Workplace happiness is not “fluffy” and could inject up to £334bn annually into the UK economy, but organisations should conduct cost/benefit analyses of each of their wellbeing initiatives to ensure they are getting bang for their buck.
This is according to Dr Christian Krekel, associate professor of behavioural science at the London School of Economics (LSE) (pictured), who is the author of The Happiness Dividend report from Reward Gateway/Edenred, in partnership with LSE which found employee happiness is capable of increasing firm value by 20% and potentially injecting up to £334bn into the UK economy annually.
The report found organisations that score highly in employee happiness see a significant 12% uplift in productivity, which translates into a 20% increase in overall firm value. And it’s not just businesses that feel the benefit. Assuming productivity gains translate directly into gross value added (GVA), widespread adoption of happiness-driven practices could theoretically add up to £334bn to the UK economy every year.
However, despite this positive impact, happiness was found to remain an under-utilised metric for the majority of businesses. Only 30% of companies are currently measuring employee happiness directly, meaning the majority are likely unaware of sentiment among employees. More than half (51%) of UK employees were found to be frequently happy at work.
Effective cost benefit analysis
Speaking at a launch event for the report in London yesterday, Dr Christian Krekel maintained that the costs of methods of improving employee happiness vary so firms should conduct cost benefit analyses to determine which are most effective.
“We usually say you want to do some cost benefit analysis of your initiatives.
“You want to rank your initiatives by how much you spend on them in pounds per unit of happiness.
“That would be the rational thing to do,” Dr Krekel added.
“I would always say you want to rank your initiatives in terms of the cheapest in terms of producing happiness and the most expensive.”
Not fluffy
Dr Krekel further maintained that organisations need to move away from the idea of happiness being seen as a “fluffy” concept.
“Many people talk about happiness, but when they talk about it without any sort of substantiation it causes “well-washing”.
Dr Krekel added that there is good quantitative science behind workplace happiness. “There’s a science behind it,” he continued. “You can put numbers onto that.
“You can be very rational about launching initiatives and this would convince management at a higher level because if you can put numbers on to it, it stops it from becoming fluffy and it can be done.”
Recommendations
In terms of other recommendations for improving workplace happiness, the report calls on firms to measure what matters most to employees, foster a sense of connection and support in the workplace, invest in training line managers, treat happiness as a strategic asset rather than a cost and build a proactive financial wellbeing strategy.
Financial education on its own is ineffective
But staff financial education on its own may not be enough in order to improve wellbeing, Dr Krekel continued.
“The literature has found that financial education alone is often not really enough if people are in financial distress.
“What the literature suggests, and this is really not conclusive, is that there should be more to it in addition to financial education.
“Maybe financial loans could be given to employees. Maybe there could be more hands-on initiatives that might be helpful.
“But financial education has been found to be not a good solution by itself.”