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The toll that working through the global pandemic has taken on employees’ job satisfaction and emotional well-being has focused business leaders on fostering workforce happiness as never before. While many — if not most — of us are motivated by genuine caring for the people who power our organizations, we also intuitively know that employee happiness should boost job performance. Still, two nagging questions remain: Which comes first, succeeding and then being happy, or being happy and then succeeding? And just how much does initial happiness matter?

The results of our recent research, published in the Journal of Happiness Studies, have gotten us one big step closer to answering those two questions. For our study, we followed almost 1 million U.S. Army soldiers for nearly five years. We first asked them to rate their well-being — their happiness, if you will — along with their optimism, and then tracked which soldiers later received awards based on their job performance. We collected our data in the midst of the wars in Iraq and Afghanistan, so the stakes were high: Some of those awards were for exemplary assigned job performance, while others were earned for extraordinary performance in heroic actions. Receiving an award in the Army, either for exemplary job performance or for heroism, is a relatively rare event. Of the nearly 1 million soldiers in our sample, only 12% received an award of any type during the five years that we ran the study.

You might dismiss these results if you believe that military data somehow doesn’t apply to the business world, but you would be wrong to do so. After all, the U.S. Department of Defense is the single largest employer in the world, dwarfing Walmart by nearly 1 million employees. It has nearly $3 trillion in total assets (compared with Walmart’s $236 billion) and maintains over $290 billion in inventory (compared with Walmart’s $44 billion). The U.S. military is not just “big business”; it is, in fact, the biggest business by an order of magnitude, so what we learn from the military can and often does apply to the business world. There are over 190 distinct job categories in the Army — from clerk to pilot, cook to commander — and most were included in our data.

In short, not only do happiness and optimism matter to employee performance, but they matter a lot, and both predict how well employees will do. Our military research, along with other behavioral science research spanning the past 40 years, highlights the competitive advantage that employee happiness offers businesses. There are some things about employee happiness that every business leader should know and be able to apply. And, as we emerge from a demoralizing global pandemic, we would all do well to take stock of how to influence the happiness and optimism of those around us in the workplace.

That raises the question, what really is happiness? The behavioral science literature often refers to happiness as subjective well-being because the meaning of happiness varies in different contexts. As with most concepts that emerge from psychology, definitions vary, but when it comes to happiness, they generally coalesce around three areas: a person’s own assessment of their satisfaction with life; how much positive emotion (such as enjoyment, enthusiasm, inspiration, or pride) they experience; and how little negative emotion (such as hostility, irritability, fear, or nervousness) they experience.2 We combined these three to yield our measure of happiness.

What Do We Know About Happiness?

Since the advent of positive psychology in 2000, there has been a tremendous amount of research in the field, with well-being mentioned in over 170,000 academic articles.3 Some of that work has found that there is truth to the perception that some people just seem happier, and researchers have looked closely at heritability (factors we’re born with) and how our environment shapes our happiness. If we think of general happiness as a pie, then the research suggests that heritability accounts for about 40% of that pie while 60% is attributed to other factors, especially life experiences. Nearly the same can be said for the workplace: In a recent long-term study, researchers found that while heritability accounted for about 30% of job satisfaction at age 21, the importance of heritability dropped to less than 20% when measured again at ages 25 and 30. Thus, environmental factors within the workplace become more important over time.4

The relative importance of some of those environmental factors has shifted recently. The “World Happiness Report 2021” noted that within the workplace, happiness before the pandemic was largely due to employees’ sense of belonging within an organization and among coworkers, the flexibility afforded to workers, inclusivity, and a sense of purpose to their work (in descending order of importance).5 Things changed dramatically during the pandemic: Having a supportive manager became the largest predictor of happiness — nearly twice as important as the next ranked workplace happiness factor, purpose.

Not surprisingly, money matters to employee happiness too — but research has shown that is chiefly for those employees who indicated that money is important to them. In a recent study, the relationship between income and happiness was over four times greater for people who reported that money was important to them compared with those who cared much less about money.6 Thus, for employees who aren’t driven by money, income may merely be a hollow way to keep score.

Within the workplace, we know that happier employees are more likely to emerge as leaders, earn higher scores on performance evaluations, and tend to be better teammates.7 We also know, based on substantial research, that happier employees are healthier, have lower rates of absenteeism, are highly motivated to succeed, are more creative, have better relationships with peers, and are less likely to leave a company.8 All of these correlates of happiness significantly influence a company’s bottom line.

Taken together, the data indicates that there is a lot of room for leaders and organizations to influence happiness within the workplace. While happiness is influenced by heritability and drivers like finding a sense of meaning, a larger portion of the happiness pie may result from factors like workplace flexibility, reasonable pay, type of work, and managers who are supportive. That means it’s possible for leaders to shape the workplace to make happier employees.

