Why happy workplaces make more money?
Irma is the grand old lady of Danish retail. Founded in 1870, the company is the second oldest grocery chain in the world. It’s a multi-million dollar business with 70 locations in and around Copenhagen.
However, during the 1990s the lady was ailing. The only people who still shopped there, the joke went, were little old ladies who did so mostly out of habit, because Irma was where they’d always shopped. Switching to cheaper products to compete 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. Irma was on the verge of bankruptcy.
In 1999 they went with a different solution, and in one last gamble made Alfred Josefsen CEO. The soft-spoken, 42-year-old Josefsen had a plan to fix Irma’s deep-set woes: “Put people first.” Sure, he would improve purchasing, distribution, cost-cutting and advertising, but Alfred believed that if Irma could make its people happy at work, everything else would follow.
Results quickly followed, and Irma became profitable inside a year of Alfred taking the reins. Today Irma is one of the best workplaces 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 its best financial result ever in over 130 years of doing business. This is the result of happy people doing great work.
The success factor
Here’s a short list of just a few of the critical success factors in business today:
- Customer loyalty
- High quality
- Great customer service
Look familiar? Does your company face some of the same demands? Now ask yourself, where will all of these things come from? Machines? Improved business processes? High-priced consultants? New IT systems? The answer is none of them. All of these can help, but is not the source of innovation, customer service, motivation or any other item on the list above. All of these things come from people—and not just people, but happy people! Alfred Josefsen had to improve Irma in each one of these areas. They needed innovation, they needed to cut costs, they needed to attract customers and improve service. Alfred had no doubt what his main point of attack needed to be: If he could make his people happy, all of this and more would follow.
Even if you believe that the only point of a business is to make money, you must still look after the happiness of your people, simply because studies show that happy employees will make you more money!
According to a study by the Great Place To Work Institute, which conducts annual international rankings of the world’s best workplaces, happy companies are a better investment. From 1998–2012, the S&P 500 stock market index rose by 4.81%. The 100 best workplaces increased their stock prices by 14.75% in the same period—three times as much.
Many other studies confirm that the main advantages a business enjoys from happiness at work are:
- Higher productivity—happy people work faster and more efficiently.
- Higher quality—happy employees care about quality.
- Lower absenteeism—people actually want to go to work.
- Attract the best people—people want to work for you.
- Lower employee turnover—saving huge efforts in recruiting new people.
- Higher sales—happy people are the best salespeople.
- Higher customer satisfaction—happy employees are the best basis for good service.
- More creativity and innovation—happy people have more ideas.
- A better bottom line—for all of the above reasons.
Basically, happy companies beat unhappy ones in every area, and studies confirm this again and again.
The jury is back and the verdict is unanimous: Happy employees are guilty of improving the bottom line.