John Lodder: New Organizational Research-Happy People Create a Competitive Advantage

The United Nations ‘International Day of Happiness’ takes place each year on March 20, this year for the 10th time. This day promotes the idea that happiness is a global human right and promotes the importance of happiness to humanity. This year’s theme is ‘Build Back Happier’ focused on the recovery from the pandemic.

Naturally my March column is about ‘happiness in organizations’. After a possible scenario for 2030 I present the stunning results of a recent published research project about ‘Happiness in the USA army’ and what (non-)profit organizations and their leadership could learn from the conclusions? I finish with some practical suggestions for leaders to increase happiness and a short explanation of the ‘PERMA model’ for happiness.


In 2021 only 35% of employees in the United States were engaged. These findings underscore the impact that employee engagement has when it comes to the overall success of organizations. The Gallup Employee Engagement Report figured out that disengaged employees cost 450 – 550 billion $ annually for all USA companies.

The Gallup report also showed that globally, 70% of employees in organizations with the best leaders were engaged.

In 2021 only 12% of Croatian employees were engaged, thus 88% were not engaged.

If you, as a leader, look at your company, what do you think about the engagement of your employees?

What is the situation? What are the reasons? How can you increase engagement? What are possible actions to improve the wellbeing and happiness of your employees?

It is not the strongest of species that survive, nor the most intelligent, but the ones most responsive to  Change’’ (Charles Darwin)


Stuart Nelson’s Vision  

By 2030 over 70% of the workforce will be comprised of generation X and Millennials.

The economic effects of COVID-19 and the Russian invasion of the Ukraine will feel like a distant memory and work itself will be integrated into a broader, a holistic lifestyle. The working world will be thriving as human respect, kindness and happiness take a center stage.

How do we travel to 2030?

As the world keeps on turning, the challenge of stabilizing the global economy will need to be overcome first and we see many companies are already reinventing themselves.

-Company structures will become much flatter to encourage and make rapid communication and decision-making possible at all levels.

-Demographics show a shortage of people leading to prioritize the human side of organizations.

-Artificial Intelligence and further Robotization requires that millions of workers worldwide need to be reskilled.

-Office space needs to be repurposed with every organization finding ways to successfully accommodate remote working.

-Employers need to create a safe and happy environment for their employees.

-Managers need to become Leaders and leaders need to develop new skills to cope with reinvention, with the pace of constant change and disruptions.

-Leaders need to be skilled to cope with the rapidly changing demands of employees and customers and meeting sustainability targets.

-What became known as ‘reverse mentoring’ will be common place, where junior employees mentor the most senior employees on matters of technology and generational culture differences.

-Learning Agility and agile working will reshape the way how leaders communicate and employees and teams will function.

This is a scenario that needs leadership that delegate, that supports employees and that motivates people.

It needs people with a sense of ‘ownership’ for the company and the job, skilled for self-management and self-support for executing their tasks and teamwork.

Top Performers Have a Superpower:  Wellbeing and Happiness

3 Professors of Positive Psychology, Paul B. Lester, Ed Diener and Martin Seligman conducted a large-scale study and found that ‘well-being’ of employees predict outstanding job performance:

Happy Employees have an enormous impact on results and competitive advantage of organizations.

The results of this research are published in the ‘Journal of Happiness Studies’. I give a summary.

About this research

Ca. 1 million U.S. Army service members were followed during five years, measuring their relative happiness and optimism, using 25 questions drawn from PANAS and the Life Orientation Test.

These questions were included in a larger survey taken by every Army soldier each year.

This ‘well-being’ measurement combines individuals’ own self-assessments and their reporting on the frequency of positive and negative emotions experienced, to yield the researchers’ measure of happiness.

Even after the researchers controlled for previous performance and a range of demographic factors, soldiers who were the happiest and most optimistic went on to earn significantly more job performance awards across the next five years compared with those who were initially unhappy and pessimistic.

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 how much does initial happiness matter?

For our study, we first asked service-members to rate their well-being, their happiness, 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 ca. 1 million soldiers in our sample, only 12% received an award of any type during the five years that we ran the study. (Only 2,4% per year !)

While we expected that well-being and optimism would matter to performance, we were taken aback by just how much they mattered.

We saw four times as many awards earned by the initially happiest soldiers (upper quartile) compared with those who were unhappiest initially (lower quartile), a huge difference in performance between those groups.

