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Empathy: Capitalist Tool (Part 3): Let’s do the numbers

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Empathy by the numbers

I have been known to say: “We don’t need more data; we need expanded empathy.” But truth be told, we need both. 

In an April/May survey by the human resources company Businessolver of some 1,740 employees, including 140 CEOs and some 100 Human Resources (HR) professionals, respondents reported: 

37% of employees believe that empathy is highly valued by their organizations and is demonstrated in what they do. 

Of the other 63% of employees, nearly one in three employees believe their organization does not care about employees (29%). 

One in 3 believe profit is all that matters to their organization (31%). 

Nearly one in two believe their organization places higher value on traits other than empathy (48%). 

The evidence supports a conclusion that a significant deficit exists between experience and expectations relating to empathy. On a positive note, 46% of employees believe that empathy should start at the top. This opens the way for business leaders to articulate the value of expanding business results through empathy. The same survey indicates that the three most important behaviors for employers to demonstrate empathy include: 

listening to customer needs and feedback (80%); 

having ethical business practices (78%); 

treating employees well, including being concerned about their physical and mental well-being (83%).

Three behaviors that demonstrate empathy according to the Americans Businessolver Survey: 

listening more than talking (79%); 

being patient (71%); 

making time to talk to you one-on-one (62%). 

The five behaviors that demonstrate empathy in conversation include: 

verbally acknowledging that you are listening (e.g. saying, “I understand”) (76%); 

maintaining eye contact (72%); 

showing emotion (70%); 

asking questions (62%); 

making physical contact appropriate for the situation (i.e. shaking hands) (62%). 

All this is well and good. But is it good for business? The survey reports that 42% of the survey respondents say they have refused to buy products from organizations that are not empathetic; 42% of Americans say they have chosen to buy products from organizations that are empathetic; 40% of Americans say that they have recommended the company to a friend or colleague. The answer to “Is empathy good for business?” is “Yes it is!”

“Corporate empathy” is not a contradiction in terms

This section is inspired by Belinda Parmar’s article “corporate empathy is not an oxymoron.”[i] Belinda Parmar is one of those hard to define, engaging persons who are up to something. She is founder of the consultancy The Empathy Business. She is an executive, a self-branded “Lady Geek,” public thinker, woman entrepreneur evangelist, and business leader. 

According to Parmar, her consultancy’s corporate Empathy Index is loosely based on the work of the celebrated neuropsychologist Simon Baron-Cohen’s account of empathy.[ii] Parmar states in the newly revised 2016 Empathy Index, “empathy” is defined as understanding our emotional impact on others and responding appropriately. How does one map this to the four dimensional definition in Figure 1 (see p. 41 above)?

This captures what our multi-dimensional definition of empathy has called “empathic interpretation.” Parmar’s definition also calls out both the aspects of “understanding” and “responding,” which nicely correspond to empathic understanding and responsiveness, respectively, but misses empathic receptivity. Thus, three out of four. Not bad. How these get applied is a point for additional discussion. 

Parmar and company’s Empathy Index aims at measuring a company’s success in creating an empathic culture on the job. This is not just a spiritual exercise. Parmar reports that the top 10 companies in the 2015 Empathy Index increased in value more than twice as much as the bottom 10, and generated 50% more earnings according to market capitalization.[iii] Now that I have your attention, a few more details. 

The Empathy Index reportedly decomposes empathy into three broad categories including customer, employee, and social media. These contain further distinctions such as ethics, leadership, company culture, brand perception, public messaging in social media, CEO approval rating from staff, ratio of women on boards, accounting infractions and scandals. Over a million qualitative comments on Twitter, Glassdoor, and Survation were classified and assessed as part of the process of ranking the companies. Impressive. There is also a “fudge factor.” 

The Empathy Index used a panel selected from the World Economic Forum’s Young Global leaders, who were asked to rate the surveyed companies’ morality. Note that Belinda Parmar was herself one of these leaders at some point, though presumably not for purposes of her own survey. Further conditions and qualifications apply. The company must be publicly traded and have a market capitalization of at least a billion dollars. The companies were predominately companies in the US and UK, a few Indian and no Chinese (due to difficulty getting the data). All the companies on the index had large numbers of end-user consumers (see “The Most Empathetic Companies,” 2016, Harvard Business Review for further details on the methodology). [iv]

Presumably the absence of steel mill, oil service, and aero-space-defense companies is not a reflection on their empathy, but simply indicates the boundaries of the survey. The 2015 index is widely available publicly and will not be repeated here. Suffice to say that the top three companies in 2015 were LinkedIn, Microsoft, and Audi. Google was at 7; Amazon, 21; Unilever, 38; Uber, 59; Proctor & Gamble, 62; IBM Corp, 89; Twitter, 93; and 98, 99, and 100 were British Telecom Group, Ryanair, and Carphone Warehouse, respectively. Interesting. My sense is that being on the list at all and relative ranking on the list in comparison with companies in a similar industry is more important than any absolute value or the numeric score as such, though the absence of a intensely consumer-product-oriented company such as Nestlé does give one pause. It is a deeply cynical statement, but an accurate one, that you know the pioneers by the arrows in their backs. 

The truth of this otherwise politically incorrect observation is that innovators do not get the product or service perfect the first time out, and competitors are strongly incented to criticize and try to improve on the original breakthrough. Therefore, I acknowledge the value of the Empathy Index, and I acknowledge Belinda Parmar’s contribution. Empathy is no rumor in the work Parmar and her team is doing. Empathy lives in the work she and her team are doing. 

How shall I put it delicately? The challenge is distinguishing empathy from ethics, niceness, generosity, compassion, altruism, social responsibility, carbon footprint, education of girls (and boys), and a host of prosocial properties. As this list indicates, lots of things correlate with empathy. Lots of things are inversely correlated with empathy. Empathy is the source of the ten thousand distinctions in business, including correlation with improved revenue, and meanwhile empathy gets lost in the blender. 

The Empathy Index is a brilliant idea—and I am green with envy in that I did not implement it. In a deep sense, the only thing missing in my life is that my name is not “Belinda Parmar.” 

Yet the reduction to absurdity of corporate empathy progresses apace with the Empathy Index as carbon footprint, reputation on social media, and CEO approval rating get included. 

This index was designed prior to the revelation that social networking systems had become a platform for a foreign power (Russia) to publish exaggerated, controversial positions designed to ferment social conflict over race, economics, and extremist politics in the USA. Presumably further checks and balances are needed prior to accepting the reputations culled from such networks, unless one wants to include the approval rating of Russian trolls. Nothing wrong with approval ratings as such, but I struggle to connect the dots with empathy. Empathy is now a popularity contest to drive reputation and, well, popularity.

An alternative perspective on corporate empathy

I acknowledge the engaging and powerful work being done by Belinda Parmer and associates to expand empathy in the corporate jungle. The challenges of engaging with empathy as a property of the complex system called a “corporation” should not be underestimated. However, I propose to elaborate an alternative point of view regarding corporate empathy. 

Corporations are supposed to be treated as individuals under law, which makes sense if one restricts the context to having a single point of responsibility for the consequences of the corporation’s actions. 

Thus, for example, the accounting department cannot say, “It’s not our fault; marketing made promises we were unable to honor while manufacturing cooked the books behind our back.” That is not going to work as an excuse. Whoever did it, the corporation is responsible. However, empathy in a corporate context is not additive in this way. 

