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The Business Case for Empathy

As we look towards the future of work, there is a growing consensus that we’ll see a fundamental shift in the employer / employee relationship. 

More than ever before, leaders must reckon with significant changes in employee expectations in the wake of what has been a time of rapid societal and workplace change.

Digital burnout and stress over a lack of work-life balance have emerged as real threats to employee wellbeing; these frustrations, plus a reflective mood, are contributing to restlessness among workers. Many are sensing something out there may suit them better, they are rethinking their role – a phenomenon thatsome have dubbed “the great resignation”.

Elevate Empathy’s extensive research with team members is discussed on our About page.

Whilst there is yet to be corresponding ABS data to support the great resignation narrative in Australia, there are significant warning signs for employers. For example, the Future Forum Pulse (October 2021) reports that 60% of Australian knowledge workers are open to taking on a new role in the next 12 months.

Gallup’s recently released 2020 State of the Workplace report also included trends from Australia and New Zealand and made the following observations:

Despite a better performance managing the pandemic than other countries, 45% of Australian workers (especially women) report significant day-to-day stress. This is higher than the world average and the report author speculates, “Unlike less fortunate nations, Australia and New Zealand’s stress relates more to the integration of busy work and home lives, which is a real concern with very real impact on the workplace”.

The Future Forum Pulse report is clear that having worked through the pandemic, greater flexibility from the employer side will be expected as a permanent feature of employment. Employees feel they have proven they can be trusted to do their jobs without being micromanaged and will continue to seek a high level of autonomy over how they deliver their work.

This finding was replicated in a 2021 study by PWC, where a full 90% of Australian knowledge workers desire either fully remote, or a mix of in-person and remote working arrangements.

The pandemic catapulted us into a new world of work. Without a fresh mindset, it could be challenging for legacy organisations to retain their existing staff given the possibilities that remote working offers. If their current workplace fails to extend a reasonable degree of flexibility, staff will find one that does.

Could there be a “secret sauce?”

Whilst there can never be a single, simple solution to complex issues, a surprising secret sauce is emerging – to demonstrate a new mindset by embedding the behaviours of empathy into the culture, modelled from the top down.

Where is the evidence to support this claim?

An EY study conducted in 2021 shows a staggering 89% of employees agree that empathy leads to better leadership, furthermore,

  • 88% of respondents feel that empathetic leadership creates loyalty among employees AND that empathetic leadership inspires positive change within the workplace.
  • 87% of respondents say that it enables trust among employees and leaders. 

Similar numbers believe mutual empathy increases efficiency (87% agreement), innovation (86%) productivity (85%) and most employees can perceive a link to revenue growth (81%). 

Empathy – the ability to read and understand other’s emotions, needs and thoughts – is one of the core competencies of emotional intelligence and a critical leadership skill. It is what allows us to influence, inspire and support people to achieve their goals. Empathy enables us to connect with others in a real and meaningful way, which in turn makes us happier and more effective at work.

The empathy skillset covers perspective taking, non judgement and deep listening. It is the underpinning of shared understanding, trust and respect between colleagues.

It’s always been an important skill for leaders, but the challenges of the post pandemic world means empathy is taking on a new level of meaning and priority.   

Changes are permanent. From an employee perspective there will be no return to hierarchical days of old. Having risen to the challenges, they’re looking to be understood, heard, included in decisions, and to know where they stand.

Being led with empathy offers employees the consideration and authenticity many are craving. It meets them where they are, positions them as partners and can offer the organisation a potential upside in productivity that is unrivalled by other strategies.

The simplicity is obvious, if your team feels well treated, they will serve customers well, the results will amplify and profit will result.

“As a result of the COVID-19 pandemic, leaders are working to establish business transformation models to adapt to the new normal, EY’s research finds that empathy is not only a nice-to-have, but the glue and accelerant for business transformation in the next era of business. Empathy’s ability to create a culture of trust and innovation is unmatched, and this previously overlooked trait must be at the forefront of businesses across all industries.”

Steve Payne, EY Americas Vice Chair – Consulting.

So to the business case:  Why consider using an empathy mindset as a change signal?

Since we started Elevate Empathy, this has been the most difficult question. Not because it’s hard to answer – we have the opposite problem, there are so many potential benefits and so much likely upside, it’s hard to know where to direct attention first.

We lead with the benefit with the most obvious ROI for empathy training to organisations; a reduction in the attrition of valuable employees.

Altogether, there are 4 “bottom line” benefits:

  • reducing turnover 
  • enhancing team performance
  • powering innovation
  • authentic service to bond customers.

Plus 3 significant opportunities:

  • upskilling managers in empathy traits (the biggest single opportunity)
  • embedding empathy into the culture
  • weaving empathy through the customer journey

Benefit 1: Reducing turnover

If your organisation does not get on the front foot to prevent a wave of resignation, the potential costs are enormous (cost of replacing a single staff member is estimated to be up to 1.5x their annual salary). 

