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July 31, 2019 10:00 am

Employee Happiness and Business Success Are Linked, Study Finds

A new study (PDF) by Christian Krekel, George Ward and Jan-Emmanuael de Neve finds a link between employee happiness and business success. "The study, based on data compiled by Gallup, a polliging organization, covers nearly 1.9 million employees across 230 separate organizations in 73 countries," reports The Economist. From the report: 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 organizations 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 recognize 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.

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