Article: Can happiness buy you money?

This is a long piece, ostensibly aimed at a business audience, but there are some pretty interesting ideas in it.

Workers Paradise: Can happiness buy you money
Published in The Sunday Business Post on September 12th, 2010, by Alex Meehan

By the time you have finished reading this article, you will be just a little bit closer to the start of another working week.

But what kind of a working week awaits you?

Does it involve dragging yourself out of bed to face another five days of unfulfilling grind before the weekend comes, and you can start to enjoy life again?

Or do you enjoy Monday morning and doing a job that makes you really happy for a company that really values you?

You may find the notion of the second scenario far-fetched, or at least a bit naive.

After all, how many of us can plausibly hope to be truly happy at work? All companies want happy customers and clients, but how many of them actively try to have happy employees?

In fact, an increasing number of employers are trying to do just that, spurred on by evidence that happy staff actually make a difference to a company’s bottom line. While money can’t bring you happiness, it seems that – at least for some companies – happiness can bring you money.

For technology entrepreneur Tony Hsieh, keeping employees content is a crucial part of building any successful business. Hsieh is something of a legend in technology circles. In 1999, at the age of 24, he sold Link Exchange to Microsoft for $265 million before moving on to become chief executive of the internet clothing giant Zappos.

He grew the company from a turnover of almost zero in 1999 to sales of over $1 billion in 2009, and went on to sell it to Amazon.com for $1.2 billion last November.

Zappos is famous for the lengths it will go to in order to keep its customers happy.

It offers free, ultra-fast shipping, and will take returns back for any reason, paying the cost of postage in full. Its customer service staff have an unusual degree of autonomy, and everyone in the company, from call centre staff right up to senior management, is required to do a four-week course in customer service and then spend two weeks answering calls in a call centre.

Most notably, the company is known for paying a $2,000 bonus to new employees who want to quit after their first week in the job.

The reason is simple – if they’re not happy in their job, they won’t create happiness around them in the workplace.

And delivering happiness is what Hsieh thinks doing business is all about.

Last month his new book, Delivering Happiness, shot straight to the top of the New York Times bestseller list in its first week of publication.

Its message is that happy employees create profitable companies, and that, when it comes to competing for staff, contracts and customers, company culture is the single biggest differentiator between rival firms.

‘‘In 2007, I started getting interested in learning more about the science of happiness,” Hsieh says.

‘‘I started out my business life chasing profits, but then I figured out that money alone isn’t enough to bring me or anyone else true happiness.

So I started to think about the things in life I was passionate about and that other employees here were passionate about. I started to think about how to make customers happy and how to make employees happy – and in today’s world, that turns out to be really good for business.

The best businesses are those that can combine profits, passion and purpose.”

Hsieh’s research led him to the conclusion that true happiness is about four things: perceived control, perceived progress, connectedness (or the number and depth of relationships with other people), and vision (or meaning).

‘‘Tome, happiness has been about discovering that it’s less about what’s external to us, and more about what’s internal to us. It can be a difficult idea for business people to get their heads around, because the pay-off of focusing on happiness is two to three years down the line.

Many companies tend to focus on what will maximise profits for the current quarter or year,” he says.

Hsieh’s message may sound revolutionary, but for some companies, the philosophy of creating a corporate culture first, and then generating profits as a result, is already well established.

The Great Place to Work Institute publishes an annual table of companies endorsed by their own employees, and it has been consistently shown that those companies where employee satisfaction levels are high do better than rivals that are less concerned with company culture.

‘‘No matter how you want to crunch the numbers, or what time period you want to measure performance over, the companies listed as great places to work outperform their competition by a factor of three or four to one,” says Bob Lee, chief executive officer of the Great Place to Work Institute of Ireland.

Lee believes that companies without a corporate culture focused on employee happiness often misunderstand what’s involved.

