Is a Happy Worker Great for Business? Settling the Controversy

Most have heard the adage, “Happy wife, happy life,” and many partners seem to believe it is true. More recently, I am hearing, “Happy spouse, happy house”. Incidentally, I don’t seem to hear much chatter about “happy husband, happy ….”

Maybe the difficulty is in finding a rhyming word to pair with husband.

Regardless of how enthusiastically you nod your head in favor or disagreement with either of the sayings, if you are an employee, you likely have no reservation in joining the camp that declares, “Happy employee, happy company”.

Numerous people question whether there is truth or evidence behind the popularly held assertion, “When the employees are happy, the entire business is happy”. In other words, they wonder if a happy worker translates to a more productive worker.

In my experience, I have sensed a hesitancy on the part of employers and managers to invest their hard-earned profits back into their staff’s happiness. They wonder if such a strategy will indeed yield a profitable ROI. There is even some doubt as to whether or not their business will have more magnetic appeal to their customers if they are being served by a happy employee.

The Sources of the Skepticism

At first glance, the happy worker-productive worker relationship seems a no-brainer, but there are those who challenge the connection. Who are the skeptics?

  1. For some employers, their skepticism spikes when looking across the working landscape and noticing a carrots and stick management style (rewards and punishment) in operation at other companies. This influence, compounded over time with common discourse about staffing issues and economic uncertainties, ignite a fire of fear within the boss and consequently, he or she typically defaults to a hard-nosed approach, believing that a stern reinforcement of rigid rules is the best and least risky approach to building a productive team and successful business. Fear based cautions of scarcity, competition and mistrust are deeply rooted in average business cultures. To everyone’s detriment, fear causes many bosses to withdraw and detach from the staff, looking out primarily for number one.
  2. In the minds of many skeptics, there exists a philosophical chasm between their bottom line and the staff’s wellness and he or she believes their responsibility lies with the former. Like a carpenter with inadequate tools, the employer’s low EQ and atrophied soft skills become a leadership limitation or impediment to staff development. Wellness and healthy cultures seem too abstract and wishy-washy to even consider. By such reasoning, the paycheque should be enough to ensure loyalty, exceptional performance and even happiness. If an employee has other needs, they are viewed as weak and needy.
  3. Ostensibly, the fewest number of skeptics, albeit the most reasonable, doubt the happy-productive worker thesis because of the existing research countering the notion that a happy worker is always a productive worker. There are a fair amount of caution and criticism coming out of some labs regarding the bevy of existing research proclaiming that a happy worker is a productive one. Many well conducted studies have questions as to why there exists unhappy workers who outperform their happier coworkers. (1,2,3)  Such researchers are quick to point out the meta-analytic research that provide ambiguous and inconclusive results (4,5) Despite the mounds of evidence reporting correlation and causation between happy workers and their production, some of the cautionary research is enough to convince some employers to squash any notion of enhancing the wellbeing of his or her staff.
  4. Finally, we would be remiss to not consider how many decision makers within our offices of employment are influenced by a combination of the three factors. The third source being a confirmation bias towards their pre-existing doubts that was birthed from the first and/or second.

Boosting The Bottom Line Through Worker Wellness

Although the list above is not a comprehensive list of why an employer would not invest in the wellbeing of his or her staff, it does shed some light on what seems to encompass most of the skeptic’s rationale. After reviewing such justification, maybe you are tempted to also wonder if it is really worth it for companies to invest in benefits, policies and programs that boost staff morale and satisfaction. If so, an up-close look at some of the solid research and rationale may clarify the issue.

1.     Before peeking inside some of the outstanding research declaring that satisfied employees indeed drive performance and better contribute to the company’s bottom line, stand back from the semantics, interpretative complexities and intricacies of scientific study and imagine this scenario: You have been given an opportunity to manage a lucrative multi-million dollar company. You have been assigned to hire workers for the operation and there exists two groups to choose between. Group one is comprised of workers who are disgruntled, unhappy and unmotivated. Down the hall, a group of enthusiastic, attitudinally healthy, happy and motivated workers wait to be hired. Without knowing any of the research, which would you choose to work with as your staff?

