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4 Reasons Why Happy Employees Are Good for Your Bottom Line

Posted on March 20th, 2023
Happy Employees

When running a company, it’s natural to use stock price and profits as metrics for how your business is performing. But if you’re not actively supporting your employees, you are missing out on a large piece of the puzzle. Happy employees not only makes for a more positive workplace environment, but it also benefits a company’s bottom line

As a company, you likely prioritize the happiness of your clients and customers. After all, a happy customer can lead to repeat business, as well as new business through word-of-mouth referrals. However, if you don’t consider employee happiness, you could be inadvertently hurting the company’s financial performance. Though it may seem an unlikely budget line item, companies can expect to see several benefits as a result of investing in employee happiness. 

1. Increased productivity

What business doesn’t want high output from its employees? Assigning a heavy workload and expecting long hours might seem like an obvious way to get it. However, this stern-taskmaster approach can easily backfire and cause employees to physically and/or mentally disengage from their work. 

Though they might be sitting at their desk, stressed and unhappy employees are unlikely to perform at their best. When overworked employees try to cram every last task into their day, it leaves little time to address their own wellness. They may skip meals, work overtime or get lower-quality sleep. This can lead to absenteeism, like when an employee has to take a sick day due to a looming migraine or sheer exhaustion.

In contrast, when you prioritize employee happiness, productivity follows. A study of U.K. telecom workers by researchers from Oxford University’s Saïd Business School found that employees who were happy at work were 13% more productive than those who weren’t. These call center reps didn’t achieve their increased output by logging more hours. Rather, they made more calls and earned more sales conversions because they were — you guessed it — happy.

2. More collaboration among co-workers

It’s a bit of a chicken-and egg question: Do happy workers collaborate more, or does increased collaboration lead to happier employees? The answer is likely both. 

It’s not hard to imagine that employees would be more eager to team up with sunny-minded colleagues than gloomy ones. There’s research evidence to prove it. A WeWork/Ipsos survey of 4,000 workers in the U.S. and Europe found that over half of all respondents who reported themselves happy at work collaborate with five or more co-workers daily. Unsatisfied workers reported notably lower levels of collaboration — and this lack of collaboration costs businesses. 

A landmark study by consulting giant Deloitte found that strong collaboration practices benefit businesses in nearly every dimension. By putting their heads together, employees can solve problems faster, better and more creatively. The time savings resulting from collaboration amounted, in Deloitte’s estimation, to an annual $1,660 per worker and manager, with enhanced work quality contributing another $2,517 per worker and manager each year. Whether employee happiness is cause or effect, the happiness-collaboration symbiosis drives innovation, growth and profitability, offering plenty of reasons to make it a priority.

3. Stronger client and customer relationships

A happy employee can boost client relationships in several ways. First of all, the employee working with the client is the one who will leave a lasting impression. If they’re unhappy in the workplace, those feelings may seep into client meetings. Furthermore, an employee who is feeling overworked and stressed may not offer beneficial services to the client, as doing so could add to their workload. Not only do you miss the chance of an upsell, you risk not meeting the client’s expectations and ultimately losing them to a competitor.

On the flip side, a happy, unstressed employee will aim to make your company look good. They’ll be more available to clients and have the time to develop and foster a relationship, which is crucial to the success of the account. Such positive relationships help build client trust in your business, leading to long-standing partnerships and increased revenue for the company. 

If anything, the relationship between employee happiness and customer satisfaction is even clearer in more consumer-oriented businesses. A Glassdoor study found that every one-star increase in a company’s rating on the platform resulted overall in a 1.3-point rise in customer satisfaction scores — an effect that was even greater in high-touch industry sectors like hospitality and retail. Customer happiness drives increased retention, which in turn yields higher revenues, increased profitability, and brand advocacy. The bottom line is that an investment in employee happiness can produce big dividends whether you run a B2B or B2C business.

4. Higher retention rates

As the Great Resignation vividly demonstrated, employees who aren’t happy at work won’t hesitate to leave. And that’s something business owners definitely want to avoid. In Gallup’s conservative estimate, a company will spend anywhere from one-half to two times an employee’s annual salary to replace the departed worker. That’s not petty cash.

