Chapter 17

The Workforce Happiness Index

WHAT MAKES EMPLOYEES HAPPY?

We tend to equate happiness with achievement of key milestones or accomplishments in life: getting that promotion to vice president you’ve waited for, getting married, having your first child, buying your first house, taking a trip around the world, or finally getting that PhD. However, day-to-day happiness does not seem to be influenced much by achievement of major milestones either at home or work. In fact, some of the happiest countries on earth are populated by a lot of poor people. Denmark is the happiest country, although it is far from being a poor one. Citizens there have access to excellent health care and a great education, and almost everyone makes about the same amount of money, so you choose your profession based on what you like and are good at, versus what is going to make you the most amount of money. Family and friends are very important, and the country values healthy eating and taking care of children and the elderly. There is virtually no crime, so safety is also a component of happiness. But what about the climate? And have you ever seen the size of the houses and apartments Danes live in? In California we have one of the best climates on earth and live in big houses with lots of room, and yet many people are miserable. Singapore, with its tropical climate, little or no crime, and booming economy, is the unhappiest. One of the biggest reasons Singaporeans are unhappy is because of work. Only 2 percent of the country’s workers feel engaged by their jobs, according to Gallup. Others blame the school system that discourages students from thinking for themselves as individuals. America rates much better on job satisfaction, but still 70 to 75 percent of Americans are disengaged from their jobs. Although this is a lot better than Singapore’s 98 percent, it is alarming to think that three-quarters of the people we pay on a daily basis to come to work are not really bringing their best game to the workplace each day.

TYPES OF ORGANIZATIONS WHERE THIS METRIC IS APPROPRIATE

Any organization that spends at least 20 percent of its costs on people in salaries, benefits, and facilities needs to think about measuring workplace happiness. Many of my clients find that personnel are 50 percent or more of their costs. Any organization that has a lot of employees probably cares about measuring this as well. Even if people are only 15 percent of your total expenses, if you have 20,000 employees you probably need to track this metric. If you work for a small organization of less than 15 people, you are probably really out of touch if you can’t measure employee happiness by watching and talking to your people each day. However, this is tough to do if you have 150 people or 150,000 of them. Another factor to think about is how important employees are to your overall performance. If you run an aluminum plant and the manufacturing process is highly automated, how people feel about their jobs may have little bearing on the quality and quantity of aluminum produced. However, if you run a hospital, the satisfaction of your nurses and other patient-facing employees can have a major impact on both health outcomes and patient satisfaction. So, in summary, you might want to consider tracking this index if:

• Employee costs make up a big part of your expenses.
• You have so many employees that you can’t gauge their happiness by talking with them.
• Key outcomes like revenue, growth, and quality products and services are dependent upon employee behavior.

HOW DOES THIS IMPACT PERFORMANCE?

FedEx and GE are both big believers in three key performance indices. At FedEx they are:

Managers are held accountable for the satisfaction of their employees, and individual contributors are held accountable for the satisfaction of their team. Everyone has customers, and everyone has some way of contributing to the financial health of FedEx. Jack Welch, former CEO of GE, was fond of saying he only really cared about three key metrics to evaluate the health of GE:

Both of these wildly successful companies seem to understand the formula that says that if you first take care of your employees, they will take care of the customers, and they will make money for the shareholders. Pretty simple stuff, but organizations tend to have 100 times more precision in their efforts to measure financial performance than they do for measuring employee satisfaction or customer satisfaction.

If you look at companies like Southwest Airlines, Purina, and Google, you will find senior managers who understand the impact satisfied and engaged employees can have on the bottom line. All three of these companies lead their competitors on just about any measure of performance, and most attribute a lot of their success to their employees. Of course, having happy and incompetent employees will not make any organization more successful, but it seems that at these top-ranking companies a small minority of employees are incompetent, whereas at many other organizations a huge percentage of the employees aren’t happy or engaged.

Happiness not only makes you a better employee, it can add years to your life. Four factors in the analytics for Realage.com are

Being married actually adds years to your life, or maybe it just seems like life is longer. Having close friends whom you see often adds a few more years. Believing in something or having passion for a spiritual interest helps. In fact, all of these factors can add up to nine years to your life span, whereas not smoking only adds three or four years. So how does this relate to work? Well, many people meet their future spouse at work, and some still work with their spouses. My neighbors Paul and Susan both work as accountants from their home office. Most of us have friends at work as well. In fact, often that is where people meet most of their friends once they leave college. Work is also something that you can have passion for and find spiritual fulfillment through. I have been working for the last couple of years for AltaMed, which is California’s largest community health care provider dedicated to serving populations that have a hard time affording health care. Many of the doctors, nurses, and other patient-focused employees get a tremendous amount of satisfaction helping their patients.

