Does Employee Happiness Drive Business Results?

Employee happiness used to be considered an important business goal.

People thought that happy employees make organizations more successful. Maybe they were wrong. The idea certainly has fallen out of favor in recent decades, and it has largely been replaced with a broader emphasis on “employee engagement.”

Some people might even suggest that the pursuit of employee happiness isn’t worthwhile. But before we give up on employee happiness, let’s see what the research evidence shows us.

Employee engagement

The “employee engagement” movement considers a much wider range of factors than just happiness.

This is a good thing. It brought more attention to some very important topics, including work-life balance, employee recognition, employee dedication, fairness, and “speaking up.”

That’s great, but why give up on employee happiness?

Types of employee happiness

There are different types of employee happiness, and they can sometimes lead to very different outcomes. In other words, happy employees aren’t necessarily more motivated or loyal. And in particular, there might be a problem with focusing on job satisfaction.

People who are satisfied with their job might just feel content or complacent. Not necessarily motivated to get things done. Perhaps they’re even less motivated because they’re already feeling satisfied.

What does the evidence show?

An analysis that includes more than 300 studies, and over 50,000 employees shows that job satisfaction clearly is related to better job performance (not worse).

Job satisfaction explains about 10% of the variation in job performance.

That’s not everything, but it is a significant effect. And it would be very valuable to any organization where job performance translates into business results.

What about business results? Another analysis that includes more than 7,000 business units across 36 different companies.

The results show that job satisfaction is related to better customer satisfaction, higher profits, greater productivity, reduced employee turnover, and better safety records. Job satisfaction explains up to 12% of the variation in business outcomes.

This is clearly valuable. Even small changes in these overall outcomes can be worth large amounts of money.

But perhaps what’s most interesting about this business-level analysis is that they compared job satisfaction against a more comprehensive measure of employee engagement.

The results were virtually identical. Job satisfaction was just as important on most measures, and in fact it was more important than engagement when it came to predicting turnover.

Employee happiness seems valuable after all

(Even in the form of job satisfaction, it seems to be good and there is no real evidence of a downside)

Granted, these results are correlational. We don’t know if employee happiness actually causes improved business results.

Maybe better job performance causes employee happiness. Maybe working for a more successful organization causes employees to be happier. But we do know that, for whatever reason, happy employees perform better—and organizations with happy employees see better results. That’s definitely not a bad goal to have.