The choice seems obvious because anecdotally and rationally we understand the odds of having a great day at work and “getting things done” will be much more in your favor with the second group. Although within each group there may exist exceptions or outliers, the general odds of success – which is what we are primarily concerned with – seem stacked in your favor by hiring the happy group.

2.     Despite what appears obvious from the previous imaginative exercise, evidence based decisions must be accounted for in order to eliminate biases, blind spots or unknowns. And boy, do we have evidence for investing in the wellness of a staff.

Whether looking at studies that observe simple correlations between worker satisfaction and financial performance, or peeking inside less equivocal studies that measure the causal link between satisfied workers and results, the message is clear and consistent: Any investment in an engaged, motivated and happy workforce is also an auspicious financial investment. Listed below are a miniscule fraction of the studies highlighting the happy worker-productivity relationship. In consideration of brevity, I list only five; five that when examined up close, should quiet the noise from negative critique of what already seems “common sense”.

A.     According to a 1996 -2001 study reported in the Industrial and Labor Relations Review, an increase in job satisfaction is directly related to a 6.6 percent increase in productivity per hour. (6) A chief concern raising skepticism among the critical studies mentioned in point three above is that production function estimation may be hampered by the endogeneity of the input variables on the right-hand side of the equation. This comprehensive study negates the chief criticisms of opposing studies by utilizing several additional specifications that use different productivity measures, various estimation methods, and varying specifications for job satisfaction, among other things. It extensively considered such potential problems that often preclude making recommendations. By considering total factory productivity according to numerous productivity factors established by a scientifically created database of factors (7), and measuring satisfaction and productivity by several observation models, the researchers were able to eliminate possible measurement errors, and address the potential endogeneity of job satisfaction in the estimating equation.

B.     In a study released in 2015, researchers explored whether employee satisfaction directly impacted financial and productivity performance, measured by return over assets, operating margin, and revenue per employee. After analyzing 475 companies (the biggest among the studies that analyze performance and employee satisfaction at the firm level), the researchers reported, “ … a direct and positive association between employee satisfaction and firm performance.” (italics added for emphasis)(8)

C.     A 2017 study utilizing more than one million employee reviews revealed a statistically significant link between changes in employee satisfaction and stock returns. Portfolios of company stocks consisting of firms with the greatest quarterly improvements in job satisfaction ratings financially outperformed those companies that experience declining quarterly ratings. (9)

D.      After setting out to determine once and for all if the happy worker is indeed more productive, a 2016 study affirmed the predictive effect of well-being at work in relation to performance. It urgently recommended, “ … organizational practices are (to be) developed with the objective of increasing the well-being and satisfaction of their employees.” (10)

E.     A 2015 study out of The University of Warwick tested the happy-productive worker thesis through three separate experimentation styles and designs. The various approaches were attempts to address critics’ specific claims of experimental weaknesses from previous research. No matter the style, each experiment produced evidence consistent with the notion that happy workers indeed produce more and contribute to healthy workplace cultures. During the various studies, when workers were made happier by adjusting happiness factors, their productivity improved by 12 percent. Interestingly, lower happiness was systematically associated with poorer production. “These different forms of evidence,” the researchers noted, “are consistent with the existence of a casual link between human well-being and human performance.”(11) (italics added for emphasis)

The Flawed Sources of Skepticism

3.     Earlier, we laid out three common reasons why employers hesitate or refuse to invest in the well being of their staff. Although I am convinced that for many employer’s who refuse to invest in staff wellness, their motive is sincere and skepticism warranted, there is a strong rebuttal for each that well serves the happy -productive worker assertion.

