The im­pact of hap­pi­ness on the bot­tom line

Finweek English Edition - - MANAGEMENT -

Un­con­ven­tional shoe re­tailer Zap­pos is get­ting a lot of at­ten­tion for its busi­ness model and cul­ture cen­tred on the hap­pi­ness of its work­ers. And the com­pany’s reap­ing the re­wards. In an­nual work­place sur­veys from For­tune Mag­a­zine and the like, Zap­pos has been con­sis­tently rated as one of the top com­pa­nies to work for. It has also ex­celled in the tra­di­tional busi­ness met­rics. It took Zap­pos un­der 10 years to reach $1bn in an­nual rev­enue. It was ac­quired by Ama­zon in 2009 for a size­able $1.2bn. There is a pow­er­ful les­son here. Like Zap­pos, by putting the hap­pi­ness and well­be­ing of your staff on cen­tre stage, com­pa­nies can build a happy cul­ture that’s healthy for prof­its and growth. Zap­pos isn’t an iso­lated case. One study found that even a mod­est in­crease in hap­pi­ness at work grew the bot­tom line by 20%. In an­other study, the hap­pi­est com­pa­nies were re­ported to be three times as prof­itable as reg­u­lar busi­nesses. This is ac­cord­ing to Alexan­der Kjerulf, founder of Woohoo inc. and a lead­ing ex­pert on work­place hap­pi­ness.

IN RE­CENT YEARS, THERE IS MORE AND MORE EV­I­DENCE TO SHOW THAT WORK­PLACE HAP­PI­NESS MAKES MONEY. HERE’S WHY:

1. Happy em­ploy­ees are more pro­duc­tive. Re­search demon­strates that happy staff boost the bot­tom line. This is ac­cord­ing to An­drew Oswald, pro­fes­sor of economics at the Univer­sity of War­wick. He has earned the nick­name “the Pro­fes­sor of Hap­pi­ness” be­cause of his re­search in this f ield. Oswald’s stud­ies re­ported a 12% rise in pro­duc­tiv­ity in hap­pier re­search sub­jects. Fur­ther sup­port for this comes from Sh­effield Univer­sity’s In­sti­tute of Work Psy­chol­ogy in the UK in the Nineties. Their re­search, which in­volved se­nior man­agers and 5 000-plus staff in 110 com­pa­nies over a seven-year pe­riod, es­tab­lished that job sat­is­fac­tion is re­spon­si­ble for as much as 25% of the variation in pro­duc­tiv­ity. How­ever, we don’t yet un­der­stand the rea­sons for this.

2. Hap­pier em­ploy­ees have greater job sat­is­fac­tion and are less likely to quit. This trans­lates into re­duced staff turnover and re­duced hir­ing costs. Why? Think of the op­po­site sit­u­a­tion: it is very costly to hire new staff af­ter their un­happy pre­de­ces­sors have quit their jobs. Not sur­pris­ingly, the tra­di­tional rea­son why many com­pa­nies fo­cused on em­ployee job sat­is­fac­tion was to re­duce churn and hir­ing costs. And this was even when busi­ness think­ing dis­missed hap­pi­ness as just a warm and fuzzy idea.

3. Im­prov­ing work­place hap­pi­ness helps com­pa­nies to at­tract and keep tal­ent. In the wake of the global fi­nan­cial cri­sis, many busi­nesses have had to sig­nif­i­cantly down­size. This means they need to do more with fewer re­sources. So one of their key chal­lenges was to at­tract and re­tain their A-play­ers. There is a grow­ing body of ev­i­dence to show that im­prov­ing well-be­ing in the work­place is one way to make this hap­pen. In their “Causal Im­pact of Em­ployee Work Per­cep­tions on the Bot­tom Line of Or­ga­ni­za­tions” study, Gallup re­searcher James K Harter and his as­so­ciates found that the work views of staff were di­rectly linked to com­pa­nies’ cus­tomer loy­alty, re­ten­tion of staff, sales and profit.

