Is happiness better than profit?

Since 2010, the key economic metric of the Kingdom of Bhutan has been Gross National Happiness (GNH) rather than GDP. The UN – and various national governments, including the UK – measure the happiness of citizens. Could an ad agency use happiness as its key performance measure, rather than profit? Ian Henderson looks over the balance sheet.

The ancient philosopher Epicurus held that seeking pleasure was the path to human happiness. This did not mean the Epicureans were all for self-indulgence, although their teachings were misappropriated by later bons viveurs; they counseled living a simple, contemplative life and warned of the unhappiness caused by giving in to immoderate desires.

The ‘pursuit of happiness’ is enshrined as an essential human right in the 1789 US constitution. Eighteenth century English thinker Jeremy Bentham argued that the ‘greatest happiness of the greatest number’ should be the primary objective of government. And in 2010 King Jigme Khesar Namgyel Wangchuck of the small Tibetan kingdom of Bhutan decreed that his government should manage the country’s economy by GNH, not GDP; the Gross National Happiness index.

So it seems a very small (and belated) step to think that any private company, even one with a turnover that makes tiny Bhutan seem a global giant, could perhaps be managed for the happiness of its staff rather than more conventional measures like revenue, margin or compound annual growth rate. It’s a plan which of course needs a name, like Bhutan’s GNH; how about Happiness Ratio, unless that might be confusing for the HR department? Let’s call it Company Happiness Ratio, CHR.

But how would CHR work, exactly? Is it about satisfied customers, doing some good for society, offering competitive loan rates? Or, given that it’s the staff whose happiness is being sought, is it about their job satisfaction? Whether they receive sufficient recognition for what they do? Their pay and conditions? Promotions?

Workers cannot live on happiness alone, so you’d have to pay them something like the going rate. Then once in a job, pay rises (and promotions) are usually expected to make people happy. But a promotion or a raise one year followed by none the next would, human nature being what it is, be more damaging to happiness than if it wasn’t offered in the first place. You might have to go all the way and take the Buddhist view that true happiness is about reducing earthly desires, not satisfying them. So would a CHR-governed company not give pay rises or promotions? Tricky. Even more so is that the relationship between an employee and their line manager, usually cited as the biggest factor in how people feel about their job, should probably be central to the happiness metric. So should it be a manager’s main job to ensure the happiness of their reports?

Whether subjective happiness can be objectively measured could be another fairly major obstacle to the introduction of CHR. It’s even a problem in Bhutan, a previously closed society where TV and the internet were unavailable; spiritual questions like ‘have you experienced calmness in the past month?’ may be replaced by more functional assessments of how the government’s doing, like ‘are you content with your broadband connection?’ The emotional pursuit of happiness could be replaced by the transactional provision of happiness.

Does all that mean happiness, as a way of running a company or a bank, is bound to be a miserable failure? Not entirely. People who are happy in their work are usually good at what they do, and clients like working with happy companies. So improving the agency’s CHR should have a positive effect on productivity and profitability – and as any manager knows, once you start measuring something it tends to get better. So while CHR probably can’t be the primary metric, it certainly deserves far more attention than it usually gets. We’re going to be keeping a close eye on our CHR at AML. We’ll let you know if we’re happy with the results.

This article was first published by Chartered Banker