It is accepted wisdom today that employers benefit most when employees are happy and engaged. To better understand why that is and what it means for employers, we talked to economist and researcher Andrew Oswald.
Less than a generation ago, the notion that a worker’s well-being had a direct impact on their value as a business asset was a matter of opinion (if it was even considered at all). What mattered in most cases was making sure people showed up and put in a full day of effort.
Happiness Increases Productivity
In the early 1990s, however, Dr. Oswald, now a professor of economics at the University of Warwick in England, began to probe the economic and social roots of happiness and mental health. It was an unusual line of research at the time, but the conclusion it reached – that subjective personal matters do correlate with more objective metrics in meaningful ways – spawned a whole new category of social science inquiry.1
“What can be more important than happiness?” Oswald asks. In randomized trials, happier people become about 12 percent more productive. “It’s as though happiness creates its own kind of extra energy.”2
Oswald notes that work increasingly has less to do with synchronizing head and hands to perform recurring manual tasks. Social and intellectual skills that align head and heart – intelligent communication and effective collaboration – are the reigning priorities.
The High Cost of Disengagement
The “economics of happiness,” as it is sometimes called, changed the conversation about the relationship between employer and employee. By one reliable estimate, unhappy, disengaged, distracted workers cost U.S. businesses up to $550 billion annually in lost productivity and turnover.3