How Positive Psychology can Add Value to Businesses and Organisations
The Value of the People in an Organisation
· The value of "intangible assets" which include everything from skilled workers to patents to brands has increased from 20% to 70% of the value of companies in the S&P 500 according to a Hay Group 2006 study. In 2005, the intangible capital of the world's largest 150 companies was $7.5 trillion compared to $800 billion in 1985.
· Mercer and CFO Research Services find that companies spend an estimated 36% of their revenues on human capital.
· Human capital practices are a leading indicator of corporate financial performance. A 2005 Watson Wyatt study found the 5 year shareholder return for companies with strong human capital practices was nearly double that of companies with weak human capital practices (103% vs. 53%).
· There is a growing trend in both Medicine and Organisational Science towards evidence-based practices (Pfeffer & Sutton, 2006)
The Incremental Value of Employee Engagement
· Worldwide, the vast majority of employees across all levels of organisations are less than fully engaged in their work. According to a recent study completed by Towers Perrin, only 14% of employees worldwide indicate that they are highly engaged. Roughly a quarter are actively disengaged, and 62% are only moderately engaged.
· The Gallup organisation has been measuring employee engagement since 2000, and their recent studies found results consistent with Towers Perrin. Gallup estimates the annual economic costs associated with disengagement as high as £32 billion in the UK. 100 billion Euros in France, and $370 billion in the United States.
· It is generally accepted that there is a scarcity of talent, meaning organisations cannot rely on hiring in, but must also develop the talent they have to it’s full potential, and unlock motivation in new ways. (O’Reilly and Pfeffer, 2000).
The Field of Positive Psychology
Positive Psychology is an evidence-based science studying what’s right with people. It includes a classification of strengths, the deployment of strengths to enrich development, meaning, purpose and virtue, constructive relationships, the impact of optimism, hope and resilience on optimal performance, and the role of positive emotions. It applies the same discipline as traditional psychology, but with a very different purpose.
The University of Pennsylvania, with Professor Martin Seligman, leads the field in Positive Psychology Research and other centres are emerging with a particular focus on the application of positive psychology to organisations. The fields of study include:
1) Positive Organizational Behaviour research at the University of Nebraska focused on psychological capacities that can be measured, developed, and managed for performance;
2) Positive Organizational Scholarship at the University of Michigan where researchers are focused on positive organisational characteristics that can enhance organisational survival and success; and
3) Appreciative Inquiry at Case Western Reserve University. It is a well-established model of organisational change that involves three stages moving from elevation of inquiry, to fusion of strengths, to activation of energy.
The last two of these present a convincing argument for application through case studies of organisational change. They make compelling reading and can be explored further at the following websites:
http://www.bus.umich.edu/Positive/Center-for-POS/ http://appreciativeinquiry.case.edu/
The Need for New Approaches
All organisations are now broadening their remit to include an emphasis on Sustainability, Responsibility and Long Term Health. A review of the challenges facing organisations suggests some key themes that will contribute to these goals:
1) New levels of Employee Engagement.
2) Developing Leaders fit for the 21st Century.
3) Increased adaptability, speed of response and creativity.
4) and (of course) sustained high performance.
The Role of Positive Psychology
1) New Levels of Employee Engagement
Organisations are enhancing Employee Engagement by focusing on strengths, meaning and purpose.
· At Toyota's North American Parts Centre, 400 employees went through strengths-based interventions:
o After one year, per-person-productivity at the warehouse increased by 6%, compared to the normal yearly variation of around –1% to 1%
o The two teams who underwent a more intensive strengths-based program saw a 9% productivity increase after only 6 months (Connelly, 2002).
· Wachovia Bank saw an increase in performance of 13% with a group of employees who they actively engaged in the purpose of the Bank Vs a control group.
· A meta-analysis of more than 300,000 employees in 51 companies showed that work teams who scored above the median on the number of employees who get to use their top strengths daily had:
o 38% higher productivity scores
o 44% higher customer loyalty and employee retention scores (Harter & Schmidt, 2002).