The empathy of the corporation is not the sum of the empathy of all the individuals. It is true that a single individual who becomes known as “unempathic” has the potential to “zero out” the empathy of the entire organization; but for empathic purposes, “corporate empathy” is the integral of the seemingly uncountable possibilities, interpretations, and responses of leaders, workers, stake-holders, across all the functions in the organization. 

For example, when IBM says “everyone sells,” IBM does not mean that the geek in the software laboratory has a sales quota. That would be absurd. IBM means precisely that the geek in the lab sells by writing software code so great that it causes customers actually to call up the account (sales) representative and ask for it by name. This puts me in mind of Arthur C. Clarke’s science fiction saying: “Any sufficiently advanced technology is indistinguishable from magic.” Likewise, with empathy: the customer may not directly experience the empathy of the geek in the back office, but the commitment, functionality, and teamwork “back there” is so over-the-top, that the sales person’s empathy with the customer is empowered in ways that seem magical. 

In this alternative perspective, a corporation is an individual that positions itself on the continuum between “empathy in abundance” and “empathy is missing” by enacting four practices: (1) listening (2) relating as a possibility (3) talking the other person’s perspective (4) demonstrating all of these—listening, relating as a possibility, and walking in the other’s shoes—such that the other person (customer, employee, stake-holder, general public) is given back the person’s own experience in relating to the corporation in a way that the person recognizes as the person’s own. 

It has been awhile since the mantra of empathic receptivity, understanding, interpretation and response has been reiterated, so the reader is hereby reminded to check on Figures 1 and 3 in the previous chapters for a review as needed (see pp. 41, 89). Empathy is not something “owned” by the executive suite, marketing, human resources, or sales, to the exclusion of other roles. Everyone practices empathy. 

Stake-holders may include the general public, whose well-being and livelihoods are impacted by corporate practices (or lack thereof). For example, the general public was profoundly affected (and not just by the price of gasoline) by the failure of an off-shore oil well in 2010 that sent some 205.8 million gallons of crude oil pollution into the Gulf of Mexico.

It is never good news when one’s corporate break down becomes a major motion picture—in particular, a disaster movie such as Deep Water Horizon. Note also this implies that empathy is not a method of waging a popularity campaign on social media.

If the corporation is British Petroleum (BP), then the empathic response might well be an acknowledgment that your experience of us is: “The only thing more foul than our reputation is the pollution perpetrated on the coastlines of Louisiana, Alabama, Mississippi, and Florida and the lives and livelihoods of the millions of people who live there.” And BP has to do this even while defending itself in court against major legal actions where anything one says can and will be used against you. 

What does it mean for a corporation to listen? Ultimately customers, employees, stake-holders must decide if a corporation has been listening by the way the company’s representatives respond. At the corporate level, empathic receptivity (listening) and empathic responsiveness are directly linked. 

“Empathically” means respond in such a way that boundaries between persons are respected and respectfully crossed, agreements with the other person (or community) are honored, the other is treated with dignity, the other’s point of view is acknowledged, and the other is responded to in such a way that the other person would agree, even if grudgingly, that its perspective had been “gotten.” 

People test whether others have been listening by examining and validating their responsiveness. Responsiveness includes the questions that they ask and the comments that they make in response. Most importantly it includes follow up and follow through actions. 

Once again, breakdowns point the way to breakthroughs. A less dramatic example than Deep Water Horizon? From a customer perspective, here is an example of an everyday breakdown: “Corporations to customers: Stop Calling! Go to the web instead. Fill out the form, and wait for a response”—usually in an undefined time. The experience is one of being left hanging. 

Today many corporations prefer that the customer interact with them through their web site, because web sites are less expensive than call centers. Phone numbers are disappearing from web sites; and even when a phone number is present, it may not be the proper one. The phone number at the bottom of a press release causes the phone to ring in the marketing department, not customer service. 

Even when a phone number is available, the wait time is long and the service representative, who is a fine human being, is poorly informed. What is the experience? No one is listening. That is not a clearing for success in building an empathic relationship. 

What then is? An ability to assess quickly what is the break down, suggest a resolution, and have a defined process of escalation to open an inquiry into the problem. The breakthrough is when the customer call is acknowledged and the equivalent of the help desk trouble-shooter calls the customer back at the number provided to the automated system with the solution or proposed action. The technology to do this has existed ever since the call center was invented, but until Apple thought of it, no one configured it to work from outbound call center to customer. 

From an employee perspective, an employee will experience the corporation as listening if the person who sets his or her assignments (“supervisor”) is a listener. That means creating a context in which a conversation between two human beings, who are both physically present, can occur. Given that one person may report to someone in a different city, teleconferencing has a great future as does a periodic in-person visit. 

However, if the one person is multi-tasking, working on email while supposedly having a conversation with the other person, that is not listening. Eliminate distractions. Set aside emails. If one is awaiting an urgent update regarding an authentic emergency, then it is best to call that out at the start of the conversation. “I might have to interrupt to take a call from Peoria, where the processing plant has an emergency.” 

An “open door” policy can mean different things, but I take it to mean that “anyone can talk to anyone” and not have to feel threatened with retaliation. An “open door” is a metaphor for “listen” or “be empathic.” 

If an employee is having trouble focusing on the job, something is troubling her or him, and the listener demonstrates empathy by asking a relevant question or providing guidance that brings the trouble into the conversation: “Say more about that” or “Help me understand” can work wonders. As soon as the employee believes that someone is really listening, out come the details needed to engage in problem solving.

If we are engaging with what might be described as employee “personal issues” such as the ongoing need to care for a disabled parent or child, substance abuse, mental illness, corporations realize that managers are not therapists. Smart corporations marshal external resources that operate confidential crisis phone lines and referral services. It is not entirely clear what “confidential” means here, since if the employee is missing most people notice it; but presumably such an absence does not directly feed into the employee review process. Such personal assistance centers are able to make referrals to providers of medical, mental health, or legal services. The benefit for the corporation is that employee stress and distraction are reduced. The employee is able to continue contributing productively as an employee. It is an all around win-win. 

Yet the employee and his crisis are predictably going to show up in the manager’s office at the end of the business day before a holiday weekend. This is perhaps the ultimate test of the manager’s empathy. He or she is now being addressed as a fellow human being by another human, all-too-human, human being. 

This is an empathy test if there ever was one; and this is where practice and training can prepare the manager to respond appropriately by marshaling resources on short notice. In a crisis on Friday afternoon at 4 pm before a holiday weekend, managers can create loyalty for life in the commitment of the employee, who was assisted in a way that made a profound difference. “Above and beyond” recognition awards for the empathically responding manager are appropriate too. 

Let us shift gears and take the conversation about corporate empathy up a level with a particular example. Nestlé has a portfolio of popular and even beloved brands that literally come tumbling out of the consumer’s pantry and refrigerator when one opens the door. Some 97% of US households purchase a Nestlé product, which extend from chocolate to beverages to prepared foods to baby food to frozen treats to pet products and beyond. You might not even know it, but Perrier, Lean Cuisine, Gerber, and Häagen Dazs are Nestlé brands. So are Purina pet products..

Nestlé is so committed to sustainability in nutrition, health, and wellness that it produces a separate annual report dedicated to identifying, measuring, and reporting on its progress against literally dozens of sustainability goals. After reviewing this material, as I did, the reader can hardly imagine that Nestlé has any commitments other than social responsibility, though Nestlé is a for profit enterprise and doing very well as one. 

