Happy Staff Mean Greater Profits Introduction This article aims to share some of the current information that suggests that happy staff mean greater profits (and performance) and explore what it means to be ‘happy’. Maybe you never doubted that happy staff mean greater profits. Maybe you just avoided thinking about it because happiness was difficult to define. But the evidence is growing. The Evidence The first evidence I have comes from David Maister in his book ‘Practice What You Preach’. He says ‘This is the first attempt to use hard data to prove the link between employee satisfaction and performance. I set out to test what I’ve been advocating for years. The bad news is I still believe it. The good news is that now I’ve got proof.’ In a study involving 139 professional service firms covering 5,500 people in 15 countries, he studied the correlation between employee attitudes and financial performance. He found that financial performance – evaluated by margins, profit per employee and profit growth over a two year period – is directly linked to employee satisfaction. ’generalised investments’ Interestingly Charles Galunic and John Weeks at INSEAD (Financial Times Mastering People Management Series) have found similar results. Their evidence suggests that when companies undertake what they call ’generalised investments’ in developing people, for example leadership and personal development, then employee commitment and loyalty can be increased. In a study with insurance agents they found that ‘generalised investments’ including management development and technology training produced greater satisfaction and profitability. However, they also noted that ‘generalised investments’ are something of a two edged sword – they increase loyalty and commitment but also increase mobility. This link between ‘generalised investment’ and commitment is strengthened by Linda Bilmes at Harvard and her book ‘The People Factor’. She identifies ‘people factor’ criteria and the ones most likely to increase satisfaction are: allowing people to influence decisions that affect their working lives; training; and performance linked pay. She quotes a study of 2,000 US and German companies, the overall levels of satisfaction were 34% of US workers and 35% of German workers. However, among workers in companies that offered people-factor benefits, job satisfaction was much higher – 58% of US and 63% of German workers. However, she found a huge gap between what companies thought they provided and what workers believed they received. For example, 71% of respondents listed ‘I am able to influence decisions that affect me’ as ‘very important’ but only 34% of employees agreed they could do it. Empowered Employees Dinah Daniels from The CEO Refresher says: ‘The key to creating this type of stable, productive workplace is to put employees in charge of their own success. Employees who are empowered to manage their own growth and achievement on the job tend to be more self-satisfied, more cooperative, and more pro-active in trouble-shooting and solving problems. Ultimately, they are more invested in contributing to the organization’s efficiency and bottom line because they know they have the power to affect change within the organization and to promote and control their own career growth.’ According to further research, "experts" and news reports, production is directly related to how happy employees are. How do you measure happiness? How do you link happy people and profit? Several companies have attempted to do this. Sears has proven that for every 5% increase in "employee motivation," the company profits pushed up by half a percentage point. Unfortunately, the article from the Customer Service Advantage newsletter did not explain how Sears defined "employee motivation." A study by Towers Perrin, a global management consulting firm, showed that a lower employee turnover rate helps a company keep customers. The study showed that increasing employee retention by 2% could increase business by as much as 6%. So if employee happiness directly affects production and performance. How can you increase employee happiness, keep employees and increase productivity? What is happiness? First lets explore what we mean by happiness as it plays such a large part in our lives and work and is often misunderstood. We use words like happiness, pleasure, fun, laughter, enjoyment, satisfaction, and excitement as if they are interchangeable. We use each or any of them to create a general image of people having a good time; implying they all mean about the same. However, happiness is quite different. Fun, pleasure, satisfaction and excitement all turn on and off but happiness does not, it stays with us regardless of the emotion being experienced. Happiness is a condition of my being - it stays with me while I am experiencing emotions. The Benefits of happiness When you have greater control of your happiness: You feel good. You feel joy, cheer, peace and contentment You are pleased with who you are and what you do People enjoy being around you You have higher self esteem Your life is improved physically You can more easily solve any problems that may arise You have additional energy Your life is improved in every way You will have the best life imaginable – a happy one! On the other hand, despair or unhappiness: Makes you feel anger, loneliness and resentment Stops you from solving your problems Often creates new problems Limits friendships with other people Has no positive benefits Will eventually destroy your life For organisations, it appears that staff are more productive when they feel they are in greater control of their lives and when the company is investing in their development. The happiness that results leads to greater self leadership, self confidence, self responsibility which in turn result in: less blaming, less stress, better internal relationships, increased creativity, greater trust, greater confidence and maturity in dealing with customers. The Conspiracies of Happiness Often we collude to maintain many conspiracies about happiness that have us believe that happiness comes from outside of us. We are promised instant happiness for simply buying the right toothpaste or drinking the right beer. We know from our own experience that more material things do not bring us happiness. We remember how quickly the ‘happiness’ of a new job, pay rise, new house or car, international holiday etc wears off. Often leaving us feeling empty and needing something ‘bigger and better’. Here are some common happiness conspiracies: If only I had more money I’d be happy If only I was more famous I’d be happy If only I could find the right person to marry I’d be happy If only I had more friends I’d be happy If only I wasn’t physically disabled I’d be happy If only someone close to me hadn’t died I’d be happy If only the world was a better place, then I’d be happy Definitions of Happiness We would say we are in a state of happiness when our mind is at peace. Importantly, happiness comes from the inside out and not the outside in. The modern world needs to measure everything and a mind at peace is a difficult challenge for researchers to deal with. The closest they have come in measuring it is Life Satisfaction or the extent to which I am satisfied with my life. A great deal of interest and research is going into this area. For example the Strategy Unit of the Cabinet Office has produced a report titled “Life Satisfaction: the state of knowledge and implications for government” However, as the underlying belief is that happiness comes from outside of us, research into Life Satisfaction looks into issues such as health, employment, income etc as measures of satisfaction. While this might be valid, it is not happiness in the sense that we understand it because life satisfaction comes from outside of us, not inside. Taking Control of Happiness If we accept that happiness comes from the inside out, then it is possible for us to take control of our happiness. Learning to take control of our happiness is an immensely valuable capability for a person and at the same time, as we have seen, can result in great benefits for the organisation. Imagine how the performance of you organisation would improve if more of your staff were taking control of their happiness; were more self-confident, self-leading and self-responsible. To find out how to make this possible, email Mike Bell Top © The Wisdom Meme 2007