Are Happy Workers Really More Productive?

Are happy employees correlated with better financial returns? Are happy employees more productive? Most of us instinctively would agree with an article in the Harvard Business Review that “a decade of research proves that happiness raises nearly every business and educational outcome: raising sales by 37 percent, productivity by 31 percent, and accuracy on tasks by 19 percent, as well as a myriad of health and quality of life improvements.”

One new study--looking at firms deemed “best companies to work for” from 1984 to 2020, suggests it could be the case, at least for these firms. 

Other studies also suggest that happier workers are more productive, though the studies do not address the relationship between productivity and profit directly. 

The issue always is the “Hawthorne Effect.” The Hawthorne Effect refers to the tendency of some people to work harder and perform better when they are participants in an experiment. 

In other words, individuals may change their behavior due to the attention they are receiving from researchers rather than because of any manipulation of independent variables. They might report being more productive or happier simply because they are being studied. 

There are lots of other views, including the argument that happier people are more productive, irrespective of work conditions. In other words, they were happy independently of the work setting. 

Methodologically, one issue is that we cannot actually quantity “happiness” well enough to measure it. And some studies report just the opposite: unhappy workers also are productive. 

Also, the reverse might also be true: productive workers feel happy. It is productivity itself that drives feelings of happiness, not the other way around. 

According to Stephen P. Robbins, a careful review of the evidence finds the correlation between satisfaction and productivity in the range of +0.14 and +0.30. Essentially, no more than nine percent and maybe as low as two percent of the variance in output can be accounted for by job satisfaction self reports, which then is used as the proxy measure of happiness. 

So productive employees are more likely to be happy workers, rather than the reverse.    

There is evidence that more-profitable firms also have more happy employees, though it is hard to say whether the relationship is causal or only correlative. 

Highly-profitable firms are able to provide more benefits for their workers, more opportunities for promotion and nicer work environments, for example, so that alone might contribute to relative feelings of happiness. 

Most of us would instinctively believe that happier workers also are more productive. It might be the case. But it is difficult to prove the thesis. We need proxies for “happiness” that are relatively more objective than self reports. 

We need evidence that there is a causal--not merely correlational--relationship between work environment and “happiness.” We need to remove performance effects (Hawthorne). 

Also, there is little incentive for research about circumstances where “happiness” is unrelated or inversely related to productivity or firm profits, so that subject likely is under-researched.