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Link between wellbeing and productivity is made ‘clear’

Financial Times

The good news, says William Fleming, research fellow at Oxford university’s Wellbeing Research Centre, is that there is a “clear link between subjective wellbeing and productivity”.

He points to two recent studies that show happier workers make more sales, and wellbeing at work can boost financial performance. They support the business case for tending to staff happiness, he argues. “This is without considering absence rates because of mental health and costs of employee turnover.”

Companies reap bigger dividends from happier staff

Financial Times

For academics Jan-Emmanuel De Neve and George Ward at the University of Oxford, and Micah Kaats at Harvard University, it is no surprise, then, that the company’s share price has performed so strongly: their recent study provides the clearest link yet between staff wellbeing and financial performance in quoted US companies. “We find that higher levels of wellbeing generally predict higher firm valuations, higher return on assets, higher gross profits, and better stock market performance,” they write in a 42-page paper.

Happiest companies better in multiple measures of firm performance

  • Firm value, return on assets and profits all higher for companies with higher workplace wellbeing scores
  • Top 100 ‘happiest’ companies outperform S&P 500 and Dow Jones by 20% since 2021
  • Researchers analyse data from more than 1,600 US companies and 15 million employee surveys in partnership with jobs site Indeed

Companies with higher employee wellbeing scores outperform their counterparts in multiple traditional measures of firm performance, new research has found.

Investment in the top 100 US workplaces ranked by employee wellbeing would have returned 20% more than the same investment in the S&P 500 or Dow Jones over the same two-year period.

The findings are published in the most comprehensive study to date linking employee wellbeing to financial and stock market performance, led by researchers from the Wellbeing Research Centre at the University of Oxford and Harvard University.

They worked in partnership with the jobs site Indeed, whose Workplace Wellbeing Score is the largest survey of employee wellbeing anywhere in the world with more than 15 million responses collected since its launch in 2019.

The researchers analysed data from more than 1,600 US listed companies whose employees reported anonymously on four key measures: Job satisfaction; Purpose; Happiness; and Stress1, and compared this against publicly available annual accounting data. They found that, on average, higher levels of employee wellbeing were associated with increased firm value, higher return on assets, and higher profits. Pre-pandemic measures of workplace wellbeing also subsequently predicted higher levels of firm performance following the Covid-19 outbreak.

In a separate analysis, the researchers also ranked the top 100 firms by employee wellbeing scores. Starting on January 1, 2021, they ‘invested’ a hypothetical $1,000 dollars into this new wellbeing-oriented portfolio and saw a greater return than equivalent investments in the main US stock indices.

This higher performance held true in both the so-called bull market of sustained growth through much of 2021 and the bear market of prolonged decline in 2022.

Workplace Wellbeing and Firm Performance’ is open access and available as part of the Wellbeing Research Centre’s Working Paper Series.

  1. https://wellbeing.hmc.ox.ac.uk/article/wp-2303-measuring-workplace-wellbeing

Micah Kaats

Micah is a Research Associate at the Wellbeing Research Centre at Oxford. He has also worked as an Analyst at the Happiness Research Institute in Copenhagen and Research Assistant at the Erasmus Happiness Economics Research Organization (EHERO). Micah is committed to developing evidence-based tools for public and private decision-makers to promote subjective wellbeing. He holds two Master’s degrees in Economic Policy and Applied Ethics from Utrecht University, and a Bachelor’s degree in Philosophy from UPenn. He has contributed to academic publications and reports on subjective wellbeing, cost-benefit analysis, and policy evaluation. His research interests converge around topics in health, work, aging, and migration. He is based in Amsterdam.