This gap held when we accounted for status (officers versus enlisted soldiers), gender, race, education and other demographic characteristics. 

In fact, happiness, and, to a bit lesser extent optimism, were better predictors of awards than any demographic factor we examined.

As a business leader you might dismiss these results if you believe that military data somehow doesn’t apply to the business world, but, you would be very, very wrong to do so !

After all, the U.S. Department of Defense is the largest employer in the world, dwarfing Walmart by nearly 1 million employees. It has nearly $3 trillion in total assets (Walmart $236 billion) and maintains over $290 billion in inventory (Walmart $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 perform.

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 coincide with three areas that we combined to yield our measure of happiness:

-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.

What Do We Know About Happiness?

Since the advent of positive psychology in 1998, there has been a tremendous amount of research in the field, with well-being mentioned in over 170,000 academic articles. 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 25-30. Thus, environmental factors within the workplace become more important over time.

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).

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. 

Thus, for employees who aren’t driven by money, income may merely be a hollow way to motivate.

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. 

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. 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 advocate using measures of happiness and optimism as discriminators or tiebreakers, because the risks are low and the benefits could be important.

It is 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.

Why findings from a study of the Military Matter to All Employers

The findings from our study are broadly applicable because the sample we used was not drawn from a specific functional area, such as salespeople or IT professionals, as is often the case in the published research on happiness in the workplace. Rather, while some soldiers in our study worked in typical Army jobs, such as those found in the infantry, many more were office workers, truck drivers, police officers, medical professionals, logistics experts, pilots, engineers and strategists among others.

Thus, our measurement of so many professions at this scale and in a single study is unique and makes our results highly applicable to the business world. In short, happiness mattered across the work spectrum. The sample matters for other reasons too. Because it was huge and ran for five years, at ca. 1 million people, it’s the largest long-term well-being study ever done, we could perform more detailed analyses with the data and demonstrate that the findings held true regardless of demographics, as described above.

Another comparison

Beyond hiring, employee happiness should also be a consideration when measuring organizational performance.

Of course, objective performance still matters. However, while a high-performing division within a company may bring short-term profit, if that performance was driven by toxic management practices, then those profits could evaporate quickly if employees were to leave in response. Unwarranted attrition is expensive.

The U.S. military has caught on to this and has fired commanding officers who have fostered poor organizational climates, and at times it has done so pre-emptively, before a catastrophic event could occur.

After all, it costs several hundred thousand dollars and years of effort to recruit and train a nuclear reactor engineer, and much more to do the same for an aviator. Losing even a few to unhappiness born from toxic leadership is expensive and creates personnel shortages that increase the risk to those who remain.

Attrition and talent shortages in a corporation have similar negative effects. Thus, we advocate treating happiness as an objective performance outcome of the organization, as well as a leading indicator of leadership success.

In our study, we used one of the gold-standard measures of well-being, the Positive and Negative Affect Schedule (PANAS), which has been used in thousands of published studies to examine happiness in a variety of contexts. It takes about 10 minutes to complete it.

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 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 Return On Investment (ROI).

Here are three examples of simple exercises, each backed by rigorous evidence of effectiveness.

-‘The Gratitude Visit’: participants prepare and present a 300-word testimony of gratitude to someone who   changed their life for the better.

-‘Three Good Things’: participants write down three things that went well each day and what caused these things to go well, for one week.

-‘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.

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. 

That aside, the costs are quite low, the interventions can occur at any level of an organization, and they don’t require outside consultants. Of course it requires (team) leaders with relational and motivational skills.

For organizations willing to make a larger investment, there are of course different turnkey, validated programs shown to improve employee well-being.

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 (friends of their friends’ friends). Another important finding from this study is that like happiness, unhappiness is also contagious.

This effect could place leaders in a position with the scenario of having to select only one of two candidates.

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.

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.

Global Happiness 2021 (

For the 10th year the UN used different parameters to create a ranking of the happiest countries in the world.

146 countries participated in this analysis. This ranking / parameters can be used as a benchmark for your company.

Both Croatian Government and Organizations could take some action based on this result.

