The ROI of Being Nice.

As companies grapple with a market that is less than stable, with declining revenues and an ever-present need to maximize resources (while minimizing expenditures) there’s a reasonably simple and inexpensive solution out there: Be nice to your employees.

My father has served as a director of finance for various non-profits both large and small for several decades. One of the difficult issues he is forced to confront is where and how to allocate funds. The organization’s cause? Salaries? Marketing? Fundraisers? The challenge: how to maximize each dollar and every resource so that the organization can A) stay afloat and B) carry out its mission.

He taught me that one of the best ways to save money is to create an environment where a salary is not the single defining assessment of an individual’s value to an organization. The truth is, money has and always will be an important factor for employees. However, deep down we know that money is only one of many factors, and its significance diminishes greatly after a certain point. Princeton University conducted a study and determined one’s happiness as it relates to the amount of money he or she makes starts to level off at around $75,000. It’s at this point that other factors play a surprisingly more significant role.

Whether or not you subscribe to the theory that a happy employee is a productive employee, the science backs it up.  Results of a study conducted by the University of Warwick‘s Economic Research Institute overwhelmingly support this idea.

“We find that human happiness has large and positive causal effects on productivity,” the team said. “Positive emotions appear to invigorate human beings, while negative emotions have the opposite effect.”

The study goes on to conclude:

“If happiness in the workplace brings increased returns to productivity, then human resource departments, business managers and the architects of promotion policies will want to consider the implications.”

So the question then becomes, absent of money, how do we make employees happy? Sure, compliments, greetings and everyday friendly gestures can make a difference, but it’s a small (albeit important) piece of a much larger pie. The seemingly obvious solution would be the public recognition of an employee’s contribution or success. Yet even as this basic act can often go unrealized, the larger challenge for managers can be how we deal with errors, missteps and failures. Harvard University and the Stockholm School of Economics investigated the benefits of a reward-based strategy as opposed to one that focused on punishment. The study found:

“When both options are available, reward leads to increased contributions and payoff for the group, while punishment has no effect on contributions and leads to lower payoff for the group.”

Often when we think of rewards in the work place we think money. It just simply isn’t the case. What we do know is that there are several factors that motivate us, and each seemingly contributes to our overall happiness. Congruently, the factors that demotivate contribute to our unhappiness and ultimately detract from the group as a whole. If revenue is down, try working to get employee spirits up, and just maybe the revenue will follow.

For more information on what motivates us see Daniel Pink’s (author of Drive) video “The Surprising Truth About What Motivates Us.

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  • http://www.facebook.com/people/Simon-Garrett/100003281503127 Simon Garrett

    “Positive emotions appear to invigorate human beings, while negative emotions have the opposite effect.”

    Science proves common sense once again!