Discover the Formula for Happy Employees

UPDATED: December 21, 2022
PUBLISHED: December 21, 2022
happy employees talking to each other

The formula for maintaining a workplace with happy employees is straightforward, psychologists and researchers say. However, it’s just not always a piece of cake.

Entertainment perks and employee-friendly campuses take center stage when Google and SAS claim top spots on “Best Places to Work” lists. But what’s more important is the process these companies use to figure out their cultures.

“It’s not about jolly, jolly basketball courts and Friday everybody gets cake,” says Noelle Nelson, Ph.D., psychologist and author of over a dozen books, including Make More Money by Making Your Employees Happy. “It’s about things like workplace safety, clean restrooms, flextime.”

Jim Goodnight, CEO of SAS, the North Carolina-based business analytics software company, follows a seemingly simple philosophy: Treat employees like they’re making a difference, and they will. Google brings the same intellectual prowess and zeal to its workplace programs that it uses to create computer eyeglasses.

The Keys to Keeping Employees Happy

Regardless of the type of business, the process to creating a happy work environment starts with some fundamentals:

  • Make wise choices in hiring.
  • Clearly communicate your company’s reason for being and its cultural goals.
  • Nurture civility.
  • Encourage innovative thinking.
  • Recognize the positive.
  • Find out what is important to the people around you, and how that may differ from one to the next.
  • Determine what perks are important to whom.
  • Share the gain as well as the pain.
  • Don’t micromanage every move in the house.
  • Look people in the eye.
  • Mean what you say, and vice versa.

The Importance of Happy Employees

There is mounting evidence that keeping employees happy leads to increased productivity and profitability. But Nelson says mainstream acceptance of those facts is occurring at a glacial pace.

“We are still at what I call the 10% level,” she says. “Those who get it, really get it. They understand that it’s about paying attention to what matters to employees that’s the secret, if you will, to happiness in the workplace.”

Nelson explains that a 2004 Labor Department study really drove home a critical issue she had observed in her practice. The study reported the No. 1 reason people quit their jobs was because they felt unappreciated.

In her experiences as a trial consultant in civil cases, “over time, I realized that for the vast majority of lawsuits that I worked, somebody was not feeling appreciated and that’s why they sued,” she says. “And it sounds very simplistic, but I guarantee you that whether it was a software developer that felt he got eaten up by the big guys or a wrongful termination case, it was amazing how over and over and over again, it was simply lack of appreciation—meaning that somebody felt that they were taken for granted or worse: disrespected, dismissed, devalued.”

Those courtroom experiences launched Nelson into an exploration of workplace practices. In her ensuing research, Nelson, who has never worked for a corporation, got to see the flip side. She got to see what it is like in a company where “the employees are valued, where the clients and customers and vendors are appreciated overtly, where what matters to them matters to the company,” she says. “And the difference is astounding.”

An Evolving Terminology

Employee “happiness” wasn’t part of Peter Drucker’s lexicon. Certainly, the concept was not on the list of critical concerns in 1939 when he began writing his first book. He wrote 39 books that eventually led to him being known as the “father of modern management.” Drucker did, however, put great currency in listening, asking questions and letting natural patterns emerge from the answers.

“Months before his death in 2005, he told me that happiness was too big of a word, but that people who were satisfied and contented tended to, as he put it, ‘live in more than one world,’” says Bruce Rosenstein, who published his second Drucker-inspired book, Create Your Future the Peter Drucker Way, in 2013.

Happy Employees Are Successful, Not Vice Versa

Among Drucker’s key concepts and touchstones were meaning, purpose, accomplishment and achievement, Rosenstein notes. “He believed that developing and nurturing a sense of responsibility and accountability brought success for individuals and organizations.”

The main thrust of Shawn Achor’s research is the notion that optimism and happiness will lead to success rather than the other way around. He is the author of The Happiness Advantage: How a Positive Brain Fuels Success in Work and Life. Achor was a teaching assistant for Harvard’s positive psychology course, taught by his mentor, Tal Ben-Shahar, Ph.D. The class was among the university’s most popular courses.

Achor is also the founder of the consulting firm Good Think Inc. It researches positive outliers—people who are well above average—“to understand where human potential, success and happiness intersect.”

The prevailing career formula—work harder, be more successful, be happier—doesn’t work because “our brain changes the goal post,” he explains.

Instead of an employee’s success making them happy, the reverse is true. “Our research shows that when the human brain is positive, you have 31% higher levels of productivity, 23% fewer fatigue-related symptoms and are 40% more likely to get a promotion. The greatest competitive advantage you can possibly have is a positively charged brain,” Achor says.

Putting Theory into Practice

For organizations big and small, nurturing these positively charged brains can be simple in theory. Yet it can be difficult for their leaders to instigate, especially in challenging economic times.

Nelson likes to cite Alcoa Inc.’s experience as one of the most dramatic examples of a company turning itself around by listening to its employees.