Sometimes our strengths are also our weaknesses. Nestlé is a strong contender to be the most empathic corporation on the planet, regardless of how one chooses to define empathy. Yet it did not even get on Belinda Parmar’s Empathy Index. What gives? A single blind spot in the 1970s, in which Nestlé leadership thought it saw a long term growth opportunity in infant (baby) formula, got in the way. Given the population growth in parts of Asia and Africa, Nestlé thought it could steal a march on the competition. 

Nestlé had been a force in infant formula, especially for those babies whose mothers are unable to nurse due to illness or when it comes time to wean the infant. Yet it looks like corporate planners projected first world infrastructure onto the third world in an apparent breakdown in empathic understanding and interpretation. A world of good work and good will was destroyed or at least put at extreme risk. 

Nestlé’s marketing of baby formula has created an enduring controversy. Starting in the 1970s Nestlé has been the target of a boycott based on the way that Nestlé marketed baby formula in the developing world.[i] From a public relations perspective, it has been a breakdown, if not a train wreck. The initial issue was supposedly that Nestlé was too aggressive in marketing baby formulation as a substitute for breast feeding. However, when one looks at the details, the issue really seems to be empathizing with the practice of breast feeding, given life in many third world countries. A breakdown in empathy?

The third world often lacks clean water, reliable power for sterilization of baby bottles, instruction labels in local languages that can be read and understood and followed by possibly illiterate or partially literate mothers. If the mother is healthy and lactating, breast feeding is a strong candidate to be the preferred method of infant feeding. 

I have been known to say: “We don’t need more data, we need expanded empathy.” But, truth be told, both are required here. 

Infant morbidity and mortality is reportedly three to six times greater for those infants using formula than for those who are breast fed.[ii]Nestlé responds—with a stance whose empathy is questionable—with a defensive conversation about compliance. Nestlé states that it fully complies with the 34th World Health Assembly code for marketing infant formula. 

Nestlé’s Annual Review 2016 states with expanded empathy:

We support and promote breastfeeding as it is the best start a baby can have in life. In cases when breastfeeding is not possible due to medical or physical conditions, infant formula is the only breast-milk substitute recognised by the World Health Organisation. Nestlé Nutrition provides high-quality, innovative, science-proven nutrition for mothers and infants to help them start healthy and stay healthy during the critical first 1000 days.[iii]

But the matter is complex. IBFAN (the International Baby Formula Action Network) states that Nestlé distributes free formula in hospitals and maternity wards in the third world. This seems literally like manna from heaven; but the free formula lasts only long enough for lactation to stop (“lactation,” of course, being the naturally occurring production of breast milk after the woman gives birth). 

After leaving the hospital, the formula is no longer free, but because lactation has ceased, the family must buy the formula. Gotcha?! IBFAN also asserts that Nestlé uses “humanitarian aid” to jump start markets and does not label its products in the language spoken in the country where the product is sold. “Humanitarian aid” is not marketing, but then again maybe such “aid” has similar, if unintended, consequences as “free samples” in marketing. Further, IBFAN asserts that Nestlé offers gifts and sponsorship to influence health workers to promote its products.

Nestlé denies these allegations, and states that it is responsive, and ongoing steps are being taken to remedy the situation.[iv] Never was it truer that empathic interpretation is a dynamic process. 

One person’s empathic responsibility is another person’s unempathic irresponsibility. Note that the duck-rabbit (see Figure 4, cited above, p. 182) maps to a single continuous line on the page. It is the “objective” reality of the line itself that starts resonating, flipping back and forth, when it encounters the human perception system. Perhaps it was just too complicated and controversial to include Nestlé in the Empathy Index, formulated by Belinda Parmer’s process.

Any corporation that commits to practicing empathy will find its commitment challenged in ways that an Empathy Index (as currently defined) cannot imagine—or capture. 

So popularity contests are likely to remain the preferred method of expanding empathy in marketing departments, especially among those who are—you guessed it—popular! The easy way out? Among those who decide to do the tough work of empathy, acknowledging inauthenticities and cleaning up integrity outages, a corporation can practice empathy at a high level and also have a reputation that is (in)distinguishable from the tar-like asphalt that randomly washes up on the beach after an oil spill. 

Empathy in the corporate environment is “trending,” but remains a work-in-progress with many trade-offs and opportunities for debate. Still, the battle is joined.

The challenge is to see the empathic forest for the trees. Corporate empathy means many things. In corporate speak, “empathy” becomes a synonym for “employee benefits,” “social responsibility,” “executive ethics,” “favorable feedback from employees,” and “team building.” For example, input to Parmar’s Empathy Index includes “carbon footprint,” “number of women on the Board,” and reputation on social networking media. Carbon footprint? 

Connecting the dots between empathy and carbon footprint is definitely a work-in-progress.

Follow the money. Definitely. But do not follow it off a cliff.

Stake-holders—people who buy stocks or bonds in a publically traded company—give money to the company. They want money back in turn—cash flow or profit or both. Don’t tell me about empathy; show me the money!

Although some investors are interested in social responsibility, most investors are interested in profit. They are not asking for empathy or even particularly interested in empathy, unless they decide it can make money for them. As Chris Janson, country western, singer says: “They say money can’t buy happiness. [Pause.] But it can buy me a boat—and a truck to pull it.” Funny. The suspicion is that the good ol’ boy doesn’t get enough empathy from the supervisor down at the saw mill, and needs to get away to go fishin’, which, in turn, simulates an experience like stress reduction, a major result of empathy.

Saying that the purpose of business is to make money is like saying the purpose of life is to breathe. Keep breathing—and make money—by all means. But the purpose of life is to find satisfaction in one’s work, raise a family, write the great American novel (it’s good work if you can get it!), experience one’s efforts as contributing to the community and making a difference. 

Likewise with business. Business is about delivering human value and satisfying human demands and goals, whether nutrition, housing, transportation, communication, waste disposal, health, risk management, education, entertainment, and so on. Even luxury and conspicuous consumption are human values, which show up as market demands. 

The customer with a complaint is an example of supply and demand. The customer is “demanding” a product or service that satisfies the real or implied service level agreement. What is often not appreciated is that the customer is also often demanding empathy as part of the service level agreement. 

Which direction is the empathy travelling? From employee to customer? From supervisor to employee? From executive to stake-holder? The one who gets paid the money provides the empathy along with the produce or service. Even fairly abstract financial instruments such as insurance and hedging future prices in commodities such as wheat or oil have a valid function in risk management and so have an empathic core of managing hope and fear about the future. The one exception I can think of? Trading derivatives and derivatives of derivatives becomes a formal financial form of gambling. Absent empathy, some people find that gambling provides them with the stimulation they require to feel alive.

One may argue that transportation does not require a Lamborghini and that a Honda Civic will do quite well, thank you; but the debate is still about the experience of brand equity, which is a proxy for empathy like “carbon footprint.” The purpose is to create satisfied customers, suppliers, buyers, sellers, and partners. Review the above-cited quote from Jack Welch that “shareholder value is a result, not a strategy” (see p. 274 above). If one does these things well, addressing a demand in the market, the money shows up. 

In conclusion, business people “get it”—empathy is good for business. Profit is a result of business strategy, implementation, and operations, not “the why” that motivates commercial enterprise. And if profit shows up that way (as the “the why”), then you can be sure that, with the possible exception of index derivative hedging, it is a caricature of business and a limiting factor. Business prospers or fails based on its value chain and commitment to delivering value for clients and consumers. However, as noted, some of the things that make people good at business make people relatively poor empathizers. 

