Happiness at work, whether it is described as engagement or something else, is the subject of much attention these days, from the January 2012 cover of the Harvard Business Review to the Sept. 4, 2011, New York Times article suggesting “Happy People Work Harder.” Employee happiness generally does correlate with business results.

Happiness studies, a fairly new field, comprises academic disciplines as diverse as positive psychology, neuroscience, positive organizational scholarship and behavioral economics. Hundreds of researchers in some of the world’s top universities, such as Harvard, the University of Pennsylvania and Michigan’s Ross School of Business, are working in this area.

Their findings — that optimism increases life satisfaction and creates positive business outcomes, that strong human relationships have a direct impact on the quality and length of life, and that developing strengths is more powerful than trying to fix weaknesses — are being applied in the military, health care, education and the highest reaches of several governments. Happiness studies, broadly defined, even won psychologist Daniel Kahneman a Nobel Prize in economics.

In business, while no one has shown a direct correlation between happiness and stock price, “[There] is a lot of compelling evidence — across industries, continents, sectors, that positive practices pay off,” said Kim Cameron, a positive organizational scholar at the University of Michigan’s Ross School of Business. “Companies make more money, they are more productive, they produce higher quality, higher customer satisfaction and higher employee engagement” when they focus on positive practices.

Strengths, Strengths and More Strengths

Mainstream happiness studies in the workplace typically focus on strengths. Work in this realm from The Gallup Organization, which is chronicled in StrengthsFinder 2.0 by Tom Rath, head of Gallup Consulting, is well known.

Typically, performance management has been about identifying employee weakness, as is often done in annual performance reviews. Gallup has turned this approach on its head, surveying more than a million workers during the last four decades about their jobs and how often they use their greatest strengths at work. Those who work in environments where they use their strengths daily are “50 percent more likely to work in business units with lower employee turnover, 38 percent more likely to work in more productive business units and 44 percent more likely to work in business units with higher customer satisfaction scores,” write Donald O. Clifton and Marcus Buckingham in Now, Discover Your Strengths. The Gallup annals are filled with success stories of how a strengths approach improves work outcomes in large businesses such as Toyota North America.

For instance, Westin Hotels has used a strengths-based approach to drive engagement at the Westin Savannah Harbor Golf Resort & Spa, a historic resort situated among the moss-shrouded wetlands of the Georgia coast. Working in 2010 with consultants trained in a process called “appreciative inquiry,” a team-based approach to discovering and building upon strengths as opposed to fixing problems, all front-of-house associates took a survey to get a rank order of their individual character strengths. Then, working from this strengths platform, they created new and innovative ways to interact as a team and serve their guests. Today, the resort is experiencing improved leadership, engagement and guest satisfaction scores.

General Manager Mark Spadoni is sold on a strengths-based approach. “We just seem to be better focused when we orient to the positive and when we are grateful for what we have versus what we do not have or what we are doing wrong.”

Strengths in Assessment

If strengths alignment at work is important, it makes sense to include strengths assessment during the hiring process.

Lisa Dzintars-Pahwul, a managing director in talent acquisition at New York Stock Exchange (NYSE) Euronext, is leading a pilot project to assess applicants partly on character strengths that don’t always show up during a skills-based interview — things such as truth, honesty, collegiality and respect for others. The belief is that by considering the right soft skills in addition to technical and business skills during the hiring process, NYSE Euronext will end up with more engaged and productive employees. To measure these, the company has teamed with consultants trained in positive psychology to develop an employee assessment tool based on applicants’ psychological and character strengths.

“We know that employees are happiest when they can use their personality and character strengths — whatever they are — in their jobs,” said Dzintars-Pahwul, who holds a master’s in organizational psychology from Columbia University.

So far, she said the results are promising. Partnering directly with line management, the talent acquisition team uses an assessment tool to customize a strengths profile for each position being sourced. Once an applicant for that position completes the assessment, behavioral interviews are conducted to get information beyond technical and business experience and the candidate’s background.

