Why Employee Happiness Matters

There is an undeniable link between workplace happiness and financial success. The happiness of employees is not only important for each individual but also for the wider organizations and economies.

But what does happiness at work mean? How can managers measure it and have more of it? And what happens to organizations when they get happiness right?

Why should an organization improve employee happiness?

Management often focuses on productivity metrics and performance outcomes, but both of these depend on the extra discretionary effort you can get from your employees and how this compares to your competitors. A happy employee gives more by going the extra mile.

Happiness at work extends beyond mere job satisfaction. It encompasses a sense of fulfilment, purpose and positive engagement with tasks and colleagues. Factors contributing to workplace happiness include meaningful work, supportive management, opportunities for growth and development and a positive work culture. When employees find joy and purpose in their work, they are more likely to be engaged and motivated, as well as to take fewer sick days, all leading to enhanced performance.

Happy employees are more productive. Positive emotions enhance cognitive functions, such as problem-solving, creativity and decision-making, enabling employees to perform tasks more efficiently and effectively. Happiness at work also encourages positive relationships among colleagues. Employees who are happy are more likely to communicate openly, share ideas and support each other. This collaborative environment is crucial for innovation and problem-solving, directly impacting team performance.

Importantly, engaged employees are emotionally invested in their work and the organization. They are more likely to show initiative and demonstrate a commitment to excellence. Happiness promotes this engagement, resulting in better performance outcomes and lower turnover rates.

A key reason to ensure that employees are happy is that employers will have a much higher retention rate. According to WorkL’s July 2024 data, employees who experience happiness and fulfilment at work are less likely to take unnecessary sick days. Reduced absence translates to more consistent performance and productivity, as well as lower costs associated with employee turnover.

What is the current state of happiness and wellbeing at work?

WorkL’s July 2024 data has found that globally, the overall employee happiness score is 69%, one percentage point lower than it usually is. This has been the trend since the beginning of 2024. The largest disparity is between managers and non-managers, with the former scoring 74% and the latter scoring just 66%, highlighting the need for employers to focus on the happiness of non-managers.

WorkL also reveals that over a third of employees worldwide have a wellbeing risk, with disabled employees topping the chart. Global data from Q2 highlights that employees have a wellbeing risk of 31%, which is the average score over the last five months and on par with 2023’s average wellbeing risk of 31%. 2022’s average score was 33%. Specifically, employees with a disability have the highest score of 39%.

It is good news for managers who score just 25%, yet it’s non-managers who score 34%, again highlighting that more needs to be done for this group of employees to reduce the risk.

So, what can business leaders do to change this?

Six practical strategies to improve employee happiness

1. Reward and recognition

Everyone in an organization should enjoy the rewards of success. If you’re not earning a fair salary, no amount of recognition for a job well done will be enough to make you forget you’re not being paid enough. Your pay scale must meet expectations and encourage discretionary effort.

2. Being transparent

Not sharing information makes employees feel like an unimportant part of the business. Engagement and commitment can be eroded by this. If you are a business that wants to get the best out of individuals on the team, openness is key. Employees at all levels need a genuine overview of what is going on in their area and elsewhere. If employees understand the business, its strategy, how it is doing and who the customers and competitors are, they will make it stronger. Knowledge will unlock an influential role in important decisions. Individuals on the team will have valuable input on working methods and work together to coordinate their efforts.

3. Empowerment

The aim of any business must surely be to make their employees feel empowered and this means making them a key part of the decision-making process, listening to their ideas and integrating their suggestions to build and refine your strategy. Our personal experiences inevitably bring us all to different solutions and ways of achieving them, but only by listening to all views can the best outcome be reached. Nobody is perfect but a team can be.

4. Wellbeing

Health and wellbeing can be broken down into three key areas; physical, emotional and financial. By addressing all three, employers will improve engagement levels and productivity. Happy workplaces have lower levels of absence because people are engaged and engagement strengthens well-being. At the heart of well-being are relationships based on mutual trust and respect that managers have with their team members and individuals have with one another, so they can proactively and reactively spot and discuss any concerns they may have and get the timely help they need. Listening to employees and responding to their anxieties plays a crucial role too.

5. Instilling pride

Employees who love what they do and feel proud of where they work will speak openly and positively about it to colleagues, potential employees, customers and people in their community. When people ask the inevitable, getting-to-know-you question of ‘where do you work’, you’ll hear the pleasure in their voice when they reply. Instilling such pride is not just about stirring speeches, sharing growth figures or saying a few well-placed ‘thank you's.

6. Job satisfaction

There are many elements to feeling satisfied at work, but time and again, two key reasons are cited – personal development and the strength of your relationship with your line manager. We have nothing of greater value than our people. A high level of employee engagement is the key to unlocking organizational success. Research shows that the two biggest drivers of satisfaction are respectful treatment and trust between employees and senior management. A poor relationship with your manager is often cited as the number one reason for leaving an organization, no matter how great the brand is.

The connection between performance and happiness in the workplace is undeniable. By creating an environment where employees feel happy, valued and engaged, organizations can unlock improved productivity, innovation and overall performance. As the modern workplace continues to evolve, prioritizing employee wellbeing is a key strategic advantage that can drive sustainable success.

It’s what I call, Happy Economics.