Well-Being as Business Purpose?, Yannis

Well-being as objective function for business?

Yannis Georgellis

Friday 7 November 2014, OECD Conference Centre

‘A business’s sole purpose is to generate profits for their

shareholders and companies that pursued other missions would be

less competitive, resulting in fewer benefits to owners, employees,

and society’

Milton Friedman, 1970, New York Times

Profit Maximisation

max PROFIT = (Total Revenue) – (Total Cost)

= (Price) x (Output) – (wL + rK)

Production function: Q = f (L, K)

Stakeholder Theory of the Firm

Firms aim at satisficing rather than maximizing their results.

i.e., some groups may settle for "good enough" achievements rather than striving for the best possible outcome

Stakeholder Theory of the Firm

How much profit are we ready to give up in order to keep stakeholders happy?

Profit

A

B

Business Models

A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. The process of business model construction is part of business strategy.

The business model indicates how the firm

will convert inputs (capital, raw materials

and labour) into outputs (total value of

goods produced) and make a return that is

greater than the opportunity cost of capital

and delivers a return to its investors.

Business Models

Any resilient business model

must be able to create and

sustain returns for its investors

over time, otherwise, it is likely

to go out of business or fashion.

Employee Happiness and Well-being

as

Objective Function for Business?

Employee Happiness and Well-being

as

Objective Function for Business?

Employee happiness as a business model

Employee happiness

Motivation Productivity/

profit

Employee happiness as a business model

Company Valuation

Employees as a resource (inputs)

wage Hours of work

Effort

Incentives for performance (The standard economics paradigm)

Incentives for performance

Ranking of job characteristics, as revealed by subsequent quit behaviour (Clark, 2001- Labour Economics)

Most important Next most

important

Insignificant

Men Job Security Pay Everything Else

Hours

Women Initiative Hours Promotion

Work Itself Relations

30 or Under Initiative Job Security Everything Else

Hours

Over 30 Pay Hours Promotion

Work Itself Relations

Job Security Initiative

Are happy employees more productive employees?

Are happy employees more productive employees?

• Happy employees could turn complacent?...

• Correlation vs. Causality

Happiness Performance

• Measurement issues

Thank you

Yannis Georgellis

[email protected]