THE BLOG

Good Common Sense and Good Business Sense

14/02/2014 11:17 GMT | Updated 15/04/2014 10:59 BST

Let's imagine for a moment that you run an ABC - that is, an Average Business Company. Your ABC is ticking along averagely. Your 100 employees are paid average wages. They take, on average, five days a year of sick leave. In an average year, 16 of them will leave the company. Your customers are averagely happy with their products and services. And the employees are averagely happy too.

Other companies - in fact, half of all other companies - are doing worse than you are, and perhaps you feel content with that. But perhaps you're all too aware of the other half doing better. If you find yourself wondering what's their game? you might be interested to read the latest from Gallup. According to its recent report 'State of the Global Workplace', it seems that those companies which are excelling in the marketplace are the ones that take the happiness of their employees seriously. As the report makes clear: 'To win customer - and a bigger share of the marketplace - companies must first win the hearts and minds of their employees.'

In fact, those companies doing very well are not only thinking hard about their employees' and customers' happiness. They actually put in place lots of policies to that ensure their working environments work well and that their managers are good at managing people.

People at these companies enjoy their work. They get along well with their colleagues and feel genuinely proud to work there. In other words, they are happy. Their happiness is a great bonus in itself - but it also contributes towards creating great business.

The 'State of the Global Workplace' report suggests that the best performing companies (the top 25% of Gallup clients) have these advantages over the worst performing companies (the bottom 25%):

• 45% higher staff retention

• 22% more productivity

• 38% lower absenteeism

• 10% higher customer satisfaction

• and lower accident rates, less theft and fewer product quality issues.

Those companies doing the best financially have the most highly engaged and happy workforces. All of these statistics make good common sense. These companies retain their staff more easily because people who are happy at work have less reason to leave. They see higher productivity because people do better work when they enjoy their jobs. Lower absenteeism at these companies makes sense because happier employees take fewer sick days. This is not just because they don't want to miss work, but also because happier people are healthier - and recover more quickly from illnesses, too. The fact that happier employees produce more highly satisfied customers makes sense too - we know this from our own experience of what its like to buy something from someone with a smile on their face as opposed to a world-weary scowl.

Happiness at work makes good common sense. The good news is that we can now also show exactly how it makes good business sense too.

Let's return to your 100-person Average Business Company and run the numbers here. The annual wage bill for an ABC is approximately £2.4million - you are spending a lot of money each year to pay your employees! And yet, by losing 500 working days a year to staff sickness, you lose £50,000 a year. Replacing 16 employees each year costs an additional £150,000.

How much of this money could be saved if your ABC began to make some changes in the direction of employees' happiness? Even modest changes make a big difference to a business's bottom line. Just 10% less absenteeism, for example, would mean a saving of £5,000, whereas 10% greater staff retention would save £15,360 a year. Just 5% greater productivity would produce an extra £120,000 for a company, either as extra output or in reduced staff costs. And these projected changes aren't unfeasible - they are modest gains that can be made when attention is focused on how people feel in the work place. Each projected change here only accounts for a quarter of the gains made by the very best of Gallup's clients compared to their worst.

In tough economic times, when resources are limited, investing in people's happiness and well-being might seem difficult to justify. But the figures above give us an indication of how an average 100-person company might be missing out on over £140,000 a year by carrying on as they always have.

The question all the ABCs out there need to be asking themselves is 'Can we afford not to invest in the happiness of our employees?'

Can you?