Employee engagement and happiness: Why it’s your most important success metric

Workplace wellness & culture
Estimated read time: 6 mins
Last updated: 08/10/2025

As we celebrate Happiness at Work Week 2025, it’s worth asking: are we measuring what actually matters? Most businesses track revenue, productivity, and profit margins obsessively. But there’s one metric that influences all of these – and it’s often overlooked: employee engagement through workplace happiness.

The numbers tell a compelling story. Organisations with high employee engagement see better retention, higher productivity, and stronger financial performance. But here’s what many business leaders miss: engagement isn’t driven by perks or ping pong tables. It’s driven by genuine happiness at work.

If you’re serious about building a successful business in 2025 and beyond, it’s time to start treating happiness as the success metric it deserves to be.

Why happiness matters for employee engagement 

Employee engagement isn’t just about whether people show up to work. It’s about whether they’re genuinely invested in what they’re doing, connected to their colleagues, and committed to your organisation’s success.

And here’s the crucial link: you can’t have truly engaged employees without workplace happiness. They’re not separate concepts – they’re intrinsically connected.

What the research shows:
Research consistently demonstrates that happier employees are more engaged, more productive, and more likely to stay with their employer. Whilst we should be cautious about treating correlation as causation, the link between happiness and performance is difficult to ignore.

Why happiness drives engagement:

  • Psychological safety: Happy workplaces create environments where people feel safe to contribute ideas and take risks
  • Stronger relationships: Happiness fosters better team dynamics and collaboration
  • Intrinsic motivation: When people enjoy their work environment, they’re motivated by more than just a paycheque
  • Resilience: Happy teams handle challenges and setbacks more effectively
  • Creativity: Positive emotions enhance problem-solving and innovation

The business case for happiness as a success metric 

Traditional success metrics – revenue, profit margins, quarterly growth – are important. But they’re lagging indicators. By the time these numbers decline, your problems are already severe.

Employee engagement and happiness are leading indicators. They predict future performance and give you time to course-correct before financial metrics suffer.

Tangible business benefits:

Reduced turnover costs

Replacing an employee typically costs between 50-200% of their annual salary when you account for recruitment, onboarding, and lost productivity. Engaged, happy employees simply stay longer.

Higher productivity

Study after study suggests that happiness correlates with improved performance. Whether it’s faster task completion, better quality work, or increased innovation, the productivity benefits are measurable.

Better customer experience

Engaged employees deliver better customer service. It’s straightforward logic: people who feel good about their work treat customers better. And better customer experiences drive revenue growth.

Attracting top talent

Your employer brand increasingly matters for recruitment. Prospective employees research company culture, read reviews, and talk to current staff. Organisations known for workplace happiness attract stronger candidates.

Reduced absenteeism

Disengaged, unhappy employees take more sick days. This isn’t just about physical illness – mental health, stress, and burnout all contribute to absence rates. Happy workplaces see consistently lower absenteeism.

Diverse business professionals collaborating in Work.Life flexible workspace showing creative studios, consultants and recruitment agencies working together in modern coworking environment

How to measure employee engagement through happiness 

You can’t improve what you don’t measure. But measuring employee engagement effectively requires looking beyond annual surveys and tick-box exercises.

Regular pulse surveys

Short, frequent surveys (weekly or fortnightly) give you real-time data on how people are feeling. Keep them brief – 3-5 questions maximum – and actually act on the feedback.

Key questions to ask:

  • “On a scale of 1-10, how happy are you at work this week?”
  • “Do you feel your contributions are valued?”
  • “Do you have what you need to do your job well?”
  • “Would you recommend this company as a great place to work?”

One-to-one conversations

Structured check-ins with line managers provide qualitative insights that surveys miss. Train managers to ask open questions and genuinely listen.

Exit interview data

When people leave, find out why. Patterns in exit interview feedback reveal systemic issues with engagement and happiness.

Participation rates

Track engagement with optional activities – team socials, wellness programmes, learning opportunities. Low participation often signals low engagement.

Anonymous feedback channels

Create safe ways for people to raise concerns without fear of repercussions. The feedback might be uncomfortable, but it’s invaluable.

Observable indicators

  • Team collaboration quality
  • Voluntary knowledge sharing
  • Initiative taking
  • Support between colleagues
  • Energy levels during meetings

Practical employee engagement strategies that work 

Improving employee engagement through happiness isn’t about grand gestures or expensive programmes. It’s about consistent, genuine actions that demonstrate you value your people.

1. Flexible working that actually works

Flexibility has become table stakes for talent attraction. But truly flexible working means trusting your team to manage their time and location.

