Stop measuring output and start measuring happiness

If you believe the news as reported in some papers, the UK is in fine economic shape. Business is booming and the economy is doing better than expected following the decision to leave the EU. Just last week the IMF issued a report report in which it predicted the UK economy will grow by 2% this year, up from 1.6% in 2016. Apparently, everything is rosy in the garden and the IMF figures will no doubt be used to promote a pro-Brexit agenda in the coming electoral campaign. There was nothing to worry about after all, the predicted economic Armageddon never happened.

Unfortunately, reality is rarely that simple. To understand the real situation, the IMF figure needs to be analysed along with other economic indices. When you consider that living standards and wages continue to remain stagnant, the headline IMF figure masks a deeper, more unpalatable reality; that while UK PLC is making more money, most people are not seeing any of it. Divisions of wealth are growing.

There is another underlying anomaly to this apparent success story that all business leaders need to consider carefully. In the UK, productivity is declining. In fact, it’s not just declining, it is tanking. And it has been for years. Again, taken alongside the IMF growth figure this means that while companies are making more, they are using more resources to generate that profit, which means people at the coal face are working harder and less efficiently. And this is making them miserable.

Productivity, in short, is an economic measure of output per unit of input. Inputs include labour and capital, while output is typically measured in profit and goods produced. Businesses, sectors and national economies with high productivity accomplish more with less. And in business, that is usually seen as a good thing. But Britain’s productivity performance before, during and after the 2008 financial crisis has left us an average of 16% below the other six members of the G7 group of industrial nations. International comparisons published by the Office for National Statistics show that in 2015 – the last year for which data is available - output per hour worked continued to lag well behind the US, Germany and France. Britain’s output per hour worked is now 22.2% lower than that of the US, 22.7% lower than in France and 26.7% lower than in Germany. Italy has shown no productivity growth since the turn of the millennium but still leads the UK by more than 10%. The only G7 countries with weaker productivity than the UK are Japan and Canada.

This juxtaposition between economic growth and poor productivity performance has been dubbed the ‘productivity paradox’. Output is not growing at the rate it should in relation to the amount of input.

To try and solve this puzzle, we need to look at one of the main input factors that drive productivity; labour (this is especially true in the UK where the service sector dominates the economy). Economists can sometimes talk about labour as if it is a raw material to be measured and graded, but in reality, labour means people. It is employees, colleagues, family and friends. They have thoughts and feelings and emotions. Labour is human, with all the complexity that entails. And to make labour more productive, employers need to understand the human processes that drive people to work better, to be motivated and to become more efficient. Ultimately, in order to drive productivity, employers need to make their people/labour happy, because happy people work better and more efficiently while unhappy people tend to work slower.

Many employers are beginning to understand this and currently, workplace happiness is gaining traction as a serious business concept. Some backward-looking companies still shy away from directly addressing worker happiness, believing it to be flaky and esoteric. They prefer to refer to wellbeing and engagement instead. Others pay lip service and develop well-meaning but disjointed and flawed employee benefit schemes.

At Laughology we talk about ‘realistic happiness’. This is the idea that you cannot be happy all the time and that happiness isn’t about quick wins and employee perks. While free coffee, dress-down Friday and staff days out are all very nice, they don’t increase overall happiness scores and they do not increase productivity. Realistic happiness is a much more concrete, sustainable, grown-up concept.

Google’s Senior Vice President of People Operations, Laszlo Bock, touched on the subject recently when he explained that the perks Google is famous for offering staff do little to retain the best workers. Instead, he revealed that meaningful work and a high standard of co-worker are the two main reasons people remained at the company.
So just how do you increase productivity by introducing realistic happiness in your organisation. It is not about quick wins and boosting pleasure with short term interventions. It’s about developing a culture where leaders and managers understand the factors that truly engage employees, and where employees are skilled and supported by a strong network in which they have an emotional investment and a belief.

Below are some of the most important elements to consider when analysing your productivity:

Sadly, in many workplaces, the focus is on profit generation without a strategic view of the effects working practices have on staff. It always shocks me how many businesses invest lots of money in new IT and new plant and machinery, but neglect their workforce. The most important ‘equipment’ in any organisation is people. If you invest in an expensive piece of equipment, it makes sense to maintain it. Why don’t businesses do that with people?

At Laughology, we know that realistic happiness makes businesses and organisation more efficient and more productive. It is not about squeezing the most out of people under duress, it is about nurturing them and challenging them to excel. It is about helping people to go through struggles in workplaces and not feel helpless. It is about providing support but also giving them the tools to have the confidence to tackle new tasks and to fail at first, because that is how humans learn. After all, success after failure builds a much deeper sense of achievement, confidence and pride, which then drives progression. Happiness is about having the confidence to tackle challenges, the courage to fail and the resilience to keep trying and to learn in the process.

Once we understand and reflect this in workplace culture, we will create truly productive workplaces that people who work there are proud to be part of. Stop measuring output and start measuring happiness.