Yes, Happy Employees Make Good Companies

Do  happy employees make good companies? Rob May asked this question on his businesspundit blog maybe six weeks ago. He cited research. The results were inconclusive. There seemed to be correlation between happy employees and good financial performance, but it wasn’t clear which caused which. He had a couple posts on that in May, and in a comment on the second post, UCLA Law Professor Stephen Bainbridge agrees and cites additional research along the same lines.

I like BusinessPundit; I read every post and usually agree with it. On this case I’d disagree, except that I’m not sure whether author Rob May is buying the implied conclusion, or not. He seems to be interested in the research more because it’s surprising than because it’s useful. Research that seemingly contradicts common knowledge is always more interesting.

As far as I’m concerned, that question might or might not merit research in the context of large companies, but in the real world, your business and mine, there is no question. Until you get big enough (God help you) to ignore people because there are so many in so many different locations, or so many different cubes, having happy employees is vital.

As a business owner or operator  you’re going to walk into your office every morning greeting the people who work there. You’re going to work with them shoulder to shoulder, as a teammate. You’ll get coffee with them, have lunch, sit at meetings going over plans and presentations and problems and solutions. You’re going to know their spouses and children, and eventually you’ll meet the parents of the younger ones and the children of the older ones. If they aren’t happy, then your life in the office is hell. Who among us is thick-skinned enough to not feel the heavy air of an unhappy company? Do you want to live with that? Can that possibly be good for business?

People have to believe in what they’re doing. Working at something you don’t believe in causes intolerable stress over the long term. For them to believe in it, it has to be something of value, and they have to be treated fairly. I call that common knowledge. I don’t think it’s particularly surprising. You already knew that.

Part of the problem is that a healthy community and teamwork are necessary but not sufficient conditions for good business. In the long term, without a good relationship with employees, your company won’t prosper. Having a good relationship with employees, however, isn’t enough to guarantee success. There are so many other factors. Necessary but not sufficient is hard to pinpoint.

So what’s with the research here? I don’t want to critique PhD-level studies, that’s hardly my charter with this blog; but this collection is more interesting to me as examples of the problems in research than for their findings. In trying to answer a pretty obvious question they generate — in my mind at least — more questions about research than useful answers. And, after dealing with the questions, I’d like to jump past the research and comment on the question itself.

First question is how do you measure happiness in the happy employees? Is it that they say they’re happy, or that they don’t leave the company, or perhaps you measure their stress levels and vitals. To be fair, the studies themselves are thorough and rigorous on this point, but still, this is hard to measure. It reminds me of the work (I posted on it yesterday) Dr. Robert Sapolsky at Stanford University does to study ape populations; the scientists shoot the apes with a dart to put them to sleep and then measure indicators of stress in the body. They have to shoot the apes when they’re not looking, though, because otherwise the researchers are measuring the ape’s stress of walking around the jungle with researchers shooting darts at them.

The second question is how you decide which companies are good companies. Analysts usually use standard financial indicators or the all-time-favorite – stock prices, even though stock prices are only available for public companies and they are a few large companies at the top of the pyramid. What about the other 25 million companies? And if profits or stock prices are the barometer, is that for the long term, short term, or what? I’ve posted before about problems measuring things by stock prices, which are generally influenced by short-term performance, not long-term strategic positioning.

So am I developing an anti-research theme in this blog? I hope not. Still, some of these studies show how hard it is to do good research on some topics, and how much you have to trust your instinct. Now that — trust your instinct too, maybe with some research to educate your guesses — could be a theme.

— Tim


  • How to Manage Quiet, Introverted Employees says:

    […] employers, this is pretty important to understand, not only for the well-being of employees but also for the company. You could be missing out on a lot by not knowing—or worse, not […]

  • Carole says:

    You are correct that happiness alone will not determine success. But the deeper question is whether you can have success without happiness. Has anyone ever proven that you can have a successful company with UNhappy employees?

  • Tim Berry says:

    Yes, and thanks for mentioning Blink too, I just finished reading that this weekend and it has definitely influenced my thinking. Great book.


  • Eric Nehrlich says:

    "trust your instinct too, maybe with some research to educate your guesses"

    This theme makes sense to me. Books like Gary Klein's Sources of Power and Malcolm Gladwell's Blink have shown that our brains are tremendously powerful pattern recognition machines if we train them. Our instincts can often make the correct decision when it would take weeks of conventional analysis to reach the same conclusion. But it's also important to verify those conclusions by seeking out feedback (or research), so as not to be wholly dependent on unexplainable instincts.

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