Business leaders lose contact with what clients and consumers are experiencing as the leaders get entangled in solving legal issues, reacting to the competition, or implementing the technologies required to sustain operations. Yet empathy is never needed more than when it seems there is no time or place for it. This is a challenge to be engaged and overcome.

What to do about it? Practice expanded empathy. Empathy is on the critical path to serving customers, segmenting markets, positioning products (and substitutes), psyching out the competition—not exactly empathy but close enough?—building teams and being a leader who actually has followers. Empathy makes the difference for contributors to the enterprise at all levels between banging on a rock with a hammer and building a cathedral. The motions are the same. When the application of empathy exposes and strengthens the foundation of community, then expanding empathy becomes synonymous with expanding the business. 

Building customer communities, building stakeholder communities, building teams that work, are the basis for product innovation, brand loyalty, employee commitment, satisfied service level agreements, and sustained or growing market share. Can revenue be far behind? Sometimes leaders don’t need more data, leaders need expanded empathy, though ultimately both are on the path to satisfied buyers, employees, and stakeholders. If the product or service is wrappered in empathy, has an empathic component as part of the service level agreement, gets traction in the market, and beats the competition’s less empathic offering, then we have the ultimate validation of empathy. We do not just have empathy. We have empathy, capitalist tool. 

[i] Belinda Parmar. (2016). Corporate empathy is not an oxymoron, Harvard Business Reviewhttps://hbr.org/2015/01/corporate-empathy-is-not-an-oxymoron [checked on June 30, 2017]. This article includes the complete list of 100 companies. 

[ii] Simon Baron-Cohen. (2011). The Science of Evil: On Empathy and the Origins of Cruelty. New York: Basic Books (Perseus).

[iii] Belinda Parmar. (2016). The most empathetic companies. 2016. Harvard Business Review, 12/20/2016: https://hbr.org/2016/12/the-most-and-least-empathetic-companies-2016 [checked on June 30, 2017].

[iv] Parmar 2016.


[i] Anonymous Contributors. (nd). Nestlé boycott, Wikipediahttps://en.wikipedia.org/wiki/Nestlé_boycott [checked on August 15, 2017].

[ii] Ibid., Nestlé boycott, Wikipedia

[iii] Nestlé Annual Review 2016: https://www.nestle.com/asset-library/documents/library/documents/an nual_reports/2016-annual-review-en.pdf: 20 [checked on 12/11/2017]. Note that Nestlé produces three (3) corporate annual reports every year. One for Nestlé International; one for Nestlé USA; and a third on Nestlé’s measurable commitments to social responsibility. 

[iv] Op. cit.: Nestlé boycott, Wikipedia.

(c) Lou Agosta, PhD and the Chicago Empathy Project

Empathy: Capitalist Tool (Part 2): “CEO” now means “Chief Empathy Officer”

Listen on Spotify: https://open.spotify.com/show/6nngUdemxAnCd2B2wfw6Q6

“CEO” no longer means “Chief Executive Officer,” but “Chief Empathy Officer.” This time one can hear the groans—from the executive suite, not the cubicles. 

Empathy is one of those things that are hard to delegate. This role shows up like another job responsibility with which the CEO of the organization is tasked—along with everything else that she already has to do. As if she did not already have enough alligators snapping at various parts of her anatomy, one has to be nice about it, too? But of course empathy is not niceness, though it is not about being un-nice. It is about knowing what others are experiencing, because one has a vicarious experience and then processing that further to expand boundaries and exercise leadership. 

This puts me in mind of a mini-case-history reported by Annie McKee in the Harvard Business Review (HBR).[i] In this case, an up and coming executive, Miguel (not his real name), goes from turning around many struggling divisions in a multi-divisional corporation to a kind of identity crisis about who he authentically is in relation to the possibility of empathy. Miguel is a wizard at finding profit and weeding out waste. Miguel goes from division to division (each big enough to be a separate company) working his financial wizardry. It seems to work. 

If the case sounds like a thinly disguised version of the career of Jack Welch, who was CEO of the multi-divisional General Electric (GE) from 1981 to 2001, then so be it. Welch retired from GE with a package estimated at $417 million.[ii] According to some reports, Welch was nicknamed “Neutron Jack,” because, like the neutron bomb, he eliminated the people while leaving the buildings and the profits standing. 

Welch innovated a management approach called “rank and yank,” now widely imitated. Each year, the bottom 10% of his managers, regardless of absolute performance, would be let go. Those in the top 20% were amply rewarded with bonuses and stock options, which were extended liberally from top executives to nearly one third of all GE employees. 

Welch reportedly fought against, but did not solve, the chronic problem of Wall Street pressure to sacrifice the sustainability of long term growth for short term profit. Welch railed against the very system that he outfoxed brilliantly over a twenty year career as CEO, but, note well, only after he got his payout. 

Regarding shareholder value, Welch said in a Financial Times interview on the global financial crisis of 2008–2009: “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy […] your main constituencies are your employees, your customers and your products.”[iii]

Now you are going to expect me to say this method was the epitome of lack of empathy, and from the perspective of the employees whose jobs were eliminated, it definitely lands that way. Yet that is precisely what Welch was hired to do. Thus, the context.

Next act, quick scene change back to Miguel. In McKee’s HBR mini-case-history, his corporate superiors inform Miguel that those employees who survived his restructurings now hate their jobs, teams are dysfunctional, and the “by the numbers” culture has become toxic. (I believe this did not happen at GE.) Miguel is told “fix it” or he will never become CEO (which is apparently part of his agreement and expectation). 

Miguel hires Professor McKee as his empathy consultant, and he is making slow, all-too-slow, progress working with her in expanding his empathy when another set-back occurs. Miguel’s wife throws down the gauntlet, pointing out that he is never available for her and the kids even when he is supposedly physically present. This hits home, literally. This inspires Miguel to expand his practice of empathy to a new level. He commits to learning how to listen, relate to others as a contribution, walk in their shoes, and respond empathically. 

Thanks to Miguel’s renewed commitment—and McKee’s consulting and coaching—the empathy training works. Miguel expands his empathy in time. All live happily (and empathically) ever after, both at home and on the job, in this “just so” story. 

However, in the real world, the Miguel and Welch narratives dramatically diverge—as do fiction and nonfiction. As a celebrity CEO, the dynamics of Jack Welch’s personal vicissitudes were played out in the public press, so they are readily available to the interested gossip—I mean reader—and the details of Welch’s three divorces will not be rehearsed further here. This speaks volumes to most ordinary humans. Thus, the lives of the rich and famous.

The empathy lesson? There is an cost and impact to every initiative and project. The cost and impact extend to empathy. Empathy is expanded or contracted. There is a cost and impact to “rank and yank,” even for those doing the ranking (though, of course, especially for those who are “yanked”). 

No one needs to feel sorry for anyone, reportedly the “yanked” walked away with nice packages, but this is not for the faint of heart. On a happier note, Welch goes on to found a management school, the Jack Welch Institute, in an initiative designed to rationalize and replicate the business methods and financial “magic” that he developed at GE. Some thirty-five CEOs heading corporations today have been trained in his method (mostly at GE, not his theme-branded school). The principles Welch developed are also delivered at business schools such as MIT’s Sloan School of Management. With the case of Welch in the background, one realizes that the mini-case-history of Miguel really does indeed conceal an alternative point of view. However, “alternative” does not mean “inaccurate,” but a re-description of events that points to a hidden empathic breakdown. 

