The key to business success: How workplace wellbeing drives firm performance
An overview and insight into the Workplace Wellbeing and Firm Performance working paper, published by the University of Oxford Wellbeing Research Centre.
Summary: Workplace Wellbeing and Firm Performance working paper
As a business leader, you know that data-driven decisions are key to success. But have you considered the impact of employee wellbeing on your firm's performance? A recent groundbreaking working paper, "Workplace Wellbeing and Firm Performance," published by the University of Oxford Wellbeing Research Centre, sheds light on this crucial relationship.
The May 2023 working paper from the University of Oxford aggregates data from over 1,600 listed companies in the United States, and draws from a data set of more than 15 million surveys on wellbeing. By combining insights from the major jobs website Indeed with financial data from Compustat, the study examines the correlation between workplace wellbeing and firm performance, uncovering what the Financial Times is calling “the clearest link yet” between employee wellbeing and financial performance among quoted US companies.
The key findings at a glance
Lead author Professor Jan-Emmanuel De Neve and his team of researchers used self-reported wellbeing data from employees to draw some exciting conclusions, including:
Companies with the highest levels of employee wellbeing also outperform standard benchmarks in the stock market.
There’s a strong correlational relationship between employee happiness and various performance metrics, such as gross profits, company valuations, and return on assets.
Happier employees exhibit reduced turnover rates and unplanned absences, while displaying enhanced productivity, collaboration, creativity, commitment, and motivation.
Let's unpack some of the key findings and explore how you can leverage workplace wellbeing to achieve unparalleled success.
Wellbeing and stock market outperformance
Companies with the highest levels of employee wellbeing outperform standard benchmarks in the stock market. The strong positive relationship between employee wellbeing and firm performance has a direct impact on your company's profitability and success.
Although the working paper cannot prove causality, Professor De Neve says “the strength of the correlation of wellbeing with the stock market was the most exciting because it’s predictive”.
“Wellbeing data in 2020 successfully predicted stock market performance in 2021. And the 2021 wellbeing data did so again for the bear market in 2022, and it looks promising once more at the start of this volatile year. The predictive power of these wellbeing reports seems to suggest that stock markets underestimate the value of intangibles such as how employees feel at work.”
Workplace wellbeing garnered a lot of attention in the wake of the Covid-19 pandemic, but its impact on an organisation’s bottom line has been difficult to prove. This comprehensive working paper suggests a shift away from ‘if’ employee wellbeing impacts profit, to ‘how much’.
Correlation between happiness and performance
The working paper also showcases a strong correlational relationship between employee happiness and various performance metrics, such as gross profits, company valuations, and return on assets.
Happier employees also exhibit reduced turnover rates and unplanned absences while displaying enhanced productivity, collaboration, creativity, commitment, and motivation.
What makes these findings even more exciting is they come from self-reported employee wellbeing data.
“We’re hearing directly from the employees themselves. It’s not an HR officer telling us how they think employees feel. We’re actually getting to the heart of the matter,” says Professor De Neve.
Pathways from wellbeing to performance
The study explores six possible pathways that connect employee wellbeing to performance:
1. Productivity
A positive environment fosters productivity, leading to improved sales conversion rates, increased calls per hour, and schedule adherence.
2. Social Relationships
Happier employees build supportive connections, collaborate better, satisfy customers, and excel in negotiations.
3. Creativity
A positive mindset enhances mental flexibility and awareness, fueling innovation and inventive solutions.
“Knowing your company cares about you, having friends at work, feeling a sense of belonging — it all matters.”
4. Health
Employee wellbeing impacts both mental and physical health, with happier employees experiencing reduced burnout and distress, resulting in better overall work performance.
5. Recruitment
Workplace wellbeing becomes a crucial factor in attracting talent, as employees prioritize work autonomy, job security, flexibility, and organizational purpose over financial compensation.
6. Retention
Happier and more satisfied employees tend to remain committed to their jobs, leading to reduced turnover rates and increased employee loyalty.
How to embrace workplace wellbeing as a business leader
To leverage the power of workplace wellbeing, business leaders can take actionable steps.
Integrate wellbeing into decision-making
Build a culture that prioritises employee wellbeing in all aspects of decision-making processes.
Empower wellbeing teams
Provide wellbeing teams with the necessary resources, training, and budget to make a genuine impact.
Embrace complexity
Recognise that wellbeing is multifaceted and affects individuals differently. Challenge assumptions and promote understanding.
Lead by example
Normalise conversations about both personal and organizational wellbeing by openly discussing your own wellbeing journey.
Conduct wellbeing audits
Seek employee feedback on support needs and research best-practice wellbeing options to enhance workplace satisfaction and engagement.
Recognising a trend: Wellbeing as a key to business success
The significance of employee wellbeing on business success is not a novel concept. Leading media outlets like Forbes, The Wall Street Journal, Financial Times, CNN, Harvard Business Review, and prominent consulting agencies like McKinsey and Deloitte have emphasized the importance of workplace wellbeing in the global competition for talent and organizational prosperity.
The University of Oxford's working paper reaffirms the critical connection between workplace wellbeing and business success. As a business leader, prioritising employee wellbeing should be at the heart of your strategy. By valuing and investing in the wellbeing of your workforce, you pave the way for a prosperous and thriving future for your organization in today's competitive landscape. Embrace workplace wellbeing, and watch your business soar to new heights.
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