In today's fast-paced business world, the pursuit of hard targets and productivity can often out-muscle the more intangible, softer benefits to be derived from a happy workplace. As we celebrate World Happiness Day, let’s consider the profound impact that a strong culture of workplace happiness can have on organisational success and individual wellbeing.

Why happiness at work makes business sense

Research by Oxford University has revealed more than just a correlation between happiness and productivity - it uncovered a causal link. Their 2019 study found that happy workers are 13% more productive than their unhappy counterparts. And the benefits go beyond simple productivity, also positively impacting sales, quality of work and customer satisfaction while reducing staff turnover. On the latter point, MIT research has also emphasised the pivotal role happiness can play in retention by influencing employee decisions to join, stay or leave a company.

What makes employees happy?

How much of a worker’s happiness comes down simply to financial reward, as opposed to feeling valued? This is a key question because the two things can often be confused. In terms of financial recompense, psychologists broadly agree that paying a worker more money translates to increased happiness. However, a 2022 study by Daniel Kahneman and colleagues also found that the link between money and happiness applies to a threshold of around £80,000, after which the opposite can happen: any further pay rises - and the uplift in work and responsibility that comes with them - can have diminishing returns on happiness.

Growing a culture of recognition

While having a competitive salary is undoubtedly important, enduring happiness at work relies on employees feeling valued, appreciated and respected. This is particularly important to a younger generation of workers who thrive in this ‘warm’ environment and recognition schemes are playing an increasingly pivotal role in fostering this sense of worth. OC Tanner’s decade-long research project involving 200,000 employees, found that 94.5% of workers reporting the highest levels of morale also rated their managers highly effective at recognition.

This latter point is also significant because recognition will not come naturally to every leader. Businesses are made up of different personalities and while some managers will naturally lead from the front, others will need help and training, or a reminder of how an act of recognition impacted their career. This kind of advocation for recognition often comes from the very top and permeates down through the organisation. At Innecto we have even created manager toolkits to help with this process.

Not only does recognition boost employee happiness, it also serves as a catalyst for performance enhancement by reinforcing desired behaviours, bedding in company culture and motivating employees to excel. Whether through a simple thank you note or a personalised reward, timely recognition boosts morale and strengthens interpersonal bonds.

Recognition – Key factors

Here are some important steps for HR leaders to consider when implementing recognition schemes:

1. Align recognition with your company DNA – Think carefully about your company’s broader values, strategy and business objectives so that you can link these with your recognition criteria and the behaviours you want them to drive. This includes celebrating instances where employees embody those values.
2. Create excitement and buy-in - Making recognition authentic to your workers is key, so we’d always recommend involving employees from the start and looking for opportunities to maximise worker ownership. Engaging everyone in the scheme’s name, look and feel and even testing can be a great way to gain early buy-in, grow interest and build excitement.
3. Be practical and think fair - Consider carefully how the scheme will work in practice and never lose sight of the fact that everyone should have the chance to nominate and access rewards. If there is even a hint of unfairness or inaccessibility, whole sections of a workforce may switch off and disengage.
4. Never assume recognition will simply happen - To make it work properly, recognition needs dedicated time, a calendar of events and regular communication. Many of the best case studies involve companies who think carefully about lulls in staff happiness and challenges to engagement throughout the year and counterbalance these with dedicated dates and milestones that can be aligned with other internal communications, calendars and meetings. Remember too to allocate resources because the best schemes are led and managed by one person. It may not be their full-time job, but it should be part of their role and objectives to make it work.
5. Personalise rewards – Where possible, make sure that rewards resonate with the individual or team. An inappropriate reward can do more harm than good by showing a lack of thought.
6. Promote immediacy by thinking Digital - Recognition impacts best on morale and happiness when it's actioned straight away. By allowing a lag in time between the work and the reward, the two can become disconnected and this is an increasing challenge with hybrid and remote working. The answer is to make it quick and easy by using a smartphone app like HAPI. Not only does this enable 24/7 recognition, it gives everybody access.

On this World Happiness Day, let's recommit to building workplaces where employee happiness can thrive, driving individual fulfilment, organisational excellence and business success.

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