Building empathetic work environments is an investment that will minimise the stress, inconvenience and cost of replacing unhappy team members.

Why does a culture of empathy inspire loyalty among staff? By creating a genuinely enjoyable, person-centred workplace where staff feel a sense of belonging and ownership. It’s one thing to pay lip service to your company’s commitment to staff wellbeing; empathy-driven management demonstrates this in a tangible manner.

Team members want to reduce the friction between work and home life. An empathetic manager understands that employees can attend to caring responsibilities and personal matters while still producing a high standard of work. By demonstrating trust and offering an appropriate degree of autonomy, managers offer empathetic leadership that gets the best out of people while supporting them to thrive.

Another factor proven to increase “stick factor” for employees is the perception they have friends at work. Empathetic organisations encourage connection and inclusion and have group norms, which ensure everyone feels well treated. Empathetic policies encourage friendship and connection amongst co-workers and in the wider network.

Benefit 2: Enhancing team performance

Empathetic leaders create trust by communicating openly and honestly, they are scrupulously fair, they acknowledge conflict so it can be gracefully addressed, they promote a culture of appreciation and celebration of achievements. 

Work engagement reflects employees’ emotional investment in their work and the company’s mission, and is strongly correlated with loyalty and high performance. Because people feel valued when they are led with empathy, engagement increases, which has a huge positive impact on team performance. Happy and engaged workers consistently bring their best to the job and are more willing to go the extra mile. 

A team culture which prioritises empathy humanises work, as teams commit to treating each other well. This kind of culture leads to closer connections within and between teams, reducing the kind of separation that can be created by silos and hierarchy. 

Google certainly found this when they undertook their mammoth research project to understand the essence of high performing teams. It was called Project Aristotle and the major findings related to groups having positive group norms: Treating each other well, humility, listening, empathy, and all being encouraged to share their views. Teams with consistently positive norms greatly outperformed other teams.

Benefit 3: Powering innovation

Employee innovation refers to an individual’s ability to generate new ideas, processes, and approaches to achieving goals; it is highly correlated with organisational performance. Innovation is powered by insight, creativity and risk-taking; staff need to know they can safely and fearlessly offer ideas. 

Learning the specific skill of perspective-taking results in the ability to understand customers from within their own frame of reference. This helps identify fertile opportunities, approach problems with compassionate curiosity, and leverage team members’ lived experience. 

Knowing that their ideas will be listened to (even when they are unconventional) empowers employees to be creative in developing new approaches to solving problems.

Beyond individual innovation, stronger networks drive collective innovation. Networks don’t just emerge naturally, they have to be cultivated by bringing people together in the right environment. 

Empathetic leadership understands that humans are wonderfully complex creatures and that fostering networks is a long-term game. The open mindedness that characterises empathy is critical in bringing together diverse groups of people and managing divergent perspectives.

Benefit 4: Authentic service to bond customers

The numbers are in. According to NewVoiceMedia’s 2018 “Serial Switchers” report, poor customer service costs businesses more than $75 billion a year. 

The report claims, “Brands are failing to create the positive, emotional experiences that drive customer loyalty”. The result is that 67% of customers are open to switching because of a poor customer experience

The main reasons for customers ceasing to do business with a company are:

  1. Customers do not feel appreciated.
  2. Customers are not able to speak to a person who can provide them the answers they are looking for.
  3. Customers experience rude and unhelpful employees.
  4. Customers are being passed around to multiple people.
  5. Customers are put on hold for unreasonable lengths of time.

Whilst some of these must be addressed at a system level, making empathy the bedrock of customer experience is likely to provide the fastest and simplest fix.  It can guide systems improvements alongside increasing perceived empathy in customer interactions.

People want a human experience, 86% of customers surveyed said that if there was an emotional connection with a customer service agent, they would be willing to continue to do business. However, only 30% felt the companies they had interacted with during the past year had made that connection.

The POLAR Intelligent Empathy skillset developed by Elevate Empathy includes perspective taking, non judgement, attentive listening, acknowledgement, appreciation, understanding and learning to respond appropriately.   

This simple framework can be applied to conversations within teams, between teams and with customers, becoming a central tenet of an organisation’s culture. Empathy is foundational to the human connection customers are seeking, especially when there is trouble. Great service is an opportunity to create a stronger customer relationship, and it starts with empathy.

In customer service, one simple step – acknowledgement – is the one that is easily overlooked and the one that can have the biggest impact on customer satisfaction.

Engaged, positive employees relate authentically to customers and complete their tasks with diligence and excellence. Customers and clients are the lifeblood of any business, and the flow-on effects of a positive workplace culture extend to these customers, optimising their experience and increasing the likelihood that they will return.

Opportunity 1: Upskilling managers in empathy

Recent studies are reinforcing the old adage that people leave bosses, not organisations. Around half of all workers have previously left a job to escape a bad manager. These findings were reinforcedi n an October 2021 study of 1,000 employees released by Ernst & Young (EY) showing 54% of workers have left a job because their boss wasn’t empathetic, and 49% also said employers were unsympathetic to their personal lives.  As the old adage goes “if you have a good boss, you have a good job”.

