Happier Employees Help Companies Post Bigger Profits and Returns

“Goodness is the only investment that never fails.” –Henry David Thoreau

 By Mark Crowley

Every year around this time, a new edition of the “100 Best Companies To Work For” is released, and employers deemed to have the happiest and most satisfied workers are heartily celebrated by the media.

What’s perplexing about all this fanfare, of course, is that we know most workplaces in the U.S. aren’t at all that good in sustaining employee morale. Gallup’s announcement a few months ago that only 19% of American workers are fully engaged in their jobs sufficiently validates this. It also suggests that few organizations have made it a priority to learn and model the leadership practices known to produce high employee contentment.

The question needing to be asked is whether or not we fully believe there’s a direct connection between having happy workers and improved profitability.


Yes, but is happiness at work profitable?!

At this point, the evidence suggests many of us remain suspicious of any firm that, say, allows its employees to play foosball or shoot hoops during work hours. But our enduring cynicism may also have its roots in traditional beliefs about leadership effectiveness. Many of us have been taught that it’s actually desirable to have some worker unhappiness. The idea is that keeping people under some constant tension actually is a more powerful driver of productivity. There’s also the concern that when employees are cared for to any extent they’re likely to get soft in the middle–so sufficiently sated that motivation to work hard and produce is spoiled.

One person who may have the answer is Jerome Dodson, the founder in 1984 of Parnassus Mutual Funds. Since April 2005, Dodson has held the additional role of portfolio manager for the Parnassus Workplace Fund, a mutual fund that invests exclusively in large American firms proven to have outstanding workplaces.

“The idea of creating a fund that only invested in organizations where employees were really happy,” Dodson told me recently, “was brought to me a decade or so ago by a journalist named Milton Moskowitz.” In 1998, Moskowitz and his associate Robert Levering (cofounder of the ) oversaw the production of the first “Best Companies To Work For” list ever published in Fortune magazine.

“He told me that the Russell Investments, publishers of the Russell 2000 Index, had performed an investment return analysis of all the “100 Best Companies To Work For” and proved it was phenomenal and much better than the S&P Index, one of the most commonly used benchmarks for the overall U.S. stock market. So, Moskowitz said, ‘Why don’t you start a fund like this?'”

Initially, Dodson, a Harvard Business School graduate, was resistant and told Moskowitz directly, “It’s a little different using real money compared to doing an analysis on a hypothetical basis.” But soon after their conversation, Dodson said, “the idea struck a chord in me because I’d always felt that having a happy workforce really meant a much better business as an investment. But until then I had no way of proving it.”

To get the fund going, Dodson and his firm invested $600,000 and solicited investors in other Parnassus funds to contribute more. In the first few years, with no track record of performance to draw on, along with an unproven premise, the fund grew very slowly.


Dodson spent his time scouring the country for companies that had built solid reputations for treating employees with profound respect and which supported them through ongoing training and personal development. To quote Moskowitz, they were the kinds of firms that “genuinely cared about their employees as people, not just hired hands.”

Other important characteristics of the firms Dodson inevitably selected: they provided some meaningful form of profit sharing, health care, and retirement benefits while also being especially supportive of working mothers. He found many of these firms amongst the “100 Best Companies To Work For” list and discovered others that had never submitted the documentation to be officially considered an outstanding workplace. Ultimately, he chose companies like Intel, Google, Charles Schwab, Microsoft, and Gilead Sciences and then waited to see how they would all perform.


America’s 50 Most Innovative Companies

To Dodson–and Moskowitz’s–delight, the Parnassus Workplace Fund proved immediately, enormously, and enduringly successful. Since the fund’s inception (April 2005-January 2013) it’s had a 9.63% annualized return. This compares to the S&P Index which has earned just 5.58% during the same period. “Our fund has had returns over 4% better than the S&P Index every year,” Dodson noted. “Eight years later, the performance of the fund confirms what I’ve always believed. Treating people well and authentically respecting them does lead to far better business performance. We proved it works.”