Miguel was doing exactly what his corporate superiors asked him to do. If the financial results were not sustainable after his departure, this was so much “regression to the mean.” Even the average profitability of the companies identified by the celebrated In Search of Excellence by Thomas Peters and Robert Waterman dropped sharply within a few years in the absence of sustained leadership. “Regression to the mean” means literally that when one performs above average now, get ready for one to perform below average later; when one performs below average now, get ready to perform above average later. The boss will predictably approve of the above-average performance and disapprove of the below-average one; but the subsequent performance is governed by “regression to the mean,” not the boss’ approval or disapproval. 

For all the ambiguous comments made about Jack Welch such as “Neutron Jack,” he managed to create an entrepreneurial spirit in a giant, multi-divisional bureaucracy. Now that was both the good news and the bad news. For those employees looking to put in their time, performing routine tasks—and conforming—prior to collecting a pension, that was bad news. It demanded a way of relating to possibility that required innovation and transformation that was ultimately career ending for those individuals. 

To his enduring credit, Welch inspired an approach to creating possibilities by his own example that he called “boundaryless.” In short, he broke down organizational silos by giving permission to cross boundaries between traditional functions in search of possibilities, i.e., innovations. The boundary crossing sounds like the skillful use of empathy in building and managing cross functional teams.

Welch formed cross-functional teams to brain storm and implement possibilities that had not previously been envisioned. He championed ideas and possibilities for improvement regardless of whether the ideas came from inside or outside the company. “This is the way things have always been done” became the wrong answer, or at least no longer the default reply. Note that “boundless” behavior should not be confused with boundary violations. Empathy is about crossing boundaries to give the other person the possibility of breakthrough contribution, doing so with respect and recognition, and in a way that preserves the integrity of the boundary.

Welch was in charge at GE for twenty years; he had sufficient time to train divisional leaders in sustaining his practices; and retain them in charge of the divisions he had restructured. During his tenure at GE, the company’s value reportedly rose some 4,000%.[iv] If that is not sustained value, I would not know it. 

Meanwhile, Miguel’s bosses asked him to put relatively short term financial results ahead of team building, retaining the best people, entrepreneurial informality, and, like a good leader, he made it work—for a while. He made it work until the bosses decided they did not want him to do that anymore. Surprise! Then they told him, “Fix it or you’re gone!” Miguel’s listening—a key component of empathy—was operating at an advanced level. He listened well; and he gave his superiors back precisely what he got from them—and what they asked of him. It turns out his superiors didn’t like it as much as they thought they would. 

It does put one in mind of the example of George M. Pullman, who is no longer the model for employer-employee relations. Pullman ordered the workers fired when they presented him with a petition in protest of a 25% reduction in wages.[v] Pullman as Miguel’s boss? Miguel’s superiors changed their minds, having gotten the benefits of the “rank and yank” approach. Boards are allowed to change their collective mind (and minds), and were now looking for a CEO more like Walt Disney, Marshall Fields, perhaps Warren Buffet or Sam Walton, after the latter had made their first billion dollars, and could afford to throttle back a notch, cultivating a kinder, gentler image.

My redescription of events? While it is accurate that Miguel was innovating with his own version of Neutron Jack, Miguel was also on the receiving end of the breakdown in empathy. He could not give what he did not get, and, by the time his corporate superiors figured out what they wanted, Miguel had perfected his version of the Roman invasion of Britain. The surviving Brits were reported to have said: “The Romans ‘make peace’ by creating a desert.” The Brits were not referring to an “empathy desert,” but the idea is similar. McKee’s case history is a nice narrative and a useful cautionary tale. However, the tale lacks credibility and confronts us with the next challenge, empathy: capitalist tool. 

Empathy: Capitalist tool

“The Lone Ranger” is a vanishing breed in today’s corporation. Modern work, from the upper echelons of the corporate hierarchy to the bottom levels of the lowest cubicle, requires empathy. 

Whether sales person, software developer, accountant, or business leader, one has got to be “a team player,” “willing to go above and beyond the call of duty,” spend long hours on business travel, and be cheerful about it. One has got to get in touch with one’s empathy; and use one’s empathy to satisfy customers, teammates, stake-holders, and superiors. 

In short, empathy is now a capitalist tool. Managers need to apply ample empathic skills. Managers are required to keep workers contented so that the workers can be productive. Managers are now coaches, facilitating employees feeling valued, so employees are emotionally invested in contributing to the team, team spirit, and the long hours and frequently uninspiring routine work required as a project hits “crunch time.” 

Both managers and line employees must be able to turn empathy “on” for customers; “on” for team work; “on” for co-workers; but “off” for the competition; “off” for efficiency and discipline; and “off” for compliance and rule following. This ability to turn empathy “on” and “off” implies an approach that this book has questioned in arguing that empathy is a dial or tuner rather than an “on-off” switch. However, even if, for the sake of argument, we imagine empathy as an “on-off” switch, this calls for a level of skill in regulating empathy in which most people lack practical skill.

Consider. Customers pay their good, hard earned money for products and services, and it is a low bar to say that customers are entitled to be listened to, treated with dignity, and responded to empathically by a corporation and its representatives. The empathic engagement with and treatment of customers is demonstrably a rewarding investment. 

How about employees? As a person moves into the work force, he is empathic because those in authority advocate for it as a form of team building. It is important that one be empathic in addressing the issues and concerns of co-workers, customers, and stake-holders. 

Employees who feel that they are “gotten as a possibility” by their company are emotionally invested in the success of the company. They are inspired to go the extra mile to deliver value on their agreements, make extra effort for the team, and see their personal contribution in terms of the big picture. They are not just stone cutters banging away at a rock with a hammer; they are building a cathedral. 

Neither the employee nor the manager “above” him have been trained in empathy, and it is not a part of their job description, at least in any explicit way. Though there are dozens of training firms in everything from compliance to conflict resolution, the number of individuals and firms in North American and the European Union delivering empathy training can be counted on the fingers of one hand. While that may be changing, expecting CEO’s to give empathy when they are not in touch with their own empathy, makes no sense. Nor is it fair either to the leader or would-be recipient. Welcome to the age of Machiavellian empathy!

Niccolò Machiavelli (1469–1527) was famous for saying that it would be best if the leader—the Prince, in his day—was loved, but it is essential that he be feared.

Machiavelli never actually said that the ruler, the Prince, must be perceived to be empathic, even as he ruthlessly wields power behind the scenes. But that is what he implied. In the context of politics, Machiavellian empathy refers to politicians who present themselves as being empathic while manipulating, spinning alternative facts, double dealing, and so on, behind the scenes. Machiavellian empathy shows up in business, too. If managers are not in touch with their empathic abilities, they are counseled to “fake it till you make it.” Many never “make it” and continue “faking it.”

Whether or not one authentically understands the experience of the other person is less relevant to the Machiavellian Empath than scoring points on a check list of concerned behavior. 