Again and again (here, here, here), research is showing that improving manager quality could hold the key to boosting the overall performance of the organisation.   Here is a chart from a recent study by Catalyst.

Especially prized in people managers are communication skills, including displaying empathy, and understanding and engaging in meaningful conversations.

Employees describe an empathetic leader as someone who is transparent and fair, encouraging, respectful, open to difficult conversations, and follows through on promised actions.

Each of these are readily trainable and learnable sets of skills. Putting them into practice creates almost immediate rewards for managers, even stimulating their dopamine reward system.

How does showing empathy pack such a powerful punch in the workplace? 

Applying empathy skills such as listening without judgement and understanding someone’s personal stakes in a matter can liberate managers from old patterns, helping them be more open and collaborative. By inviting perspectives, acknowledging experiences and developing human-centred responses, organisations and employees co-create fair and respectful solutions to workplace issues.

Overall, empathy in the workplace promotes positive staff wellbeing and prevents employees feeling the need to escape a situation that’s negatively impacting their wellbeing.

Opportunity 2: Embedding empathy as a foundational driver of culture

There’s a growing number of business thought leaders saying that raising the set level of empathy within your organisation will drive significant improvements in business results.

Here’s Simon Sinek:

“Increasing leaders’ capacity for empathy makes a ton of sense. This is the core skill set that you’re going to need to understand and motivate people. It helps you connect, helps you solve problems, helps you move situations forward”.

Simon Sinek, Leaders Eat Last

PwC’s recently released Hopes and Fears study sounded a strong warning for organisations. Australian CEO’s are placing more focus on workplace culture and behaviour – 53% said workplace culture and behaviour would have the greatest impact on organisational competitiveness, which was significantly higher than the global average of 32%. Focus on health and wellbeing (37%) also fared higher than overseas counterparts, indicating Australian CEOs awareness of the impacts of the pandemic on their teams.

Forbes notes in a recent article, “Empathy has always been a critical skill for leaders, but it is taking on a new level of meaning and priority. Far from a soft approach it can drive significant business results. You always knew demonstrating empathy is positive for people, but new research demonstrates its importance for everything from innovation to retention”. Author: Tracey Brower

Employees are also expressing a desire for more meaningful interactions with others and the freedom to bring their whole selves to work – which includes knowing that they can be honest when they’re struggling, preferably within the container of a supportive relationship with their manager.

Opportunity 3: Weaving empathy through the customer journey

If your primary goal is revenue growth, your focus should be on boosting retention rates and increasing the lifetime value of customers. These objectives go hand-in-hand with embedding empathetic practices from end-to-end in your customer journey. Customers want to do business with brands that can demonstrate their care for them; in the way they communicate, what they stand for, and at each interaction and experience.

Empathy is the foundation of human connection and can be woven into every stage of the customer journey. Insights born of empathy will enhance resonance in messaging, plus innovation and problem solving in design.

While the trend to adopt more empathetic practices began well before the pandemic, COVID-19 has accelerated the need for businesses to show more empathy. It’s no longer enough simply to provide a positive customer experience. There’s an opportunity to demonstrate care about the communities they serve.

It is also important to ensure every team member, even those who may not be customer-facing, knows how their work impacts the consumer.

For example, there may be members of the finance department who aren’t directly involved with customers and may not think about the impacts of their decisions, but every interaction can alter how a customer feels about the brand. When employees routinely use an empathy test for decisions that affect customers, they will naturally be contributing to an improved customer experience


A powerful summation from Business Solver (PDF):

The discussion of empathy in the workplace goes far beyond a ‘soft skill’ or any type of management fad. We’ve seen repeatedly how empathy leads to tangible business outcomes, most notably employee retention and engagement.

With 93% of employees reporting they’re likely to stay with an empathetic employer – a number that has risen steadily for four years – this is a value that cannot be underestimated by employers.

In fact, the connection between empathy and positive business outcomes has never been stronger. In today’s labor market where jobs outnumber employees, organisations can use empathy to differentiate themselves to attract new talent and retain their best people.”

In essence, an empathetic brand is one that has embedded empathetic protocols into the heart of their culture, driving positive employee and customer experiences at every level. This mindset shift can increase both employee and customer loyalty and deliver major revenue gains for years to come.

The role of empathy in business has been overlooked for many years, and even managers who genuinely want to build a culture of workplace empathy often don’t know where to begin this process. The skills of empathy have been severely undertrained, leaving managers to rely solely on their innate empathy. While it’s true that some people are naturally more empathetic than others, the skills of empathy are easy to identify and practice, and the benefits are so immediate people are encouraged to improve.

This is where Elevate Empathy can support you. We offer immersive empathy workshops to support your people managers with the essential skills they need to take their team member’s perspective, listen effectively and engage in conversations with confidence and care.Read more about our one day workshop here.

Further Reading