The evidence is clear: Wellbeing drives profitability and firm value

Keywords: mentalhealth, wellbeing, leadership, profitability, sustainablesuccess

Date: 3 March 2025, WorkLife Digital

Research from Oxford University's "Workplace Wellbeing and Firm Performance" (2024) provides compelling evidence of the strong positive relationship between employee wellbeing and firm performance. By analysing data from approximately 1 million employee surveys across 1,782 publicly listed companies in the United States, the study revealed some key insights:

Wellbeing is associated with firm profitability and firm value. Companies with higher average levels of employee wellbeing, measured by job satisfaction, purpose, happiness, and low stress, report higher gross profits and greater returns on assets (ROA).
Wellbeing predicts future performance. Company wellbeing levels are predictive of not only current but also future firm performance.
Wellbeing drives stock market outperformance. An investment portfolio of companies with high levels of workplace wellbeing outperforms standard benchmarks in the stock market, such as the S&P 500, Nasdaq Composite, and Russell 3000.
Happiness is the leading indicator: The study showed strong correlation between company happiness and firm performance indicators. Specifically, a one-point increase in the average employee happiness score (on a 1-to-5 response scale) is associated with an increase of 1 to 1.2 percentage points in ROA, and an increase of approximately 1.39 to 2.29 billion USD in profits.

These findings challenge the conventional wisdom that employee wellbeing is a secondary concern. Instead, they demonstrate that a happy, healthy, and engaged workforce is a powerful engine for driving financial success.

The multiplier effect: Six channels through which wellbeing impacts performance

The Oxford research echoes and amplifies existing evidence highlighting how employee wellbeing translates into tangible business benefits. These benefits manifest through several key channels:

Productivity: Happy workers are more productive. They are more focused, efficient, and committed to their tasks.
Performance: Investing in employee wellbeing reduces absenteeism and presenteeism (being at work while sick). Healthy employees are more energetic, resilient, and able to perform at their best.
Recruitment: Companies known for prioritising employee wellbeing attract top talent. In today's competitive job market, a strong reputation for employee care is a significant advantage.
Retention: Happy, mentally healthy employees are less likely to leave their jobs. Reducing employee turnover saves on recruitment and training costs and preserves valuable institutional knowledge.
Relationships: Positive workplace cultures foster better collaboration and communication. Employees are more likely to support each other, share ideas, and work effectively as a team.
Creativity: Wellbeing enhances creativity and innovation. When employees feel safe, supported, and valued, they are more likely to take risks, experiment with new ideas, and develop innovative solutions.

Beyond the data: Real-world examples

While the research provides a compelling statistical case, real-world examples further illustrate the power of prioritising employee wellbeing. Companies like Google, Zappos, and Patagonia have long been recognised for their commitment to employee health and happiness, and their financial performance reflects this investment.

Taking action: Practical steps for business leaders

So, what can business leaders do to translate these insights into action? Here are some practical steps:

Measure and monitor employee wellbeing. Implement regular surveys and feedback mechanisms to assess employee stress levels, and overall wellbeing.
Use data analytics to develop a tailored strategy that can be measured for efficacy and ROI
Foster a positive and supportive work environment. Create a culture of trust, respect, and open communication where employees feel valued and supported.
Lead by example. Demonstrate your own commitment to wellbeing by prioritising your own mental and physical health.
Invest in mental health resources. Provide access to mental health counselling, stress management programs, and other resources to support employee wellbeing.
Promote work-life balance. Encourage employees to take breaks, use their vacation time, and disconnect from work outside of business hours.

The evidence is clear: investing in employee wellbeing is not just a feel-good initiative – it's a sound business strategy. By prioritising the mental health and overall wellbeing of your workforce, you can create a more productive, engaged, and innovative organisation that drives profitability and creates long-term value.

WorkLife Digital is a global mental-wellbeing consultancy driven by the mission to improve the sustainability of businesses. Our psychological wellbeing tool, Worklife Quotient (WL-Q), is modelled on cutting-edge scientific research and provides organisation-wide measurement and intelligence on the mental wellbeing levels and psychological resilience of staff. WL-Q also assesses the impact of organisational practices (i.e. people and culture, leadership styles, organisational purpose and values, social impact) that have a direct influence on staff wellbeing and provides strategic recommendations on addressing risks and promoting strengths.

For more information, get in touch at lisa@worklife.digital

REFERENCES

Workplace Wellbeing and Firm Performance Oxford University, 2024

https://wellbeing.hmc.ox.ac.uk/papers/2304-workplace-wellbeing-and-firm-performance/