Empathetic Leadership: Why CEOs Need It To Improve Their Culture And Bottom Line

Empathetic Leadership, it’s a skill most CEOs aren’t aware of that could make the difference between meeting numbers versus exceeding them.

Think a companies’ culture doesn’t affect the bottom line? How about a CEO’s empathy?

As competition in the market becomes fierce, the need to differentiate and create a competitive advantage is palpable. We all know having the best “talent” and “innovation” are key components of a company that stands out from the rest, but what if I told you “culture” is an untapped vehicle to increase the bottom line?

If culture is the gold medal, then empathetic leadership is the secret weapon to win it.

According to research by Deloitte, “mission-driven” companies have 30% higher levels of innovation and 40%  higher levels of employee retention. In addition, a 2016 poll by Gallup showed that higher workplace engagement leads to 37% lower absenteeism and 41%  fewer quality defects.  Clearly, having a good culture with engaged employees results in lower costs, but how do you quantify it?

There are lots of survey companies ready to help you measure your employee engagement, a $1Billion marketplace in fact, but the problem is the survey companies simple supply the data, they don’t tell you what actions you need to implement to improve.

In an article by the Conference Board called, “The Engagement Institute: How organizations create and sustain highly engaging cultures,” some surprising data was revealed from a survey including 80 of the most advanced users of engagement surveys; only 50% believe their executives know how to build a culture of engagement.

And why would they know how to create a culture of engagement, their job is to run the business, not be a culture expert, right?

Wrong.

It Starts At The Top

A corporate culture starts at the top.  We all know the saying, “a fish rots from the head down,”  and the same goes for a company culture.  The leadership takes cues from the CEO, the managers take cues from the leadership and eventually it trickles down into every layer of the organization.  Even HR policies are reflective of the CEOs attitude, values and ideals.

In other words, the CEO is the captain of the ship, and whichever way he or she steers, the rest of the organization is going to follow.

With that much power to affect a companies culture, what skill does a CEO need to improve it?

Empathetic Leadership

In a study conducted by Businesssolver, 87% of CEOs agree that a company’s financial performance is tied to empathy, and 43% strongly agree.

More data suggests empathy is the foundation of employee engagement. Empathetic behavior shows people they are being heard and therefore appreciated.

 

  • 8 in 10 CEOs, employees and HR professionals agree that an empathetic workplace has a positive impact on business performance.
  • 9 in 10 employees are more likely to stay with an organization that empathizes with their needs.
  • 8 in 10 would be willing to work longer hours and take slightly less pay for a more empathetic employer and empathetic leadership.
  • Majorities in all demographics of employees responded that empathy motivates workers and increases productivity.

 

In a blog post last month, I outlined the model for “Happiness at Work”( the PERK model ) from my training at UC Berkeley’s Greater Good Science Center.  What is implied in that model is under the K (Kindness) is Empathetic Leadership.

Empathy enables those who possess it to see the world through others’ eyes and understand their unique perspectives. And YES, it can be learned, which is why I call it a skill.  Being more mindful, aware and open to others is something that requires practice and observation.

Best In the Business

A great example of using Empathetic Leadership is by Satya Nadella, CEO of Microsoft. In his new book, “Hit Refresh” he describes how he views empathy in business and in life .

“At the core, Hit Refresh is about us humans and the unique quality we call empathy,
which will become ever more valuable in a world where the torrent of technology will
disrupt the status quo like never before.”

“It’s a quality my wife, Anu, helped me begin to learn when our son was born with severe
disabilities 21 years ago. It’s a quality that shapes our mission of empowerment at Microsoft
and our quest to meet unmet and unarticulated needs of customers.  And it’s the quality that
helps us as a society move forward in creating new opportunity for all.”

 

Satya also discusses how empathy has led to Microsoft’s newest products.

“Empathy makes you a better innovator.
If I look at the most successfulproducts we
[at Microsoft] have created, it comes with that ability tomeet the unmet, unarticulated needs
of customers.”

 

 

Measuring Empathetic Leadership

Still not convinced Empathetic Leadership is a CEO’s Superpower? Take a look at the data that proves the point even further.

