Here’s Why Every Business Should Focus on Employee Happiness

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Did you know that unhappy employees cost U.S. companies $450-550 billion each year?

Unhappy employees as a whole are 10 percent less productive than their neutral counterparts, and 22 percent less productive than their co-workers who actually enjoy their jobs.

To put that into perspective, let’s say Company A has two employees:

One feels happy and fulfilled at work; the other, not so much. If each employee is expected to create 100 widgets per day, your happy employee is probably going to produce around 112, while your unhappy employee is probably going to produce closer to 90. That’s 22 fewer widgets on your shelves each day. Multiply that number times 240 business days per year? Company A has 4,800 less widgets to sell!

But let’s take it one step further. Say you pay each employee $100 per day (which, in a perfect world, equals out to $1 per widget) and you sell each widget for $2 (a profit margin of 100 percent). Each widget produced by your productive employee costs you about .89 cents in labor, and you can expect to see a profit of 112 percent. But each widget produced by your unproductive employee costs you closer to $1.11 in labor, lowering your profit margin to 89 percent.

Now imagine it’s not two-dollar widgets you’re selling. Suddenly, 10 to 12 percent makes a huge difference in your bottom line.

What is the impact of unhappy employees?

In addition to being less productive, unhappy employees can have a direct impact on your customer service ratings, and not the good kind of impact.

Unhappy employees are unlikely to go the extra mile for a customer, or even the required distance. Just one bad experience can send your most loyal customer packing. Now, not only has that unhappy employee cost you a loyal customer, but that customer is likely to spread the word about their bad experience. Suddenly you’ve lost ten, twenty, or even hundreds of potential customers, all thanks to that one bad egg.

Now imagine you don’t have just one unhappy employee: You have an entire fleet of them. That’s thousands upon thousands of lost customers, and thousands upon thousands of dollars you’ll have to spend in customer acquisition costs to make up for the deficit.

Here’s the kicker: None of this takes into account the cost of turnover when these employees jump ship. Unsurprisingly, unhappy employees usually aren’t in it for the long haul and the cost of replacing them when they inevitably call it quits can total out to 1.5 times more than their annual salary—a number that only increases with the “lifespan” of the employee.

Once you combine the cost of lost productivity, lost knowledge, and the time and money it takes to find, interview, and train their replacement (not to mention the extra strain on your other employees who are busy attempting to cover multiple bases), suddenly your business is tens of thousands of dollars in the hole.

At a company filled with unfulfilled employees, the cost of turnover can quickly become a monthly charge.

Finally, don’t forget to take into account the cost of absenteeism: When your unhappy employee decides to take a day—or two, or three—off work, not only does it lower productivity, but it forces your other employees to pick up the slack.

There’s also low quality work to consider: Unhappy employees simply don’t put forth the same effort as their happier counterparts. And, of course, you’ll be dealing with detachment from the company’s mission, which results in an unwillingness to come in early, stay late, or work hard for the company’s success.

Suddenly that $450-550 billion per year starts to make a whole lot of sense—which is bad news for business owners.

What’s the solution to employee unhappiness?

It’s simple: Focus on employee happiness.

The happiest companies in the world are also the most successful, and it’s not a coincidence. Companies like Apple, Virgin Group, and Google (the same companies that landed near the top of the “happiest companies” list) have always placed a thriving company culture above their bottom line, and they’ve already seen the payoff.

They discovered early on that happy employees—employees who are invested in the company’s success as if it were their own, employees who enjoy their jobs and feel fulfilled at work, and employees who work hard for the sake of doing right by the company—are productive employees. They go the extra mile, they stick around for the long term, and they never sacrifice quality.

On top of that, they discovered that a happy brain simply works better. In other words, employees are better able to solve problems, collaborate, and think creatively when they’re feeling positive.

With that in mind, why wouldn’t you do whatever it takes to invest in employee happiness?

A lot of business owners shy away from this idea because they figure that the cost of outfitting their break room with a ping-pong table or allowing their employees to take creative breaks could make a dent in their profits, but what they fail to realize is that the exact opposite is true.

In fact, failing to do so will cost you (about $450 billion dollars).

Here at TSheets Time Tracking, not only do we have a ping-pong table in the break room, but we’ve got a keg in the office, and a foosball table in the foyer. We encourage our employees to live healthy, active lifestyles (knowing that, in many cases, health equals happiness) and do everything within our power to help them make it happen. We offer full benefits, a 401k, and team-outings aplenty.

But we know that employee happiness doesn’t revolve around purely material offers. Every employee lives and breathes our core values, and the personal and professional support they receive (from both their fellow co-workers and their supervisors) is second-to-none. That culture didn’t come cheap, but the return has been more than worth the investment.

So, if you really want to increase your bottom line, invest in culture first. Invest in happiness, and it won’t just be your employees who wear a smile to work each day.

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Matt Rissell
Matt Rissell
Matt Rissell co-founded TSheets in 2006 which is headquartered in Eagle, Idaho, but its time tracking software lives in the cloud. As a successful entrepreneur and a proven expert on company culture and rapid growth, Matt has build his business to combine high-tech expertise with friendly real-world insight so small business owners can learn and understand how to make the best use of our technology.
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