When future Secretary of the Treasury Paul O’Neill assumed control in 1987, the almost 100-year-old company had experienced a significant downturn. It was losing customers. “A new CEO comes in, and all the stockholders and investors and so forth are expecting him to talk about a turnaround, making a profit and slashing budgets, and all the rest of it because the company has been losing money like crazy,” Nelson says. “But instead, he said we’re going to focus on one thing and one thing only: worker safety, which was a huge concern of his workforce. And literally within a year, within just one year, their profits hit a record high. By the time he stepped down, 13 years later, the company’s annual income was 500% larger than before.”

Happy Employees Aren’t Just for Big Businesses

Nelson cites another example of how policy focused on keeping employees happy can work in a small-business environment. Based in New Richmond, Wisconsin, JA Counter was founded in 1976 as an insurance agency. It later expanded into the securities arena. The company, which employed just 14 people, implemented a modest flextime and flex-place program based on one developed and implemented by Best Buy. As a result, JA Counter’s expenses decreased 23% and net income increased 94%, she says.

Small-business people often think they can’t offer day care or some other cost-challenging measure, Nelson says. “But one of the most basic steps that a person can do costs nothing except literally a moment of attention and time. That is, to systematically catch your employees, whether you have one of them or 50, in the act of doing something right.

“Most employees feel like they are literally invisible until they mess up, and that’s a horrible feeling. You can be invisible, churning out your best day after day, and nobody says squat to you. And then you make one mess-up—it could be a small mistake or a big fat one—and that’s it. I don’t want to say it’s all over, but your self-esteem gets tanked. You get openly berated in one form or another, or it goes in your personnel file, and all of those days and all of those hours that you really stood up at the plate are meaningless.”

The Most Critical Choice

In a 2013 e-book, Got A Bad Boss? Work That Boss to Get What You Want at Work, Nelson cites a Gallup Inc. State of the American Workplace report which found that “of the approximately 100 million people in America who hold full-time jobs, 30 million (30%) are engaged and inspired at work…. At the other end of the spectrum are roughly 20 million (20%) employees who are actively disengaged. These employees, who have bosses from hell that make them miserable, roam the halls spreading discontent. The other 50 million (50%) American workers are not engaged. They’re just kind of present, but not inspired by their work or their managers.”

“Active disengagement” costs the U.S. an estimated $450 to $550 billion annually. Meanwhile companies whose employees are engaged “have higher earnings per share (EPS) and seem to have recovered from the recession at a faster rate.”  Smaller companies—those with fewer than 10 people—expressed the highest employee engagement (42%), “suggesting something unique and beneficial about working in a smaller, tight-knit work environment when it comes to engagement,” according to the Gallup report.

Navigating the Road to Happy Employees

Ask Employees for Input

The biggest mistakes many managers make? They forget to ask their employees what they think would make their companies the best places to work, Nelson says.

The same thing goes for rewards and recognition programs, she notes. “Don’t assume that everybody wants a Starbucks card or $10 on Amazon. Include in their annual reviews a checklist of a dozen comparable things and have them select the one they prefer. Maybe that will be cash. Maybe it’s a half a day off.”

In a similar vein, too many companies still look upon an annual review as a justification for why a person doesn’t earn a promotion or raise, instead of the productive opportunity it can be. “But this does take some serious thinking,” Nelson says. “It can be a conversation that starts out with the employer or the supervisor asking the employee, ‘How do you feel you did this year? What are you most pleased about with what you did this year?’”

This process is particularly critical in the entrepreneurial process, Nelson says. A startup often launches as a tight, functional, two- or three-person core that enjoys the benefits and the hardships together. Keeping that focus and camaraderie can be difficult as the enterprise grows. But “the cultural shift calls for the leaders to see employees as allies, not servants,” she says.

Communicate Changes When Possible

“Now, you don’t share everything with your allies, but you share a lot. And what employees really resent is to be the last ones to find out about the merger, or the consultant coming in, or the downsizing, or the change of facility, or the new software. I’m not talking about sharing every single little bit of information—some of it is only appropriate for your three or four founders. But if you share basic information as you go along, people have a better understanding of why something is turning negative and perhaps what steps you’re taking right away to turn it positive. Right alongside that—and this is what happens too often as companies grow past the two- or three-person level—is that they do not solicit, actively solicit, opinion and solutions from the newer hires,” Nelson continues.

Keep Generational Differences in Mind

Finally, today’s manager needs to be cognizant of the challenges of managing generational differences. Baby boomers, Gen Xers and millennials may have very different ways of looking at work and goals, Nelson says. “Don’t clump all your employees in one basket.

“You’ve got to speak to your people individually as well as collectively. And then you’ve got to use your common sense, look at your budget and see what you can do. But there’s nothing that says that all employees must be treated alike—especially when it comes to rewards and recognition. I think that’s a big mistake. Employee of the month just does not cut it for most employees,” she continues.

This article was published in July 2014 and has been updated. Photo by adriaticfoto/Shutterstock