The Business Case for Happy Employees
We talk a lot about how important company culture is as a way of attracting the best talent, but how much does it actually affect the bottom line? In this post we will explore the benefits to companies of a happy and engaged workforce; the business case for employee happiness.
The general consensus is that success brings happiness. This implies that as long as the company is successful, its employees will be happy, no matter the cost. However, Shawn Achor says that positivity and happiness improve productivity, creativity and even sales. Success does not lead to happiness — it’s the other way around. There are a number of ways in which employee happiness can positively affect a company’s performance.
Productivity
Happy people spend 80% of time on task — unfortunately the rest of our time is taken up by the mundane things that don’t directly contribute. In contrast, unhappy people spend just 40% of their time on task. That’s just 2 days of real work done per week. 144 days of lost productivity per year.
We are not simply talking about how much work gets done while an employee is at work — unhappy employees spend less time actually at work too. Shawn Achor highlights the findings of a 2008 study by Gallup Healthways:
“Employees who score low in “life satisfaction,” a rigorously tested and widely accepted metric, stay home an average of 1.25 more days a month… That translates into a decrease in productivity of 15 days a year.”
So overall, unhappy employees lose you 159 days of real work every year.
That’s not the end of it. Even on the odd day that all your employees are actually working, happy people are 10–12% more productive. Maybe we should all be watching a comedy at the start of every work day?!
Creativity
Creativity leads to innovation; a crucial ingredient for high-growth companies. It has been proven that creativity at work is directly correlated with employee happiness.
“A liberated mind in a more confident and secure individual is more likely to feel free to express itself in different, innovative, and ultimately more creative ways” — Russ Lidstone, CEO of creative agency Havas Worldwide London
Innovative companies want employees that are constantly finding new and better ways to solve specific problems, so if happy employees are more creative with their problem solving, it is plain to see the benefits.
Joe Robinson talks about how ‘play’ increases happiness and therefore creativity. He implies that happiness helps employees escape any blockers to innovative problem solving.
“Playfulness can increase performance on the job and stoke creativity by breaking up the mental set that keeps us stuck”
This might seem a bit ‘fluffy’, but it really can have a huge impact on your business. If you can get your employees to a place where they can express their creativity, you will reap the rewards.
Cost of replacing unhappy employees
A final, maybe more obvious benefit of having happy employees is the cost of the alternative — replacing them. Ultimately, an unhappy employee will want to leave — and you don’t want to give them more of a reason than the fact they could earn up to 50% more elsewhere. But the cost of replacing that employee can be far more than the unfinished job they leave behind.
On average, it costs over £30,000 to replace a staff member. This includes both the logistical costs of replacing someone as well as the lost output encountered while looking for someone new and training them, which links back to the productivity point, in that it takes an average of 28 weeks for a new employee to get up to optimum productivity.
Depending on the level of the employee, it can cost from 30% to as much as 400% of their annual salary to replace them, and if we play some ‘fun with math’:
“The absolute lowest estimated end of the spectrum — your best case scenario — you are looking at almost $250,000 as the cost of the turnover of just 12 employees”
Win Win
Hopefully I have shown just a few of the benefits of employee happiness, and how happy employees can both make you more money and save you on costs at the same time.
If for some reason you are still not convinced, here’s some hard proof: between 1997 and 2014, companies in the ‘100 Best Companies to Work For’ list “consistently outperform major stock indices by a factor of 2”. Happier companies simply make more money.
To bring this home even more, Happiness at Work Survey provide a ‘Business case calculator’ for you to work out the savings you could make for your company. It shows that a company of just 20 people could save over £41,000 every year, just by keeping their employees happy.
So what can you do with all this information? How can you make employees happy and therefore improve your bottom line? Studies that have been conducted which conclude that the best performing companies in terms of long term financials are those that can combine profits, passion and purpose.
“Profits, passion and purpose” is the subtitle of Tony Hsieh’s (Zappos) book “Delivering Happiness”, where he outlines how you can apply the science of happiness to business. This is a great read for anyone sold on the benefits of happiness in the workplace — hopefully this post has helped with that!
Has anyone experienced real bottom line benefits from concentrating on employee happiness? I’d love to hear from you! Comment below or tweet me @LiamNolan90.
Note: This post was originally published on 12th May 2015.