‘‘They think a great place to work is one that looks like fun – where the company has a nice office building, or there’s a pool table in the recreation room, or something like that.

But those things only exist as a consequence of the respect that the organisation has for its employees.

They’re not what makes a great place to work,” he says. The Great Place to Work list started life as a book published in 1984 by San Francisco-based industrial relations journalist Robert Levering.

Approached by a publisher and asked to produce a record of the 100 best companies to work for in America.

Levering initially turned the commission down, as he genuinely felt that there weren’t 100 good companies worth writing about.

The publisher persisted, so Levering set out to research the subject exhaustively and took three years to put together his book, which went on to become a New York Times bestseller.

Three years later, he updated the first edition, and this time, a throwaway claim he made in it attracted the attention of Fortune magazine.

Levering said that these top 100 companies would be good companies to invest in, because they all seemed to enjoy superior stock market performance.

Fortune was sceptical of the claim. In its view, any cash spent on employee satisfaction was wasted, and rightfully should be given back to shareholders so they could decide what to do with it themselves.

The magazine commissioned investment house Frank Russell to look into Levering’s analysis, and was surprised by the results – the companies listed by Levering as great places to work outperformed their competition by a factor of up to four to one.

The magazine has published the US version of the list every year since.

So just what makes a great place to work if it’s not the standard perks and benefits?

According to Bob Lee, the answer lies in culture and crucially, in the degree to which trust is present in the workplace.

‘‘From an employee perspective, you should be able to trust the people you work for, have pride in what you do and enjoy the people that you work with.

Trust, pride and camaraderie are really important, but far and away the most important factor of those three is trust,” he says.

‘‘Measuring trust is difficult, but there are three sub-elements.

The first is: do you find the people you work for credible – do you believe in them and do you believe them?

Respect is the second factor – the extent to which you feel respected by the company.

That’s to do with work/life balance, what kind of working hours you have, are there flexible working hours and so on.

The third element is fairness.”

According to Lee, simply having policies and procedures on paper that should make for a great workplace isn’t enough.

‘‘It isn’t what you do, it’s the spirit with which it’s done and the motivation that make the difference,” he says. ‘‘There are lots of organisations that appear to have the same or better perks and benefits on paper as some of the companies on our list, but there is a completely different culture, and culture is the one thing that really sets them apart.”

Research suggests that there are many advantages for companies that aim to create great workplaces, not least of which is that in tough times, employees at such companies are more likely to be sympathetic to the plight of their management.

‘‘Because of the levels of trust between management and staff, when the downturn hit those companies were able to adapt to the new realities of the marketplace much faster.

The level of trust that had been built up was and is a resource that these firms can call on.

Whether they are letting staff go, reducing their hours, lowering wages or looking for people to change their work patterns, in a high-trust environment that happens more easily than it otherwise would, because it’s appreciated that it doesn’t happen thoughtlessly,” says Lee.

‘‘In fact, many of the best companies to work for are now in post-recession phases.

They’ve made their changes, reduced their costs, weathered the worst of it and are now recruiting again or ramping up their staff hours again.

In many lower-trust environments, things are far from that point, and in some organisations, they haven’t even had the arguments yet.”

Traditionally happiness has been seen as a vague quality, so individual and personal as to be impossible to quantify or measure.

Once seen as solely the preserve of philosophers and mystics, science increasingly has more to say about happiness, as brain function becomes more and more understood. One of the things science has discovered is that the things people often think will make them happy rarely do.

‘‘There have been studies on lottery winners that compare their happiness levels right before winning the lottery with their happiness levels a year later.

The studies generally find that a person’s happiness levels revert back to whatever it was before,” says Tony Hsieh. ‘‘I find this incredibly interesting. It shows that, for most people,  achieving their goal in life, whatever it is, will not actually bring them sustained happiness.

And yet, many people have spent their entire lives pursuing what they thought would make them happy.”

But is it really possible for everyone to be happy in their working life?