Not only are there the hard costs of advertising the opening, interviewing candidates and training subsequent hires, there’s a significant cost in lowered productivity. It can take a year or more for a new employee to get fully up to speed, and the colleagues who are training them get pulled away from their own work, causing a further hit to productivity. Add in skill loss and damage to the customer experience, and it’s not hard to see why employee turnover is so harmful. 

The corollary is that higher retention rates can benefit your company in numerous ways. As noted, you can expect increased productivity because your employees are already trained and know the company’s offerings and how the business works. Company morale is higher because coworkers aren’t losing the working relationships they’ve developed — or questioning why they should stay when so many others are heading for the door. In short, you’ll save time, money, and headaches by keeping your best employees around long-term. 

How to make your employees happy

Offer an attractive compensation package

With relatively few exceptions, the number one reason people take a job is to get paid. Coming in a close second are the benefits that employers provide, chief among them health coverage and a retirement plan. 

As an index of the employee happiness potential of good benefits, consider the following. A 2022 Willis Towers Watson survey found that 81% of employees who were pleased with their benefits would stick with their current employer for another two years or more. Just 51% of the displeased would say the same. To make your employees happy, your compensation package should be “competitive-plus.” Aim for the upper range of the prevailing salary scale, and consider adding additional perks (childcare reimbursements, transit pass discounts, etc.) to the expected health insurance, PTO and retirement benefits trifecta. 

Another way to improve your compensation package is to make the benefits you offer easy to sign up for and use. To streamline plan selection and enrollment, for example, the Benebee app from Hamilton Insurance Agency walks employees through the signup process and provides instant access to virtual insurance cards. That means employees always have the card they need on hand, even if you switch providers. As Hamilton vice president of business development Jason Zuccari notes, when it comes to benefits, you should “make sure that they’re as usable as they are valuable.”

Make flexibility your watchword

Remote work was a rising tide that the COVID-19 pandemic turned into a tsunami. Now that millions of employees have gotten a taste of remote work life, many aren’t willing to give it up again. Others are eager to return to the office, perhaps because they crave face-to-face interaction or they want to reclaim their dining room table. Either way, the upshot is this: Your business must offer employees schedule and location flexibility.

Some employees might prefer a set schedule and the ability to leave work behind when they go home at night. Others may be more productive if they’re working from home a few days per week or even after so-called business hours. This variability argues against in-office or at-home requirements. Instead, give your employees some guidelines and trust them to choose the settings where they will be at their most productive. 

You might even follow the lead of the more than 70 U.K. companies that are experimenting with a four-day workweek. When asked how the pilot program was going, 35 of the 41 survey respondents said their company would “likely” or “very likely” continue the policy past the trial stage. And why not? All but two of the companies had found that productivity had either stayed the same or gotten better. In fact, six of them reported that it had improved significantly. 

Protect their time

An inexpensive — even cost-saving — way to improve employee productivity and happiness is to eliminate superfluous meetings and check-ins. Unnecessary meetings eat up valuable time and energy across the company. Instead of using recurring meetings to check on the status of a project, use project management software to stay up-to-date in real time instead. 

Some meetings are necessary, but you can undoubtedly make them shorter and more efficient. Invite only those people whose input is necessary to make decisions. Others who simply need to be informed can be updated via email or other channels. Develop and pre-circulate a meeting agenda, and when meeting time arrives, be sure to stick to it. 

Or you might take your cue from companies like Atlassian and Facebook and consider scheduling meetings on certain days of the week. This allows employees to focus solely on their work on the other days. The time saved by eliminating unnecessary meetings can be put toward more productive matters, such as investing in career development opportunities for your employees. 

Employee happiness is an investment worth making

Although you may need to shell out some money to keep your employees happy, it will be well worth it in the long run. When you show employees that you care about their happiness, you’re building a bond of trust and loyalty. Not only does this lead to a happier and more productive workplace, but it also helps save money by retaining employees and avoiding the costs of hiring someone new.

Deanna Ritchie

Deanna Ritchie

Deanna Ritchie is a managing editor at Due. She has a degree in English Literature. She has written 2000+ articles on getting out of debt and mastering your finances. She has edited over 60,000 articles in her life. She has a passion for helping writers inspire others through their words. Deanna has also been an editor at Entrepreneur Magazine and ReadWrite.

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