4 Reasons Why Empathy Is Good for Business

How this traditionally soft skill yields hard, bottom-line results for organizations big and small

November 22, 2018 8 min read

Opinions expressed by Entrepreneur contributors are their own.

It’s easy to be cynical these days. The 24/7 news cycle brings us images and extreme headlines about tragedies almost as soon as they occur. If you listen to the rhetoric, it’s easy to believe violence, sexism, ageism, xenophobia and prejudice are winning the day.

However, there is another -- more positive -- way to look at this. Access to information from around the globe gives us opportunities to consider the needs of others and to respond with compassionate action. Yes, playing to our emotions is the cable news and social media business model. But what we choose to do with our emotions is up to us. So, why not choose empathy?

We all know empathy is the right thing to do, but empathy is not just good for the world (and our own sanity). It can also bring a competitive advantage in business. Our ability to see the world from the perspective of others is one of the most crucial tools in our business toolbox. So, let’s walk through the business benefits of empathy and acting with compassion.

1. Increased sales, loyalty and referrals.

Every skilled salesperson knows that the key to closing sales is anticipating your customers’ needs and demonstrating how your product or service will suit their needs best. Truly understanding your customers’ needs means reflecting on their fears, desires, pain points and whatever keeps them up at night. If your sales team doesn’t intimately understand your customers’ lives, how can you expect them to explain how your products or services fit their lives? This is the power of empathy in business.

Going beyond increased sales though, what’s even more valuable are loyal customers and strong referrals. To see repeat customers and customers transformed into super fans, make sure this empathy mindset enlivens the culture of your entire organization from customer service to the accounting department.

One industry where empathy clearly counts is in the ultra-competitive airline industry. Any company that can make flying more convenient and pleasant scores points with perpetually frustrated passengers. By now, we’re all familiar with this string of PR blunders from United Airlines demonstrating the failure of empathy on a corporate level. But you may be less familiar with Ryanair’s empathy success. After implementing their “Always Getting Better” program, which many customer annoyances like hidden charges,un-allocated seating and carry-on baggage restrictions, Ryanair saw a net profit increase from €867 million to €1.24 billion (US$1.39 billion). CEO Michael O’Leary famously remarked, “If I’d only known being nice to customers was going to work so well, I’d have started many years ago.”

Who knew being nice could be so profitable?

2. Accelerated productivity and innovation

When customers perceive your company as empathetic, you will see sales increase, but wait...there’s more. Employees with strong empathy skills are also more productive and innovative. This means if you want to increase efficiency and expand the number of problems you can solve for customers, you want to hire employees with strong “soft skills.”

Google knows this well. Since the company began in 1998, Google focused on hiring the best computer scientists, software engineers, analysts and highly skilled STEM professionals. But when it comes to putting together successful teams, it turns out that soft skills rule. Project Aristotle, a study released by Google in 2017, showed that the company’s most important new ideas came from B-teams comprised of employees exhibiting a wide range of skills including: equality, generosity, curiosity toward others’ ideas, empathy and emotional intelligence. These teams may not have had the top scientists, but when team members feel confident speaking up and know they are being heard, great ideas are born.

3. Greater competitive advantage and market value.

The highest performing companies also top the list of the Most Empathetic Companies. This might seem surprising at first: Don’t you have to be cutthroat and willing to win at any cost to be competitive in this global, capitalist economy? Well, if you’ve been paying attention, the answer will be obvious. In fact, statistics show that empathy is more important to business success than it has ever been.

According to the 2016 Empathy Index, a report published by UK consulting firm The Empathy Business that seeks to analyze the internal culture of 170 companies on major financial indexes, “The top 10 companies (on the 2015 list)...increased in value more than twice as much as the bottom 10 and generated 50 percent more earnings (defined by market capitalization).”

How’s that for competitive advantage?

4. Expanded engagement and collaboration.

So if the best managers and team members express empathy and a willingness to act compassionately toward others, it stands to reason that companies with cultures that encourage empathy would attract highly engaged individuals. And that’s just what the data show. Empathetic companies also have better retention and higher morale among employees.

This makes a lot of sense when you consider what today’s workers value. Good, high-performing individuals have lots of employment choices. Among other things, the gig economy and access to technology have created opportunities beyond traditional corporate work. So, it’s time to think beyond traditional corporate benefits.

Additionally, according to a Gallup poll, 60 percent of Millennials are open to new job opportunities, while only 29 percent of them report feeling engaged at work. This means less than a third of workers born between 1980 and 1996 feel connected to their companies. Studies by the Queens School of Business and by the Gallup Organization show that this lack of connection can result in higher absenteeism, lower productivity...and lower profitability and share price for the company over time.

What skilled workers are demanding is a different kind of working experience: they want their voices -- and their workplace requirements -- to be heard. That’s bad news for companies that aren’t considering company culture as they look toward future growth. Fortunately, making small, subtle shifts toward improving empathy in the culture can make a big difference.

Small changes can yield big results.

All of these business benefits sound great, but none of them are likely to make any company empathetic. To really make a change, the first step is to WANT to understand where others are coming from. When you focus on wanting to understand your colleagues, you can cultivate empathy in your own sphere of influence, which can have a big impact on your team, brand and the world.

Here are some key areas to consider as you plan ahead for 2019:

“Employee of the month” awards do not constitute an empathetic environment. When we feel that others value our contributions, we feel respected. While trying to create an empathetic environment from the top down is unlikely to work, letting workers know, through word and deed, their work is valuable should be a daily focus.

Respect makes workers more engaged. There is an intangible value to feeling respected by one’s colleagues and superiors. We’re more likely to take personal responsibility and our desire not to lose the respect of others means we’ll be more engaged. Listen closely to how employees talk about their work. Ask them what would make their jobs easier and make them feel heard.

Motivate based on individual needs. In Daniel Pink’s bestselling book, Drive: The Surprising Truth About What Motivates Us, he points out that financial rewards are not universally enticing. Consider how your company rewards colleagues. How much better would things be if we asked our team members what they would like? Use empathy to see things from their point of view and act accordingly.

Consider ways to flip the Golden Rule: “Do unto others as they want done unto them.” This rule goes for every stakeholder involved in your organization from investors to board members to customer service representatives to clients. This is the mantra of the empathy mindset. Get out of your own head. Engage in more active listening and curious conversation to unlock what matters most to them.

As you reflect on the business benefits of creating a more empathetic company, you may have noticed the irony of compelling you to set aside your interests by showing that it’s actually in your interest to do so. Of course, in an ideal world, the drive to do the right thing would be motivation enough. But because motivation is unique to each individual -- and organization -- presenting a menu of reasons to embrace empathy is a good idea. In my own career, I have personally witnessed leaders and marketers who have embraced empathy purely for PR motives, but found themselves personally transformed -- and left with a desire to do more good for the right reasons. Sometimes, initially speaking to selfish motives can help people and organizations transform “from the outside in,” and end up making the world a more empathetic place.

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