Why Happier Workplaces Make More Money

So the results are in. According to a study by the Great Place To Work Institute, which conducts annual international rankings of the world’s best workplaces, happy companies are a better investment. From 1998–2012, the S&P 500 stock market index rose by 4.81%. The 100 best workplaces increased their stock prices by 14.75% in the same period—three times as much.

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But what does this mean for business metrics? Is employee happiness something business leaders should be tracking? What we found was pretty shocking. Not only should we be tracking company mood, we predict employee satisfaction is fast becoming a leading metric for modern business. Especially for anyone wanting to attract and retain top talent.

The new workforce

Millennials are driving a new type of fusion — of company culture and brand — as they seek meaning in the products they buy and the companies where they work.

The blurring of customer and employee isn’t only happening with emerging companies. Even for established companies, customers are increasingly driving sales, generating input for new services and building the company’s brand. They are a core part of the value generation process.

Marketing and HR are the two core functions in a company concerned with people. They both focus on how to attract and engage people in the mission of the company. For a long time they have been able to operate in a disconnected fashion but that is decreasingly possible or desirable.

The emerging model is a hybrid role that focuses on communities that cut across employees, contractors, partners and customers. This new model builds long-term communities that support the mission of the firm where, at any given time, a member could be a shareholder, customer and employee at the same time.

It is an organisational structure in many ways that represents the talents and needs of Millennials. It connects people to purpose and enables them to work without as many boundaries and hierarchy.

In the next decade we are likely to see the emergence of a new standard organisational structure with Chief Community Officers (CCO) replacing Chief Marketing Officers and their HR counter-parts. The CCO success will be measured in human capital, sales, innovation and brand loyalty. They will be the heart and soul of organisations.

By combining these functions, organisations are not only more efficient and effective, they begin to become something far more important. By centralising the people-oriented parts of an organisation they begin to become more human-centered. They become organisations that are driven by purpose and care about the well-being of the members of their community.

How do we quantifying happiness?

A team of economists from UK and German universities recently attempted to find out. Andrew Oswald, Eugenio Proto, and Daniel Sgroi from the Department of Economics at the University of Warwick led the research.

The economists first tested the relationship between happiness and productivity by randomly assigning volunteers to one of two groups. One set of subjects was treated to a funny video of a stand-up comedian in action as well as some free fruit and chocolate. The others watched a neutral video and got exactly nothing. Needless to say, the participants scoffing the free chocolate were the “happy” group.

So how did the two groups perform? Those who had enjoyed a sweet and laugh before being asked to complete a series of timed math problems, correctly completed between 10-12 percent more problems. To check the findings, the researchers also conducted a second experiment where they first asked participants to complete the math challenge and then interviewed them about their real-life stressors. They found that those who had a solid reason to be unhappy, such as a recent bereavement, were again less productive than their happier counterparts.

They summarised that happiness made people about 12 percent more productive.

This research confirms what Google already knows—greater employee happiness results in higher productivity.

“Companies like Google have invested more in employee support and employee satisfaction has risen as a result. For Google, it rose by 37 percent; they know what they are talking about. Under scientifically controlled conditions, making workers happier really pays off,” says Oswald.

“The driving force seems to be that happier workers use the time they have more effectively, increasing the pace at which they can work without sacrificing quality,” adds Sgroi.

How can we measure employee happiness?

Start asking the big question ‘how happy are you?’ every single day and do something with what you find out!

Look at Atlassian, an Australian company developing Jira, an issue tracking system, which helps companies around the world organise their projects. They realised pretty soon that its success is deeply linked with its ability to attract and keep the best software engineers. If developers are not happy with what they are doing competitors will snatch them up in no time.
Atlassian measures employee happiness every day. They’ve placed iPads at the exit of all office buildings and are using them to display the real time status of the company. Employees are asked just one question, every day. Feedback from employees is frictionless and results are shown in real time.

This allows senior management to intervene when the general mood of the company is declining.
Another option would be to combine the physical measuring method with the virtual/technical one. NixonMcInnes, a Brighton based consultancy recently implemented a “barometer of happiness”. How did they do it? By using 3 buckets and a couple of tennis balls; every day before leaving the office the people would place a ball either in the happy bucket or the unhappy one, depending on how they felt. The next morning, someone would count them and write down the results on a sheet of paper; at the end of the week the data would be transferred in an Excel file. To top it off and have a global image on the situation, accessible to everyone from the company, the data would be processed and published on the internal dashboard.

So over to you. Are you tracking your employee happiness? What ideas can you implement in this area?

Remember, that ultimately unhappy employees vote with their feet… by walking out the door so let’s make sure we’re keeping them happy.

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