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Business and Finance

Seven reasons why empathy makes you better in business

Libertine
While it might be a soft skill, its impact on the bottom line is anything but, argues Belinda Parmar in 'The Empathy Era'

The 2003 documentary The Corporation infamously compared the profile of the contemporary profitable business corporation to that of a clinically diagnosed psychopath. Twenty years on, the kind of ruthless, un-empathic approach with which we tend to associate corporate culture seems to be shifting. “Empathy is the key to profit,” Belinda Parmar writes in The Empathy Era. “Not trendier or more hippy-chic cool. But actually more profitable.”

Parmar argues that despite the misconception of empathy as a “soft” skill, it is, in fact a hard commercial tool. Here’s why.

1. Empathy pays

An empathic approach generates an emotional relationship with customers based on reassurance, which leads to trust, Parmar writes. Studies show that high-trust companies outperform low-trust companies, in both shareholder value – in a Watson Wyatt 2002 study, high-trust organisations outperformed low-trust organisations in total return to shareholders by 286 percent – as well as in sales and profits.

Note that Ryanair has had to change its notoriously un-empathic ways, and has been rewarded for doing so: profits soared by 66% after a series of more consumer-friendly policies were put in place.

2. Consumers expect better

With more competition than ever, consumers are spoilt for choice – which means higher expectations. “Businesses that don’t change their culture will soon see themselves being passed over as more innovative and likeable competitors take their place,” Parmar writes. Embedding empathic, authentic values into your brand’s image means future-proofing your company.

2. Company culture helps retain talent…

An empathic business culture makes for a better work environment – which increases levels of employee retention, Parmar notes.

3. …and foster innovation

Not only does company culture help attract and retain employees: it maximises their potential. Think Google’s (now terminated) ‘Twenty-Percent Time’ initiative, which let engineers devote twenty percent of their time to developing their own personal projects to minimise burn-out and keep them excited about coming to work. As Parmar points out, it led to some of Google’s most successful innovations: Gmail, Google News and Google Talk.

4. Women are increasingly the pathway to profit – and they’re being ignored

The current company culture, what Parmar refers to as the “male model” whereby empathy is undervalued and ignored in favour of systemising, is putting off women workers. Meanwhile, Catalyst’s 2004 research shows that Fortune 500 companies with a strong representation of female executives deliver a 34% higher return to shareholders than companies with the lowest representation of women.

On the customer front, 91% of women say that advertisers don’t understand them. It’s not just appalling socially – but financially. In the U.S., women control more than 60% of all personal wealth and 85% of all consumer purchases, while UK women are responsible for 83% of purchases. Globally, women decide on 91% of home purchases, 65% of new cars, 80% of healthcare choices and 66% of computer sales. Empathy can help tap into this growing consumer base: as Bridget Brennan writes for Forbes, “understanding why she buys is the most valuable insurance policy there is, for 2015 and beyond.”

5. Self-interest is bad for the company

Parmar, when working in a major tech company, saw that people “were more interested in being individually successful. Or more crucially, in not being seen to make any kind of slip-up that might endanger their own career prospects, than in helping to make the company more successful overall.” An empathic company culture builds team spirit and, effectively, helps your company make progress as a team, as opposed to fostering a climate of self-preservation.

6. Doing good is no longer anti-corporate

We now live in an interconnected world, a fact that seems to be making us change the way we think about the role of business in society. In 2012, 76% of global consumers believed it was acceptable for brands to support good causes and make money at the same time – a 33% increase from 2008. A 2012 study by Edelman surveyed 8,000 consumers across 16 markets and found that 87% of people globally believe that companies should place at least equal weight on business and society, but only 28% believed that businesses actually were performing well in this regard. “The more connected the world becomes, the more aware we become of the world’s problems, and the more we expect of those in a position to do something about them”, Parmar writes.

7. Improving service means reducing losses

Estimates show that UK firms lose £12 billion a year from poor service, while half of U.S.73 consumers prefer to simply spread the word about bad service with only a minority 37% even bothering to complain to the company itself.

Empathy helps create dialogue. It means listening to feedback, getting to the root of the issue and effectively improving customer care. Which means your company won’t keep inadvertently losing out on business.

The Empathy Era: Women, Business and the New Pathway to Profit by Belinda Parmar (£14.99)

91%

Of women say advertisers don't understand them (She-conomy report)

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