2) Developing Leaders Fit for the 21st Century
The latest ideas in this area reflect an emerging model of leadership that is quite different (Resonant Leadership (Boyatzi), Authentic Leadership (George), Level 5 Leadership (Collins). Terms such as compassion, hope, optimism, resilience, authenticity and humility are entering the Leadership Vocabulary and sit firmly in the remit of Positive Psychology.
· CEOs who rated high on positive affect (i.e. the experience of positive emotions) were more likely to have employees who rated themselves as happy and healthy, and who reported a climate conducive to performance. Organisational climate was then correlated with productivity (r .31) and profitability (r .36). (Foster, Hebl, West, & Dawson, 2004).
· Teams lead by managers who exhibit positive leadership behaviours (e.g. focusing on strengths, giving frequent recognition and encouragement, and maintaining a positive perspective) are more engaged and have higher project performance. (Greenberg and Arkawa, 2007).
· Service departments with happy leaders were more likely to receive high ratings from customers (George, 1995).
· There is a positive relationship between Organisational Leaders’ level of hope and the profitability of their units and the satisfaction and retention of their employees (Peterson and Luthans, 2003).
· Optimistic CEOs receive higher performance ratings from the chairpersons of their boards and head companies with greater returns on investment (Pritzker, 2002).
3) Increased adaptability, speed of response and creativity.
Certain psychological characteristics such as hope and optimism increase our ability to effectively deal with challenges, whilst the experience of positive emotions (sometimes enabled by a focus on strengths) allows us to broaden our thinking and build new ideas.
· Optimism and Resilience can be taught (Seligman, 1998) and has been linked to:
o Coping better with crisis, coming up with more effective coping strategies and improving the quality of decision-making (Fredrickson, 2003).
o The development of more innovative problem solving techniques (Isen, 2000).
o The ability to thrive and flourish (rather than just survive) inevitable difficulties and uncertainties (Ryff & Singer, 2003).
· The Experience of Positive Emotions leads to increases in lateral thinking and creativity (Fredrickson, 2003).
· People who focus on negative events tend to show less creativity in problem solving (Lyubomirsky, 1995).
· A positive relationship exists between the amount of positive and constructive interaction within a team and the performance of that team (Fredrickson & Losada, 2006).
· Employees are more willing and able to adapt to change and new challenges that are aligned to their strengths (Linley, Harrington & Hill, 2005).
· Strengths use and strengths knowledge is associated with psychological well-being and vitality (Govindji & Linley, 2007).
4) Sustained High Performance
The above all link to Performance, but some studies show a direct relationship between job performance and positive psychological states (such as hope, optimism and self-efficacy) and constructs (such as strengths based approaches and high quality relationships).
· A study of 19,000 employees found that an emphasis on performance strengths led to a 36% increase in performance, whereas an emphasis on weakness saw a decrease in performance of 27% (Corporate Leadership Council, 2001).
· One study shows that the level of hope of over 1000 employees and managers is positively related to their performance, job satisfaction and organisational commitment (Youssef, 2004). Specific approaches have been developed that increase hope in an organisational setting (Luthans, Youssef and Avolio, 2007).
· Optimistic Life Insurance Salesmen sell more insurance (Seligman and Schulman, 1986). This may be due to the optimistic explanation for setbacks that led to a focus on self-development and creative problem solving (Luthans, Youssef and Avolio, 2007).
· The Marriott Hotel Chain saw an increase in sales of 6% Vs a control Group when they were given Strengths Based Feedback (Gallup 2004).
· A meta-analysis of 114 studies showed a strong positive correlation between Self-Efficacy (the probability that we believe we will succeed in a particular endeavour) and job performance (Stajkovic and Luthans, 1998a). There are well-established techniques for increasing work-related Self-Efficacy (Luthans, 2006).
Engagement, leadership, innovation and performance are inherently linked and, when taken as a whole, there is growing evidence to support a role for Positive Psychology in helping organisations flourish in the 21st Century.
Emma Judge
Positive Organisations
April 2008
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