In fact, the link between employee attitudes and business performance has been known for decades. A series of influential experiments from the 1930s, known as the Hawthorne studies, showed the impact of improved workplace environments on overall factory outputs. One finding was that reducing the working day by half an hour saw productivity improve.
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IN EMPLOYMENT: GLOBAL BEST PRACTICE
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Later, James Worthy, a sociologist-turned-executive, wrote in 1950 of increased autonomy for employees leading to improved morale and productivity.
While some have argued that successful companies make employees happy, not the other way round, academic studies have steadily discredited this view.
One of the most comprehensive studies on the topic is Gallup’s 2012 research of 192 organisations in 49 industries and 34 countries, covering 50,000 business units and 1.4m employees. It found that business divisions scoring in the top half of reported employee engagement had nearly double the performance outcomes compared with those in the bottom half.
The authors concluded: “Financial performance is best viewed as a downstream outcome . . . Employees with positive attitudes toward their workplace are likely to carry those attitudes over to customers and to engage in the discretionary effort it takes to serve . . . at a high level.”
Yves Morieux, director for the Boston Consulting Group’s Institute for Organization, believes the debate is now over. “Happy employees create high-performing organisations . . . because there are more opportunities to satisfy their aspirations, job security, chance of promotion, career development [and] wages,” he says. “That is obvious . . . if the company is very productive but does not maintain satisfaction at work then in a few years performance will drop.”
But many employers have yet to cotton on. Employee engagement and happiness at work is in decline. Separate studies by the Conference Board, Gallup and Quantum Workplace found that employee engagement has been falling for the past decade or more. Mr Morieux attributes this to a “proliferation of cumbersome processes, systems, scorecards, metrics, meetings — what I call ‘complicatedness’. People spend between 40 per cent and 60 per cent of their time wasting their time, working on less and less value-added activity.”
If the bonus is very significant then your goal becomes to earn the bonus
- Yves Morieux, Boston Consulting Group
By contrast, best practice employers are “turning the engagement process into a lot more than an annual event,” says Jim Harter, Gallup’s chief scientist for workplace management and wellbeing. “They embed it in how people think about their day-to-day work . . . education and training, development that focuses on the natural talents and strengths in the team. Helping people feel like they are the future of the organisation and helping them do what they do best.”
Teamwork and collaboration are consistently linked to increases in innovation and discretionary effort, shaping how some companies now think about reward packages. “You must be very careful with reward and bonuses,” says Mr Morieux, “because if the bonus is very significant then your goal becomes to earn the bonus. And then you will do everything you can to earn the bonus, including hiding, exaggerating and why not cheating? These strong incentives are counterproductive if you want people to co-operate.”
Netflix, the digital broadcaster, pays only salary and not bonuses. It allows staff to choose their working hours.
A seemingly dull set of 124 PowerPoint slides outlining Netflix’s employment culture has become a surprise viral hit, now viewed close to 14m times.
Mr Morieux believes the Netflix model has become “an archetype”. He adds: “The Netflix values include management that is about ‘context, not control’, creating the right environment that inspires people, that provides direction and transparency — as opposed to top-down decision making, approvals processes and committees.”
Lego, the Danish toy manufacturer, also credits employee empowerment as central to its success. The Lego group chief executive, Jorgen Vig Knudstorp, is widely quoted as saying “blame is not for failure, it is for failing to help or to ask for help”.
Mr Morieux says: “When you use this principle it changes everything because suddenly it becomes in people’s interest to be as transparent as possible about their real weaknesses, their real forecast, as opposed to hiding or protecting themselves . . . The way [Lego] describe it is, ‘don’t think less of yourself, but think of yourself less’. This is precisely to promote co-operation.”
Lego, along with the likes of Google and WL Gore, a US manufacturing company, has a flat management structure. Layers of management are effectively stripped out, leaving only the employees, a cadre of team leaders and the executive team. WL Gore’s 10,000-plus employees are divided into self-managing teams of eight to 12 people who set their own work and pay. Staff also to elect the company’s chief executive.
What does this say, then, for the future of managers? Yves Duhaldeborde, director of organisational surveys and insights at consultants Towers Watson, argues that managers — the ones that are left, at least — actually become even more important in flatter structures.
“What people need from managers is not someone they get permission from, but the person who coaches and gives meaningful feedback,” he says. “Good people management is key to having happy people in an organisation.”
The best managers build “a sense of trust and autonomy” in teams, adds Mr Harter of Gallup. “Getting that right leads to higher performance.”
My ultimate career goal is creating a happy workplace. - HJ
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