Another compelling statistic buried in the Parnassus prospectus: Over the past five years–the height of the Great Recession–the average annual return on the Workplace Fund was an incredible 10.81%. The S&P Index for the same period was just 3.97%, a 6.84% difference. Dodson believes the wide gap in performance is easily explained: “I think what happens when you have a contented workplace, people are willing to put out more effort to improve operations during really difficult times. While I think every organization has their ups and downs, the downs are not as pronounced because everybody pulls together to try to get through the crisis. And, of course, this consistently more engaged performance inevitably reveals itself in the firm’s bottom line.”

After five years, investments in the Workplace Fund had grown to $80 million. Today, less than 3 years later, balances have ballooned to over $300 million. As reported by rating agency Morningstar, the fund also ranks highest in shareholder return compared to 1,303 other peer funds.

According to a 1997 article in the San Francisco Chronicle, many business leaders dismissed Moskowitz’s earliest list of “Best Places To Work” and derided it as being “a ’beauty contest’ that didn’t matter to anyone outside of corporate personnel departments.” But Moskowitz, and soon after, Dodson, have gone on to prove that the leaders at organizations which ensure employees feel valued, supported, developed, and rewarded are the most enlightened. They inspire a greatly expanded bottom line and set an example for all to follow in this 21st century.

–Mark C. Crowley is the author of Lead From The Heart: Transformational Leadership For The 21st Century. Reach him via his website, markccrowley.com, on Twitter at @markccrowley and on Facebook.

To a happy, healthy, thriving life,

John Schinnerer, Ph.D.

Positive Psychology Coach, Keynote Speaker, Corporate Consultant

Author of the award-winning Guide To Self: The Beginner’s Guide To Managing Emotion & Thought

Guide To Self, Inc.

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The Missing Link Between Values and Actions

Richard Boyatzis and his colleagues (Boyatzis, R.E., Murphy, A.J., Wheeler, J.V. Philosophy as a missing link between values and behavior. January, 2000) have proposed that each of us uses an underlying philosophy to determine how we behave in relation to our values. Boyatzis suggest three major philosophical systems that are likely to influence an individual’s actions, thoughts, values and feelings in various ways.

These three philosophies are pragmatic, intellectual and humanistic.

A person with a pragmatic outlook looks at the output or consequence of a decision as the key to the perceived value. The desire is to maximize the output relative to the input. Pragmatists focus on the individual and assume that the individual chooses actions based on their own self-interest in order to maximize their benefits. This is akin to rationalizing away any values above and beyond those that work in the favor of self-interest. For example, a pragmatic person might list “family” as a top value, yet spends eighty hours a week away from his family working at his job. He spends as little time as possible at home. He says his behavior is in accordance with his values since he is earning money and providing for his family’s needs. In truth, his behavior is a function of his workaholism. He is addicted to working because he is afraid of intimacy and therefore is uncomfortable at home.

A person with an intellectual philosophy uses his intellect to make most decisions. The intellectual gauges the value of an activity, person or effort by its consistency with a set of rational ideals such as the Ten Commandments or a professional code of ethics.  The intellectual uses logic as the main means to make judgments of value and meaning. An example is the intellectual person who lists “family” as a top value, and spends 55 hours a week at work and evenings and weekends with his family. He is present to help with homework and bedtime. The intellectual interacts with his family rationally and gets irritated when his children are not rational in their response to him. While he spends more time with his family, he is not available emotionally for his children and wife. His behavior is in keeping with his stated value of “family” but the quality of time spent with family members is low due to low emotional and social awareness.

