Happy bosses at work even improve the company’s stock market value, says professor

Your boss can influence the performance of everyone around him, depending on his mood and behavior. The happier he is, the more satisfied employees tend to be — and this tends to positively impact both the company’s financial results and performance in the market.

That’s the conclusion of Arthur C. Brooks, a Harvard professor who teaches about leadership and happiness at the Harvard Kennedy School and Harvard Business School. Speaking recently at Harvard Business School’s Klarman Hall during an episode of HBR IdeaCast, Brooks said, “Happier employees are more productive and profitable. That’s how it works. If you can have a happier team, you’ll have a better company. And the results will show.”

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Brooks, a best-selling author whose latest book, “Build the Life You Want,” was co-authored with Oprah Winfrey, said leaders who know how to prioritize their own happiness realize that it “really is a great investment.”

The business case for happiness at work

Research from Irrational Capital, a Wall Street investment manager for which Brooks served as a consultant, shows a clear correlation between employee happiness and company performance. The firm analyzed data from 7,500 publicly traded companies, including the entire S&P 500 and the Russell 1000.

“What they find is that, for example, if you are in the top 20 percent of workplace well-being, your company is, on average, about 520 basis points above the S&P 500 in share price over the last year,” Brooks said. “This really works. It’s a really, really good investment.”

Separate research from the University of Oxford reinforces this relationship, showing that a single point increase in employee happiness scores correlates to billions of dollars in additional annual profits.

What workers want

The problem, Brooks argued, is that companies often don’t understand what really makes people happy. When Silicon Valley companies ask employees what would increase their satisfaction, “they don’t know. They just know they’re not happy. Then they say things like: I don’t know, a ping pong table. How about avocado toast?”

Brooks attributed this gap between what companies offer and what employees need to a deeper problem: disconnection from leadership. When a boss is stressed, isolated or unhappy — conditions he said are nearly universal among new CEOs — he or she has difficulty creating the psychological safety and genuine attention that are core desires of employees.

“The number one reason someone hates their job is having a bad boss,” Brooks said. “And that has a lot to do with the boss’s character, personality and leadership style. If you’re the boss, you can ruin the environment very, very quickly.”

This influence operates through what psychologists call emotional contagion, which means that employee satisfaction and engagement are directly shaped by the emotional state and presence of the leader. A leader who works on their own well-being is more prepared to listen, empower the team and create conditions for real relationships to flourish at work.

According to Brooks, employees want four specific things: genuine friendships at work, feeling empowered and improving in their roles, having managers who listen to their suggestions and working efficiently (not having time wasted in useless meetings).

The leadership trap

It’s natural to want to climb the career ladder — seek challenges and the benefits that come with more responsibility. But Brooks said the two most common emotions experienced by CEOs in the first 24 months are neither joy nor satisfaction. They are loneliness and anger.

This aligns with broader research showing that about half of CEOs report feeling isolated, and 70% of junior executives say loneliness negatively affects their performance.

“They’re very surprised because, once again, their old brain says, go up, man, reach the goal. That’s where it all happens. It’s going to be amazing. And when they get there, they don’t like it.”

For Brooks, his main objective is to train managers with a specific objective: “to be happy people”.

“That’s the main factor in being a good boss: working on your own happiness,” he said.

He drew a parallel with parenting, rejecting the common adage that parents are “never happier than their unhappiest child,” calling this idea misguided. “That’s just bad parenting, because nobody wants to have an unhappy parent. And nobody wants an unhappy boss.”

“If you are in any leadership position, you have an ethical responsibility to work on your happiness, because it is your gift to the people you are responsible for.”