University of Oxford research links workplace wellbeing to business performance
Insights.
If you're a business leader who loves data, you might enjoy the recent Workplace Wellbeing and Firm Performance working paper, published by the University of Oxford Wellbeing Research Centre. The May 2023 paper aggregates data from employees at more than 1,600 listed companies in the United States with company-level performance and profitability. It combines a large-scale data set from the major jobs website Indeed with financial data from Compustat, to assess the relationship between workplace wellbeing and firm performance.
The high-level summary is that the authors found that "companies with the highest levels of wellbeing also subsequently outperform standard benchmarks in the stock market. Overall, these descriptive results show a strong positive relationship between employee wellbeing and firm performance."
Disclaimer:
This University of Oxford paper measures employee wellbeing via self-reported job satisfaction, purpose, happiness, and stress. At Sonder, we prefer to use a more holistic definition of employee wellbeing that ensures all aspects of a member's wellbeing (e.g. physical, mental, social, and cultural) are considered and valued.
Happiness, performance, and profits
In terms of context, the paper's authors note that "The idea that employee wellbeing can promote business success is not new. Researchers have long been interested in the link between the two… But, in recent years, in both popular and academic discussions, the power and potential of employee wellbeing to promote business success has reached something of a high-water mark.
Major outlets including Forbes (Malcolm, 2021), The Wall Street Journal (Smith, 2021), the Financial Times (Hill, 2019), CNN (Achor, 2012), and the Harvard Business Review (Sepp¨al¨a and Cameron, 2015), as well as high-powered consulting agencies including McKinsey (Segel, 2021) and Deloitte (Hampson and Jacob, 2020), have all begun focusing on the importance wellbeing at work… Workplace wellbeing is being touted as a new frontier in the global competition for talent and a key ingredient to business success." (p.1)
In terms of research results, the team behind the working paper discovered a "strong correlational relationship" between employee happiness and performance, and gross profits (p.10-11). Higher levels of wellbeing were found to predict higher company valuations, return on assets and gross profits as well as better stock market performance. (p.29)
Source: Workplace Wellbeing and Firm Performance, University of Oxford
Wellbeing Research Centre Working Paper 2304, p.14.
In the research surveys, workers rated their levels of job satisfaction, purpose, happiness, and stress across four key areas:
- I am happy at work most of the time;
- My work has a clear sense of purpose;
- Overall, I am completely satisfied with my job; and
- I feel stressed at work most of the time.
Workers responded using a five-point scale from strongly disagree to strongly agree, with an overall score taken from a mean of the four results.
The results showed that happier workers were less likely to:
- leave their jobs;
- miss workdays for health reasons; and
- work while sick.
Furthermore, they found happier staff tended to be more:
- productive;
- collaborative;
- creative;
- committed to their jobs; and
- motivated at work. (p.2)
Source: Workplace Wellbeing and Firm Performance, University of Oxford
Wellbeing Research Centre Working Paper 2304, p.19.
Pathways from wellbeing to performance
The working paper provides a highly-referenced argument (p. 21-27) for "six possible pathways" from wellbeing to performance.
They noted, "This model is, of course, somewhat oversimplified. Different pathways may be mutually reinforcing, or exist in a positive feedback loop with performance outcomes (e.g. happiness improves performance, which improves happiness, which improves performance). The evidence pertaining to them is also not equally strong in each case, and some pathways are likely to be stronger than others." (p.21)
1. Productivity
There are many examples of how positivity can influence productivity, including a 2023 study published in Management Science of the UK's largest telecommunications company, British Telecom. Weekly happiness reports were collected from employees in 11 call centres over six months and lined up with productivity data. Employees reporting higher levels of happiness had greater productivity, including:
- converting more calls to sales;
- making more calls per hour; and
- adhering closely to their schedule.
A study in The Quarterly Journal of Economics in 2015 explored the impact of working from home on employee productivity - well before the COVID-led tilt towards hybrid working. At the 16,000-employee Chinese travel agency, Ctrip, call centre workers who volunteered to take part were randomly assigned to work either from home (WFH) or in the office, for a specific nine-month period.
WFH arrangements led to a 13 per cent performance increase, improved work satisfaction, and halved attrition rates. Ctrip later rolled out the option to all employees and saw performance increase 22 per cent.
