Well-Being as Business Purpose? 7 November 2014, Paris, France

1. Well-being as objective function for business?
Yannis Georgellis
Friday 7 November 2014, OECD Conference Centre

2. ‘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

3. Profit Maximisation
max PROFIT = (Total Revenue) – (Total Cost)
= (Price) x (Output) – (wL + rK)
Production function: Q = f (L, K)

4. 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

5. Stakeholder Theory of the Firm
How much profit are we ready to give up in order to keep stakeholders happy?
Profit
A
B

6. 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.

7. 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.

8. Employee Happiness and Well-being
as
Objective Function for Business?

9. Employee Happiness and Well-being
as
Objective Function for Business?
Employee happiness as a business model
Employee happiness
Motivation
Productivity/
profit

10. Employee happiness as a business model
Company Valuation

11. Employees as a resource (inputs)
wage Hours of work
Effort
Incentives for performance
(The standard economics paradigm)

12. 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

13. Are happy employees more productive employees?

14. Are happy employees more productive employees?
•Happy employees could turn complacent?...
•Correlation vs. Causality
Happiness Performance
•Measurement issues

15. Thank you
Yannis Georgellis
y.georgellis@kent.ac.uk