A KPI for the Leaders of the Future: Return On Flourishing (ROFL)

First, I have to admit it feels really good to think something (or at least: say it “in the digital public”) for the very first time. At least with regard to Google hits, I´ve created a new expression:

Return on Flourishing - Dr. Nico Rose

Return On Flourishing (ROFL – pun somewhat intended)

In my main occupation, I work as a human resources director. In most business organizations, Key Performance Indicators (KPIs) are of paramount importance. One of the most important KPIs in every organization is Return on Investment (ROI). In its simplest form, ROI is the return of some activity divided by the cost of that same activity. For instance, if a marketing campaign costs $10,000 and (identifiably) leads to $20,000 in additional sales in a certain period of time, the ROI of that project is 200%.

To this effect, it would also be possible to calculate a Return on Flourishing – which I propose to be the additional (financial) return that is generated by investing in measures designed to foster flourishing of the company´s workforce; minus the cost of those measures. By now, there´s an abundant body of research that is able to demonstrate that companies which invest in employee wellbeing do indeed fare better economically – which may ultimately even be detectable in stock prices (please check out the following paper: Does the stock market fully value intangibles? Employee satisfaction and equity prices).

By way of example, employee well-being could lead to a better quality of products or services; or a more engaged salesforce, leading to better sales figures. On the other hand, higher levels of flourishing may lead to cost reductions, e.g., by decreasing levels of absenteeism and healthcare costs; or lower levels of employee turnover which in turn helps to minimize recruiting costs. Therefore, it is reasonable to expect that investing in employee flourishing will lead to an increase in financial returns. In order to make this effect visible and clearly identifiable from the inside perspective, first, we would have to establish a baseline of overall flourishing in the workforce. Based on Seligman´s PERMA framework, we could rather easily measure the following:

Alternatively, there are existing “one-stop” questionnaires to measure flourishing, e.g., the PERMA Profiler (please check out my MAPP Capstone thesis for its items; this could be adapted so as to better fit to a working context).

Second, one or more activities to foster workforce flourishing would have to be implemented. For instance, there could be company-wide workshops on job crafting. Or rather, first we would have to implement that project with a part of the workforce (treatment group; e.g., a product line) in order to later compare those employees with another group that will receive the workshops at another point in time (control group; another product line). If, after implementation, the treatment group shows significantly higher levels of flourishing compared to the control group (manipulation check), we could move on to the final step.

Ultimately, the financial success of the different business units would have to be calculated for several ensuing periods. If the treatment group fares significantly better than the control group (e.g., a significant increase in sales), this difference could be attributed to the increase in employee flourishing. Of course, it is always tricky to make this kind of causal inference, but there are lots of steps one can take to rule out or control for other effects. Now, if the increase in financial returns surpasses the cost of the measures to increase flourishing (over time), we would assume a positive Return on Flourishing (ROFL).

Return on Flourishing (ROFL): the wider Perspective

Of course, this is still a rather limited point of view. Studies were able to show that an increase in well-being at work leads to higher levels of general well-being. To that effect, we can assume there could a be a wider ROFL – where higher employee well-being leads to an increased level of well-being with regard to the company´s community and stakeholder groups via a kind of ripple effect.

What are your thoughts on this?

One thought on “A KPI for the Leaders of the Future: Return On Flourishing (ROFL)

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