An individual with a humanitarian philosophy views personal relationships as the primary yardstick for judging meaning and value in life. Emotions and actions within the context of a relationship are seen as most important. In particular, family and close friends are the most important of all relationships. People with a humanitarian outlook prize values that emphasize the worth of the individual and interpersonal relationships as the greatest “good.” The worth of an activity or effort is judged in terms of its effect on an individual’s close relationships. For example, the humanitarian lists “family” as his top value and establishes a balance between work and home. He also has a balance between his intellect and his emotions. Thus, when he is home with his family, he is available to them emotionally as well as intellectually.

On the face of it, it seems that a high degree of emotional intelligence is required for an individual to operate based on the humanitarian philosophy. If that is true, then these three philosophies might be related to the degree of IQ and EQ that an individual possesses. For instance, a person with adequate IQ and little EQ is likely to be employing the pragmatic view. And a person with adequate IQ and moderate EQ is probably using the intellectual philosophy. Finally, a person with adequate IQ and a high EQ is likely to use the humanitarian outlook.

Boyatzis states that no one philosophy is “better” than another. Hi belief is that the philosophies merely drive the individual’s behaviors, thoughts and emotions in different ways.

What If One Philosophy Is Better Than Another?

While Boyatzis has made great progress in clarifying part of the mystery connecting values and behaviors, I believe that these philosophies are hierarchical and developmental in nature. This means that one philosophy is better than another.

My model states that all of us start out as children with a pragmatic or self-centered philosophy. Assuming a normal developmental path, we eventually learn the intellectual philosophy and adopt it as the primary means by which to evaluate our actions, thoughts and feelings. For those of us who continue to learn, grow and develop beyond our intellect, into the realm of emotional intelligence, we adopt the humanitarian outlook as our method of judging the worth of our behavior, thoughts and emotions. This implies that certain values and/or strengths will be “available” to different individuals at different times in their lives. And some values may never be available to individuals that don’t progress past the pragmatic philosophy, such as allowing one’s self to be loved and wisdom (or perspective-taking).

In other words, the pragmatist may never be able to truly act in accordance with a stated value such as world peace because it is not in his best interest to do so. He can state world peace as a value yet it would not make any sense to work towards it as it does not maximize output and minimize input. Just the opposite would be true; he would have to put in a great deal of time and energy to make a tiny difference.
Every one of us has a values system.  A values system is the set of values that we hold important and the way in which they are prioritized. 

Personal Values As Ends and As Means

Personal values come in two types — ends and means

End values are the desired outcomes that a person desperately wants to achieve such as “freedom”, or “a purposeful life.”  Each individual has a different set of end values in his or her values system. 

Means values are beliefs about a person’s desired traits or ways of being such as “loving”, “forgiving”, or “kind.”  We possess means values because we believe that each one of the means values helps us to achieve our ends values.  For instance, “loving” may be a means value that helps one move towards the ends value of “a purposeful life.”

Take a moment to clarify your own top values. Take a moment to figure out which of the three philosophies is your primary one. Figure out where you want to go from here and how you want to get there. Figure out your values and the personal philosophy that underlies them…on your way to success.

To life, love and laughter,

John Schinnerer Ph.D.

Founder of Guide To Self, Inc.

Visit the site above for a complimentary copy of my award-winning book on the latest ways to manage your own thoughts and emotions to ensure greater character, integrity and success! Be character driven, not emotion driven!

Failure better teacher than success. Knowledge from failure lasts longer – U of Colorado Bus. School

University of Colorado Denver Business School study shows failure better teacher than success

Knowledge gained from failure lasts longer

DENVER (August 23, 2010) – While success is surely sweeter than failure, it seems failure is a far better teacher, and organizations that fail spectacularly often flourish more in the long run, according to a new study by Vinit Desai, assistant professor of management at the University of Colorado Denver Business School.

Desai’s research, published in the Academy of Management Journal, focused on companies and organizations that launch satellites, rockets and shuttles into space – an arena where failures are high profile and hard to conceal.

Working with Peter Madsen, assistant professor at BYU School of Management, Desai found that organizations not only learned more from failure than success, they retained that knowledge longer.

