As Pret a Manger becomes the latest company to credit happy workers for improved profits, we examine the evidence that suggests smiling employees might keep the tills ringing
Was it the new quinoa pots on the menu? Or the 50,000 portions of macaroni cheese it is selling each week? There are a number of reasons why the sandwich chain Pret a Manger was able to report an impressive set of annual figures yesterday – with sales up 16 per cent to £594 million. But many management experts think they know the biggest cause: happiness.
The company takes the wellbeing of its workforce very seriously. Not because it is intrinsically paternalistic (though it may well be) but because it thinks there is a direct link between the happiness of the people serving the avocado and herb salad wraps and the company’s turnover.
Its chief executive, Clive Schlee, was interviewed by the Telegraph a couple of years ago as he toured some outlets. He said: “The first thing I look at is whether staff are touching each other – are they smiling, reacting to each other, happy, engaged? I can almost predict sales on body language alone.” The staff are given a bonus – paid to everyone in their branch – if a weekly secret shopper spots positive and happy staff behind the counter. No wonder the employees are often frighteningly enthusiastic and decidedly unBritish in their high-fiving, whooping and giving out the occasional free coffee to customers .
It is easy to dismiss Pret’s management style as nauseatingly Californian and to dismiss any link between its workers’ real wellbeing and the company’s profits. But the economics of happiness is a topic being taken increasingly seriously around the world – in universities as well as on factory floors, warehouses and offices. Not least in Britain, where levels of productivity lag many major economies.
On some measures Britain is now around a fifth less productive per worker than the G7 average, and an embarrassing 40 per cent below the United States. It is a stick which Ed Balls regularly uses to beat George Osborne with. So could a happier workforce close this productivity gap and help Britain enjoy a full throttle recovery?
Professor Andrew Oswald, at the University of Warwick, is regarded as one of the leading experts in this field. Last year he and his team published major findings . In simple terms, happy people were 12 per cent more productive than “normal” people. This sounds deceptively black and white. But Prof Oswald insisted that his team’s experiment, involving 700 people in laboratory conditions, is the most conclusive proof that there is a causal link between happiness and improved performance.
During the experiments volunteers were either shown a comedy clip making them laugh or given free chocolate or fruit as an incentive. They were then given a series of arithmetic tasks. The happy group just did better. The unhappy group (weeded out through a series of interviews to ascertain if they were suffering from tragedy in their family life) did worse.
The paper was widely reported at the time and cited as a compelling reason why companies needed to follow the example of Google . The internet company is regarded as the pioneer in employee happiness. Googlers, as they are called, are given free ice creams, free lifts to work, free dry cleaning, the opportunity to spend 20 per cent of their time in the office on non-work projects of “passion” (no, that does not mean an affair).
Cynics suggest this is a clever method to ensure workers never need to leave the office. But many companies have embraced this ethos. Stickyeyes, a digital consultancy in Leeds, is one of many companies to now offer free massages to workers as well as “Free Food Fridays” and a non-pay bar at the end of the week. Innocent Smoothies, the juice company, has ping pong tables nestling on fake grass at its London headquarters, and every three months it gives workers a detailed questionnaire about their happiness. It helps them spot spikes as well as dips in satisfaction. “We were getting feedback about our working hours,” says Jane Marsh, the head of people, at Innocent. Employees were expected to finish work at 6pm. They wanted to leave at 5.30pm. “We changed it,” she says.
A fairly simple measure – but one that, in theory, cost it 875 working hours a week across its 350 employees. Was it cost effective? “We implemented it at the end of last year, so we’ve yet to get our first read on it. But anecdotally it has had a very positive impact.”
There is a slight problem with anecdotal evidence from trendy companies and laboratory experiments undertaken at Warwick. Dr Alex Bryson at the National Institute of Economic and Social Research says: “You have to ask yourself about the believability of the experiment. How did they induce happiness? By showing a comedy clip. Even if you could induce higher wellbeing into individual workers that doesn’t necessarily translate into improved profitability.
“Firstly, it is costly. If, for instance, you have a profit share model for workers.” This is the case with John Lewis, often given as shining example of a company stuffed with happy “partners”, enjoying the company’s own country club and generous sabbaticals. But, despite excellent sales and profit growth in recent years, when it comes to profit per worker – the standard measure of productivity – John Lewis lags significantly behind many of its rivals, such as Marks & Spencer.
Work undertaken by Prof Alex Edmans at the London Business School and Wharton, suggests, however, there is a link between not just happier workers, but between happier companies and shareholder returns over a long period of time. Between 1994 and 2009, the 100 best companies to work for in the United States, as measured by Fortune magazine, outperformed their peer group by 2.3 per cent per year. This is not a correlation, but a direct causation, insists Prof Edmans.
Everyone agrees that rewards – usually bonuses and better pay – lift workers’ morale most. But small things help too.
One of the key measures experts recommend is to give them more autonomy about how they work. This can be as little as allowing them to move their desk, says Prof Oswald. But even expensive measures can be cost effective. An American private medical insurer called Humana studied 33 of its nursing teams, and found patients working with its happiest nurses had 40 per cent less paid in claims, 70 per cent fewer visits to hospital. In turn, Humana paid out 24 per cent less per patient.
This mounting evidence that worker happiness is an important a measure as operating profit margin has, of course, bred a whole happiness industry. Companies are increasingly turning to analytics companies and human resource specialists and asking them track their workers’ satisfaction.
This, in turn, raises an important ethical question: is the business of your employer to investigate your mental health? Marsh, at Innocent, says: “Do you need to keep an eye of border of privacy? Of course you do. Some people may be unhappy at work, which has nothing to do with their office life. You have to tread carefully.”
But even if all privacy concerns are overcome and measuring worker happiness become standard practice across the offices of Britain, it’s not certain than workers will actually start skipping to their desks. This is because of the fact that happiness is a relative concept. “Because we are creatures of comparison [if] everyone gets paid more, everyone looks at each other, there is an enormous washing out effect because relativities haven’t changed,” says Prof Oswald. “Unfortunately humans can’t help looking over their shoulder.”
Only if we can crack envy, it seems, can we all truly learn to be happy, and so productive, workers.
This article was written by Harry Wallop from The Daily Telegraph and was legally licensed through the NewsCred publisher network.