2. Social relationships
Wellbeing can promote performance by improving relationships and expanding social capacities. The University of Oxford report explains that happier employees have been shown to:
- develop more supportive relationships with colleagues and supervisors;
- show higher abilities to cooperate and collaborate;
- have more satisfied and loyal customers; and
- be better negotiators.
3. Creativity
Creativity and innovation are important across all industries because business challenges require inventive solutions, according to Harvard Business School. The working paper suggests happier people have greater mental flexibility and broader awareness, allowing them to make sparse connections and generate original ideas. (p.24)
4. Health
Employee health can have a significant impact on the workplace. The working paper provides references to support the argument that happier people experience better mental health - including lower levels of burnout, depression, distress and anxiety.
Conversely, both poor physical and mental health have been linked to reduced work performance. Employees with low job satisfaction were more likely to leave early, arrive at work late, and miss entire days of work. This has an expensive ripple effect because it impacts not only the individual staff members but the organisation as a whole. (p.25)
In a case study based on a large, high-tech, manufacturing company, it was found that low evaluative wellbeing at work accounted for 11 per cent of voluntary absenteeism at the company, representing an annual loss of $92 million. (p.25)
5. Recruitment
Another important way that wellbeing can promote organisation performance is by improving a company's ability to attract talent. Evidence shows that employees are attracted to jobs for more reasons than just income. The report explained that some studies have shown workers are willing to trade financial compensation in favour of work autonomy, job security, flexibility, and/or organisational purpose. (p.26)
6. Retention
A large body of research has examined the extent to which happier and more satisfied workers remain at their jobs. For example, a study of managers at a large U.S. company found that workers reporting high levels of job satisfaction in an initial assessment were less likely to leave the company over the next two years. A study of Fortune magazine's "Best Companies to Work For" list also noted that employees of highly-ranked companies were less likely to express intentions to leave than their counterparts. (p.27)
The authors reported that several studies showed that introducing workplace interventions to encourage family-supportive behaviours and manager support led to decreased turnover intentions and quit rates. (p.27)
Summary
Overall, the authors concluded that workplace wellbeing was a strong predictor of company success. And while employers shouldn't need a business case to treat workers well, the authors noted that wellbeing was an area that employers hadn't always prioritised.
"These results can help shed new light on one of the oldest questions in organisational research - the relationship between wellbeing and performance. Across industries, between companies, and over time, wellbeing is proving to be an ever more important predictor of company performance. Organisations seeking to be successful in the new world of work would be wise to take note." (p.29)
Next steps for business leaders
The University of Oxford working paper is a timely reminder of the need for leaders to prioritise employee wellbeing if they want their people to be well, engaged, and productive at work.
Here are some suggested next steps to help leaders on that journey:
- Build a culture that integrates wellbeing into decision-making processes. Embed accountability for wellbeing across all parts of your organisation.
- Empower the collection of qualitative and quantitative data. Give your wellbeing teams the profile, training, and budget they need to make a genuine difference.
- Raise awareness about how wellbeing is complex and impacts people differently. Encourage a mindset that challenges assumptions about wellbeing
- Walk the talk. Normalise conversations about both individual and organisational wellbeing by being vulnerable enough to talk about your personal wellbeing.
- Audit your existing wellbeing support. Ask your employees what support they need the most and research best-practice wellbeing support options for comparison.
- Do your people want medical support more than mental health support?
- Could psychological debriefing after traumatic events be causing them harm?
- Why does your EAP only have a 5 per cent uptake?
- Is a convenient, self-help, digital app the answer?
- Should you review your employee assistance program against innovators in that space who can offer more than only mental health counselling?
Interested in another evidence-based report?
We invite you to download A people leader's guide to active care, which aims to help you:
- Appreciate why employee wellbeing needs to be a shared responsibility;
- Understand five key elements of an active care culture;
- Learn the benefits for employees and organisations; and
- See how employee empowerment has led to better business outcomes.
Want to learn more?
For more information about how Sonder can help you rethink your employee and/or student support, we invite you to contact us here.
About Sonder
Sonder is an Active Care technology company that helps organisations improve the wellbeing of their people so they perform at their best. Our mobile app provides immediate, 24/7 support from a team of safety, medical, and mental health professionals - plus onsite help for time-sensitive scenarios. Accredited by the Australian Council on Healthcare Standards (ACHS), our platform gives leaders the insights they need to act on tomorrow's wellbeing challenges today.
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