Companies often chase success through traditional metrics like market share, innovation, and operational efficiency. But what if the key to better performance was right in front of us? A new study of public companies reveals a compelling insight: businesses that prioritise employee wellbeing consistently outperform their rivals.
Researchers at the University of Oxford’s Wellbeing Research Centre analysed data from 1,782 public U.S. companies. Using information from Indeed, they examined how employee wellbeing relates to company performance.
The results are striking. Companies with higher employee wellbeing show:
• Better profitability
• Higher returns on assets
• Increased company value
• Stronger stock market performance
The study looked at four key aspects of wellbeing: happiness at work, sense of purpose, job satisfaction and low-stress levels. These factors combine to create a ‘Work Wellbeing Score’ – a comprehensive measure of employee contentment and engagement.
From Happy Employees to Financial Success
The link between employee wellbeing and financial performance isn’t just feel-good theory. The numbers tell the story:
- Companies with top-tier employee wellbeing had much higher Tobin’s Q ratios (market value compared to asset replacement cost).
- Return on Assets (ROA) correlated positively with wellbeing scores, showing that happier employees help use company resources more efficiently.
- An investment strategy based on companies with the highest wellbeing scores beat major stock indices like the S&P 500, Nasdaq Composite, and Russell 3000.
These findings suggest the market may be undervaluing employee wellbeing. This presents an opportunity for smart investors and business leaders to gain an edge.
The study identifies several ways employee happiness leads to better business outcomes:
- Productivity: Happy employees work more efficiently and effectively.
- Creativity: A positive work environment sparks innovation and problem-solving.
- Customer satisfaction: Engaged employees provide better service, leading to happier, more loyal customers.
- Retention: Companies with high wellbeing scores have lower turnover, reducing hiring and training costs.
- Talent attraction: Word spreads about positive work cultures, drawing top talent.
Making the Case for Investing in Happiness
This research has big implications. It suggests that investing in employee wellbeing isn’t just nice to have – it’s crucial for businesses aiming to thrive in today’s competitive landscape.
But what does this investment look like in practice? It’s more than just offering perks or occasional team-building. True commitment to employee wellbeing involves:
- Building a culture of trust and open communication
- Providing opportunities for professional growth
- Ensuring work-life balance and flexibility
- Meaningfully recognising and rewarding contributions
- Fostering a sense of purpose and connection to the company’s mission
As work continues to evolve, employee wellbeing will only become more important. Companies that recognise and act on this trend stand to gain a significant advantage.
For business leaders, the message is clear: prioritising your people isn’t just ethical – it’s smart business. By creating environments where employees can thrive, companies set themselves up for long-term success and sustainable growth.
Consider how focusing on employee wellbeing might transform your company’s performance. The evidence suggests it’s a worthwhile investment.
