For people raised on the spiritual values laid out in all of the world’s great religions, the question was answered and the issue settled literally thousands of years ago: Money cannot buy happiness. But that hasn’t stopped science from asking the question repeatedly and trying to tease out greater insight into it empirically. And recent psychological research has uncovered certain insights that may contribute to a more nuanced understanding of the basic answer—insights that leaders of people and builders of organizational cultures could benefit from knowing.
To begin with, the science says that people with money are generally happier than people without money, for an obvious reason: People who must struggle every day to satisfy their basic needs for food, shelter and clothing are less happy than people who have enough money to meet those basic needs.
The better question to ask is whether more money can buy a proportional increase in happiness. The answer to that question is far more complicated. Believe it or not, recent research out of Princeton University actually identified a household income level --$75,000 per year—beyond which “affective” components of happiness do not increase. “Affective” components, according to researchers Daniel Kahneman and Angus Deaton, are defined as the experience of positive emotions like joy, affection and tranquility (as distinct from overall life satisfaction).
Psychology Professor Ryan Howell of San Francisco State University has come up with a more nuanced answer: How much happiness you can “buy” depends on how you spend your money. He concludes that all other things being equal, experiences that you can buy tend to bring more value than things you can buy. Put another way, an African safari or 50-yard line seats at a Lions’ game are more conducive to “happiness” than a Lamborghini Aventador or the latest smartphone. The reason is that the satisfaction one derives from “experiences,” because they are less tangible in the first place, tends to last longer. But the problem for most people is that they don’t realize that fact before they make the purchase; on the contrary, they assume that because the Lamborghini or the smartphone will last longer than the safari or the football game, it will bring them more happiness. But afterwards, the satisfaction from having gone on the safari or having seen Matt Stafford throw a touchdown pass to Calvin Johnson lasts longer.
Professor Howell’s research subjects responded on a scale of 1 (“not at all”) to 7 (“very much”) to describe how much value they felt certain material purchases held for them compared to experiential purchases, before and after they made the respective purchases. Before (i.e., in anticipation of) the material purchase, the average response was 4.41; it went up to 4.91 two weeks after the purchase but then fell to 4.67 four weeks after the purchase. Before the experiential purchase the rating was lower (2.9), but jumped to 5.7 two weeks after the purchase and settled back to a still-higher 5.42 four weeks after the purchase. In other words, people felt greater anticipation when they were planning to buy a particular thing, but they felt more satisfaction after they had a particular experience.
Professor Thomas Gilovich of Cornell University supports Howell’s conclusions. He characterizes the process as “misforecasting”—i.e., something that is rationally true (“I have a limited amount of money. If I do such-and-such, it’ll be great but it’ll be over in no time. But if I buy this thing, it’ll last longer) is psychologically untrue. Gilovich makes the point that experiences tend to meet more of our psychological needs than things do, and therefore make up a more substantial portion of our identity, our sense of who we are. But, over and over again we buy material things because they are tangible and we assume they will give us more happiness because they will last longer. Conversely, we don’t see the true worth of a particular experience ahead of time; only afterwards do we appreciate it in line with its actual value.
How does this lesson apply to the workplace? It should leave no doubt in the minds of leaders that although higher pay is important because it contributes to a greater overall sense of well being, it is the experiences that come with a person’s employment that will bring about his or her affective sense of happiness, i.e., his or her experience of “happy” emotions like satisfaction from a job well done, the joy of being part of a successful team, the excitement from having contributed a creative idea, and so on.
The conclusion? It is the job of the leader to enable those kinds of experiences to the greatest degree possible. The successful result will be what we call employee engagement.
Source: The Wall Street Journal 11/10/14