Does Employee Happiness have an Impact on Productivity?

Abstract

This article provides quasi-experimental evidence on the relationship between employee happiness and productivity in the field. We study the universe of call center sales workers at British Telecom (BT), one of the United Kingdom’s largest private employers. We measure their happiness over a 6 month period using a novel weekly survey instrument, and link these reports with highly detailed administrative data on workplace behaviors and various measures of employee performance. We show that workers make around 13% more sales in weeks where they report being happy compared to weeks when they are unhappy. Exploiting exogenous variation in employee happiness arising from weather shocks local to each of the 11 call centers, we document a strong causal effect of happiness on labor productivity. These effects are driven by workers making more calls per hour, adhering more closely to their workflow schedule, and converting more calls into sales when they are happier. No effects are found in our setting of happiness on various measures of high-frequency labor supply such as attendance and break-taking.