“We found that the knowledge gained from success was often fleeting while knowledge from failure stuck around for years,” he said. “But there is a tendency in organizations to ignore failure or try not to focus on it. Managers may fire people or turn over the entire workforce while they should be treating the failure as a learning opportunity.”

The researchers said they discovered little “significant organizational learning from success” but added “we do not discount the possibility that it may occur in other settings.”

Desai compared the flights of the space shuttle Atlantis and the Challenger. During the 2002 Atlantis flight, a piece of insulation broke off and damaged the left solid rocket booster but did not impede the mission or the program. There was little follow-up or investigation.

The Challenger was launched next and another piece of insulation broke off. This time the shuttle and its seven-person crew were destroyed.

The disaster prompted the suspension of shuttle flights and led to a major investigation resulting in 29 recommended changes to prevent future calamities.

The difference in response in the two cases, Desai said, came down to this: The Atlantis was considered a success and the Challenger a failure.

“Whenever you have a failure it causes a company to search for solutions and when you search for solutions it puts you as an executive in a different mindset, a more open mindset,” said Desai.

He said the airline industry is one sector of the economy that has learned from failures, at least when it comes to safety.

“Despite crowded skies, airlines are incredibly reliable. The number of failures is miniscule,” he said. “And past research has shown that older airlines, those with more experience in failure, have a lower number of accidents.”

Desai doesn’t recommend seeking out failure in order to learn. Instead, he advised organizations to analyze small failures and near misses to glean useful information rather than wait for major failures.

“The most significant implication of this study…is that organizational leaders should neither ignore failures nor stigmatize those involved with them,” he concluded in the June edition of the Academy of Management Journal, “rather leaders should treat failures as invaluable learning opportunities, encouraging the open sharing of information about them.”


Located on the University of Colorado Denver’s downtown campus, the Business School is the largest accredited graduate school of business in Colorado with more than 18,000 alumni. It serves more than 1,200 graduate students and 1,400 undergraduate students each year. Students and faculty are involved in solving real-world business problems as they collaborate on more than 100 projects with area businesses every semester through classroom work, guest lectures and research projects.

From EurekAlert!

John Schinnerer, Ph.D.

Founder Guide to Self

Award-winning author, blogger and speaker

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Workplace Wellness Plan Saves Money Over the Long-Term, New Study Shows

From ScienceDaily (Aug. 18, 2010) — A Midwest utility company learned firsthand that it pays to keep healthy employees fit, reaping a net savings of $4.8 million in employee health and lost work time costs over nine years.
A University of Michigan study of workplace wellness programs is one of the only longitudinal studies of its kind, said co-author Louis Yen, associate research scientist in the School of Kinesiology’s Health Management Research Center.

Over the nine years, the utility company spent $7.3 million for the program and showed $12.1 million in savings associated with participation. Medical and pharmacy costs, time off and worker’s compensation factored into the savings, said Alyssa Schultz, research area specialist intermediate.

The findings are good news for companies looking to implement wellness programs, said Dee Edington, director of the U-M Health Management Research Center and principal investigator.

“One of the advantages of the study is it shows that a sustainable program will give you savings,” said Edington, also a professor in the School of Kinesiology and a research scientist in the U-M School of Public Health. “Previous studies looked at programs that are short and intense and cover the same people.”

The U-M study differed in three important ways. First, it shows that wellness programs work long-term, even though the employees who participated aged during the study. Second, the study took into account all bottom line costs for implementing the wellness plan. For instance, indirect costs such as recruitment and costs for changing menus. Most studies include just the direct costs to the company for paying for employees who participate. But even using the very conservative U-M figures showed a cost savings, Yen said.

A third difference is that it looked at lost work time as well as pharmacy and medical costs, Schultz said. The employees who participated in all years saw those costs had increased by$96; those who participated in some of the years rose $230; and costs for those who never participated jumped by $355. The program cost $100 per year per employee whether the employee participated or not. Therefore, a participation-related savings of $257 and $125 was calculated for the employees who participated in all years and those who participated in just some years.