4. Many man­agers think hol­i­days, bonuses and raises are what make work­ers hap­pi­est. How­ever, re­search shows this is not the case. Ac­cord­ing to the Gallup Busi­ness Jour­nal: En­gage­ment is a key driver of hap­pi­ness. Why? First, en­gaged em­ploy­ees are sub­stan­tially hap­pier than dis­en­gaged ones. Sec­ond, an en­gag­ing work­place plays a more vi­tal role than any com­pany pol­icy in shap­ing the hap­pi­ness of its work­ers. Gallup as­serts that en­gaged

work­ers “drive in­no­va­tion and move the com­pany for­ward”. So, with­out th­ese en­gaged staff, or­gan­i­sa­tions stag­nate and stum­ble.

5. Hap­pi­ness in­creases as coun­tries’ GDP grows, ac­cord­ing to Oswald and other re­searchers. So there is an eco­nomic in­cen­tive for mak­ing peo­ple hap­pier. (But only up to a point. In all coun­tries in­ves­ti­gated, above a cer­tain level, per­sonal hap­pi­ness f lat­tens out af­ter GDP con­tin­ues to rise.)

6. But doesn’t money it­self make peo­ple happy? Yes, it is part of the equa­tion, but only one small part, says Oswald. Based on the re­search f in­d­ings of so­cial sci­en­tists world­wide, if you go above a yearly per capita in­come cor­re­spond­ing to $10 000 in pur­chas­ing power par­ity, it is non-mone­tary fac­tors that de­ter­mine hap­pi­ness. For all lev­els of wealth be­yond this range, the sup­port of your fam­ily, friends and com­mu­nity, a mean­ing­ful role in life, and ba­sic free­doms all play a much more im­por­tant part.

7. In­ter­est­ingly, peo­ple who eat a healthy diet with lots of fruit and veg­eta­bles, tend to be hap­pier. This is one of Oswald’s lat­est re­search find­ings. Giv­ing your work­ers healthy food choices not only im­proves their phys­i­cal health, but also their men­tal well-be­ing. So there is some­thing to be said for com­pa­nies like Mondi’s South African forests di­vi­sion that serves nu­tri­tion­ist-pre­pared daily meals with fruit and veg­eta­bles to their field work­ers.

8. Hap­pier work­ers mean hap­pier cus­tomers. Back in 1998 in the UK, a Sains­bury’s study of em­ploy­ees’ at­ti­tudes in­di­cated that the more sat­is­fied your staff are at work, the hap­pier your cus­tomers are with the ser­vice they get from your work­ers. More re­cently, Zap­pos CEO Tony Hsieh be­lieved a fan­tas­tic com­pany cul­ture should ful­fil a greater pur­pose. At Zap­pos, this means de­liv­er­ing hap­pi­ness and blow­ing cus­tomers away with out­stand­ing ser­vice. By fo­cus­ing on the hap­pi­ness of those around you, Hsieh as­serts, you rad­i­cally im­prove your own. This sup­ports a mount­ing body of re­search link­ing em­ployee sat­is­fac­tion and busi­ness suc- cess. Re­search from Sh­effield Uni­ver­sit y’s In­sti­tute of Work Psy­chol­ogy, Rut­gers Univer­sity in New Jersey and the Work­place Em­ployee Re­la­tions Sur­vey ( WERS) all back this view. “The mes­sage is clear,” said David Guest, pro­fes­sor of or­gan­i­sa­tional psy­chol­ogy at Lon­don’s Birk­beck Col­lege. “This kind of ev­i­dence shows a link be­tween in­vest­ing in hu­man re­sources man­age­ment and im­prove­ments in the bot­tom line.”

