Why being happy at work matters for businesses

A grand old lady falls ill

Irma is the grand old lady of Danish retail. The company was founded in 1870 and is the second oldest grocery chain in the world. It’s a multi-million-dollar business with 70 locations in and around Copenhagen.

But during the 1990’s the lady was ailing – the joke was that the only people who shopped there were little old ladies who did so mostly out of habit, because Irma was where they’d always shopped. Danes are very cost-conscious when it comes to food, (a less charitable description would be to call call us downright cheap), and most of Irma’s customers had switched to the low-cost supermarkets that had spread all over the country. For a decade, Irma had been losing it’s owner a lot of money.

Switching to cheaper products to compete with the discount stores didn’t work. An attempt to expand from Copenhagen to the rest of Denmark proved downright disastrous and had to be abandoned. Advertising campaigns didn’t work. The owner was on the verge of either selling of Irma, closing all the stores or converting them to their discount alternatives.

In 1999 they went with a different solution and in one last gamble made Alfred Josefsen CEO. The soft-spoken, 42-year old, apointee had a plan to fix Irma’s deep-set woes: “Put the people first”. Sure, he would improve purchasing, distribution, cost-cutting and advertising, but Alfred believed that if Irma could make it’s people happy at work, everything else would follow from that.

To achieve this, Alfred focused on some specific areas:

  • Leadership training – all leaders go through leadership training focused on personal development, not on MBA skills
  • Open communications – Alfred’s weekly newsletter to Irma’s people has been instrumental. It is not a press release or a corporate memo – it’s deeply personal and heartfelt and has fostered trust and openness between employees and management
  • Celebrating good results – whenever Irma needs to celebrate, all employees are invited to a huge party. Part of this involves top exeutives getting on stage and singing the company hymn – badly but loudly!

The results quickly followed. Today Irma is the fifth-best workplace in Denmark and the best retailer to work for in Europe. Irma’s employees say things like:

  • Working for Irma is an honor.
  • We take care of each other. If a person seems to be doing badly, it isn’t just ignored.
  • Management has faith in us, that we can function independently.
  • Irma is the best place I have ever worked.

Additionally, in february of 2006 Irma proudly announced it’s best financial result ever – in over 130 years of doing business. All of which is the result of happy people doing great work.

Alfred has described the journey in his excellent book “Kære Irma – It’s all about people” (Dear Irma) which is unfortunately only available in Danish.

The point – in one simple graph

If you take away only one thing from this chapter, I would like it to be this graph:

Happiness AND profits

The point of the graph is simple: Businesses don’t have to choose between happiness and profits. It’s not a matter of either/or. Happiness is inexctricably linked with profits.

Even if you believe that the only point of a business is to make money, you must still look at the happiness of your people, because happy employees will make you more money!

(Insert study here – once I have permission)

Even the founder of one of the world’s most successful companies is with me on this one. Soichiro Honda, the founder of (surprise) Honda once said:

Each individual should work for himself. People will not sacrifice themselves for the company. They come to work at the company to enjoy themselves.

And Honda hasn’t done too badly :o)


Let’s try a thought experiment. Imagine two different departments in the same company, department A and department B. They do pretty much the same work, work out of the same building and are comparable in most respects.

The difference is this:

  • Department A is mostly happy. They’re not deliriously happy each and every day, but people do like their jobs, they like each other and look forward to coming to work most days.
  • Department B is less hapy. It’s not that they hate their jobs, it’s just that they’re not crazye about them, they’re not mad about each other and though they show up at work, it’s mostly for the pay-check.

Here’s my question to you: If department A (the happy one) needs 10 people to do their jobs, how many people do you need in department B to complete the same amount of work?

Think about it for a second.

Whenever I speak about happiness at work to groups of leaders I ask them this question. The answers range from 30 (that dept. B needs three times as many people) to 8 (dept. B is actually more efficient than dept. A because they don’t waste time being happy). Typical answers are 11, 12 or 13. While this does not sound earth-shattering, it actually represents a productivity difference of 10-30% between happy and unhappy employees.

Bonus question for managers: What is it like to be a leader in dept. A? And in dept. B? Where would it be easier for you as a leader to:

  • Motivate people
  • Initiate and implement changes
  • Create good communication
  • Create understanding for the company’s objectives

This question is left as an exercise to the reader :o)

The success factor

Let’s look at it more broadly. Here’s a short list of just a few of the critical success factors in business today:

Business needs

Look familiar?

Now ask yourself where all of this will come from. Machines? No. Business processes? Nah. New IT systems? They’ll help, but they’re not the source of innovation, customer service, motivation, etc.

It’s clear what is: People! And not just people. but happy people!