Not everyone can enjoy an intellectually stimulating career, studded with personal challenge and opportunities for creative expression.

Can people with so called dead-end jobs really expect to find happiness in the workplace? According to occupational psychologist Lynne Forrest of the Well At Work Centre in Dublin, the answer is yes.

‘‘The level of the job doesn’t matter, it’s more a case of the person/environment fit,” she says.

‘‘Is the person in the right job in order to satisfy their personal needs? Some people will be fulfilled by one type of work environment, while another person might find the same environment intolerable.”

Bob Lee agrees, pointing out that some of the best places to work are actually minimum wage employers which offer relatively few perks and benefits.

‘‘It isn’t the perks and benefits that make them great places to work.

For example, McDonald’s figures highly on our list at number five, and is genuinely world-class in terms of attitudes to culture. It’s an organisation that measures everything – how long a burger sits in a tray, how long its fries are cooked for.

Everything about the organisation that can be measured is measured,” he says.

‘‘Its approach to human resources is not accidental, it’s mutually beneficial.

They recognise that to get the best people to come and work for them they need to have a magnetic appeal, so they play to their strengths.

They don’t try to compete with Microsoft for employees – they are an entry-level and a post-career employer, and effectively they are employing the management workers of tomorrow.”

According to Forrest, having the right fit to your environment is a huge factor in determining how much stress and, crucially, what kind of stress, the average person experiences in their working lives.

‘‘When the demands placed upon a person exceed their ability to cope, the result is stress. Stress can be moderated by levels of control, and also moderated by levels of support,” she says.

‘‘In the workplace, stress is much more manageable if you have a degree of autonomy and if there are appropriate levels of communication.

Being told ‘well done, great job’ when an employee completes a significantly difficult assignment goes a long way to influencing how they see future assignments.” Forrest believes that stress in itself isn’t a bad thing, but it’s important that it’s the right kind of stress.

‘‘There probably isn’t a workplace in Ireland that hasn’t been affected by the recession.

There is competition for scarce resources and it’s gotten more intense.

People are being asked to work harder and there is an underlying threat that their employer may still let them go or the company may go under anyway.

That’s inherently stressful,” she says.

‘‘That said, some kinds of stress are motivating and are good for you.

This is known as eustress, and is the sort of stress we have some control over.

Bad stress is the kind where we have no control and find ourselves in a situation where we feel out of our depth, but eustress can be invigorating and offer a huge sense of challenge.”

With the economy still suffering, a key question for companies keen to adopt the strategies outlined by Lee, Hsieh and other proponents of high-trust workplaces is at what point does this approach yield results – can it work for small companies, or is it solely the preserve of large multinationals with deep pockets?

‘‘It doesn’t have to cost a cent, and it’s something that SMEs actually need to do more than multinationals,” says Bob Lee.

‘‘A multinational with a strong product can probably go farther with lower levels of trust than an equivalent SME could, but you don’t need a huge number of employees or a dedicated human resources department to make it work for you.

‘‘Essentially, it’s not about what you do, it’s how you do it.

For example, if a new colleague starts work and you know you’re going to be dependent on them, and them on you, it doesn’t cost you anything except an investment of your time and a commitment to develop a relationship with them.

‘‘You don’t even have to go to lunch with them. It’s about remembering the little things – small things build trust, and conversely trust can be broken over small things.”

However, Lee believes that many indigenous Irish companies still have away to go before they fully embrace the concept – the majority of the firms which make the Great Place to Work Institute’s annual list are multinationals, rather than locally founded firms.

‘‘We work with far more multinationals than we do with indigenous companies here, and that’s due to a combination of factors, some of which are cultural.

We know that there are many Irish organisations that have high trust cultures, but are quite small with between 20 and 100 employees.

The people running these businesses are people of integrity who are committed to treating people decently,” said Lee.

‘‘But they are modest about putting themselves forward for recognition.

