The Pursuit of Happiness – Why happiness should be at the core of an EVP

The economics of happiness is not a new thing – Among others, Richard Layard, the “happiness economist” has been advising governments for decades on ways to measure and impact the collective happiness of individuals in the best way possible1. Increasingly, countries are coming to the realization that focusing on GDP growth is not making the world a happier place. Many countries, including the UK, regularly measure the happiness of their population and implement policies based on the impact they will have on collective happiness and not based solely on GDP growth. A number of countries such as New Zealand and Scotland have taken the next step and now prioritize average happiness above (or at least alongside) economic stability.

The role of employers

Employers can play an important role in this evolution. Despite what I learned about the importance of Corporate Social Responsibility, shareholder wealth has remained the priority for many companies while other stakeholder groups, such as employees, have faded into the background.

The events of the past year have shone a light on the problems that over-emphasis on a single stakeholder group can create. Many companies that might have saved their cash for a proverbial rainy day instead spent it on share buy-backs and dividends to increase shareholder wealth. We then saw, early in 2020, large and ostensibly secure companies furloughing, sacking, and slashing pay to save money when faced with difficult times ahead. We’re still only scratching the surface of the data given how recent these events are, however, job loss and over-stretched household incomes (and probably patience) contributed to higher instances of mental health issues towards the end of 2020. Reduced household incomes and the consequential increases in personal debt will likely contribute to reduced overall happiness for families globally.

That said, there have been signs of change at the company level around Corporate Social Responsibility with employees a key stakeholder group. The most high-profile indicator is the emergence of the “Chief Happiness Officer”. Love or hate the role, the goal is clear – to create accountability for employee happiness. Some might argue that if employee happiness is the goal of a company, then this is the shared goal of the entire team but let’s table that debate for another time.

So why might a company rethink their impact on employee happiness? We can split it into two areas – moral and economical.

Morality is, of course, subjective. Some companies may believe that they have a moral obligation to ensure their workforce is happy, and others may not. Economics, on the other hand, is measurable and the data is unmistakable – Happy employees make good economic sense. To take a few examples and studies:

Reimagining the EVP

So how can people leaders get ahead of this trend? My belief is that this begins with a well thought out Employee Value Proposition that translates to tangible programs and initiatives to support those promises made. Among other requirements, an effective EVP should tell employees and employers what they can expect from one another. In many ways, the EVP is a social contract with current and prospective employees.

In the face of a fully remote workforce and mental health challenges, many companies have rethought their EVP, making employee happiness a key component which has led to an increase in the number of companies that incorporate wellness and mental health programs into their total rewards packages. Doing so is not only (in my view) the morally responsible thing to do, it is also the right economic choice. Mental health, even pre-pandemic, accounted for around half of all absenteeism notwithstanding the inevitable loss of productivity.

Closely related is the role of the manager. The people manager is critical to sustaining an EVP and allocating someone to this role, effectively hands over responsibility of that social contract. That said, how many people would turn down the role of manager if they were asked to be one? Identifying appropriate people manager candidates is crucial, as well as providing the necessary up-front, and ongoing training required to perform the job well. With teams becoming stretched over larger geographies, and contact limited to virtual encounters, a renewed level of responsibility is being placed on people managers everywhere.


Happiness is not an ethereal concept – it is measurable, tangible, and important. My hope is that, over time, more companies will recognize the moral and economic worth of employee happiness and we will start to see a range of new and innovative initiatives to both measure and drive happiness for employees.

1 I highly recommend Richard Layard’s most recent work, “Can We Be Happier?”, if you are interested in learning more about the economics of happiness which includes a chapter on the role of managers:

Disclosure: Some of the links above are affiliate links. This means that, at zero cost to you, I will earn an affiliate commission if you click through the link and finalize a purchase.

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