Business Transformation

Why an unhappy workforce will damage your profits

Research and data makes it clear that an unhappy workforce will damage your business and your profits. For me the issue is highlighted by the format of the traditional P&L and how companies choose to report success and failure.

However, the P&L is just a manifestation of a deeper problem. What you measure in your P&L is what you really value and take seriously.

More and more companies are reporting employee happiness in their board report but there is a big challenge with reporting a metric such as happiness because it doesn’t work like other metrics like revenue.

The biggest mindset change in using happiness in a board report is that high happiness doesn’t necessarily mean good and low happiness doesn’t necessarily mean bad. It’s simply an observation of how people are feeling. To put targets on happiness would be counterproductive but that doesn’t mean you shouldn’t measure happiness at board level.

Happiness in a board report is more like a weather report. For example rain in a weather report can be good news if you are a farmer and bad news if you are heading to the beach to sunbathe.

The important point is happiness data is intelligence that the company can use to make better business decisions that will help the business be more profitable in the long term.

Understanding and measuring happiness is about understanding emotions that will be impacting the profitability of your business, it is emotional intelligence at scale.

What makes people unhappy?
Our data reveals two main things that make people unhappy at work:

  1. Career development
  2. Culture

Employees gave career development their lowest average score, a dispiriting 5.7. Our data suggests that on average people are unhappy with the career path they see available to them within their own organisation. Younger people (aged 18-30) answered more positively, but this dropped precipitously from the age of 45.

Culture may not be recognised in good times, but once it’s broken, people will soon pick up on it. If your employees don’t align with your vision or your culture, then they won’t be happy. Every organisation has a unique make-up, its practices and vision and so on, which builds into your company’s culture. You need your values of your company to align with those of the individual employees that make up your organisation. Businesses need to listen to their staff, and empower them to build and contribute towards the overall culture.

Engagement in the NHS

A study by Jeremy Dawson and Michael West funded by The King’s Trust, looked at the link between staff engagement and patient outcomes. As part of their study, Jeremy Dawson and his team were able to isolate a number of factors that were predictors of engagement, including autonomy, well structured review and so on.

These factors were then also linked to positive outcomes for both patients, in terms of patient satisfaction, hygiene levels, and efficiency, as well as mortality rates. They found that an improvement of one standard deviation was associated with a decrease of deaths in an average hospital of 40-100. Not only that, but there was also an impact on the employees themselves, with an improvement in their health, absenteeism, and turnover.

A Happy Workforce is a Productive Workforce

A 2019 study by Jan-Emmanuel De Neve and his colleagues at the University of Oxford set out to prove the link between employee happiness on productivity. They studied measures of both happiness and productivity within sales teams at large BT call centres, covering 11 locations.

From the data collected, it was possible to see where factors like the weather affected team happiness, this had a direct impact on output, measured by factors such as number of calls made, adherence to workflow, and calls converted to sales. In fact, the study showed that happy workers were up to 13% more productive than their unhappy colleagues. It’s important to note that this isn’t simply because they’re more willing to put in extra hours – hour for hour, happy employees produce more and better work.

The bottom line

The proof of the impact of happiness on the bottom line comes from a study by Alex Edmans. He looked at the relative performance of companies who invest in their workforce, compared to those who do not. By comparing the performance of the top 100 companies to work for in the US, he was able to prove that over a 28-year period these companies had stock returns that beat their peers by 2.3-3.8% per year. That’s 89-184% cumulative. His research even controlled for industry, employee function and level as well as other confounding factors.


I can understand why some leaders don’t know happiness is linked to financial success as a lot of the research is hidden in academic journals or is very fresh as new data is uncovered daily.

I have written Freedom to Be Happy so companies across the globe are empowered to write their own business cases for happiness.

Written by Matt Phelan.

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Matt Phelan
Matt Phelan is a co-founder and Head of Global Happiness at The Happiness Index. In his day- to-day role, he is responsible for the global expansion of the business. Matt is founder of The Happiness and Humans Community, host of the Happiness and Humans podcast and author of Freedom To Be Happy: The Business Case For Happiness (Independently published; October 30, 2020). Matt Phelan is an opinion columnist for the CEOWORLD magazine. Follow him on Twitter or connect on LinkedIn.