Also, having a dog or cat can add happiness and years to your life. Some companies like Purina allow employees to bring their well-behaved dogs and cats to work with them, and many even attend meetings with their owners. The company headquarters in St. Louis has a beautiful park in the center of the campus called the Barking Lot where employees can take breaks and let their dogs run and play with others. Badly behaved dogs or owners are banned.

In fact, Gallup’s research suggests that a good boss and friends at work are important factors for engagement and satisfaction as well as workplace happiness. This seems to ring true for most of us who have had good and bad bosses, and jobs with lots of friends and jobs with none of them. The work itself is sometimes a big factor as well. Getting to do something you are really good at and have a passion for is important as well. Stephen Lundin, Harry Paul, and John Christensen’s book Fish is a great lesson on how to make boring and even unpleasant work fun.1 The employees at the Pike Place Fish Market in Seattle have found an innovative way of making work (selling fresh fish) more enjoyable, and they are much happier because of it.

A CULTURE OF WEIRDNESS AND FUN

Online shoe company Zappos in Henderson, Nevada, is known for both its business savvy and its highly engaged workforce. People love working at this company that rewards creativity, laughter, and weirdness. In fact, if you are really normal and boring, you probably won’t fit in well there.

Zappos is so confident that employees will be happy working at their company that they offer new employees a check for $2,500 to quit after the first 30 days on the job, no questions asked. It will pay you to leave. Surprisingly, almost no one takes the offer. Zappos uses this offer as a test to see if employees really like working there and are happy.

Southwest Airlines is always mentioned as a great place to work as well, and if employees are not really happy, they sure fake it well. Year after year, Southwest continues to grow and remain profitable, while other airlines struggle with labor problems and possible bankruptcy.

Another company that was recently named the best company in America for work/life balance is Nestlé Purina in St. Louis. Companies that make it onto Fortune’s annual list of the best employers get around 80 percent employee satisfaction. Purina has 97 percent employee satisfaction and also beats any company in its industry on key measures like sales, profits, customer satisfaction, and innovation. Purina also recently won the Baldrige Award, given out by the U.S. president to the best-run American companies. Having happy, engaged employees seems to translate to better business performance.

COST AND EFFORT TO MEASURE

Both the cost and effort to measure employee happiness or satisfaction should be low, but could be both expensive and challenging depending on your approach. A navy client of mine with 5,000 employees spent $150,000 to have a well-known survey and research firm conduct its annual employee survey. The vendor promised a 70 percent-plus return rate because the survey was only 12 questions and employees had multiple ways of responding to the survey—mail, e-mail, or telephone. My client convinced his commanding officer to spend the money, and it turned out to be a bad decision. Only 17 percent of the employees responded to the survey after multiple reminders, so the organization wasted $150,000 because the data from a sample that small was not even useful. When focus groups were held to find out why no one responded to the survey, the basic sentiment was, “You guys have been doing these surveys for years, and we never even hear the results of the survey, and nothing ever gets better around here.” In other words, don’t bother measuring something if you are not going to try to improve it.

Another client replaced an expensive annual survey with a daily system of measuring employee happiness or stress that cost less than $1,000 for an entire year. The bottom line is that you don’t need to spend hundreds of thousands of dollars to have a reliable and frequent way of measuring employee satisfaction.

HOW DO I MEASURE IT?

Before I explain how you should measure employee satisfaction or happiness, it is important to understand how not to measure it. As with any measure discussed in this book, it is important to measure employee satisfaction as frequently as possible (monthly would be a minimum) to detect when subtle changes occur, particularly declines in performance. It is also important to understand that the typical metrics are probably not accurate or useful unless they are part of a suite of measures that roll into an analytic. You could just borrow use the analytic used by Fortune magazine to identify the best employers in America each year. Rather than reinvent the wheel, why not use their analytic? Good question. The Fortune metric and assessment approach is designed to do an annual evaluation of employee satisfaction, not to be used to monitor and manage employee satisfaction on an ongoing basis. Take a look at the metrics and weights that go into determining the best companies from an employee point of view.

