Research shows increasing employee compensation, fulfillment, empowerment, and support from management results in improved employee productivity, efficiency, spirit, loyalty, and retention. While many changes are the ideal, there are things that all companies should do to reduce excess stress in their employees. First, the need for employee happiness will be discussed followed by an explanation of Maslow's Hierarchy of Needs theory that supports this claim. The next section will examine three companies recognized for their excellent employee environment and highlight what each company offers and what they lack. The conclusion will offer suggestions to companies that can be easily implemented.
THE NEED FOR HAPPINESS
It is important to establish the necessity of employers helping employees be happy at their place of work. Research has shown that a happy worker will be a more productive worker. Cropanzano and Wright (2001) drew from multiple sources in order to define happiness:
Taken together, it is generally accepted that happiness refers to a subjective and global judgment that one is experiencing a good deal of positive emotion and relatively little negative emotion. (p. 183) Cropanzano and Wright (2001) drew from many different studies on worker happiness, but do not offer a definitive answer themselves. Their work also emphasizes that people who feel they have happiness in their life are better able to solve problems, help coworkers, and believe in their own abilities. Furthermore, there are four ways that happiness has been measured in previous research: job satisfaction, positive and negative affectivity of the worker, lack of emotional exhaustion, and psychological well-being (pp. 184-185).
Job satisfaction could include material compensation, so it involves both immaterial and economic human factors. Positive and negative affectivity involve the worker on an individual level and could be considered pre-determined and unaffected by the work environment. Emotional exhaustion, also known as burnout, is linked to stressful work environments and creates apathy. Psychological well-being involves employees' belief in themselves and their situation (Cropanzano & Wright, 2001).
Basically, happiness could be broken down into two basic parts: economic and overall emotional state. Emotional state refers to how workers feel about their environment and themselves as well as their stress level. The reason happiness is important for employees is that it enables them to perform their job at a higher level, regardless of what it is. Also, there are less conflicts with coworkers since happy people tend to overlook small slights or frustrations (pp. 186-192).
Maslow's Hierarchy of Needs is a theory that advocates employee happiness. The basis of the theory is that there is a series of needs that escalate from basic physiological needs at the bottom level of the pyramid to the highest level of need for self-actualization (Maslow, 2013). Each level of needs must be satisfied from the bottom upwards in order for a person to rise to the next tier (Maslow, 2013, p. 1).
MASLOW'S HIERARCHY OF NEEDS THEORY
From a work perspective, Maslow's (2013) theory brings together wages, perks, company culture, and how management is performed, into one unified whole. Physiological needs are satisfied by the wage given to the employee (p. 2). Safety needs involve job security and defined responsibilities, or structure (p. 4). Love needs can be satisfied by a positive work culture that lets employees establish rapport with one another (p. 6). Esteem needs can be satisfied by a positive management relation with employees that makes them feel trusted and capable in their jobs (p. 7). Self-actualization needs are harder to satisfy and involve management actively engaging motivated employees with work that meets their potential. An example might be the promotion of a motivated employee into a more challenging position (pp. 7-8). There are more nuances to Maslow's theory, but it is easy to see how the undermining of one need can lead to the detriment of others, and lead to a defensive response from employees.
Sashkin and William (1990) published research that showed that fairness in regard to management has a visible effect on the financial bottom line in retail stores due to an inverse relationship between fairness and sick days taken as well as accident compensation costs (pp. 66-67). They attribute this to the creation of an unspoken psychological contract between an employee and their employer: that their work will enable them to receive material and immaterial rewards such as job security (p. 67). Their examination of fairness echoes Maslow's needs hierarchy and helps focus in on the higher tier.
A practical example of the importance of immaterial happiness to both workers and companies can be seen in an article written by Joseph Cangemi (2009) about a conflict between management and labor in Latin America. Cangemi wrote from his own personal experience as a consultant sent to arbitrate a dispute between unionizing factory workers and their management. This story is important because the workers were among the best paid in the region. The economic, or material, compensation aspect of happiness had been met already. In this case, the issue involved the emotions and ability to feel involved in their own jobs. The plant hadn't had any labor issues for the first 20 years, but during the last 5 years the plant had many strikes. Cangemi kept the workers and management separate and asked open-ended questions to get an unfiltered view of the situation (pp. 37-39).
Cangemi found that many of the workers didn't feel as though their ideas, opinions or input was valued by management. Management didn't take emotional or psychological factors into account when making decisions, they instead went by the numbers they wanted to achieve. Cangemi (2009) stated that management lacked "emotional intelligence" (pp. 38-39).
The importance of Cangemi's (2009) research can be seen with how he applied Maslow's Hierarchy of Needs to the situation. The worker's 'survival' needs were being met, but they felt threatened by management. The reason management was threatening their survival needs was due to their lack of respect for the workers' growth needs. Thus, the workers turned to a union to protect their 'survival needs'. After Cangemi's intervention and the recommendations offered were implemented, the management and labor relationship improved (pp. 40-47).
Ultimately, there are two ways in which a company can compensate its employees: material or economic rewards, and emotional or psychological rewards. Neither is sufficient by itself, and material rewards do not beget psychological ones on their own. The following section will highlight several companies that utilize both compensation types, have shown success in their industry, and what they do well and what needs improvement.
COMPENSATION IN ACTION: A LOOK AT THREE COMPANIES
Looking at the three successful companies: Valve Software, Google, and Southwest Airlines, a holistic view of employee compensation is pivotal to their success. Each of these companies offers significant material compensation. They are successful, yet not without significant problems, which mainly stem from the emotional side of the equation.
Valve Software is a Bellevue, WA based software development and computer software distribution company that has achieved unparalleled success in the personal computer (PC) gaming industry. Valve started out as a game developer, but eventually branched out with the launch of its "Steam" software distribution system in 2003 (Handbook, 2012, p...