How Investing in Employee Wellbeing Can Radically Improve Organizational Culture

Despite being important to organizational success, employee wellbeing is often difficult for leaders to define and take action on.

Wellbeing goes beyond a healthy work-life balance and competitive pay—it encompasses individual experiences, manager perceptions, and organizational culture and performance. SHRM research shows that organizations that foster a positive work environment have lower turnover, thereby retaining talented and motivated employees. For leaders looking to retain top talent, this holistic view is crucial.

To bring more clarity to the wellbeing conversation, Russell Reynolds Associates ran a correlation analysis of our recent Divides & Dividends sustainability survey. We then identified three attributes that contribute to an employee’s sense of wellbeing within their organization.

We found that only about half of employees (54%) identify as having “high wellbeing”—meaning they strongly agree/agree with the statements above.

While employers often focus on addressing employees with a low sense of wellbeing—understandable, as these employees feel 4x less impactful in their roles compared to those with high wellbeing—they actually account for a relatively small portion of organizations (6%).

Instead, organizations have the greatest opportunity with what we call the “vital middle”—the 40 % of employees who report having medium wellbeing. And this middling sense of wellbeing has a significant effect—employees in this category feel half as impactful as those who report high wellbeing (Figure 1).

Figure 1. Employee wellbeing across employees globally

^{Source: RRA Divides & Dividends 2023, N = 8,193 employees globally, N = 4,427 employees high wellbeing, N = 3,286 employees medium wellbeing, N = 480 employees low wellbeing}

This presents a massive engagement opportunity for leaders. While this 40% of employees may not be thriving, they are already at least partially engaged in the organization and have the potential to make a significant impact—with the right support from leadership. A small investment in employee wellbeing can go a long way.

While these attributes may not directly impact more concrete metrics (such as organizational or manager performance), employee perception contributes to productivity, reputation, and net promoter scores. Via learnings from this analysis, we offer the following data-backed insights into how organizations can accelerate their employee wellbeing efforts:

1. Employees with high wellbeing are significantly more likely to report clarity around their work environment. Aligning goals and objectives across all levels of the organization is crucial to ensure a unified direction.
   
   
2. Managers play a crucial role in fostering honesty, inclusion, and employee wellbeing. Employees who see their manager challenging unethical behavior, being transparent and honest, and vocalizing issues of discrimination and inequality are more likely to report high wellbeing.
   
   
3. High wellbeing improves employee’s confidence in organizational performance. Wellbeing directly impacts how employees perceive overall organizational performance. By taking steps to ensure that employees feel inspired, connected, and able to be authentic at work, organizations can enhance confidence and engagement.

Employees with high wellbeing are significantly more likely to report clarity around their work environment

Most employees with high wellbeing (82%) feel that their role objectives are clear. Conversely, less than half (47%) of employees with medium wellbeing agree (Figure 2). In addition, 89% of employees with high wellbeing feel that they have the right team of people around them to enable good decision making, compared to only 55% of employees with medium wellbeing.

This underscores the importance of fostering wellbeing at the individual level. Not only does it create a healthier experience for employees, but it also enhances clarity, teamwork, and access to crucial information.

Figure 2: How employee wellbeing impacts job experience

^{Source: RRA Divides & Dividends 2023, N = 8,193 employees globally, N = 4,427 employees high wellbeing, N = 3286 employees medium wellbeing, N = 480 employees low wellbeing}

Managers play a crucial role in fostering honesty, inclusion, and employee wellbeing

Employees who see their manager challenging unethical behavior, being transparent and honest, and vocalizing issues of discrimination and inequality are 1.4x more likely to report high wellbeing.

Across four manager behavior dimensions we measured, employees with high wellbeing were more likely to report that their managers display behaviors that help create a positive work environment (Figure 3). Employees with high wellbeing are more likely to report that their manager honestly acknowledges both successes and failures than those with medium levels of wellbeing (65% vs 49%). Related, those with high wellbeing were also more likely to agree that their manager effectively vocalizes issues of discrimination and bias than their medium wellbeing counterparts (56% vs 41%).

These disparities highlight the major impact that managers have on their employee’s wellbeing. As such, senior leaders should prioritize open and honest employee relationships. According to Gallup research, managers account for at least 70% of the variance in employee engagement scores—and engaged employees are more productive, loyal, and committed to the organization’s success.

Figure 3: How direct managers impact employee wellbeing

^{Source: RRA Divides & Dividends 2023, N = 8,193 employees globally, N = 4,427 employees high wellbeing, N = 3286 employees medium wellbeing, N = 480 employees low wellbeing}

High wellbeing influences employee’s confidence in organizational performance

In 2023, employees with high wellbeing were 1.4x more confident in their organization’s performance than those with medium wellbeing (Figure 4). When taking a long-term view, 88% of employees with high wellbeing express confidence in their organization’s future success, compared with 66% of those with medium wellbeing.

This highlights the link between employee wellbeing and retention. Those who have better experiences at work have simultaneously better expectations around their organization’s future—meaning they’re more engaged in the organization and ideally less likely to leave.

Figure 4: How employee wellbeing impacts organizational performance perceptions

^{Source: RRA Divides & Dividends 2023, N = 8,193 employees globally, N = 4,427 employees high wellbeing, N = 3286 employees medium wellbeing, N = 480 employees low wellbeing}

How to harness employee wellbeing to improve organizational success

In the future of work, employee wellbeing is a non-negotiable. Leaders looking to enact meaningful improvements to employee wellbeing and their organization’s success should consider the following:

Methodology

Divides and Dividends 2023

Divides and Dividends explores the extent to which organizations are integrating success into their business strategy and operations and what actions are linked to perceptions of progress. It is based on an online survey of 3,813 senior leaders and 8,753 employees across 105 countries, which was carried out between May 2, 2023, and May 18, 2023. Samples are weighted by country gross domestic product in USD based on 2022 International Monetary Fund statistics. Not all percentages in charts add up to 100% as a result of rounding percentages and the decision in certain cases to exclude the display of certain groups and “neither/nor,” “other,” “none of the above,” and “don’t know” responses.

Employee Wellbeing

“Employees” are those who are:

• Currently full-time or part-time employed.
• Reporting to someone below the C-suite (such as reporting to a department head, VP, business unit head, senior director, director, team lead, manager, or senior team member).
• Located in either the United Kingdom, United States, Australia, China, Germany, France, Spain, Mexico, Brazil, India, Denmark, Finland, or Sweden.

Employees with high wellbeing are those with an average score on a 5-point agreement scale (Strongly agree=5, agree=4, neutral=3, disagree=2, strongly disagree=1) between 3-5 points on the following three concepts. Employees with medium wellbeing are those with an average score between 2-3, and employees with low wellbeing are those with an average score of 1-2.

Reflecting on your experience in your current role, to what extent do you agree or disagree with the following statements:

• I feel a part of the culture of my company
• The people I work with inspire me to do my best work
• I do not have to sacrifice who I am to be successful

Authors

Tom Handcock leads Russell Reynolds Associates’ Center for Leadership Insight. He is based in London.
Beth Hawley is a member of Russell Reynolds Associates’ Center for Leadership Insight. She is based in Brussels.
Gabrielle Lieberman is a member of Russell Reynolds Associates’ Center for Leadership Insight. She is based in Chicago.
Peter Pickus leads Russell Reynolds Associates’ Assessment and Development Knowledge team. He is based in Washington DC.

Learn more about the authors and The Center for Leadership Insight