The selection of the best employers is based on two annual surveys. An employee satisfaction and engagement survey is worth 65 percent of the assessment, and a “culture” survey is worth the remaining 35 percent. The culture survey asks about hiring, pay, benefits, perks, opportunities for advancement, diversity, and a variety of other things. So 100 percent of the assessment is subjective and based on surveys. In previous versions of the “Trust Index Assessment” by the Great Place to Work Institute, there were a number of hard objective metrics like job growth, average pay, turnover, and other factors to offset the survey. However, a lot of companies fell off the list in the last few years because in our economy they had no job growth, salaries were flat or declining, and other measures such as training hours probably showed lower levels. Sadly, I think the older version of the assessment was more valid, because at least 35 percent of the index was based on objective measures and not a survey. However, the Great Place to Work Institute is a business, and a business does not make money by discouraging companies from applying to be on the list and paying the prerequisite fees for participation in the survey.

While everyone will acknowledge that happy and engaged employees are a prerequisite to good performance on all sorts of key success metrics, 99 percent of companies rely on annual surveys as their only measure of employee satisfaction or engagement. The three major problems with this are:

Surveys are also just a measure of someone’s opinions. Many distrust the anonymity of surveys as well and may report being ecstatic about their company and job, in case someone decides to get rid of the employees with a “bad attitude.” Measuring anything once a year does not allow you to manage the aspect of performance being measured. Imagine managing the financial results of a company if you could only measure key metrics like income and expenses once a year. Yet that is exactly what most organizations do when tracking employee satisfaction.

NET PROMOTER SCORE

Well-researched employee surveys like those conducted by Gallup and others do have their place and are an excellent way of taking the pulse of the organization once a year. Gallup’s 12 questions are likely to provide enough details to diagnose the causes of problems and develop action plans for improvement. A recent trend is to avoid asking 12 to 50 questions on employee surveys but to only ask one: “On a scale of 1 to 10, would you recommend (company name) as a great place to work?” Those who score 8, 9, or 10 are called your “promoters” and are likely to talk about how great their job and employer are to anyone who will listen.

The logic of these one-question surveys is that employees are much more likely to answer a survey if it is only one question, and the 10-point scale provides a wide enough range to capture diverse opinions. The biggest problem with these one-question surveys is knowing what to do if you get a score of 3? Unless you start asking follow-up questions, you have no idea why you got a low score and what to do about improving it.

Whether a survey is one question or 50, it can only be administered periodically. Employee happiness changes almost hourly, depending on what is going on and how they feel about it. You could have been having a good day until you got an e-mail an hour ago or heard some bad news in a meeting. Consequently, it is important to frequently take the pulse of employee satisfaction levels and identify and manage problems before they become worse.

USING SOCIAL MEDIA TO TRACK EMPLOYEE HAPPINESS

Happiily, a company based in Vancouver, British Columbia, has created a web and mobile application that provides managers with a near real-time dashboard of their employees’ engagement and sentiment. The product, also called Happiily, provides a secure, anonymous way for employees to quickly and easily respond to questions customized by their employer about four aspects of their work life: the person they work for, the people they work with, the work they do, and the organization overall.

Each employee’s answers are anonymously aggregated on a web-based dashboard that a manager accesses daily. Within seconds, managers can see the dips and spikes of employee sentiment and zero in on the issues most in need of being addressed.

This is one of the best tools I have seen in recent years as a practical and easy way of measuring employee satisfaction. Companies that get daily or weekly data on employee happiness can actually manage this important aspect of performance rather than just look at annual survey results and wonder why scores went down from last year. The cost of Happiily ranges from $25 to just $5 per month per active user, which is actually quite reasonable when you consider that annual employee surveys often cost over $100,000 and provide you with a once-a-year report.

An even lower-tech approach used by several of my clients is to have employees drop a red, yellow, or green marble in a vase at the end of the day, indicating how they felt about the day at work. Another company uses poker chips and coffee cans to track employee happiness on a weekly basis. Lake Arrowhead Hospital in California clips a stoplight chart to your biweekly time sheet, asking employees to indicate how they felt during that time.

