Employee happiness and business success are linked

via the economist

OUR STAFF are our most important asset. Many managers have intoned this mantra over the years but plenty of employees have probably thought to themselves that, deep down, executives place a higher value on the machines on the factory floor or cash in the bank.

That impression can only be reinforced when executives refer to the need to maximise “shareholder value”. The implication is that keeping equity investors happy is a company’s main priority. Employees fall into the lesser category of “stakeholders”, along with component suppliers.

To many American businesspeople, the concept of “stakeholder capitalism” is often seen as a woolly European notion. The assumption is that firms which focus on stakeholders will struggle to survive in the Darwinian world of multinational business.

It is easy to be cynical about some of the language used by those who argue that employees should be treated better. One obvious example is a book called “Humane Capital” by Vlatka Hlupic, which includes a foreword by the Dalai Lama and is dedicated, portentously, “to humanity”.

But there is a serious point hidden amid its grandiose statements. Too many companies operate a top-down “command and control” system, Ms Hlupic argues, when they would be better served by giving employees more freedom to make their own decisions.

However, hard-headed executives will only be won round by hard facts. A convincing case can be found in a recent paper by Christian Krekel, George Ward and Jan-Emmanuel de Neve. The study, based on data compiled by Gallup, a polling organisation, covers nearly 1.9m employees across 230 separate organisations in 73 countries.

The authors studied four potential measures of corporate performance: customer loyalty, employee productivity, profitability and staff turnover. They found that employee satisfaction had a substantial positive correlation with customer loyalty and a negative link with staff turnover. Furthermore, worker satisfaction was correlated with higher productivity and profitability.

Of course, correlation does not prove causality. It could be that working for a successful firm makes employees more contented, rather than the other way round. However, the authors cite studies of changes within individual firms and organisations which seem to show that improvements in employee morale precede gains in productivity, rather than the other way round.

What might explain the link? One school of thought, known as human relations theory, has long argued that higher employee well-being is associated with higher productivity, not least because happy workers are less prone to absenteeism or quitting. However, as the authors of the paper admit, there is very little research on the best measures that managers can take to improve employee well-being, or indeed which are the most cost-effective.

Rather like the judge’s famous dictum about obscenity, a well-run company may be hard to define but we can recognise it when we see it. Workers will be well informed about a company’s plans and consulted about the roles they will play. Staff will feel able to raise problems with managers without fearing for their jobs. Bullying and sexual harassment will not be permitted. Employees may work hard, but they will be allowed sufficient time to recuperate, and enjoy time with their families. In short, staff will be treated as people, not as mere accounting units.

That may be a difficult approach for executives brought up on the philosophy of Frederick Winslow Taylor, the late 19th and early 20th century efficiency guru, who wrote of the danger that workers “tend to become more or less shiftless, extravagant and dissipated.” Armed with a stopwatch, Taylor dragooned employees into increasing production in the iron and steel industries.

But most employees no longer cart heavy loads around all day. Their tasks involve creativity and empathy when dealing with the public. In service industries, staff really are a company’s most important asset. And that is why smart executives will realise that a contented workforce is a necessity for corporate success.


Employee happiness and business success are linked

Thing is, you don’t see much of it because it costs more money to develop, meaning less capital for those on top. It’s easier to slave drive workers in markets that are deprived in terms of job availability, and be a cog in the machine that makes the operators rich. That’s why we can’t move forward as a society and create positive business models to people looking for work.


I absolutely agree with Genesis. This guy is goddamn right, In our days the best employee for any boss is a guy who doesn’t have any needs and work for free. If they could, they would replace us with all machines. And most of the bosses are incredibly lazy. They want only money and they don’t want to work. I had this particular situation in one company 5 years ago. The boss didn’t even have a monthly timesheet template. Every time something was going wrong, he blamed manager. It all ended with the mass exodus of employees. This dumb guy was forced to shut down the company and search for a new job. Now I’m his superior, LOL.

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