I am going to sound mean here; but I suggest an office environment free from any play things or distractions. If someone spends half an hour on an xbox will not suddenly snap back in to full production. You are better of letting them go home early as a reward for getting things done.
Discourage social activities that invoice work time in either participation or organization. Better still get rid of such people, along with rule makers, sign makers and those that like to find things to be offended by.
If you want happy workers hire people who truly love there job, not those that just say they do during a job interview. People that like there job tend to work hard and accomplish things, and visa-versa, people who work hard and accomplish things tend to like their job
With no distractions it is amazing what people get done.
Somewhere there will be a competitor with people that work hard all day and will eventually put you out of business. Even if you have a big head start of your competitions that is rarely the case for ever, and it is hard to get a work force productive when they are used to being non productive.