Organizations prioritizing employee happiness are generally recognized as more progressive and morally superior. Moreover, they’re also perceived more positively by the general public and find it easier to attract and retain top talent. 

But does this happiness also lead to improved financial performance? Are happier companies more profitable too? 

If multiple studies are to be believed, the answer is an overwhelming “YES!”

Happier Companies and Profitability: What Do Studies Say?

A study titled ‘Does Happiness Lead to Success?’ found strong evidence suggesting a direct causality between successful business outcomes and life satisfaction. As per the research, happiness is not a byproduct of success but a prerequisite to succeed, even when the success metric is business profitability. 

Another study mentioned in the book Primal Leadership by Harvard Psychologist Daniel Goleman suggests company revenue increases by 1% for every 2% rise in employee happiness. 

Several such examples demonstrate a direct correlation between employee happiness and increased business profitability. 

But how does happiness contribute to an organization’s financial performance? Let’s take a look-

Why are Happier Companies More Profitable?

  • Happiness Increases Employee Engagement

Happier workplaces generally have more engaged employees. It makes people committed to their jobs, goals, and company values. Moreover, engaged employees are also more productive, improve company culture, and enhance customer satisfaction. 

According to a 3-year study by Wills Tower Watson involving 41 global companies, operating margin increased by 4% on average in organizations with higher employee engagement levels and decreased by 2% in companies with lower engagement. 

  • Happiness Begets Creativity

Innovation requires creativity. And for creativity to thrive in an organization, employees must feel free to make mistakes, accept the errors, and innovate a new approach. As happier employees are more confident, they can experiment with different tactics to try and deliver improved results. 

On the contrary, when employees are unhappy and stressed, it can trigger a psychological response in the amygdala (a part of the brain), turning off some mental functions to ensure adequate resources for a fight-or-flight response. The response proves detrimental to employee creativity and negatively impacts their energy levels and emotional connection with their work.  

  • Happiness Contributes to Teamwork and Collaboration

Healthy collaboration takes a backseat when employees feel stressed and cannot trust their team members or managers. Blaming each other for mistakes, blanking team members, and withholding information are common outcomes of a toxic workplace culture.  

Happier employees share a certain level of trust, leading to improved teamwork and collaboration. They give 100% to their jobs, are eager to assist others, are fun to work with and have a higher emotional quotient. 

How to Create a Happier Workplace?

Happier companies have happier employees who feel more satisfied with their jobs. In the process, it also aids improved financial performance for the company.

But how do you build a happier workplace? Here are some tips that can help-

  • Recognize and praise employee contributions
  • Offer meaningful perks
  • Invest in their professional and personal growth
  • Organize fun events to improve team bonding
  • Prioritize work-life balance
  • Encourage and incentivize workplace wellness
  • Avoid micromanaging
  • Learn to give and take feedback positively

Building a Happier Organization, One Step at a Time

Building a happier workplace is about creating an environment where the employees feel empowered to show up, energized and motivated to give their best at every opportunity. The environment supports them in reaching their true potential, which aids their professional growth and improves business performance. 

But as building a happier organization is an ongoing process, it requires consistent efforts and comprehensive planning. Companies can consider professional consulting and advisory services as the assistance of an experienced consultant can accelerate workplace transformation through a customized strategy that aligns with organizational challenges and objectives.