Multinationals have no problem accepting recognition when it comes – it’s part of their culture – but smaller companies locally have proved to be more difficult to engage with.

‘‘We’re making progress, but we’d love to see more Irish companies take part.”

PANEL: Great Places to Work and Best Workplaces in Ireland 2010

Large companies (over 250 employees)

1                  Microsoft

2                  Telefonica O2 Ireland

3                  PepsiCo Ireland

4                  EMC Ireland

5                  McDonald’s Restaurants of Ireland

6                  Unicare Pharmacy

7                  Diageo Ireland

8                  Quintiles Ireland Limited

9                  Topaz Energy Ltd

10               Medtronic

Small to medium companies (50 to 250 employees)

1                  Euro Car Parks

2                  Abbott Ireland, Commercial

3                  Mars Ireland

4                  Jones Lang LaSalle Ltd.

5                  Bright Horizons Family Solutions

6                  Merck Sharp & Dohme (Human Health) Ireland Ltd

7                  CB Richard Ellis Ireland

8                  Investec Ireland

9                  FCM Travel Solutions

10               Nationwide Controlled Parking Systems ltd.

PANEL: Euro Car Parks

Top of the list of great Irish SMEs to work for, Euro Car Parks is an example of a company with the kind of flat corporate structure that creates happy employees. According to chief executive David Cullen, his organisation’s popularity with its own staff is due to a lack of formality in the workplace and a sense of family.

“I’m a big believer that if people feel respected and appreciated, they’ll work harder and go the extra mile without being asked. Happy staff are absolutely essential, they are the key to what we do. There are other companies that provide the same service we do, but basically we’re better at it. The reason is that our staff understand what we’re doing and they’re not treated like children — they get paid more and they enjoy the job,” he says .

“There’s an idea that working in a car park is a minimum wage job, but our starting salary is the same as a teacher, and a manager with us gets €50,000 a year. We’ve challenged the industry with that approach, because our competitors all mostly offer minimum wage.”

The challenge which led Cullen to engage fully with his employees was how to handle the geographical spread of the company. Only seven of its 250 staff are located at head office – the rest are geographically distributed across the 32 counties.

“I really communicate with the staff, and we don’t have any secrets. If we’re having a bad year, I tell the staff we’re having a bad year. It’s a challenge, but it’s important and it does have an effect on the business. I’m not a totalitarian, issuing orders in complete ignorance of the effect it has on people and their lives,” he said.

It’s tempting to see employee-centric happiness as something which takes from the company, rather than contributes to the bottom line, but Cullen points out that employee loyalty can help in a recession. “We were quite profitable last year and the year before, and so didn’t actually have to take pay cuts, but I asked the staff if they’d do it anyway,” he said.

“I thought it made commercial sense, because I knew our clients were going to ask us to reduce our rates. It made sense to head the issue off at the pass in order to minimise the damage. I sent a letter out to staff, telling them what I had in mind and asking anyone with a problem to ring me and we’d talk it out. When the phone started ringing off the hook I thought I’d get a thick ear, but everyone who called me was happy to make that sacrifice for the good of the organisation.”

Cullen believes the success of Euro Car Parks is heavily dependent on the quality of service members of the public receive from his staff. Because of this, having happy staff is crucial. “Some of our larger customers have told us that our competitors are cheaper to do business with, but they stick with us because they want to offer a high quality of service. That’s a competitive advantage that can only come from staff satisfaction,” he says.

“A friend once made the point to me that anytime you mess with an employee, you also affect a family standing behind them. I developed the mentality that we’d run the organisation as if it was a big family business, and it’s now grown to involve 250 families.”

PANEL: Microsoft

Large multinationals are well known for offering enviable perks to their employees as part of their overall pay packages, but according to Joe Ffrench, head of human resources for Microsoft, that’s not enough to create happy employees.

