The following guest article by Alexa Thompson, discusses how recognizing and encouraging employees’ individual skills and talents – often termed positive psychology – can lead to happier and more productive workplaces. Thompson writes about the connection between happy and productive employees. In our analytical team we’ve learned the importance of recognizing and supporting the individual strengths of each individual. Alexa prepared this article in response to our How to Create a Culture of Evidence post and has authored several pieces for an online psychology education resource.

Until rougly the 1950s, the psychological state was rarely a consideration in the workplace. Managers (even to this day) assume that a reward system of promotions and paychecks would be sufficient to motivate employees. However, the reality of the human psyche has proven far more complex than can be accounted for by the conventional ‘carrot on a stick’ approach.

The late Dr. Harry Levinson – a pioneer in workplace psychology studies – argues that a psychological contract exists between employees and employers. When employees feel that their ingenuity and skill set are ignored in the workplace, it can lead to feelings of depression and thus low productivity by disgruntled workers. Research by Levinson and his contemporaries showed that company culture can have a significant impact on worker productivity, loyalty and pride.

Much of the modern thinking on positive psychology can be traced back to 1998, when Martin Seligman, president of the American Psychological Association and professor of Psychology at the University of Pennsylvania, developed master’s program for the study of positive emotion. Over a decade of research since then has found that happiness at work can improve revenue, profitability, staff retention, customer loyalty and workplace safety, as well as increase creativity and problem-solving ability.

Studies of small groups have identified the effects of human resource management. A report by Bloom and Van Reenen for the National Bureau of Economic Research uncovered a number of psychological factors, including security and a sense of fulfillment and connection, that affect an employee’s mindset. “As firms expand in their scope both geographically and in product space, local information will become more costly to transmit so this will […] favor decentralization.” This decentralization allows information to be processed at the level where it is used, lowering the cost of communication as well as increasing productivity through rising job satisfaction. Bloom and Van Reenen state that the “delegation of responsibility goes along with more employee involvement, greater information sharing and a greater participation of lower level staff.” This in turn enhances the quality of work and employees’ alignment with their company’s goals.

Findings in another study for the American Psychological Association further corroborate the importance of positive psychology. In the report, the authors conclude that “well-being in the workplace is, in part, a function of helping employees do what is naturally right for them by freeing them to do so… – through behaviors that influence employee engagement and therefore increase the frequency of positive emotions”. In other words, an environment of altruism and goodwill is often instrumental in creating a healthy, productive workplace culture.

The data and thinking on the subject matter continue to evolve, as it has been for the last six decades, ever since positive workplace psychology has been studied in earnest. Nevertheless, one major theme has emerged and remained clear: paying attention to the individuality of each employee will create a more positive environment for the employee and be of great benefit to the employer, even if there is an initial investment that needs to be made.