Is this then the ultimate cynical moment? Is this the ultimate easy way out? Is this the reduction to absurdity of empathy? If empathy is about setting boundaries, where is the boundary? While not a complete response, one distinct limit to Machiavellian empathy is Lincoln’s famous saying, “You can’t fool all the people all the time.” Ask Travis Kapernick, Bernie Madoff, or Harvey Weinberg.[vi]

Strictly speaking, Machiavellian empathy takes nothing away from empathy’s intrinsic benefits and uses. Even if one wants to present the appearance of being empathic for propaganda (i.e., marketing) purposes, while continuing to operate with dubious business practices behind the scenes, reality has a way of catching up with appearances. Amazon said it was a wonderful place to work. Then the New York Times got some employees to comment on the record about “mean” behavior.[vii] Uber was disrupting the disrupters and creating the Gig Economy, which supposedly set us free. Then a driver, who was not in touch with that supposed freedom, unwittingly interviewed the CEO, Travis Kapernick, on camera.[viii]

So far as we can tell at this writing, neither of these breakdowns has resulted in breakthroughs. There is no guarantee that the Machiavellian Empath will slip up and document his or her own inauthenticity for us; it rarely happens rapidly enough; but it happens. 

Empathy deserts grow: Woe to those that harbor empathy deserts!

Capitalism organizes empathy along with workers and production processes. Under capitalism, empathy is a means, not an end dedicated to the satisfaction of human needs, aspirations, and demands. (When the word “demand” is used, think “supply and demand” for products and services in a market.) Some workplaces are empathy deserts in spite of the appearance of mangers with published “open door” policies.[ix] Key term: empathy desert. After a day at the office, people often feel as if their personality had been erased. One’s humanity withers in the desert. So if you find yourself feeling dehumanized by your job, maybe you work in one of those, regardless of the prevailing rhetoric. 

Instead of the industrial supervisor shouting orders to his workers, who curse under their breath and conform to the orders, today’s managers employ therapeutic strategies to create a convivial environment of trust, relatedness, sociality, loyalty, and care. Happy people sell. Happy people write more software code with fewer bugs. Happy people deliver projects on time, on budget. Value creation in the late capitalist economy is a function of the exchange of emotion and empathy.[x]

The way “empathy” is used in the business media today, it means that corporations innovate in providing benefits to their employees. Many of these benefits enable employees to get away from the job and restore aspects of their humanity that are hard to maintain in the “corporate jungle” (or desert). It means that firms return to their employees some of the revenues that the employees earn for the firm by providing services. Such a proliferation of meanings may be a phase that empathy has to go through before we can really grasp how it essentially makes a difference. 

For example, Procter & Gamble offers a personal leave of absence, which the employee can use to engage in a “life project.” Up to three months off without pay—but with continued benefits—allows the employee to pursue a personal “life project,” and, P&G to retain valuable talent, since the employee returns to work after the sabbatical.[xi] Though Human Resources (HR) has to approve the project, the benefit can be used to: complete writing a PhD or masters thesis that requires dedicated time on task for writing and research; design and implement a database tracking system for a social justice issue for Amnesty International or Doctors Without Borders; trek to Nepal and attempt to climb an 8K meter high mountain; sail around the world. 

At Google (Alphabet) parental leave is a benefit: Moms get up to 18 weeks of paid leave; Dads get six. The company also pays “baby bonding bucks” to help with initial expenses such as formula and diapers. 

Prudential Financial is addressing the employee challenge of being a care-giver for a parent or relative by providing adult care in an employee or loved one’s home. The company provides referrals to geriatric care services as well as elder law and adult care-giving seminars. 

IBM contracts with an educational firm to provide a “get into college coach” for its employees with children applying to college. They will not write the admissions essay for the children, but provide detailed guidance as to what different colleges are looking for, test scores, grade point average, and cultural preferences. All these are valuable in reducing parental (i.e., employee) stress. Note this is one corporate benefit that does not require the employee to leave work. Sensibly enough, the worker continues to work, presumably to pay college tuition, while “out sourcing” some of the elaborate, complex project planning needed by the student actually to get into college. Win-win all around.

While my work has repeatedly emphasized that there is enough empathy to go around, empathy is not uniformly distributed. How could it be? Executives who are talented at dealing empathically with customer issues may be less skilled at dealing empathically with employees; and those skilled at dealing empathically with employee issues may be less skilled at dealing empathically with union negotiations, the press, or business partners and competitors (who may be one and the same). 

Arguably, empathy flows from those with more power towards those on the front line engaging with customers. However, if the customer is big enough, for example, contemplating buying a fleet of jets or a global enterprise software system, the ultimate sales person turns out precisely to be the CEO or her close colleagues. The executive suite is now on the front line. But who trained those leaders—or any one—in empathy? If we gave the executive (or front line help desk person) the kind of empathy exam described above by Leslie Jameson, in which an actor learns a script, portrays a client with a problem, in effect being a “secret shopper,” what would be the grade (see p. 121 above)? While we may never know for sure, I predict that the grade will be lower than if the executive fills out a self-assessment in which one can pick out the “right answer” based on common sense and an appreciation of kindness. Thus, the case for expanding empathy through training.


[i] McKee, Annie. (2016). If you can’t empathize with your employees, you’d better learn to, Harvard Business Review, November 16, 2016.

[ii] Anonymous Contributors. (nd). Jack Welch. Wikipedia: https://en.wikipedia.org/wiki/Jack_ Welch [checked on June 30, 2017].

[iii] Ibid, Jack Welch, Wikipedia

[iv] Ibid, Jack Welch, Wikipedia

[v] Melvin Urovsky. (1998). Pullman strike, Britannica Online: https://www.britannica.com/event/ Pullman-Strike.

[vi] Meanwhile, more breaking news, as this book goes to press, some 49 men stand accused of sexual misconduct in various workplaces extending from Harvey Weinstein’s Hollywood production company (from which he was fired) through venture capital to restaurant businesses: 

https://www.nytimes.com/interactive/2017/11/10/us/men-accused-sexualmisconductweinstein.html?_r=0. The problem is that, while it is good that this abuse is finally coming out, it has been hidden in plain for years and years. See Harry Markopolis’ (2010) statement in a different context above, “no one would listen.” Where is Lord Acton when we need him? Lord Acton said: “Power corrupts; and absolute power corrupts absolutely.”

[vii] Kantor and Streitfeld 2015..

[viii] Seyluk 2017.

[ix] Roman Krznaric (2104) quoted in Belinda Parmar (2014) The Empathy Era: Woman, Business and the New Pathway to Profit, London: Lady Geek: 91. Parmar does not cite a page in Krznaric. 

[x] Tristam Vivian Adams. (2016). The Psychopath Factory: How Capitalism Organises Empathy. London: Repeater Books: 56–77. 

[xi] Matt Krumie. (2016). Ten companies putting empathy into action, Cornerstone On Demand: https://www.cornerstoneondemand.com/rework/10-companies-putting-empathy-action [checked on July 03, 2017].

(c) Lou Agosta, PhD and the Chicago Empathy Project

Empathy: Capitalist Tool (Part 1): The Empathy Deficit in Business is Getting Attention

The empathy deficit in business is getting attention

Listen to podcast on Spotify or via Anchor: https://anchor.fm/lou-agosta-phd/episodes/Empathy-Capitalist-Tool-Part-1-The-Empathy-Deficit-in-Business-is-Getting-Attention-e18tlcn

Children and parents get it. Nurses and doctors get it. Teachers and students get it. Couples get it. Consultants and clients get it. Neighbors get it. What about business people? Do they “get it”—that empathy produces results? Practicing empathy is a neglected opportunity in business. The qualities, practices, and behaviors that help a person build a business sometimes work against expanding the person’s empathy. 

