Happiness at work: The return on investment of happy workplaces and employees

The science of happiness is changing the way we work, think and live.

After a decade of psychological research and inquiry into what makes people happy, the value happy employees bring to work has recently gained attention in the business press. The evidence that is emerging is compelling. Happiness isn't just a good idea, it’s extremely good business.

By happy we mean feel happy, feel engaged and feel like life and work has meaning and purpose. When unhappy employees outnumber happy workers by two to one according to the latest Gallup global workplace report, is it time your organisation took happiness at work seriously?

The advantage of happiness

Shawn Anchor, author of The Happiness Advantage, makes a compelling case that the greatest advantage in today's economy is a happy and engaged workforce. In his blog he highlights research over the past decade that proves happiness raises nearly every business and educational outcome: increasing sales by 37%, productivity by 31%, and accuracy on tasks by 19%.

In a landmark meta-study of over 200 studies conducted on 275,000 people worldwide, positive psychologists Sonja Lyubomirsky, Laura King and Ed Diener, found that happiness leads to success in nearly every life domain, including work performance, health, longevity, relationships, sociability, creativity and energy.

This point is critical. Happiness is a prerequisite for success, not simply a happy by product.

Tangible outcomes

Happier people are more productive.

Studies show that wellbeing has a stronger impact on work performance than job satisfaction. People who are naturally happy score higher on management effectiveness tasks. When people are in a good mood they tend to solve problems faster, more collaboratively and creatively. Happy leaders receive higher ratings from customers and are more likely to have happier and healthier employees.

Businesses with high employee wellbeing report greater customer loyalty, productivity and profitability. Gallup studies over decades link these outcomes to employee engagement - people’s day-to-day involvement and enthusiasm for work. They found business units in the top quartile on employee engagement averaged $80,000 to $120,000 higher sales revenue per month.

Consider how much a very modest 1% increase in productivity would benefit your business?

Happier people are healthier people.

People who score highest on psychological tests develop about 50% more antibodies to the flu vaccine than less happy people, a striking difference echoed by increased immunity following 8 week wellbeing interventions. Other studies have found that happiness or positive mental states like hopefulness, optimism and contentment appear to reduce risk or limit severity of cardiovascular disease, pulmonary disease, diabetes, hypertension and upper-respiratory infections.

How much difference will a decrease in sickness absence by just 1 day per employee per year make to your bottom line?

Happier employees don’t leave as often.

Happy, satisfied workers are less likely to demonstrate “job withdrawal” through turnover, burnout and retaliation against the organisation. Instead, they are more likely to go beyond their job requirements, spread good will, help others, make constructive contributions and commit to developing themselves within the organisation.

How much would a 10% reduction in staff turnover save your business?

Calculating happiness ROI

Forward-thinking businesses are increasingly recognising that happiness translates into tangible business outcomes which impact the bottom line.

Tony Hsieh, founder of Zappos and author of Delivering Happiness at Work, famously grew a shoestring start-up to a $2 billion dollar company by creating a business model fuelled by happiness. Here is his ROI calculator if you want to calculate how much your business can benefit by increasing the level of happiness in employees, even to a modest degree.

Researchers such as Fred Luthans and his team at the University of Nebraska are developing financial modelling methods to estimate the value happier employees contribute over time. For example micro interventions that develop psychological resources by increasing hope, optimism, confidence and resilience have been estimated to reap annual returns of (conservatively) 2%, realising $585 million in revenue in the average mid-sized business, and far higher value in retention of A-list employees.

Positive emotion: The key success factor

Many researchers believe that positive emotions and mood are the prime drivers that engender this success. Positive emotions lead people to think, feel and act in ways that broaden their thinking patterns, build their personal and social resources and encourage them to work toward positive goals. When things are going well and they feel positive, they can relax and expand their resources and relationships, take the opportunity to try out new strategies and skills, set new goals and prepare for challenges ahead.

Making people happier at work

To what extent can we increase the level of happiness in organisations?

If we look at the science, up to 40 percent. According to Sonja Lyubomirsky and her colleagues, about 50% of the differences among people’s happiness levels are explained by genetically determined set points. A further 10% is due to your circumstances. This means a full 40 percentage of our capacity for happiness is within our power to change through intentional activities.

The advice we give our clients is three-fold.

1. Focus on increasing the duration and intensity of the ups and decreasing the duration and intensity of the downs. This will maximise the impact of positive emotions and make a significant difference to your business and the people who work in it.
2. Teach people practical strategies they can put into place in their everyday work life to increase their level of happiness and those of others.
3. Create an environment that supports people to feel happier and perform at their best. That includes integrating positive practices into business strategy, people development initiatives, processes and systems at all levels of the organisation. Even small positive actions can make a difference when designed to leverage the way people work best.

Business and human capital leaders seeking to increase the level of happiness in their organisations can start by asking some important questions:

• Do we focus on what we are doing well and can do better, more than what is wrong?
• Do our people experience enough positive emotions? Do we provide opportunities for them to laugh and enjoy themselves?
• Do our leaders know how to create a positive emotional climate that engages people and makes them feel happy about coming to work?
• Do we enable people to play to their strengths? Are people in roles that suit their strengths and allow them to be appropriately challenged and grow?
• Do our people understand the purpose of our organisation and what we stand for? Do we strive to make work meaningful day to day?
• Do we identify and reward “positive deviance” - those individuals and groups who have the courage to go against the norm and exemplify positive behaviours and excellence? Do we learn from and support them to increase their positive influence?

Sue Langley and Sophie Francis

If you would like to know more about happiness at work and how your business can benefit, contact us on +61 2 9969 0337.

Sue Langley is a speaker, facilitator and master trainer who inspires people to apply emotional intelligence, positive psychology and neuroscience to become the best they can be. Founder and CEO of Emotional Intelligence Worldwide, she is considered the leading adviser in Australia on the practical workplace application of these fields. 

Sophie Francis is a learning and development writer, consultant and coach with a background in positive psychology. Marketing Manager at EIW, Sophie has a Masters in Business Coaching.