All of these low-tech approaches are definitely less expensive, but they all suffer from the anonymity problem—others may see which marble or chip you are dropping in the bowl or can. The Happiily approach capitalizes on the fact that most employees are using various forms of social media many times throughout the day anyway so are used to communicating this way.

FORMULA AND FREQUENCY

Having designed employee satisfaction or happiness indices for many large corporations and government and military organizations, I can present you with a straw man model that can be tailored to your own organization. Regardless of how you customize the individual metrics and weights in your own index, it is important to include mostly metrics that can be tracked at least monthly. All but the annual survey are metrics that can be tracked at least monthly in the formula shown next. A few annual metrics are okay. It is also important to mix subjective metrics like surveys with objective metrics like job growth. A suggested analytic might look like the following:

Objective metrics are assigned a weight of 66 percent of the analytic, but the problem with most of these individual metrics is that they are not solely measures of employee happiness or satisfaction. Absenteeism definitely relates to stress and happiness, but sometimes people just get sick and it in no way relates to their job satisfaction. The same can be said of hours worked. I have a number of clients at R&D organizations who work long hours because they love the project they are working on so much. Having to attend training all the time might be a dissatisfier for one employee and something that makes another happy and feel valued. This is why it is important to have at least a third of your metric be composed of measures of employee perceptions and opinions.

VARIATIONS

If the previous model is too complex, you might boil it down to a few key metrics. One client constructed an index that included a quarterly survey of one-fourth of the employees, turnover, percent of new employees from referrals, and percent of internal promotions versus external hires. A consulting client measured billable hours (too many are bad and too few are stressful), a one-question survey done quarterly for all employees, and travel percentage, which is viewed the same way as billable hours. Too much travel is very stressful, and very little travel is not good either. I find that about 10 days a month is my max before I start getting stressed out. Another client (a government R&D lab) came up with an interesting metric. The boss noticed that morale was way down when money was tight, travel restrictions were in place, and there was not enough work in the lab. He also noticed the opposite was true when there was plenty of work from paying clients and budgets were eased up for travel and conference attendance. So he measured the amount of work the lab had on a monthly basis and the amount of money that was being spent on training, travel, meetings, and so on as an employee satisfaction measure. He was not a big fan of surveys, and this objective measure turned out to be a very good and easy way of assessing employee satisfaction. The bigger challenge was defining the red, yellow, and green ranges, because too much work could also be stressful.

TARGETS AND BENCHMARKS

Setting a target for the overall index should be based on targets set for the individual metrics. Most organizations track many of the individual measures I list, so it should be possible to get industry averages and benchmarks to use in crafting targets based on comparative data. The overall index should probably define the bottom of the green zone as 80 percent. The companies that make it to the top 10 of Fortune’s annual list of the 100 Best Companies to Work For generally have employee satisfaction levels of around 80 percent. As I mentioned earlier, a few companies like Purina are higher than 95 percent satisfaction. The red or poor performance zone would probably be anything less than 50 percent, with yellow in between these two figures.

BENEFITS OF DATA

The key to measuring a dimension as complex as employee happiness is to construct an index that is based on a number of different individual metrics that are each assigned a weight based on factors like data integrity and the degree to which they are a true measure of employee happiness. For example, absenteeism is not a clean measure of employee stress or happiness, because sometimes people just get sick. Similarly, an employee may work long hours because he does not have much of a life outside of work and loves his job. Because of factors like this, it is important that an employee satisfaction or happiness index comprises a number of different individual measures.

Employee happiness is becoming increasingly important as a predictor of business performance. Important studies as well as anecdotal data suggest that people who love their jobs perform at 120 percent, and those who hate their jobs and employers do just enough to avoid being fired. Smart organizations realize that a factor like employee satisfaction needs to be accurately measured and managed just like financial performance. What this means is that you need to figure out how to measure employee happiness frequently, be able to analyze the data to determine the causes of high and low scores, and develop actions and improvement initiatives to make your organization a better place to work.

Just as the financial health of a company cannot be assessed by a single metric, employee satisfaction should be measured using a suite of individual measures combined into an index like a FICO score. The dreaded annual employee survey is a practice that is quickly falling by the wayside as new companies like Happiily are developing tools for tracking employee happiness daily and providing enough analytical data to help improve this important performance dimension.

NOTE

1. Stephen C. Lundin, Harry Paul, and John Christensen, Fish: A Proven Way to Boost Morale and Improve Results (New York: Hyperion, 2000).