1. Finland (7.821)

2. Denmark (7.636)

3. Iceland (7.557)

4. Switzerland (7.512)

5. Netherlands (7.415)

6. Luxembourg* (7.404)

7. Sweden (7.384)

8. Norway (7.365)

9. Israel (7.364)

10. New Zealand (7.200)

11. Austria (7.163)

47. Croatia (6.125)

146. Afghanistan (2404)

Ranking of Global Work-Life Balance 2022

We all just want to be happy and it’s safe to say our jobs can have a huge effect on this. 

Small Business Prices has analyzed the average hourly wage around the world, average hours worked per week, minimum annual leave days per year and each country’s happiness score, to find out if there is a direct correlation between the two and which countries around the world have mastered the best work-life balance. 

Croatia did not participate in this study, the parameters could however be used as a benchmark for your company.

Leadership Mindset

As a leader you need to regularly take some distance of the daily operations and take some ‘thinking time’ as an investment in yourself.

When it comes to leading during times of chaos and uncertainty, how do you respond to your people? Do you admit that you don’t have all the answers but want to talk together about finding ways to make things better together?


The average manager thinks he knows it all. If he doesn’t know he often pretends to know. That brings up the point of ‘Vulnerability’. Vulnerability is hardly a trait many managers like to embrace.

In fact, many managers think that being vulnerable is a sign of weakness, but, actually it’s a sign of strength!

Showing that you’re human can help you become a great leader, nobody is without problems and challenges; everyone has strengths and weaknesses; managers are no exception.

Everybody knows that, including your employees.
Great leaders recognize the importance of bringing vulnerability to the workplace because it’s the foundation for open and nonjudgmental communication. Vulnerability fuels the most robust relationships and ultimately helps to bring even more success for your company.

A Leader, first and foremost, is human. Only when we have the strength to show our vulnerability can we truly lead.˝  (Simon Sinek)

The future

“We face a future of volatility, uncertainty, complexity, and ambiguity due to the current political, economic and cultural instability in which we find ourselves,” explained Professor Edgar Schein, author of Humble Leadership, when we recently interviewed him. “Leaders who can take a humble inquiry approach can accept this instability and adopt an attitude of curiosity as they invite people to share information and make collective, group-based decisions.”

 “An attitude of humble inquiry when approaching our relationships allows us to build a bridge of empathy and connection across our information bubbles,” explained Edgar. “It allows multiple perspectives to be respectfully considered and to surface shared hopes on which a solution can be built.”

So, how can you find the courage to be a humble leader in the face of uncertainty?

-If the leader believes that most people cannot be trusted, that’s how, in the end, we’re treating each other in the organization. (Creating a self-fulfilling prophecy).

-Few ideas have as much power to shape our world as the leaders’ view of people. Because ultimately you get what you expect to get.

-If a leader wants to tackle the greatest challenges of our times (…fill in whatever …) then the place to start is the leaders’ view of human nature.

So Edgar Schein suggests a few questions:

Get curious about yourself

Tune into the situations where your negative feelings limit the way you approach certain relationships.

Instead of continuing with a heart at war, try to understand where your approach to this relationship may be going wrong and how you might be able to engage with a heart at peace.

Remember that the things we least like in others often reflect what we don’t like about ourselves.

Get curious about what is being sparked within you during these interactions.

What inner work do you need to do to resolve rather than projecting it on someone else?

Ask: What else is going on?

People don’t come to the workplace with the intention to ‘mess things up’.

90% of the time, people are doing the best they can with what they have at that moment.

Of course, this doesn’t mean everything is going as planned or that what is being done can’t be improved.

Start from this belief, rather than the fear that people are intentionally being lazy, deceiving you, or manipulating you. Then it’s easier to slow down when things aren’t working and ask: “What else is going on?”

Be mindful of ‘telling’ 

When you feel under pressure, slipping into telling mode can help us feel like we’re getting things under control.

Clearly telling people what to do in a life-threatening crisis, like when a building is burning down, is helpful and warranted.

However, in most day-to-day situations, unfortunately your advice is nowhere near as good as you think it is.

By staying with your attitude of humble inquiry and asking open questions that allow people to surface their own answers, people are far more likely to take responsibility for their actions.

What are the humble questions that you are already asking?

Ask: Open, blame-free questions

Don’t assume that you know what people’s intentions are, what actions they are taking, or that they are aware of their impact on you and others.

Instead, start asking open, blame-free questions to understand what else is going on in this situation and how you can find a better way forward together.