–         The fear-based boss who defaults to the outdated or at best, average mindset of management, had better get used to average results. Most fear-based leaders subscribe to what social psychologist, Douglas McGregor coined “Theory X management”. Such a boss operates through a belief system that people dislike their work, have little initiative or ambition, must be rewarded or threatened in order to work and are unwilling to take responsibility. Such a belief promotes an authoritarian style of management, where workers are mistrusted and closely supervised.

This type of boss is difficult to reach because beliefs, by definition, are difficult to rationalize with. There is a self-fulfilling prophesy to this type of thinking because people treat others as they see them and in return, people act accordingly to how they are treated. Trying to engage workers through rewards and punishment however, are about as effective as is slashing at the leaves of a tree, trying to bring it down. The best hope of connecting with such an authoritarian is to offer evidence, such as described above, and point out situations in his or her own life narrative where he or she behaved more enthusiastically and earnestly when in a happier state of mind.

This style of weak leadership plug-in is certain to create a punitive atmosphere with a heavy blame culture and mistrust, divided rather than united. In addition, as the business grows, it will need more managerial staff to control those without a positional title. A ‘them versus us’ division is inevitable, where each side is concerned primarily with “getting through the day” and grabbing their own piece of the pie, with little or no regard for “them”. In a moment of intellectual honesty, what business owner would desire this workplace and expect outstanding results

–         The boss with low emotional intelligence is the second type of boss who seems hesitant to invest in the wellbeing of his staff. Here, we need only do a brief scan on the mounds of research outlining the direct connection between success and soft skills.

Talent Smart tested emotional intelligence alongside 33 other important workplace skills and found that emotional intelligence is the strongest predictor of performance, explaining a full 58 percent of success in all types of jobs.(12) Dr. Travis Bradbury, co-author of Emotional Intelligence 2.0 writes, “Of all the people we’ve studied at work, we’ve found that 90 percent of top performers are also high in emotional intelligence. The link between emotional intelligence and earnings is so direct that every point increase in emotional intelligence adds $1,300 to an annual salary. These findings hold true for people in all industries, at all levels, in every region of the world. We haven’t yet been able to find a job in which performance and pay aren’t tied closely to emotional intelligence.”

What leader would not take a second look upon realizing that a great leader with an outstanding EQ can double a company’s profits while at the same time, improve employee satisfaction and engagement to revenue and profits? (14) When the ratio of technical skills, IQ and emotional intelligence are calculated as ingredients of excellent performance, emotional intelligence proved to be twice as important as the others for jobs at all levels. (15)

Daniel Goleman, an authority on emotional intelligence in the workplace, declares that through his research, he has come to realize that “Even if they (leaders) get everything else just right, if leaders fail in this primal task of driving emotions in the right direction, nothing they do will work as well as it could or should.”

If after revealing such evidence for the need for soft skills in the workplace, there remains an obstinate boss who is still not sold on the connection between EQ and productivity, have him or her consider the poll that involved 17 industries. It was revealed in this extensive study that among workers who have been on the receiving end of poor soft skills, nearly half of those surveyed, intentionally decreased their work effort and 38 percent decreased their quality of their work. In addition, 25 percent admitted to taking out their frustrations on customers (so much for having magnetic appeal) and two out of every three people surveyed said their performance declined. (13)

–         Finally, there are the skeptics who are hung up on the relationships discovered in some research where there are unhappy-productive or happy-unproductive workers. As in any scientific body of research, outliers and equivocal results deserve further analysis and in the meantime we must look to the current consensus among research and commonalities in trends and outcomes. When we do so, it becomes quite clear that a happy worker is great for company appeal and their bottom line.

In research where studies did not differentiate between hedonic and eudaimonic aspects of wellbeing and failed to consider different dimensions and sources of evaluation, we turn to the bevy of research that accounted for this. I previously referred to several.

Any interpretation of a happy worker being an unproductive worker must consider that the relationship may be impaired by the reality that one worker’s happiness may be low outside of work and therefore although happy at work, productivity may dip. This would, in my opinion, offer an explanation for why some happy workers do not produce well although scoring as a happy worker. This does not negate the true happy-productive relationship.

