What is the relationship between wellbeing, productivity and business outcomes?

At our most recent Business Leaders’ Council webinar, we examined the relationship between productivity and wellbeing.

Peter Cheese, CEO of the CIPD and Chair of our Board, hosted an inspiring discussion with Dr Matthew Agarwala, Economist at the Bennett Institute for Public Policy; Occupational Physician and member of the National Forum for Health and Wellbeing, Dr Richard Heron; and Nancy Hey, our Executive Director. The event explored the relationship between wellbeing (life satisfaction), productivity at different geographic scales across the UK, and business outcomes.

In this blog we outline the main areas of discussion. Want to know more? You can watch the webinar recording and find the full list of links and resources mentioned here.  

Understanding how productivity relates to socio-economic measures such as health and wellbeing is essential for policymakers because it can inform better business policies.

But how do we measure productivity and wellbeing? What is the link between the two? And what sort of evidence supports this? How much do businesses understand about the wellbeing of their people and what can they do to improve it?

Measuring life satisfaction and productivity

Dr Matthew Agarwala from the Bennett Institute for Public Policy at Cambridge presented his team’s findings on the impact of subjective wellbeing on economic productivity. 

Firstly, why does this matter? 

• The UK has seen a substantial slowdown in its productivity growth. For about 100 years, productivity in developed economies, or output by worker, has been expected to grow at around 2% per year and this has typically led to increased wages. In turn, this should increase wellbeing. In the UK, this has been at 0.5% per year for the past decade – a 20-22% shortfall in output per worker. This is a substantial reduction in the amount that we’re able to produce, compared to our previous productivity growth rate.
• If we want to demonstrate that levelling up will benefit both productivity and wellbeing, we need to be able to evidence this.

The study looked at data on various levels:

• Individual 
• Organisation/firm 
• Community/local 
• National 

There are established links between individual and firm level wellbeing and productivity. This is also the case at national and global levels between life satisfaction and productivity. However, at a regional/sub-national level, this relationship is less clear. 

The Bennett Institute’s study started in Norfolk, then expanded out to the East of England, followed by England, and finally spanning UK-wide.

Key findings

• Should life satisfaction be an ‘input’ or an ‘output’ measure? The study suggests that this varies depending on the geographic scale. 
• At local authority and East Anglia level, increased life satisfaction looks like an ‘input’ to productivity, showing between 2-18% increases.
• At regional and England level, life satisfaction looks more like an ‘output’ of increased productivity from 1-27%.

 Key questions and areas for further research

• How do you incorporate what happens ‘outside the factory gates’ into the evidence to look at life satisfaction and productivity? A lot of what drives wellbeing happens outside of the organisation, such as housing or commuting. How can organisations work together across regions to improve these? What might sectors and regional groups be able to do?
• We are not able to confirm the ‘win-win’ theory yet of life satisfaction and productivity, and need more research on the link between the two.
• We also need more research at the intersection of wellbeing and productivity policies, at scale.
• Next, Dr Agarwala wants to explore the impact of the pandemic. Eg. were people more productive working from home?

Data vs feelings

How we measure things like wellbeing, productivity and other business outcomes is important, as is to make sure that the data truly reflects how people are feeling. 

Dr Richard Heron raised this point and posed a question for practitioners to ask when working with their organisations: ‘Is what I’m seeing in the data what you are feeling in the organisation?’ He recommends that businesses start by identifying their ‘outcomes of interest’. This could include investment, retention, performance and wellbeing.

Dr Heron also discussed the limitations of metrics that focus solely on economic performance and highlighted the importance of organisations measuring subjective wellbeing. 

When measuring wellbeing, it’s also important that we do not only rely on the statistical average, or ‘mean’ results, as this can sometimes hide important insights and nuances at the tail ends of the group. Practitioners can also show the relationship between wellbeing and safety, governance, ethics, and employee sentiment; this information is well available in many organisations. 

While a lot of companies make claims about wellbeing that are not always backed up with evidence, this could lead to broken trust in the employer/employee relationship if the intervention doesn’t work. 

While research continues on the best way to measure wellbeing in the workplace, you can find our guidance and resources for measuring workplace wellbeing here, including a workplace wellbeing questionnaire. 

Key questions and areas for further research

• The local context is important for understanding correlations between life satisfaction and productivity, and for informing effective policies.
• What does ‘good’ look like and how do we know?
• What’s changed as a result of the pandemic? What is the impact of flexible/hybrid working? 
• How can we ‘get caring right’, create shared objectives and link academic findings with practice?

Jobs and wellbeing

The panel discussed changes in wellbeing across the country from 2011/12-2022. Nancy Hey highlighted that jobs may have had a big impact on this and also that the job quality varies across the UK. 

Key questions and areas for further research

• How does transport links/commuting options affect people’s wellbeing when it comes to jobs and bouncing back from job loss?
• What can organisations do in their sectors/regions to make things better? There is a good will to improve things, but organisations do not always know the best way to go about this.
• How can we build on good work already happening, for example in the West Midlands, to look at wellbeing and productivity together?