Why 99% Of Businesses Are Destroying Employee Creativity, Productivity, and Happiness

There’s an epidemic in America that’s hurting 99% of businesses.

Companies are offering "benefits" (if we can call them that) that give employees a maximum amount of vacation days per year. Yet businesses that don't restrict vacation days (1% of all businesses) are experiencing tremendous growth.

This article explores why this is happening. And why 99% of the business who aren't adopting this are hurting. 

Research from the U.S. Travel Association says 40% of American workers are not using all of their vacation days.

In other words, they're mentally punishing themselves, forfeiting time for rest and relaxation. 

In fact, countless studies have demonstrated that work performance plummets (thus company performance plummets) when we work for too long without a break.

We dream of laying in a hammock, nestled between two palm trees, hovering above the Jamaican white sand beach with turquoise-blue water shimmering in the 85 degree sunshine sipping a margarita … but 4 out of 10 of us don’t turn that into reality. Vacation remains a dream.

Why is this happening? 

Well, research validates that 40% of Americans are actually AFRAID of taking vacation:  

  40% of employees are afraid of the work they’ll face when they return.  

  35% say they’re afraid no one else can do their jobs.  

  32% of employees are worried that taking vacation puts extra pressure on colleagues to do their jobs.  

  25% are afraid of losing their jobs when they take a vacation.  

As a result, we’re an overworked and stressed workaholic society, built upon 50+ hour workweeks.

The anti-vacation epidemic is rooted in a common “benefit” granted by 99% of businesses — allowing a maximum of vacation days per year.

But there’s an alternative. Some call it an “unlimited vacation” policy.

Only 1% of all American business offer an “unlimited vacation” policy. That means 99% of businesses don't.

And as we saw, placing a limit on vacation days doesn't work ... people don't use them. Remember, 40% of American workers aren't using their vacation days. 

By employing an unlimited vacation policy, those days won't go to waste. Employees can take vacation when they need it — often after a massive, stressful project is completed — giving time for renewal and recharging. 

In addition, an unlimited vacation policy leads to lower employee turnover, greater commitment to the company, and faster business growth. 

This is because vacation makes employees happier, more creative, and more productive.

Research below validates the psychological (and economical) benefits of vacation time:

• According to Nielsen, more than 70% of vacationers are satisfied w/ their jobs. But those who don’t vacation, only 46% are satisfied. 
• NASA found that after a few days vacation, people’s reaction time jumps by an astonishing 80%. 
• According to Gallup, how often you vacation is often a better predictor of happiness than your income. A regular vacationer earning $24k/year is happier than someone who doesn’t vacation making 5x as much. 
• Applied Research and Quality of Life found that booking a vacation drastically boosts happiness, which lasts up to eight weeks. 
• According to the World Health Organization, overworking equals stress and sleep deprivation. Stress costs American businesses $300 billion per year, whereas sleep deprivation tacks on another $63 million. 

We need time to “sharpen the saw,” as Stephen Covey explains in 7 Habits of Highly Effective People. Humans are wired to perform, then recharge. Vacation time equals calm, clarity, and overall happiness.

And happy employees equal faster economic growth. For example:

  HubSpot (that's us!) allows unlimited vacation and has been listed as the #2 fastest-growing software company on the Inc. 500. 

  Netflix’s stock price has increased 196% since they originally announced their unlimited vacation policy in 2002. 

  GoHealthInsurance.com has had a 200% increase in growth this year since implementing their unlimited vacation policy. 

Despite the obvious evidence behind why more businesses should be encouraging vacation, not limiting it, this burning question remains:

“How do I know my employees won't take advantage of the policy, taking more vacation time than they should?”

Great question.

Here's how successful companies, such as Netflix, HubSpot, and Virgin, have combated this problem by extending autonomy and trust to employees:

“Employees take the vacation when they need it … we let employees guide themselves through our internal company mantra 'Use Good Judgment' which provides autonomy.” - Dharmesh Shah, co-founder of HubSpot

"We realized we should focus on what people get done, not on how many days they worked. Just as we don’t have a 9am-5pm workday policy, we don’t need a vacation policy … instead we extend trust by letting employees make decisions guided by these five words: ‘Act in Netflix’s best interest’” - Reed Hastings, founder of Netflix

“Flexible working has revolutionized how, where and when we all do our jobs. So, if working nine to five no longer applies, then why should strict annual leave (vacation) policies?”  - Richard Branson, founder of Virgin

With all three business leaders, there’s a common theme — trust your employees.

In Game Theory, the study of strategic decision making, when one person shows trust in the other, the second person’s trust also rises. This creates an upward spike in seemingly every possible category — morale, creativity, and productivity.

On the contrary, business who put a limit on vacation time (or don’t trust employees to use their best judgment) are:

  Damaging trust between employer and employee

  Decreasing employee happiness

  Slowing productivity

  Harming creativity

  Forcing overworking, which equals poor concentration

That’s a recipe for stagnant (or even declining) revenue.

In summary, encouraging vacation, instead of limiting it, results in happier employees. Happier employees equal more productive employees. And more productive employees equal faster growth.

From where I stand, the facts prove that unlimited vacation is a smarter business decision. So why aren't all businesses doing it? 

But I realize not everyone agrees. So we included a one-question poll below.

What do you think?