… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
wellbeing at work: any lessons?
Is there a ‘business case’ for employer intervention to
improve wellbeing?
What should employers take from this? Bodies such as the Chartered
Institute of Personnel and Development and the Work
Foundation, together with relevant government departments,
often argue that UK management could be doing much more to
improve employees’ wellbeing at work. But, rather than this being
something management should do for moral or ethical reasons,
it is frequently argued (Philpott, 2009; Cooper and Dewe, 2009)
that they should also do it out of self-interest. Employers are
apparently short-sightedly missing the connection between
worker wellbeing, performance and productivity. There is said to
be a strong ‘business case’ for the adoption of new strategies and
policies to improve the working environment because it will ultimately
improve a company’s bottom line.
To an economist, the idea that large numbers of companies
can be missing out on profitable opportunities to invest in their
workforce seems slightly suspicious, reminiscent of many other
claims by interested parties 10 of alleged market failure. Very many
UK employers, as elsewhere, do have a strong concern for their
employees and, indeed, have built competitive advantage as a
result of this. But does it follow that other companies are missing
out?
Advocates of this view presumably believe that there is some
sort of information problem which they aim to remedy. Much
10 Including, in this case, the increasingly influential human resource management
profession. The percentage of private sector establishments employing someone
with ‘human resources’ in their job title rose from 22 per cent to 32 per cent between
1998 and 2004. The Chartered Institute of Personnel and Development,
the leading professional body, has over 135,000 members today. Twenty years
ago it had only 90,000.
use is made of case studies 11 which suggest that introducing new
employee-friendly ways of working and engaging employees in
managing their own jobs can lead to lower absenteeism, improved
customer loyalty, higher productivity and better returns to
investors.
Interesting though such instances are, we should be wary of
case studies, which are essentially extended anecdotes. There are
no proper controls: often the type of employer that is willing to
introduce such workplace changes is one that already has a good
reputation for the way it treats workers; consequently it attracts a
lot of applicants and can pick and choose whom to employ. Therefore
it has a positively minded workforce to begin with, one which
is favourably disposed to innovation. In employee relations, as in
other areas of business, there is a ‘first mover’ effect: it does not
follow that employers attempting to replicate the initiative with
less amenable staff will be as successful. 12
There have been other methodological approaches to building
a case for employer interventions to improve wellbeing, including
the use of laboratory-based experiments. For example, Oswald
and colleagues conducted an experiment which demonstrated
11 For instance, Robertson and Cooper in their recent volume (2011) present nine
detailed studies of employer interventions to promote wellbeing. Athough each
study has a section on ‘outcomes and evaluation’, however, it is notable that these
are all in qualitative terms. There is no quantification of the costs, which in some
cases must have been substantial, or the benefits, and thus no demonstration
that these initiatives reduced costs or enhanced profitability.
12 It is also worth bearing in mind the possible existence of a ‘Hawthorne effect’
(named after a famous series of experiments with working practices at the
Hawthorne plant near Chicago before the war), whereby virtually any change to
working conditions can induce an improvement in productivity because the individuals
appreciate being singled out for special treatment. Once made routine,
however, the new arrangements may have little permanent effect, particularly as
new workers come in who were not part of the original innovation process.
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