Direct causal link between wellbeing and corporate performance, claims study

A new report published by IZA World of Labor claims that a rise in workers’ happiness and wellbeing leads to an increase in productivity. The study from economist Dr Eugenio Proto, of the University of Warwick’s Department of Economics and Centre for Competitive Advantage in the Global Economy (CAGE) concludes that companies would profit from investment in their employees’ wellbeing. It cites the experience of large companies that have recently highlighted the importance of employee wellbeing in their company profiles. The authors claims that, until recently, evidence for a link between employee wellbeing and company performance has been sparse and that their own study shows a positive correlation between a rise in happiness and an increase in productivity. Proto believes  that finding causal links between employee wellbeing and company performance is important for firms to justify spending corporate resources to provide a happier work environment for their employees and that the available evidence suggests that companies can be encouraged to introduce policies to increase employee happiness.

Proto cites a number of studies that uncovered evidence that happiness leads to greater creativity, and that job satisfaction is positively correlated with worker productivity. Other studies show that happy people—defined as people who frequently experience positive emotions like joy, satisfaction, contentment, enthusiasm, and interest—are more likely to succeed in their career. For example, adolescent Americans who are “happier” end up with higher incomes several years later in life.

These findings have several implications for company practice and for research. First, if happiness in a workplace carries with it a return in terms of enhanced productivity, there are enormous implications for firms’ promotion policies and for the way they structure their internal labour markets. For example, managers could be rewarded on the basis of employees’ job satisfaction.

Second, Proto suggests a win-win situation for everyone: “the effect running from happiness to productivity raises the possibility of self-reinforcing spirals—ones that might even operate at a macroeconomic level. Happiness might lead to greater productivity in an economy, and that might in turn result in greater wellbeing in the population.”

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