Slowly, companies are realizing that while insurance plans must care for sick employees, those plans must also include wellness plans to keep healthy workers healthy, Edington said.

“It’s still a large company activity, but the growth (in wellness plans) is in the medium-sized companies,” Edington said.

So what should a company do when looking for a benefit plan for employees?

“You want a benefit plan that will take care of your sick people but also keep your healthy people healthy and working,” Edington said.

The above story is reprinted from materials provided by University of Michigan.

 MLA University of Michigan (2010, August 18). Workplace wellness plan saves money over the long-term, new study shows. ScienceDaily. Retrieved August 20, 2010, from http://www.sciencedaily.com­ /releases/2010/08/100818151824.htm

Happy Employees Seem To Hold Key to Profitable Organizations

How do you feel about your employer? A new study in Perspectives on Psychological Science indicates that how happy a company’s employees are is strongly related to how well the company performs in a number of important areas – increased employee retention, improved customer loyalty, and greater profitability.

Such findings may signal a coming downturn for companies such as JetBlue whose former flight attendant recently told a customer over the loudspeaker to take a hike and then jumped out the emergency exit. Assuming more of Jetblue’s workforce is equally unhappy, the company’s profitability is likely to decrease in the short term.

Given the amount of time you spend at work, it seems reasonable that work influences how happy we are. More and more studies are documenting the connection between your attitudes towards work, your mood outside of the workplace and physical outcomes like coronary heart disease.
Come to find out, that may be merely the tip of the iceberg. Gallup scientist James K. Harter reported recently that how you perceive your work conditions also seems to have a significant effect on company profitability.

In Harter’s latest findings, Gallup examined data from over 2,000 business units (e.g., retail stores and sales offices) within 10 firms. Harter and colleagues pored over employee satisfaction surveys, customer loyalty numbers, employee retention rates, and financial performance of the organizations. Harter performed data anayses to determine the strength of relationships between employee job satisfaction and the outcome measures of the firms.

Findings showed that how employees perceive work conditions predict critical organizational outcomes. In other words, when employees hold their company in a positive light, the company was far more likely to have higher employee retention, increased customer loyalty, and improved profitability.

Unexpectedly, the findings indicate that employee perceptions influence these outcomes more than the outcomes affect employee perceptions. It may be that profitability begins with positive employee perceptions of their employer, their job and their overall contribution. Thus, happy employees seem to be key to increased profitability.

Harter suggests that ‘helping employees see the ultimate outcomes the organization is working to achieve and how they play a role in achieving those outcomes’ may be the greatest benefit managers can provide to those they supervise.

By John Schinnerer, Ph.D.
Founder Guide To Self
Award-winning author (Guide to Self: The Beginner’s Guide to Happiness)
Award-winning blogger (Top 3 in positive psychology by PostRank, Top 100 by The Daily Reviewer)
Free 216 page eBook on latest ways to increase happiness from the inside out at http://www.Guidetoself.com


Journal References:

1.     Manon Mireille LeBlanc, Julian Barling. Workplace Aggression. Current Directions in Psychological Science, 2004; 13 (1): 9 DOI: 10.1111/j.0963-7214.2004.01301003.x

2.     H. R. Bowles, M. Gelfand. Status and the Evaluation of Workplace Deviance. Psychological Science, 2009; 21 (1): 49 DOI: 10.1177/0956797609356509

3.     Paul E. Spector. Employee Control and Occupational Stress. Current Directions in Psychological Science, 2002; 11 (4): 133 DOI: 10.1111/1467-8721.00185

4.     J. K. Harter, F. L. Schmidt, J. W. Asplund, E. A. Killham, S. Agrawal. Causal Impact of Employee Work Perceptions on the Bottom Line of Organizations. Perspectives on Psychological Science, 2010; 5 (4): 378 DOI: 10.1177/1745691610374589