretty much the same and not interesting. "It was the juxtaposition of these various kinds of training that made it sort of obvious what some of the rich opportunities were," he says. So those were what he worked on.

He explained the results in Competitive Strategy, which quickly became the bestselling business book ever up to that time. Every company, he said, is subject to five forces: the competitors it currently faces, the threat of new competitors, the threat of substitutes for its products or services, the bargaining power of its suppliers, and the bargaining power of its customers. Within that environment, every company must choose a strategy, and there are only three: achieving the lowest costs, differentiating its products and services, and dominating a niche. Trying to do some of each -- getting "caught in the middle" -- prevents a company from realizing the benefits of any of these strategies, and as a result it will lose to competitors who choose just one.

The book revolutionized managerial thinking around the world and made Porter famous. It also sparked another widespread reaction: "The highest compliment, I've come to understand, is, 'Oh, that's obvious,'" Porter says. "I used to get really mad about that, but now I understand that's the goal -- to take a complex problem and make it seem really clear and obvious." Real-world practitioners agree. "The five-forces framework is as valid today as it was then," says Adrian Slywotzky, a consultant.

A great paradox of Porter's career is that he has achieved the summit of academic distinction while loudly rejecting the No. 1 rule of the academic game. It states that all advancement depends on publishing as many articles as possible in the few dozen top-tier academic journals. Porter has scarcely bothered, publishing just seven such articles in his 39-year career. His many articles in the Harvard Business Review don't count; that's a mere "practitioner journal" in the view of academics. Yet Porter holds a University Professorship at Harvard, the highest honor the school can bestow, held by about 1% of the faculty; it means he isn't tethered to any particular school within Harvard, not even the business school, but can roam across the entire university wherever his interests lead him.

MORE: How to secure America's future in manufacturing

Another measure of his academic success, telling and ironic: In the many footnotes that follow every article in academic journals -- the journals Porter has so frankly disdained -- he has been cited far more often than any other writer on business or economics.

The U.S. Competitiveness Project is the largest example yet of Porter's real-world influence. "We are judging this project on impact," says Rivkin. "It's successful to the extent we help companies operating in the U.S. compete in the global economy and raise the standard of living."

With the U.S. Competitiveness Project well under way, what might Porter try to change next? He is taking advantage of his University Professorship, working in the School of Public Health to improve health in China, working at the Medical School on health care delivery in Africa, and teaching at the Kennedy School of Government. And Harvard has a lot more schools. "Yesterday I was meeting with the dean of the education school at Harvard, and we were talking about education," he says. "There's an opportunity to reframe that field. And I'm very tempted."

Porter knows he's trying to do too much. A lesson he has learned belatedly is to "enroll others" in his projects, with the U.S. Competitiveness Project as exhibit A. But taking on too much seems to be in his nature, so he'll probably keep doing it. At least until he gets tired. Which right now is not a real-world concern.

This story is from the October 29, 2012 issue of Fortune.