SO, UN­DER­STAND­ING THAT HAP­PI­NESS IS HEALTHY FOR PROF­ITS, THE QUES­TION IS: “WHAT CAN WE DO TO EN­HANCE WELL-BE­ING AND CRE­ATE HAP­PIER WORK­PLACES?” HERE ARE SOME COM­PANY PRAC­TICES THAT CAN HELP:

1. Giv­ing staff op­por­tu­ni­ties to grow and de­velop. Ac­cord­ing to Sains­bury’s an­nual at­ti­tude sur­vey on 133 000 em­ploy­ees, op­por­tu­ni­ties for learn­ing and de­vel­op­ment were what em­ploy­ees val­ued the most in their work­ing en­vi­ron­ments. In the words of Franklin D Roo­sevelt: “Hap­pi­ness lies in the joy of achieve­ment and the thrill of creative ef­fort.” “Em­ploy­ees should have a sense of con­trol and progress in their ca­reers,” says Zap­pos CEO Tony Hsieh. To re­place the tra­di­tional, generic job de­scrip­tion, Zap­pos cre­ated a clus­ter of skills for its call cen­tre reps. Staff di­rectly con­trol their pay raises be­cause they at­tain the skills that in­ter­est them at their own speed, in­stead of wait­ing for fixed re­view pe­ri­ods or yearly in­creases.

2. Good com­mu­ni­ca­tion. Your work­ers want to be kept in­formed about what is hap­pen­ing in the or­gan­i­sa­tion, es­pe­cially if it af­fects their fu­ture. The days of “no comment” are dead. Don’t hide the bad news from them. This only breeds dis­trust and in­se­cu­rity. It is al­ways bet­ter to hear it from the com­pany’s lead­ers first, be­fore you read about it in the pub­lic do­main. The key is to take re­spon­si­bil­ity and to show your staff what you as the lead­ers of the com­pany are do­ing to ad­dress the is­sues.

3. To para­phrase Cyndi Lau­per, we all “just want to have fun”. So why not have fun at work? In­ject­ing hu­mour and a sense of fun into the work­place goes a long way to­wards mak­ing staff hap­pier. This is a big part of the suc­cess of com­pa­nies like Google and Zap­pos. Zap­pos mo­ti­vates work­ers to “cre­ate fun and a lit­tle weird­ness” at work. Laugh­ter is also a pow­er­ful stress re­liever. Lo­cally we’ve seen a surge in the num­ber of laugh­ter work­shops on of­fer for cor­po­rates. (How­ever, the jury is still out on whether this re­ally works or whether work­shops for laugh­ter are un­nat­u­ral and forced.

4. Hav­ing more so­cially skilled and en­gaged man­agers.

5. Hav­ing flex­i­ble work­ing con­di­tions that al­low work­ers to bal­ance their home and work com­mit­ments. This also means do­ing away with the cul­tures of long work­ing hours that pre­vailed in many com­pa­nies un­til not so long ago.

6. Em­ploy­ees value sup­port from their com­pa­nies with all the day-to-day chal­lenges of do­mes­tic life. Many busi­nesses now pro­vide work­place crèches, dry-clean­ing, laun­dry, bank­ing and in-house hair­dress­ing to help work­ers man­age their per­sonal lives.

7. Giv­ing peo­ple more freedom and au­ton­omy in their jobs. For many en­tre­pre­neur­ial types, this freedom is a key rea­son why they choose to have their own busi­nesses rather than work in a cor­po­rate en­vi­ron­ment, de­spite the risk of lower pay (ini­tially) and less job se­cu­rity. This freedom is price­less, say many en­trepreneurs.

8. Ul­ti­mately build­ing an en­vi­ron­ment of trust. Clearly, hap­pi­ness has earned its place in the board­room, and com­pa­nies have a com­pelling in­cen­tive to en­sure their work­ers are happy. Gone are the days when hap­pi­ness and well-be­ing in the work­place were f luffy, feel-good con­cepts. To­day, there is over­whelm­ing ev­i­dence to show that hap­pi­ness di­rectly im­pacts the bot­tom line and builds a more pro­duc­tive, en­gaged work­force.

Co­lette Sy­manowitz is Founder/MD of www.MBA­con­nect.net, a so­cial net­work ex­clu­sively for MBAs from all busi­ness schools in South Africa and world­wide. To join, go to www.MBA­con­nect.net.

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