A big concern of senior management types at most companies whenever something like ’empathy’ or ‘culture’ or ‘purpose’ comes up is pretty simple:
I’ve got a business to run. How’s this tied to the bottom line?
Look, that’s logical. We’ve been doing and running businesses in a specific way — or a set of specific ways — for decades now (even a century), and people are used to certain things. We’re supposed to care about money, revenue, growth, and fiscal targets. We’re not supposed to care about fluffy things.
But what if being a company with more empathy did help you make more money?
Here’s the path we’re going to follow on this:
- A United Kingdom-based consultancy called Lady Geek creates a Global Empathy Index every year. For a brief summary of the concept, read this. For a slightly deeper dive including 160 companies ranked in order 1-160, read this.
- Methodology is important in a discussion like this — who the hell can define ’empathy’ anyway? — so let’s take a quick look at how that was handled:
To determine the rankings, Lady Geek’s research team uses a combination of publicly available financial information from the S&P Capital IQ, social media interactions from Twitter and Reddit, and proprietary data from the Lady Geek Opinion Leaders panel survey.
With the increasing importance placed on authenticity in brand interactions with consumers, the researchers analyzed about half a million tweets over the course of several weeks this October for complaints or use of repetitive language. They also analyzed the impact of controversies such as ethical lapses, scandals, and fines.
Alright … so we’re looking at:
- Financial information
- Social media interactions (but not Facebook, LinkedIn, Instagram, or Google+ — which leaves out some data there)
- Proprietary data from opinion leaders
- 500K tweets
That’s not a bad baseline. Some old-school types might run in and scream “value of the brand!” but if you don’t understand the decline in brand vs. the increase in customer engagement as a key fiscal driver, read this.
OK, now we’ve established a methodology and a basic idea of what this whole thing is. Can we talk about results?
Five of the top 10 most empathetic are technology companies that are also the fastest growing. “Their market capitalization has grown this year by 23.3% compared to a weighted average of 5.2% of all the companies in the index,” according to Parmar.
The Index also makes a case for empathy boosting the bottom line as the top 10 generated 50% more earnings than those ranking least. “Average earnings among the top 10 were up 6% this year, while the average earnings of the bottom 10 dropped 9%,” she writes.
So, here we have these takeaways:
- Tech companies: Grow fast (4x market cap), especially if showing some empathy
- 50% more earnings if you’re very empathetic (top of list) as opposed to not very empathetic at all (bottom)
- Your earnings may be dropping if you’re not an empathetic company
Here are a few things I’d add:
- These studies are external; they talk about relationships between companies and customers. However, I’d reckon that if you’re not very good at external empathy, you’re probably not very good at internal empathy either — i.e. managers to employees. In short, you probably don’t respond quickly/treat your customers well, and you’re probably worse with your employees. That’s going to create churn, and that’s going to hurt earnings. So there’s a correlation/potential causation there.
- This is kind of similar to the ties between employee engagement and sales; they exist, but because they’re hard to quantify on a balance sheet, senior leaders ignore them and assign it to something like “our Q4 strategy.” That’s a joke, because the success of strategy is often accidental luck given how often markets adjust and fluctuate and consumer needs shift.
- The only way any of these discussions will ever go anywhere — see also: “talent strategy” — is if a concept like “company culture” or “company empathy” is tied to dollars and growth. Otherwise, no one will care about it because issues that revolve around dollars and growth will always go ahead of these issues on the agenda.
It all comes back to thinking about business differently — not everything is about targets, tasks, projections, KPIs, and deliverables. Some things are really about being respectful, thinking through things, showing empathy, and genuinely caring about others. Those are harder to put on an Excel and track, sure, but they do matter.