The Connection between Employee Well-being, Productivity, and Firm Performance

happiness @ work

The well-being of employees is confident in itself, but most employers want to know if there are any benefits connected to it – benefits that will serve the employees’ productivity and the performance of the firm.

All of this is due to the apparent fact that improving the well-being of employees is a resource-intensive affair.

So the main question is simple – is it worth it? The 2019 Global Happiness and Wellbeing Policy Report shows that it is.

Correlation between Well-Being and Productivity

First of all, the report estimates that there is a positive relationship between two critical factors – productivity and well-being. It seems that the two are in great correlation and the growing evidence points out to the fact that a causal effect exists, i.e., that productivity is a direct result of employee well-being.

The most recent experiments and the evidence obtained points to the fact that a significant increase in employee well-being yields an increase in productivity of about 10% on average.

Correlation between Well-Being and Firm Performance

In addition to the previously described connection, the evidence also points to a relationship between well-being and aggregated, a firm-level measure of performance. The numbers are similar across all types of industry, so it is not an industry-specific causal effect.

This relationship mostly benefits the areas of customer satisfaction and staff turnover, and both of these drive overall profitability.

In addition to all of that, public companies that have a happy workforce tend to perform better at the stock market than those that do not work on improving the well-being of employees.

What Should Be Done?

The previously discussed correlations point to the need for consistent measurement of employee well-being. These measurements should be widely reported on, as well as the outcomes in productivity and firm performance.

All interventions that are going to aim towards raising employee productivity should target critical drivers of employee well-being. The excellent starting points here are interventions which:

  • Target social relationships at work, prominently those between employees and supervisors.

  • Aim at making jobs more interesting for everyone involved.

  • Strive to improve work-life balance.

Several methods can be used here, and they can be unique and made to fit the company brand and image. The key is for them to increase employee productivity by raising their well-being.

The results of all interventions attempted need to be rigorously evaluated to determine their overall effectiveness and cost-effectiveness. That can be achieved through randomized controlled trials, which is the ideal method.

Furthermore, costs need to be recorded to identify the best interventions regarding their cost-effectiveness.

In the end, the results need to be shared publicly as that is the best way to create and empower knowledge sharing and learning.

If all of this is done correctly, then the discussed correlations will be empirically proven. The company can then start implementing the methods that were the most cost-effective ones in improving employee well-being while also enhancing their productivity and the firm’s performance in crucial areas.