“You have to offer a competitive package and make sure people are well rewarded in terms of pay and benefits, but ultimately that’s not the main thing people come for, and it certainly isn’t the thing they stay for,” says Ffrench.

“There are companies out there that pay more than us; we’re one of the best payers in our sector, but we’re not (itals)the(itals) best. But in terms of the overall package on offer we’re considered more attractive. The reason is our culture and environment — the benefits of working with us extend past the contents of our employee’s bank accounts.”

Microsoft consistently appears in the top ten list of companies to work for in Ireland, securing the top spot for the last two years in a row. The company employs 1,100 people in Ireland and enjoys a high retention rate among its staff. Ffrench believes that the reason for this is that it makes an effort to involve people in all aspects of the company, right from the start of their employment.

“We have people here doing everything from sales and marketing to development to human resources, and they all bring a unique perspective and skill set into the work environment. The kind of culture we have is designed to recognise and value that every individual brings something unique. The next question is how do we harness that collective brain power?”

“A lot of it comes down to valuing and empowering people, how we give people responsibility early in their career and how we support them to deliver on that responsibility. We have a very open and informal culture, where people are encouraged to take the initiative if they have an idea or think they can make an improvement. It’s about empowering people to influence the company itself.”

Some employers may find the idea of consulting with their staff before making a decision hard to stomach, but Ffrench insists that there is hard logic and sound reasoning behind the culture of corporate empowerment.

“I’ve read all the HR literature and know all the arguments about this stuff – it can sound fluffy and vague, but if you talk to business leaders and ask them what is critical to creating sustainable business success in the long term, the answer you consistently get is that it’s about the type of people you bring in. And the only way you’re going to attract the best staff and keep them in the long term is making sure they feel valued,” he says.

Ffrench is also convinced that you don’t need to have Microsoft-sized budgets to harness the power of a fully involved workforce.

“People want to do interesting work, and see that their work makes an impact. If you can provide an opportunity for people to do that, whether in a five man operation, or in a 1,200 man operation, that’s a great starting point,” he says.

“It can genuinely be as simple as treating people with respect, understanding what’s happening with them and understanding where they want to go in their career, and then providing the support and development to help them achieve that career plan for themselves. That doesn’t necessarily take money.”

Q&A with Tony Hsieh, CEO , ZAPPOS

1 – If happier employees result in happier customers and hence more successful companies, why isn’t employee happiness a more prioritised quality in the workplace?

I think it’s because the payoff is generally 2-3 years down the line.

2 – Does you think the recession is going to set this concept back? In other words, will companies become so focused on surviving that issues like employee happiness will get pushed aside in the face of more immediate problems?

Regardless of whether there’s a recession or not, the companies that perform the best in the long-term are the ones that are able to balance the short-term, medium-term, and long-term needs of the company. Yes, there will be companies that are focused solely on survival. This just means that there’s more opportunity for companies that are willing and able to think longer-term.

3 – For companies who are under financial pressure but who want to improve  their levels of employee happiness, what advice could you give them on cost neutral ways to change their company culture?

Making eye contact and saying hi in a genuine way when passing other employees in the hallways doesn’t cost anything. Truly caring about the lives of the people that report to you doesn’t cost anything.

4 – Do you think, in certain sectors, this idea will simply never catch on?  Are there sectors where macho and dictatorial management styles are so  deeply ingrained that things simply won’t change?

Possibly in industries where there’s a monopoly.

5 – In the book, you talk about the importance of establishing trust between employees and management. Looking back was it difficult for you psychologically to have that level of trust in your employees? A lot of small business owners find it very difficult to relinquish control of any part of their company — was this the case for you in the early days with LinkExchange and Zappos? Any advice on how to get over that?

Trust in someone being able to technically get a job done is tough. You have to invest a lot in training and mentoring the employee, and usually it takes longer to do so than just doing it yourself.

Trust in someone’s intentions is much easier. I just assume by default that people have good intentions, and I’m right 99% of the time.

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