The Global Empathy Index, spearheaded by Lady Geek founder, Belinda Parmar, is an initiative that relies on data to validate the importance of empathy in business. Within the yearly index, companies are ranked not by an empty public commitment to empathy, but by measuring tangible indicators — from employee opinions to environmental practices. And the results show a “direct link between empathy and commercial success.”

One of the best examples is KIND Founder and CEO, Daniel Lubetzky. He is a shining beacon for young executives to follow as leadership changes direction and evolves from a top down management style to a more open and empathetic style .

 

“What’s interesting is that as my thinking has evolved – I’m on my fourth business now –
it has become clearer that empathy and kindness offer a distinct competitive advantage.
When I understand people with ease, I can accomplish more in both my business and my
private life. ”


“Being able to access these skills is especially valuable in those moments when you feel
threatened 
and your fight/flight instinct kicks in. If you can ask yourself questions like,
“where is this person coming from?” then you’re able to get to a more productive
place quicker, thereby creating value for business and society.”

 

Proof of Empathetic Leadership creating value in companies can be seen in the top 10 companies in the Global Empathy Index 2015 that increased in value more than twice as much as the bottom 10 and generated 50% more earnings.  Average earnings among the top 10 were up 6% this year, while the average earnings of the bottom 10 dropped 9%.

Empathy also has a positive impact on employee retention.  According to Businessolver’s study;

– 95% of employees are more likely to stay with an organization that empathized with their needs

– 81% of workers would be willing to work longer hours for empathetic employers

– 60% would be willing to take a pay cut to work for an empathetic company and empathetic leadership.

and shockingly,

– 92%of CEOs believe their organizations are empathetic while only 50% of employees report having an empathetic CEO.

Closing the Gap 

Why is there such a big gap between what the CEOs think and what their employees think?  It’s simple really.

Millennials think, act and communicate differently than their baby boomer bosses. They have different expectations from their jobs, the leadership and the company as a whole.

They are looking for a deeper connection to their work, a purposeful position with a company that means something to them, that walks the walk and doesn’t BS them. Salary and benefits are secondary to this generation.  This generation has new ways of seeing and doing things, they are technology savvy and have a voice, and they want to be heard and understood.

As talent becomes more difficult to acquire, companies with CEOs who understand culture and empathy as key pieces to improving the bottom line, will come out on top.  A poor culture and a CEO who doesn’t learn Empathetic Leadership will find their employees jumping ship for less pay but a better environment.

Empathy is a skill to win the hearts of employees and create a culture that is good for the bottom line and a competitive advantage for the company.

Ways To Demonstrate Empathetic Leadership

What are some basic things a CEO’s can do to demonstrate Empathetic Leadership in their organization?

  1. Surround yourself with diversity. Seek out employees from different countries, religions, races, etc and listen to their trials and tribulations with a project or goal or even a personal event that they struggled with. This helps to give you insight into what others have experienced that can make an impact on their thinking.
  2. Cultivate relationships at every level of the organization: Conduct Skip Levels roundtables where the managers are not present. Go to every office and have a discussion about what they like and dislike about the company using metaphors in stories or charades. It’s fun and gives you insight into what’s happening in the organization.
  3. Listen to hear and observe, not respond. Do not speak in a meeting, allow others to manage the conversation and simply observe body moments, tone and tempo of their voice, how they communicate their ideas, the words they use, etc.  This is give you insight into how people are feeling and whether they are living the company values or not.
  4. Do not speak until the other person feels they were heard. In person-to-person meetings, reflect what you heard back to them, and check for understanding.  Do not look at your phone, 100% precent by focusing on what the person is saying. Follow up with an email outlining what you heard and any plan of action required.
  5. Choose your words carefully and deliberately. People can get triggered by words like, “don’t, shouldn’t, wouldn’t.” Using phrases that provide a more neutral feeling like, “Have you considered…?” or “Have you thought about…?” will ease any fight or flight response.  Even if there is an issue, reframing it to focus on the improvement rather than the problem will help people to move forward with right action.

There are many solutions to improving a culture and training leadership on empathy.  If you have questions about Improving Culture or Empathetic Leadership, please feel free to contact me here.

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