What Can Business Leaders Do About Employee Happiness?

To begin, we suggest that leaders follow the science and take a structured approach to hiring for, promoting, and developing employee happiness. While the approach will vary based on organizational needs, leaders should commit to three actions.

1. Measure happiness in both employees and job candidates. In many ways, “hiring the happy” requires a bit of perspective. While we do not believe that happiness should be placed ahead of the knowledge, skills, or talent needed for a job, we conservatively advocate using measures of happiness and optimism as discriminators, or tiebreakers, because the risks are low and the benefits could be important. It is also important to use proven assessment tools and not rely on management intuition based on an employee’s affect. Many organizations already use a variety of surveys to evaluate job candidates. Even if adding these questions about happiness and optimism to the applicant survey results in only a small increase in downstream productivity and profitability, most leaders would jump at this opportunity, because it costs almost nothing. While this will of course vary across organizations and sectors, most organizations are likely better off hiring someone who is already relatively happy and optimistic, because they will influence exceptional performance and reduce turnover. If you extrapolate our findings from the military study to a private sector context where 1,000 hires are going to be made, using well-being as a hiring criterion should lead to about 11 more exceptional performers than if the company simply hired personnel without considering well-being at all.

2. Develop happiness in your workforce. Given all the training and development requirements placed on most organizations, the thought of actively trying to develop happier employees may initially seem daunting, time consuming, and expensive. However, the academic literature repeatedly shows that training initiatives targeting employee well-being do not require a significant time investment, are cost effective, and carry a high ROI.

Here are three examples of simple exercises, each backed by rigorous evidence of effectiveness. In the first, the Gratitude Visit, participants prepare and present a 300-word testimony of gratitude to someone who changed their life for the better. In the second, Three Good Things, participants write down three things that went well each day and what caused those things to go well, for one week. The third, Using Signature Strengths in a New Way, calls on participants to complete an online strengths survey and then use one of their top strengths in a new way each day for at least a week. Research testing these approaches found that the Three Good Things and Signature Strengths exercises significantly increased happiness and decreased depression over six months, while Gratitude Visit did the same over one month.10 Of course, such workplace happiness initiatives work best when people want to become happier, are willing to put some effort into the process, and believe that those efforts will pay dividends.11 That aside, the costs are quite low, the interventions can occur at any level of an organization, and they don’t require outside consultants.

For organizations willing to make a larger investment, there are of course turnkey, validated programs shown to improve employee well-being. During the height of the wars in Iraq and Afghanistan, for example, the U.S. Army invested heavily in resilience initiatives such as Comprehensive Soldier Fitness, which was demonstrated to improve the psychological health of service members.12 The program included extensive training for a large cadre of instructors, resulting in an overall ratio of about 1 trainer for every 100 service members.13 Likewise, the Enduring Happiness and Continued Self-Enhancement (ENHANCE) program was shown to improve happiness, with effects lasting for over six months. ENHANCE is a 24-hour training package that can be delivered in person or online and focuses on identifying core values, cultivating mindfulness, establishing positive social relationships, dealing with negativity and adversity, and other areas.14

Our recommendation: First, measure well-being. Next, start with the easy exercises to demonstrate that the company values employee well-being. Then start investing in the more formal programs over time as happiness increases.

3. Retain employees who are happy. The pandemic has reminded us of some tough realities, namely that organizations can contract in turbulent times just as fast as they expand when the economy is booming. Clearly, our military study shows that organizations should want happy employees, because they perform significantly better than those who are unhappy. But it turns out that organizations also need happy employees, because happiness is in fact contagious. For example, researchers examined 20 years of data from 4,700 participants in the long-running Framingham Heart Study and discovered not only that happiness can spread across a social network, but also that happy people are much more connected to other happy people within the network. Perhaps the most striking finding of this study was that the effect of happiness extended for three degrees of separation from the focal person (so, friends of their friends’ friends).15 Another important finding from this study is that like happiness, unhappiness is also contagious. This contagion effect places leaders in a precarious position, especially if they are presented with the difficult scenario of being able to retain only one of two employees. With performance and other factors held constant, they should keep the one who is happiest.

Lead by Example

Our work with the Army over the past decade consistently uncovered a foundational truth: Employee well-being initiatives work best when confident leaders present the material and when senior leaders place significant emphasis on the overall effort.16 Thus, leaders must be willing to invest their efforts into making the initiatives successful by not only advocating for them — for example, by securing resources for a program and promoting positive strategic messaging — but also by participating in the training and incorporating it into their own behaviors. If leaders want to improve employee happiness, they must model that which is taught so that it becomes integral to the organization’s lexicon and culture. We learn best by watching others, so let your employees learn to be happy by watching you.