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MOTIVATING

Why Happy Employees Are Good for Business

A new study suggests it's worth your time to pay as much attention to your employees as you do to your bottom line.

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Looking for new ways to improve your financial health? You might try spending more time and energy focusing on your employees' happiness, suggests a new study.

The report from Hewitt Associates found employee engagement with their employers at its lowest level in the 15 years the human resources consulting and outsourcing firm has studied the issue. "This highlights the growing tension between employers — many of which are struggling to stabilize their financial situation — and employees, who are showing fatigue in response to a lengthy period of stress, uncertainty and confusion brought about by the recession and their company's actions," observed the study, which tracked more than 900 organizations globally. (What is "engagement?" It includes topics such as employee morale, confidence in the organization, career opportunities, rewards and recognition programs and trust in leadership.)

But companies with high levels of engagement (65 percent or greater) outperformed the total stock market index and posted shareholder returns 19 percent higher than average in 2009. Still not convinced? Companies with disinterested employees (40 percent or less engagement) had a total shareholder return that was 44 percent lower than average.

"Those companies who have had massive layoffs or haven’t really invested in their employees are not really poised for a rebound when things get better," Florida State University management professor Bill Anthony told McClatchy Newspapers.

What can you do to improve employee morale? Luckily, it's not all about the compensation. Hewitt says companies that are successful at upping the happy factor even in the downturn have visible leaders and "provided ongoing updates to reduce employee uncertainty and stress." Four in five companies (82 percent) that have improved employees' happiness have created excitement about the future of the company.

The study also found that three-quarters of companies with high levels of employee morale conduct exit surveys to understand why employees are leaving and identify potential problems.

"Understanding what drives employee behavior — in good times and in bad — is critical to business success," said Ted Marusarz, Hewitt's leader of global engagement and culture. "All organizations face similar pressures. Companies that are successful at improving engagement in spite of these pressures are the ones that create an environment focused on key human capital elements. They may make adjustments to their engagement strategies, but they don't lose sight of their overall goals."

Sue Romanos, the president of Career Xchange, a staffing firm which has thrived in the recession, says companies need to remember to think about more than just money when times are tough.

"It’s just as important to keep in mind you have employees and they are your business," she told McClatchy. "The most important asset is human capital. Financially strong companies know that."

Last updated: Sep 20, 2010

Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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