Happy Employees Mean Better Business (Maybe Not)


Happy employees mean better business performance, right? If you search for "happy employees," you can find lots of articles that will make that claim. It makes sense. If you look at highly successful companies, the employees are all happy. That proves it, right?

Hmmm…. wait a second. What if the employees are happy because the company is successful instead of vice versa? How can we know?

According to one of the few longitudinal studies done on the issue, it's financial performance that comes first. Do you want happy employees? Then make sure your company does well. Which raises the question… will Google still be a great place to work the first time they lose money in a quarter?

  • Both making money and happy employees result from building and maintaining system that produces both.

  • I’m no expert in HR and would never pretend to be one; but I think both go hand by hand. I don’t see this issue as black and white as “who came first, the chicken or the egg”. This is much more complicated in my view, and should be trated as such. I DO think that happy employees deliver better results and are willing to go the extra mile, hence having a better business. And I as well believe that having a strong built business brand attracts better (and happier) talent.

    Ron E.

  • Albert Einstein said that you should: “Make everything as simple as possible, but not simpler.”

    A problem with the “do we make them happy so they’ll be productive or should be make them productive so they’ll be happy” school of studies is that they didn’t listen to Einstein. Yes, job satisfaction and job performance are related, but most of the research indicates that the causal relationship goes both ways, with job performance slightly more likely to affect job satisfaction than vice versa.

    That’s because there are so many other factors in this complex systems. There are intrinsic and extrinsic rewards, group norms, and goals to name a few. More interesting to me are the studies that give us an idea of what we can do to increase performance.

    A 1988 study by Pritchard, Jones, Roth, Stuebing, and Eckeberg, for example, introduced different factors successively to workers. Feedback increased performance over baseline by 50 percent. When goal setting was added, performance climbed to 75 percent over baseline. And, at each stage, job satisfaction increased.

    My experience and research tell me that efforts to make workers “happier” simply slap a coat of paint on whatever structure is already in place. Initiatives to improve the working environment by improving clarity of expectations and feedback, for example, are likely to improve satisfaction before you witness an impact on performance.

  • Google made money from Day One?

    This is one case where “read the whole thing” should apply. I think their chart on page 12 of a proposed framework for integrating the conflicting literature on the subject makes sense.