“It’s a home run,” Dzintars-Pahwul said. By using a scientifically sound strengths-based approach, the company is able to make better, more informed hiring decisions.

Teaching Resilience

There is more to the science of happiness than just strengths. During the past two years, the biggest adopter of a wide range of positive psychology techniques has been the United States Army.

In response to increased incidents of mental and emotional distress among troops facing repeated deployment, the Army started working with positive psychologists from the University of Pennsylvania in 2009 to teach “mental toughness” skills to the 1.1 million men and women in uniform. Central among these skills is resilience.

Resilience is the ability to bounce back from adversity. The Army training consists of modules conducted by Penn-trained Army and civilian facilitators to improve skills such as managing emotions and challenging pessimistic thinking processes. Psychologist Martin Seligman, one of the driving forces behind the Penn-Army effort, said the training has direct applicability in the business world. “We believe that businesspeople can draw lessons from this approach, particularly in times of stress or stagnation.”

Freddie Mac employees have seen their share of stress. The mortgage company had a near-death experience during the recent real estate meltdown. “There is so much emphasis on what we do wrong, from media or audits or Congress hearings, there is so much emphasis around what’s broken, we felt like people were losing sight of the positive and how much value they are bringing to their job and to the organization,” said Michele Lockwood, director of talent development at Freddie Mac.

To counter this, and frustrated with the usual change management menu of resources, the company conducted a series of resilience workshops during 2010-11 based on the positive psychological principles underlying the Army training. “Change is constant,” Lockwood said. “We needed to teach new skills that will help employees learn to operate in a state of continual change and an uncertain future, not just one past or future event.” Resilience training does that, teaches employees empirically proven techniques to fight overly pessimistic thinking and how to better regulate emotions.

Freddie Mac has seen the effectiveness of these programs and other positive psychology-related workshops based on follow-up surveys. For instance, 92 percent of attendees agreed or strongly agreed that they could use the knowledge and skills presented during the courses in their job; 84 percent agreed or strongly agreed that they would be more effective in their role as a result of what they learned; and 93 percent of participants said they would recommend the course to others (Editor’s note: co-author Shannon Polly has worked with both Freddie Mac and Westin Hotels).

Positive Psychology Down Under

In 2010, when executives at PricewaterhouseCoopers (PwC) in Australia explained to the company’s 6,200 auditors, tax advisers and business consultants that client research revealed their technical excellence alone was no longer enough to ensure value to their clients, leaders were met with skepticism.

The firm had been experimenting with the practices of positive psychology within its diversity programs with good results. Michelle McQuaid, executive director of human capital for PwC in Australia, said she decided to apply some of these techniques — mostly those focused on identifying and amplifying core organizational strengths and customer relationships based on the Appreciative Inquiry model — in a comprehensive program to help improve customer relationships.

Results are promising, and the skeptics have bought in:

• Brand health measurements improved across the country, placing PwC as the first or second preferred provider in every Australian state.

• Employees report the program is helping them strengthen and deepen relationships with clients at levels beyond targeted goals for the initiative.

• PwC was named the leading professional services firm, the best consulting firm and the market leader for 2010 in national client service awards.

It is time to stop talking in terms of soft and hard skills as though only the latter are important. Further, talent managers should not treat initiatives to improve employee well-being as luxuries. Research data and the aforementioned examples of practical application indicate that happiness can move the business needle. Data to establish stronger links with financial metrics is forthcoming.

More research is needed, but happiness does drive business results. To capitalize on this fact organizations should:

• Teach new thinking skills to prepare for future challenges and change.

• Change focus from fixing problems to building strengths.

• Rely on empirically proven methods to increase employee happiness.

Dan Bowling is a senior lecturing fellow at Duke Law School and managing principal at Positive Workplace Solutions LLC. Shannon Polly leads human resources consulting firm Accentuate Consulting. They can be reached at editor@talentmgt.com.

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Happiness at work can drive business results, within reason. Talent Management blogger Dan Bowling explains here.