#20 Do Happier Teams Really Drive Higher Profits?

Happiness. It’s something we all search for. But most of us accept that at work, we’re fortunate to find it.

The idea that workplace happiness might translate into better business outcomes is nothing new.

Over a century ago, industrial magnates like Henry Ford advocated for employee wellbeing, recognising its connection to productivity and performance.

Ford pioneered the 40-hour working week (previously, 60 hours across six working days was commonplace), believing that greater health and wellbeing of his staff would increase productivity, even if working hours were reduced significantly.

But somewhere along the way—particularly in the second half of the 20th century—this concept fell out of favour.

Workplace wellbeing has made a comeback. But despite its popularity, a critical disconnect remains:

Research shows 87% of executives believe employee wellbeing is a source of competitive advantage.

But only 33% make it a strategic priority.

Why is that?

3 min read

The Big Question: Cause or Effect

While most leaders accept there’s a relationship between wellbeing and performance, they wonder: is it cause or effect?

Does having happy employees make a company successful?

Or does success naturally lead to happier employees?

This is the question that a groundbreaking study sought to untangle. So convincing were its findings that it prompted the Financial Times to publish a Special Report on Wellbeing.

The most comprehensive of its kind to date, the research provides the clearest evidence yet that happier employees lead to stronger financial performance, not the other way around.

That a publication as influential as the FT devoted an entire special report to the topic—complete with headlines like “Companies Reap Bigger Dividends from Happier Staff”—says a lot about the growing acceptance of the financial case for workplace wellbeing.

The Research

So, what makes this study different? Its rigour and scale.

Researchers analysed 15 million employee survey responses collected via Indeed from staff at 1,600 publicly listed companies.

They focused on four key components of wellbeing: happiness, job satisfaction, sense of purpose, and stress.

Crucially, the study didn’t just look at snapshots of data. It tracked wellbeing scores over time and linked them to future financial performance of NASDAQ and NYSE-listed companies.

The findings were striking. A one-point increase in employee happiness (on a five-point scale) was associated with:

• 15% higher valuation

• 42% higher gross profits

• 35% higher return on assets 

The researchers also conducted a longitudinal analysis by tracking wellbeing scores and financial performance over subsequent years, confirming that happiness predicts future performance.

The Market Knows. Why Don’t You?

One of the study’s most interesting experiments was an investment scenario:

Researchers created a “Wellbeing Portfolio” by investing $1,000 on the first day of each year in the top 100 companies as ranked by wellbeing scores from the prior year.

This portfolio was rebalanced annually based on new wellbeing data.

Over the 3.5 year study period, the Wellbeing Portfolio outperformed the S&P 500 by 14%.

The researchers references similar studies which showed that companies named on a “Best Places to Work” list experience an uplift in their share price over the following days.

The financial markets are pricing in the connection between employee happiness and business success.

The question is: if investors see it so clearly, why are so many leaders still on the fence?

Linking Wellbeing to Performance

It’s clear: happier employees drive better financial performance.

But for business leaders, the real challenge isn’t just understanding this link—it’s learning how to create the conditions for happiness to thrive while ensuring it translates into measurable outcomes.

How can you foster wellbeing in a way that drives results?

How can you track and measure its impact across your business?

These are big questions, and we’ll explore them in the next edition of Towards Better Insider.

We’ll dive into the six pathways between wellbeing and performance, from productivity to creativity, and share practical tips on how to implement them effectively.

Want to Know More?

Everything referenced in this edition is drawn from the academic paper that underpinned the Financial Times’ Special Report on Workplace Wellbeing.

I’ve read all 45 pages of it and am happy to share my highlighted copy with anyone interested. Just reply “Happiness” to this email and I’ll send it your way.

For those who can’t wait until next week’s newsletter, I’ve also created a Loom video explaining the six pathways from wellbeing to performance which you can watch here.

The journey towards a better way of doing business

We are on the cusp of a new paradigm of responsible business, and helping impactful companies pair purpose with profit will accelerate the shift.

I believe this holds the key to solving many of our greatest challenges and inspiring positive change throughout society.

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