An executive’s ego, opinion, expertise, and attachment to being right raise the bar on empathizing with others, who may have diverging mind sets. Hard charging entrepreneurs find it hard to let go of their status or set aside the lessons learned as they came up through the ranks. Executives and managers lose touch with the experiences, perceptions, and perspectives of customers, employees, and stake-holders. 

The urgent drives out the important. Management effort and time are monopolized responding to competitive pressures, compliance issues, legal challenges, and solving technology problems.[i] For example, according to a report from Businessolver, a human resources and talent consultancy, some 60% of executives believe that their organizations are empathic, whereas 24% of their employees agree.[ii] An empathy deficit? 

The stress of operating the business—deadlines, financial issues, staffing crises, software breakdowns, competition, litigation—drive out empathy and a deep appreciation that a commitment to empathy is good for business. The disconnect is substantial between perceptions in the executive suite and in the cubicles of workers and the front line, customer-facing staff.

Ironically, the empathic practices such as the receptive, interpretive, and responsive processes described in detail in this work (as opposed to compassion) are what are most urgently needed in dealing with customer demands, employee crises, negotiations with competitors, vendors, clients, and one’s own budgeting authorities and board, optimally resolving conflicts with reduced cost and impact. 

When I ask business leaders what is their budget for empathy training, the response is often a blank stare. Zero. However, when I ask the person what is the budget for expanded teamwork, reduced conflict, enhanced productivity, commitment to organizational goals, taking ownership of outcomes, product and service innovations, then it turns out that budget exists after all. Empathy makes a difference in connecting the dots between business skills and performance. Empathy contributes to results in a powerful way by engaging the staff’s energies and commitments at a fundamental level. 

While every business has its own distinct commitments, in many ways, the basic empathy training in business is the same as empathy training in every other context. 

The training consists in surfacing and driving out the cynicism, denial, shame, implicit threats, and pressure that many business people experience in their communications. Empathy then spontaneously comes forth and expands the space of possibilities to do business. This does not mean that businesses do not have their own blind spots when it comes to empathy. They do. Therefore, let us take a step back and look at what it is going to take. 

An appreciation of the value of empathy to promote breakthrough results often starts in sales. In business, the sales people get it. Developing empathy with customers is good for business. 

Even the cynical sales person recognizes that putting oneself in another person’s shoes is a good method of selling them another pair.[iii] The sales person gives the prospect some empathy. Shazam! The customer calls you to close the deal. Wouldn’t it be nice? 

Yet the basic idea is straightforward. When the customer appreciates that the sales person is interested in the customer’s requirements, that the sales person is listening, then the customer is likely to open up and candidly share what is stressing him—budget, deadlines, internal politics, market dynamics, or the competition. 

When the prospective customer feels that the sales person has understood him, the chance is significantly expanded that he will prefer to purchase the product or service from the empathic representative. Once the customer feels the sales person is listening, the customer will share details about his needs, vulnerabilities, and shortcomings, including those about which he might otherwise be defensive, enabling the sales person to position the product or service as a solution to the perceived problem. 

This is not “new news.” In 1964, in the Harvard Business Review—not exactly an obscure, backwater publication—David Mayer and Herbert M. Greenberg called out the two basic qualities that any good sales person must have: empathy and ego drive. These authors define “empathy” as the central ability to feel as other people feel in the context of selling them a product or service. 

In Mayer and Greenberg’s article, the sales staff were trained to interrupt themselves when they found that they were reacting defensively to customer complaints, whether legitimate or not, whether solvable or not. Stop—hit the pause button before responding. Instead of reacting to the complaint, the sales person was trained to “get” the complaint and to communicate back to the customer that he “got it,” namely, that the customer was upset (or whatever the customer was self-expressed about). 

The sales person was trained to acknowledge that a breakdown had occurred. Key term: breakdown. The sales person was trained to acknowledge the complaint by calling it out: “This is a break down!” Even if the customer is inaccurate or wrong in his complaint about some detail, the customer is always—the customer.

By definition, the breakdown in the product or service occurs against the expectation of customer satisfaction. The relationship between the buyer and seller is itself in breakdown against the expectation of satisfaction. This does not rule out the possibility that additional training is needed on the part of the customer about product features or the service level agreement; but such training is substantially different from a defensive reaction. 

The next step is repairing, fixing, or at least managing the cause of the complaint: the respondent then solicits additional feedback and details as to the complaint, i.e., what went wrong. The empathic response includes what one is going to do about the breakdown and by when. 

The committed listening, that is, empathy, creates a clearing for communication, improving the sales process, and restoring authenticity to the relationship when integrity has gone missing. While there are no guarantees, customers treated in such a way tend to stick. Repeat business, maximizing revenue over the lifetime of the relationship, is one of the outcomes. [iv]

The empathic leader meets “economic man”

Development Dimensions, Intl., (DDI) identifies empathy as one of the critical success factors in executive leadership. One of the leading talent development corporations in the market, DDI’s report on High Resolution Leadership identifies empathy as an emotional quotient (EQ) “anchor skill.”

Empathy provides the foundation for interpersonal leadership skills such as developing subordinates, building the consensus for action, encouraging engagement, supporting self-esteem, and taking responsibility.[v]

In the DDI study, listening and responding with empathy were demonstrated by 40% of executives profiled (as opposed to 71% whodemonstrated taking responsibility or 54% who demonstrated building agreement on actions to take). 

The conclusion is that, as regards empathy, the majority of leaders have room for expanding their performance. The good news is that, using interventions designed to expand empathy, the empathy skills needed to drive business results are within reach. [vi]

Thus, the empathy deficit in business is getting attention. Empathy is moving to the foreground. The role and contribution of empathy to business results is penetrating the awareness of leaders, managers, staff, and stake-holders. 

Closely related to the challenge of closing the empathy deficit in business is the challenge that “economic man” is significantly different than man as such. Let’s define our terms. 

The person who conducts transactions in the market is defined in business school as economic man—homo economicus. The latter is significantly different than man, the human being as such. The person (man) in the economic theory is rational, selfish, and her or his tastes do not change. 

Business practices assume the organization is engaging with customers, employees, stake-holders, and leaders who fit the model of economic man. Human beings, on the other hand, do not. Most people in business do not know anyone who fits the description of economic man. Why then are we so busy trying to do business with him when he does not even exist? 

Unlike the person described in economics in business schools, humans are limited in their reasonableness. Humans are diverse and inconsistent in their preferences. Humans are even limited in their selfishness, being generous and compassionate in unpredictable ways. 

The issue? Nobel Prize winning economist Gary Becker’s rational choice theory (preference theory) in economics has been extended to many other aspects of life. Becker’s rational choice theory has been extended to areas as diverse as marriage, crime, and discrimination. 

Generalizations from rational choice theory to the social sciences at large have been a growth industry in the social sciences. From the rich mixture of inconsistencies and contradictions that most people really are in life, the human being was translated into a function of rational, self-interested, and allegedly consistent preferences. The human as such has been simplified and redescribed as a rational, calculating engine of human behavior.[vii]

People are supposed to be consistent in their preferences and tastes. People are supposed to be logical and consistently obey the rules. But finding counter-examples is easy. 

For example, if a person prefers coffee to hot chocolate and the person prefers hot chocolate to tea, then, according to this logic, the person is supposed to prefer coffee to tea. [Think: coffee > hot chocolate > tea; therefore, coffee > tea, according to the transitive rule, in which “>” means “prefers.”] But, no, it doesn’t work that way. Given all these personal preferences as indicated, the person still chooses tea instead of coffee. The person just prefers tea to coffee. The individual is from London! 

