Why wellbeing matters and how to improve it

Employee wellbeing is too often understood only as an ethical issue. Something for HR managers to worry about, but which shouldn’t trouble CEOs focused on their firm’s productivity and profit. Last year alongside colleagues George Ward (MIT) and Clement Bellet (Erasmus University Rotterdam), I published research that proves that employee wellbeing goes well beyond ethics. In fact, the happiness of your employees directly relates to their productivity.

So, how did we do it? Firstly, we partnered with international telecoms firm BT, who allowed us to communicate with workers in their call centres. We asked these workers to rate their happiness on a weekly basis for six months using an email survey containing five emoji buttons representing states of happiness – from very sad to very happy. Data on call length, call-to-sale conversion and customer satisfaction were tracked, along with the worker’s scheduled hours, breaks and much more. We collated this information with administrative data on employee performance held by the firm.

The results were staggering. Workers were about 20% more productive in weeks when they were happy as compared to weeks when they were unhappy. But they were not spending more time in the office or taking shorter breaks. In fact, they were simply more efficient with their time. We also saw a stronger link between happiness and productivity in sales that were more complex in nature such as selling package deals or retaining disgruntled customers. This suggests happiness works mostly by way of raising the emotional and social skills of employees. And it is precisely those skills that are increasingly relevant as we look towards the future of work.

If we look at this issue from a broader scale, studying a proprietary Gallup data base of 1.8 million employee engagement surveys we find that happiness correlates very strongly with customer loyalty, productivity, profitability and low staff turnover. The happiness of employees is clearly far more than just a moral imperative. So how do you make employees happier?

Here are five initial steps:

1. Improve managerial skills and empathy

It might be a cliché, but it is also true: people quit their bosses, not their jobs. By being an empathetic manager who listens and understands their employees, you can greatly improve their happiness on the job. Senior managers need to do a better job at advancing the careers of those that have the right managerial skills.

2. Emphasise positive contributions

Peer recognition schemes can go a long way to help improve happiness in the workplace. At Saïd Business School for instance, we have an ‘excellence’ award scheme, which colleagues can nominate their co-workers for. This affords employees recognition for exceptional work that may have otherwise gone unnoticed.

3. Introduce profit sharing, group bonuses or share purchase plans

We economists are always interested in incentives, money and pay – especially as drivers of employee wellbeing. But we tend to see pay as too simple a construct: just your monthly wage. However, it is not always simply the level of pay that produces greater happiness: the way the pay system is structured also plays a significant part. For example, if your compensation package includes profit sharing and group bonuses, you can create a more participatory culture.

4. Embrace flexi time, autonomy and the four-day week

The importance of work-life balance is finally being recognised in many countries, and debates around the four-day week can often be seen in the headlines. A firm named Perpetual Guardian in New Zealand recently trialled this idea and found ‘no downside’ in terms of productivity, and Microsoft also trialled a four day week in its Japan offices. Your firm might not be ready to take this step, but it should embrace the opportunities for flexi time and autonomy afforded by 21st century working practices – your employees will be all the happier for it.

5. Setup soft interventions such as health checks, exercise classes and sports activities

While the above activities are often established to some extent in modern firms, their importance cannot be underestimated. Some might chuckle at the idea of their employees taking an hour away from their desk for meditation classes, but some quiet time to unwind can make all the difference to performance later in the day.

To learn more about the Jan’s work and the Wellbeing Research Centre of which he is director, please sign up to their newsletter.