Alfred Josefsen was faced with having to improve Irma in each, single one of these areas. They needed innovation, they needed to cut costs, they needed to attract customers and improve service. And Alfred had no doubt what his main point of attack should be: If he could make his people happy, all of this, and more, would follow.

And here’s why. Happy people will give a business many advantages:

  • Higher productivity – happy people achieve better results
  • Higher quality – because happy employees care about quality
  • Lower absenteeism – people actually want to go to work
  • Less stress and burnout – happy people are less prone to stress
  • Attract and retain the best people – people want to work for you
  • Higher sales – happy people are the best sales people
  • Higher customer satisfaction – happy employees are the best basis for good service
  • More creativity and innovation – happy people are more creative
  • More adaptibility – happy people are much more adaptive and open to change
  • Better stock performance – for all of the above reasons
  • Higher profits – for all of the above reasons

Basically, happy companies have unhappy companies beat in every area, and studies have confirmed this again and again.

Happy innovation

When Poul Pabian was made CEO of a new tax office created by merging five independent departments, he faced a huge challenge. They’d been through too many half-baked change processes already, and a certain cynicism was setting in, with employees saying “Yeah, yeah, this is just one more crazy decision made over the top of our heads. If we ignore it, it’ll go away.

With that attitude, it’s difficult to make a merger a success, so Poul knew that he needed to do something special, to get the employees to approach the merger with a positive attitude.

His solution was simple: He took a one-hour chat with each of his 100 new employees. This wasn’t a job interview, the only purpose was to get to know his people, and to let them meet him.

He also organized for people themselves to paint their new offices – not to save money, but as a team-building exercise and to promote ownership of the new building. People loved both ideas, and cynicism has been transformed to trust between management and employees.

Recently the structure of the whole Danish tax service was changed, and Pabian’s office now faces new mergers. How did the employees react this time? They’re saying “A new merger? Sure, let’s do it. The last time it was so easy, we’re sure we can do it again.

Until recent years, all companies wanted from employees was their time. In a factory environment, the thinking went, all we really need from people is that they do as they’re told. Henry Ford is said to have complained: “Why do workers come with a brain, when all I need is a pair of hands????

Today however, we need much more than hands. In a business climate where rapid change is the order of the day, we need employees to realize more of their potential. Most businesses know that their very survival depends on their ability to innovate and change rapidly.

This is not possible as long as each employee comes to work only as “a pair of hands???. In order to meet these demands, businesses need motivated, creative, fully engaged employees. And since it’s very difficult to be motivated, creative and engaged at work when you’re unhappy the conlusion is this: Businesses need happy employees to innovate and change!

The bottom line

I know I’m harping on this, but it’s crucial: There is no trade-off between happiness at work and the bottom line. This is not about sacrificing one for the other. It’s not a matter of either/or – it’s both or neither.

Businesses don’t have to choose between profits and happiness. The real choice is this:

Do you want your business to be rich and happy
or poor and unhappy.

Tough choice, huh? :o)

The very best…

Let’s take it a step further: Making your business happy, is not just a good thing, it’s the best thing you can do for any business, because it enhances everything else. Happy people learn faster, communicate better and form more efficient teams. Plus happy people care about what happens to the business. Unhappy people don’t give a damn.

This means that happiness at work makes every other activity in the workplace more efficient. Expanding the business, introducing new business processes, signing new customers, dividing or merging – whateveer your business neds to do, it can do so much more efficiently, when people are happy.

The future belongs to the happy at work

Let’s take it even further: In a few years time, there will almost only be happy companies. Since happy businesses are so much more efficient than their unhappy competitors, they will beat them in the marketplace.

Happy statue
The happy companies will beat the pants off their unhappy competition

A wave of happiness is coming to the business world. Will you be on it or under it?

10 thoughts on “Why being happy at work matters for businesses”

  1. Excellent read. I suppose one problem is that some people are happy regardless of what they do; and others are never happy; but for most of us, being happy in the workplace definetly brings better results.

  2. Thanks Owen! And you’re right, some people seemingly can’t stop being happy, some seem to be permanently unhappy.

    But we can all do something to become a little (or a lot) happier at work.

  3. You should create a new category of awards for companies with the happiest employees. You could call them “The Happys”. ;)

    Nice work with this chapter.


  4. Great… but I read it expecting some revelation at the end about why people are unhappy, what is done in these better companies to make people happy etc. I suspect it is basics like nice work environment, good income, etc. Not everyone can have those…or provide them.

  5. Happiness creates Good Harmones…
    Good Harmones energizes body…
    Energized body is more active….
    Active body has better emotions…
    More actvity produces better results…
    better results creates profits…

  6. Great Article. I guess when employees are happy, they do a better job and the end result is productivity goes up.

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