The best open questions start with: What…, When…., Where…., Who…., How…

The PERMA model

Based on his research Martin Seligman identified 5 core elements to psychological wellbeing and happiness that enables individuals, organizations and communities to flourish and thrive.

(Another part consists of exercises to increase wellbeing and to guide us to begin to practice these skills in our own lives.) I focus on the 5 factors that help us to flourish and thrive.

The five core elements are:

  1. P = Positive Emotions

This is more than feeling good. It’s about cultivating the right balance of positivity and optimistic outlook that we relish in life’s highs, find the optimism to persevere with challenges and the resilience to tough out life’s lows.

How: Adopt a positive perspective as much and as often as you can. Try positive thinking strategies and affirmations especially when self-doubt and sadness creeps in.

  1. E = Engagement

You know what they say, time flies when you are having fun. Well, the same is true when you are fully immersed in doing something you enjoy and you are good at. And it isn’t limited to skills or activities we are already great at. Even if it’s something we enjoy but have not quite mastered yet, the practice and the development of these skills/hobbies can bring us happiness.

How: Find your happy thing(s) that brings a smile to your face. Find the time to explore and nurture your hobbies particularly if you like your work and/or family life is swallowing you up. Think back to what you used to enjoy doing as a child to rekindle passions you abandoned on your way to responsible adulthood.

  1. R = Relationships

Relationships are about meaningful social connections. I’d go further and say that relationships that bring us true happiness are the ones that energize us, where we can just be ourselves without feeling like we have to curate ourselves or our lives. Even if we don’t necessarily draw our energies from external stimulations like parties and friends, having those close connections are still a happiness booster because it gives us a sense of belonging, makes us feel safe and valued.

Another way of looking at the importance of relationship is the absence of it, the Covid pandemic showed how psychologically damaging that feeling of isolation can be.

How: Do a relationship audit to identify the relationships you really want to improve and cultivate. Whilst there is absolutely nothing wrong with having 200+ Facebook friends, how many will actually come to your rescue, how many really have your back through thick and thin. Spend more time on relationships with friends who treasure you just as you are, rather than spreading yourself thin with lots of “good time friends”.

  1. M = Meaning

In other words it’s our Purpose or our Why. The sense of being part of something bigger than ourselves is important so we feel that we are connected and that we matter. I don’t think it necessarily has to be something as grandiose as ‘save the planet’ or ‘cure cancer’ callings. I’d like to think that we can see the meaning to our lives if we matter to someone and what we do matter. If our contributions, whatever they are and however big or small, enable us to say: “I’ve contributed to making a difference. I’ve made someone happier, feel better, understand themselves, solve their problems, get what they want, whatever”.

How: Explore and work on your personal why. Is there a cause you passionately believe in, a community you want to serve or family/friends you want to devote time to? Working out how best you can help your chosen cause or your chosen person(s) is how you can lead a life of purpose.

  1. A = Achievement

​You know those times when we day-dream about winning the Lotto, thinking to ourselves: “Wouldn’t it be nice if we could just laze around and do nothing forever?” Yes, winning Lotto would be great. However, doing nothing at all will actually create boredom and sense of futility. Setting goals, working hard towards them is actually a driver of our happiness. Just think of the last time you accomplished something. How did you feel? Pretty happy and pretty chuffed with yourself, right! Our Achievement happiness comes from both the outcome of having worked hard and achieved our goal as well as the self-belief that we can go on achieving more.

How: Set your eyes on something you want to achieve, maybe even something to help with your PERM (Positive Emotions, Engagement, Relationship or Meaning). Set realistic goals and work hard towards achieving them. Celebrate the wins. And strive to achieve more.

Just as there is no one fixed recipe for Spaghetti Bolognese, I personally see PERMA as the key ingredients to happiness where we need to each decide on the PERMA ratio that works best for us.

The value of the PERMA model for me is the crystallization that having some of each of these factors is important for our overall sense of happiness and wellbeing.

You can’t just talk yourself into being happy with positive thinking without paying attention to your ERMA.

And that single-minded, achievement-oriented individualistic pursuit of happiness at the absolute sacrifice of relationships can be very isolating and ultimately detrimental to our overall wellbeing.

I can’t tell you how much of each you need. The fun really lies in experimenting with all five ingredients to see you thrive in life!