Predicting burnout before it happens
Have you ever had really low energy in life? Were you feeling detached from things, like you were drifting? When it was happening, did you struggle to focus and feel your productivity at work had dropped?
Estimating the monetary impact of a rise or fall in employee experience and morale is necessarily an estimation process. We use the best, most reliable available information from both external and our own proprietary research.
Estimating the monetary impact of a rise or fall in employee experience and morale is necessarily an estimation process. We use the best, most reliable available information from both external and our own proprietary research.
For example, the conclusion of a large review of the literature commissioned by the UK Government and published by the Department for Business Innovation and Skills was:
There is a considerable amount of evidence to indicate that there is a positive association between subjective wellbeing and an employee's job performance.
More recently, in a meta-analysis (a study which systematically uses the results from multiple studies to estimate an overall effect size) the Centre for Economic Performance (part of the London School of Economics) came a similar conclusion:
Ultimately, higher wellbeing at work is positively correlated with more business-unit level profitability
Professor Alex Edmans from London Business School also shows that firms listed in the Great Places to Worklist had between 2-3% higher annual stock market performance than their competitors (in the same sectors).
Building on the academic research, we draw on our own experience of working directly with our clients. Over the last eight years, we have worked with over 1,000 organisations, some of whom we have been tracking their employees’ wellbeing for over five years. This longitudinal data at firm level is particularly useful at estimating more accurately the “within firm” effect sizes from the rise (or fall) in employee experience. This is because most academic work is comparing between firms in cross sectional studies, rather than changes within the same organization over time. Our data helps fill this crucial gap.
Our return on investment estimation is based on a cost benefit analysis approach.
The key costs that are directly impacted by changes in employee experience and team morale are:
The key benefit is productivity, which is effectively a broad construct including effects from:
All our estimates are based on the impact of 0.5pt change in average employee wellbeing on our 1-5 scale. In our opinion, many studies overclaim the possible impacts as they compare the happiest teams (or employees) with the least happy. It is unrealistic that everyone will be positive all of the time but a 0.5pt across the board improvement is realistically achievable, and something that many of our clients have achieved and sustained.
Our core estimate is that a 0.5pt increase in our Happiness KPI will translate into a 7.5% increase in productivity. This estimate comes from the main academic literature cross-referenced to our own client data (especially in regard to calibrating to our 1-5 scale).
We adjust this estimate up and down according to four criteria:
In the resilience calculator we use the 7.5% productivity gain in the first
iteration estimate. In the enhanced calculator you can adjust up and
down the other impacts according to your specific business.
*This estimation was already designed before the coronavirus crisis –
we believe its role may be even larger now.
All the evidence shows, unsurprisingly, that employees who are happier are less likely to leave. We base our estimates on our client’s data where we can not only see the size of the effects but also the speed.
Based on this, we estimate that a 0.5pt increase (or decrease) in employee wellbeing in one quarter translates into a 17.5% reduction (increase) in staff turnover the next quarter. In other words, it has a large immediate impact.
For staff absenteeism and sickness absence, we estimate the effect is a 10% reduction for increases in employee wellbeing.
To complete the overall return on investment calculations the “investment” needs to be costed out too. For good implementation of Friday Pulse within your organization:
To model these effects at an organization level, we make the following key assumptions:
We use national averages (medians) as default settings for:
Friendly disclaimer: we believe our resilience calculator is a relatively conservative estimate of the costs associated with changes in employee wellbeing and team morale. However, it is worth noting that our assumptions are pre the current COVID-19 crisis.
SOURCES
**Department for Business Innovation and Skills (2014) Does
worker wellbeing affect workplace performance? Alex Bryson, John Forth
and Lucy Stokes.
**CEP Discussion Paper, No 1605 March 2019. Employee Wellbeing,
Productivity and Firm Performance, Christian Krekel George Ward
Jan-Emmanuel De Neve
Alex Edmans (2020) Grow the Pie; How great companies deliver both
purpose and profit; Cambridge University Press
Broaden your understanding of emotions in the workplace with more comprehensive articles on the science of happiness.
Have you ever had really low energy in life? Were you feeling detached from things, like you were drifting? When it was happening, did you struggle to focus and feel your productivity at work had dropped?
It's been an up and down few years to say the least. To stay competitive in challenging times, leaders need to ensure they have the right people. And, while the eNPS (employee Net Promoter Score) can help track whether teams are working well together, it is not a headline indicator of employee experience, and it should not be how companies think of wellbeing.