Whistle While You Work: How Employee Happiness Relates to Productivity It seems like all anyone is talking about in the human capital management (HCM) space these days is the recent rankings that came out for “Best Places to Work.” Google, famous for its robust perks offerings and world­class concern for employee happiness, was once again ranked by both Glassdoor and Fortune as the best place to work in 2014. And while many shake their heads at the on­site masseuse, extravagant free food offerings, and office spaces that look more like high­end hotels rather than cubicle farms, the real question to ask is: do all these perks really have business value? Google seems to think so. Since its inception, it has been one of a growing number of companies to have made employee happiness a standing part of its business operations. It’s a logical assumption that happy employees make for a more productive workforce, but recently there has been a growing amount of statistical evidence to support the idea that talent retention and employee happiness are big keys to company productivity. For example, Dr. Sonja Lyubomirsky from the University of California, Riverside did a sweeping meta­analysis of 225 different academic studies and found that happy employees have, on average, 31% higher productivity, their sales are 37% higher, and their creativity is three times higher (though how one goes about measuring creativity is separate question). Of all the research that’s out there linking happiness to productivity, the best evidence comes from a study out of the UK last February from the University of Warwick, led by Dr. Andrew Oswald. This was the first study to use real­world influences rather than laboratory conditions to simulate mood fluctuations, and was conducted on a large scale using over 700 subjects. Simply, the study found that happy employees are 12% more productive. Twelve percent more productive. Imagine what your business could achieve if you could squeeze 12% more productivity out of your current resources, just by cultivating an office culture that fosters happiness! Other research has found that when employees consider their co­workers to be friends, they are better collaborators, communicate better, and are more innovative. Additionally, the most productive individuals are the ones who see the greatest improvement in their mood before having to execute a task, which highlights the importance of facilitating strong feedback channels within teams and being attuned to employees’ moods and emotional health. All of this increased productivity doesn’t even take into account the benefit of avoiding the cost of replacing an unhappy employee who leaves. We know factors that contribute to unhappiness make up the majority of reasons why an employee leaves. After factoring in the recruitment, training, and productivity costs that inevitably follow the unplanned departure of an employee, employee turnover can range from 90% to 200% of that employee’s salary.

Creating a company culture that focuses on employee happiness is the best way to reduce this risk, as happy employees are four times more likely to stay with their current company than unhappy employees, according to the iOpener Institute. So yes, the data is there to support the benefits of investing in company culture, but how can you calculate the appropriate ROI of this investment for your specific company? We’ll explore that in a later post.