What this looks like:

  • Core hours instead of rigid 9-5 schedules
  • Remote work options without bureaucratic approval processes
  • Understanding that life happens and people need flexibility occasionally
  • Measuring output rather than presenteeism

2. Create genuine community

People spend significant time at work. Creating genuine connections and community makes that time more enjoyable and meaningful.

Employee engagement activities that build community:

  • Regular team socials (but make them optional)
  • Interest-based groups (book clubs, running groups, etc.)
  • Celebrating achievements and milestones
  • Creating spaces for informal interaction
  • Cross-team collaboration opportunities

3. Prioritise mental health and wellbeing

You can’t have workplace happiness without supporting mental health. This requires moving beyond token gestures to genuine cultural change.

Practical approaches:

  • Mental health days as standard leave policy
  • Training managers to recognise and support mental health challenges
  • Access to counselling or employee assistance programmes
  • Normalising conversations about mental health
  • Reasonable workloads and deadline expectations

4. Provide growth opportunities

People want to develop and progress. Organisations that invest in growth see higher engagement and retention.

Development opportunities:

  • Learning budgets for courses, books, and conferences
  • Internal mentorship programmes
  • Clear career progression pathways
  • Stretch assignments and new responsibilities
  • Time allocated for learning during work hours

5. Transparent communication

Uncertainty creates anxiety and disengagement. Transparent communication about company direction, challenges, and decisions builds trust.

Communication best practices:

  • Regular all-hands meetings with Q&A opportunities
  • Sharing both successes and challenges openly
  • Explaining the reasoning behind decisions
  • Multiple channels for feedback
  • Following through on commitments

6. Recognise contributions meaningfully

Recognition matters more than many leaders realise. But it needs to be timely, specific, and genuine.

Effective recognition:

  • Immediate acknowledgement of good work
  • Specific feedback about what was valuable and why
  • Public recognition (when appropriate)
  • Peer-to-peer recognition systems
  • Celebrating team successes, not just individual achievements

7. Design your physical environment for happiness

Your workspace directly impacts mood, productivity, and wellbeing. Thoughtful design demonstrates you care about people’s daily experience.

Design elements that matter:

  • Natural light and views
  • Comfortable, ergonomic furniture
  • Variety of spaces (focus areas, collaboration zones, social spaces)
  • Good acoustics and noise management
  • Plants and biophilic design elements
  • Kitchen facilities that encourage breaks

Creating lasting change beyond Happiness at Work Week 

Happiness at Work Week serves as a useful reminder to focus on wellbeing and engagement. But genuine cultural change requires sustained commitment, not annual initiatives.

Make it leadership priority

Employee engagement needs to be treated as seriously as financial performance. Include happiness and engagement metrics in leadership dashboards and board reports.

Embed it in operations

Build engagement considerations into everyday processes:

  • How do recruitment processes reflect your culture?
  • Do performance reviews consider wellbeing alongside output?
  • Are promotion decisions based on values alignment as well as results?
  • Does project planning account for workload impacts?

Empower managers

Your middle managers have the greatest influence on day-to-day employee experience. Invest in training them to lead with empathy and create happy, engaged teams.

Measure and iterate

Track your employee engagement metrics over time. When scores drop, investigate why and take action. When initiatives work, scale them. Treat this as an ongoing process of improvement.

Walk the talk

Actions speak louder than words. If leadership talks about work-life balance whilst sending emails at midnight, people notice the disconnect. Model the behaviours you want to see.

The Work.Life approach to employee engagement

At Work.Life, we’ve built our entire business model around the idea that workplace happiness matters. Our B Corp certification reflects our commitment to putting people before profit, and everything we do is designed to support the happiness and engagement of the teams who work in our spaces.

How we support employee engagement:

Flexibility built in

Our workspace solutions scale with your team. Start with two desks, grow to 40, contract when needed. This flexibility reduces business stress, which directly impacts team happiness.

Community by design

We don’t just provide desks – we create communities. Regular events, networking opportunities, and shared spaces foster the connections that drive engagement and happiness.

Wellbeing at the core

From natural light and biophilic design to wellness programmes and mental health support, our spaces are designed with happiness in mind. Because we know that environment shapes experience.

Transparency in everything

No hidden fees, clear pricing, and honest communication. The transparency we offer to our members reflects the kind of open culture that supports engagement.

The future belongs to organisations that recognise happiness and employee engagement aren’t nice-to-haves – they’re fundamental to success. As we celebrate Happiness at Work Week 2025, the question isn’t whether to prioritise workplace happiness. It’s how quickly you can start measuring and improving it.

Ready to create a workspace that puts happiness and employee engagement first? Book a tour of our London, Manchester, or Reading locations and discover how the right environment supports team wellbeing and success.

Click to view Price