It is interesting to note that many of the researchers with the harshest criticism of the happy worker – productive worker thesis that I referred to in this essay offer caveats to their own cautionary conclusions. Consider how they concede:

“The current paper’s findings should be interpreted cautiously in light of several potential limitations.” (1)

“It should in no way be construed to suggest that job-related performance is the only, or even the most important, reason that happiness is important.” (1)

“It seems evident to us that promoting happiness-related issues is an intrinsic good for which all should work (Ruack, 1999). The health model approach emphasizes the development of what’s right with people (Wright & Cropanzano, 2000). If this health approach promotes better performance, and our review suggests that this is so, then so much the better. Regardless, the pursuit of employee happiness remains valuable for its own sake. (2)

“We found positive relationships between job satisfaction and life satisfaction, happiness, positive affect, and the absence of negative affect.” (3)

In conclusion, upon analyzing the primary reasons why leaders hesitate in promoting the wellness of the staff and looking closely at the research, it seems evident that aside from the inherent goodness of caring for the wellbeing of one another in a workplace setting, a healthy culture, comprised of a happy staff, has magnetic appeal to customers and most positively serves the business’ bottom line. As you may have guessed, a happy employee makes a happy company!


Bibliography and Notes

1.                 Peiro J., Kozusznik M., Rodriquez-Molina I. and Tordera N. The Happy-Productive Worker Model and Beyond: Patterns of Wellbeing and Performance at Work. Int. J Environ Res Public Health. 2019 Feb; 16(3): 479

2.                 Cropanzano, R and Wright, T. When a Happy Worker is Really a Productive Worker: A Review and Further Refinement of the Happy-Productive Worker Thesis. Consulting Psychology Journal Practice and Research. 2001 June; 53(3):182-199

3.                  Bowling N.A. Is the job satisfaction-job performance relationship spurious? A meta-analytic examination. J. Vocat. Behav. 2007;71:167–185.

4.                 Wright T.A., Cropanzano R., Bonett D.G. The moderating role of employee positive well being on the relation between job satisfaction and job performance. J. Occup. Health Psychol. 2007;12:93–104.

5.                 Wright T., Cropanzano R. “Psychological well-being and job satisfaction as predictors of performance”. J. Occup. Health Psychol. 2000;5:84–94.

6.                 In this study, Productivity was measured according to value added per hour. For the complete study, visit :

7.                 The data set is described at

8.                 Melian-Gonzalez, S., Bulchand_ Gidumal, J. and Gonzalez Lopez-Valcarcel, B. (2015), “New evidence of the relationship between employee satisfaction and firm economic performance”, Personnel Review, Vol. 44 No. 6, pp. 906-929

9.                 Green, T. Clifton and Huang, Ruoyan and Wen, Quan and Zhou, Dexin, Crowdsourced Employer Reviews and Stock Returns (April 1, 2018). Journal of Financial Economics, Forthcoming; 8th Miami Behavioral Finance Conference 2017. Available at SSRN: or

10.             Natasha Fogaça, Francisco Antônio Coelho Junior. “Is Happy Worker More Productive?” Management Studies. July-Aug. 2016, Vol. 4, No. 4, 149-160.

11.             Oswald, Andrew J. , Proto, Eugenio and Sgroi, Daniel. (2015) Happiness and productivity. Journal of Labor Economics, 33 (4). pp. 789-822.

12.             Talent Smart is the world’s premier provider of emotional intelligence (EQ), serving more than 75% of the Fortune 500 companies with products and services related to improving EQ.

13.             Porath C. and Pearson C. Lack of Respect Hurts Morale – and the Bottom Line. Harvard Business Review. Boston: Harvard Business School Publishing Corporation, 2015

14.              Zenger, J. “Great Leaders Can Double Profits, Research Shows”. Forbes online article 2015 . Visit:

15.               Goleman, D. HBR’s 10 Must Reads: On Emotional Intelligence. Boston: HBSPC, 2015