There is a direct link between empathy and commercial success
by Belinda Parmar, OBE, is the CEO of the consultancy Lady Geek
Businesses are more profitable and productive when they act ethically, treat their staff well, and communicate better with their customers, according to the latest Lady Geek Global Empathy Index. The top 10 companies in the Global Empathy Index 2015 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%. (Last year’s empathy index can be found here.)
At Lady Geek, a consultancy based in London, we define empathy as a cognitive and emotional understanding of others’ experiences. These qualities are increasingly important as social media feeds popular demand for transparency and authentic interaction. The Global Empathy Index uses a combination of publicly available information and proprietary data drawn from its surveys and from social and financial feeds — including textual analysis of over half a million social media interactions. The analysis, which focuses on global companies, looked at CEOs’ approval ratings among staff; the ratio of women to men on the board; frequency of complaints; the companies’ performance on social networks; and the impact of controversy such as ethical lapses, scandals, and fines — among other metrics.
Among the more interesting findings:
- Five of the 10 most emphatic companies are based in Silicon Valley. They’re also among the most profitable (the top five companies make up for 15% of the index’s total market capitalization), and the fastest growing (their market capitalization has grown this year by 23.3% compared to weighted average of 5.2% of all the companies in the index).
- At the other end of the empathy spectrum are car companies. Mercedes is 91st on the list, Toyota 94th, VW 95th, and Honda 108th. There are two outliers, however: Tesla in third place and Audi in 10th. Note that Audi dramatically outperformed its parent company, VW, due to high scores for its CEO, while VW’s score suffered with the ongoing emissions scandal and low approval ratings for its recently departed CEO, Martin Winterkorn.
- Many British firms have been slow to recognize the direct correlation between corporate empathy and growth and productivity. Indeed, 16 out of bottom 25 firms are FTSE companies. Ironically, the most empathic FTSE companies are a bank and a tobacco firm.
- U.S. banks are proving quicker to wake up to the benefits of empathy, scoring 50% higher than UK ones.