Nothing inherently illogical exists in preferring coffee to hot chocolate and tea to coffee while also preferring hot chocolate to tea. Nothing unless one insists on making a dynamic network into a transitive sequence. So much for rational choice theory.

The lesson? Empathy as well as logic are required to understand decision making. Without allowing for the possibility of empathy, economics produces some strange results. People are not natural born statisticians, logicians, or gamblers, though the discipline of economics sometimes seems to assume so. 

Still, testing a person’s decisions and preferences using probabilities, bets, and lotteries is an engaging exercise, and nothing is wrong in doing so. However, unless one also adds empathy to the mixture of economics and logic one misses something essential—the person!

Now, I apologize in advance to the reader for the technical terms, but in economics the chance of winning a bet is expressed as an “expected utility.” “Expected utility” is technical talk for “satisfaction” or “happiness.” (But nothing more than arithmetic is needed to get this. )

For example, in economics the expected utility of a 10% chance of winning a million dollars is $100K [.10 x 1,000,000 = 100,000] [note: K = 1,000]. If Jack and Jill both end up with a million dollars, they should enjoy the same expected utility, no? Remember, Jack and Jill are supposed to be rational, selfish, and consistent in their preferences. Now consider a counter-example:

Today Jack and Jill each have a million dollars.

Yesterday Jack had zero and Jill had two million dollars.

Are they equally happy? (Do they have the same utility?) 

You do not need an advanced degree to know that today Jack is very happy and Jill is in despair. Yesterday Jack had zero; now he has a million dollars. Hurrah! Yesterday Jill had two million dollars; now she has only one million. Ouch! 

We must be able to put our ourselves in the shoes of Jack and Jill and get a sense of their expectations. Sounds familiar? 

These expectations, in turn, constrain their experience of satisfaction (i.e., happiness). To grasp the outcome in terms of their individual experiences, we need an empathic anchor or reference point in their expectations from which they begin. Empathy gives us access to an anchor point in their respective experiences. 

Our empathy shows that outcomes are linked to feelings about the changes of one’s wealth rather than to states of wealth. The experience of value depends on the history of one’s wealth, not only the current state of it. 

Yet another bold empathy lesson: People are strongly influenced by hope and fear. Empathy indicates that people attach values to gains and losses, and these are weighted differently than logical probabilities in decision making. This is not just saying that people are irrational, though that may be true enough at times, too. This says that people (and their behavior) frequently do not conform to the pattern of rationality, selfishness, and consistency in preferences. 

Still, the matter is not hopeless for those committed to pattern matching in economics. People are frequently surprising, but sometimes in predictable ways. People are sometimes inconsistent, but one can sometimes predict those inconsistencies if one learns one’s empathy lessons.[viii] For example:

(1) People are risk averse due to fear of disappointment and regret. The empathy lesson is that people try to avoid risks even in situations where taking a risk is a good bet. “A good bet” is determined according to the probability calculation. 

Consider: if a person had a 90% probability of winning a million dollars, he ought to accept $900K as a “sure thing” settlement, which settlement is logically equivalent to a 90% probability of winning the million dollars [.9 x 1,000K = 900K]. The 10% probability of not winning is an unlikely outcome, but still possible. The “unlikely outcome” often determines the result.

For example, law suits in cases of accidents and contract disputes produce settlements in trial law indicating that people will “settle for” $800K or even $750K for the possibility of knowing the outcome with certainty. For most people that is still a lot of money, and the possibility of having to live with the regret of missing the pay-off due to an unlikely outcome gets most people out of their comfort zone. They decide to settle. 

Empathic receptivity to the possibility of disappointment and regret may usefully “override” the rational, self-interested, and consistent preferences that the purely economic person brings to the negotiations. 

(2) People are risk seeking in the hope of getting an even larger gain instead of accepting a modest settlement.

 This is why people bet on the state lottery where the chance of winning is vanishingly small. Such a bet is illogical, but common. We need expanded empathy to get a clue what is going on here. 

The empathy lesson indicates that people are not buying a chance to win a big pot of money. Rather people are buying a chance to dream of the possibility of winning the big jackpot. “We are such stuff as dreams are made of,” said Shakespeare. The value is in the dreaming, that is, precisely in the possibility of the big jackpot, not the jackpot itself. That such a dream would more likely be the dream of a poor person rather than an affluent one is a further problem that invites attention.

If one looked rationally at the odds, one would not buy the ticket. No way. Clearly lotteries are popular, especially with the poor and “have nots.” The possibility of escaping from poverty is being manipulated in a cynical way by the establishment, and we citizens have all become “addicted” to the revenue stream. 

The lottery budget and effort would be better devoted to job training and instruction in basic financial management, except now lotteries have become a source of revenue for local government and education. This is a breakdown in empathic understanding, which gives us our possibilities. It is hard not to become a tad cynical in considering that the poor are paying for education through lottery revenue, though they are often unprepared to benefit from or hindered from accessing the educational opportunity. 

(3) People are risk seeking in the hope of avoiding a loss in situations in which simply stopping a project altogether would enable cutting their losses (rather than incurring additional likely losses). Defeat is difficult to accept. The empathy lesson is that people are attached to an ideal, in this case a losing cause, for reasons extending from perseverance, egoism, greed, risk aversion, fear of the unknown, all the way to idealism, romance, blind hope, and just plain stubbornness. 

People (and businesses) facing a bad outcome manage to turn a survivable (but painful) failure into a complete meltdown. Desperate gambles often make a bad situation worse in exchange for a small hope of avoiding the loss at all. Businesses, individuals, and even countries, continue to expend resources long after they should blow the bugle, lower the flag, and leave, implementing an orderly retreat. Instead people (and organizations) persist in a lost cause until a rout becomes inevitable. 

Business accounting teaches the basic idea of a “sunk cost.” Suppose Octopus, Inc., (OI) is building a new software system for $100 million dollars. OI has already spent $150 million. The project is over-budget. It is estimated to take another $55 million to complete the job. Suppose further that evidence of a new, breakthrough technology really exists. It would enable OI to develop the system from scratch for $25 million. What should OI do? The money already spent is a “sunk cost.” It should not influence the decision. Given the evidence that the new technology really works, the OI project leader should throw away the over-budget system and build the new one from scratch, spending $25 million and saving $30 million against the projected completion cost of the project. However, that is not what most project leaders would do. 

Due to a sense of ownership of the over-budget project and a fear of the unknown in engaging the new technology, many project leaders double down on the investment in a losing proposition. In a breakdown of empathic interpretation, they continue to project their hopes and fears onto the old technology and, as the saying goes, throw good money after bad. 

(4) People are risk averse due to a fear of a large loss and may rationally and usefully bet on a small chance of (avoiding) a large loss. This is why people buy insurance. The empathy lesson is that people are not merely buying protection against an unlikely disaster; they are buying peace of mind, the ability to get a good night’s sleep. If the negative event would have catastrophic consequences, creating a risk pool, in which everyone participates, spreading the risk in a manageable way, makes compelling sense. Note that certain risks such as war and civil insurrection (or a giant asteroid hitting the earth) are uninsurable. Insurance is a calculation, not a gamble against undefined odds. In general, the insurable risk must relate to individuals or subgroups and the occurrence of the risk should not destroy the infrastructure of the entire community, which needs to be intact to cover the insured risk. 

Insurance was a brilliant business innovation that emerged at about the time of the European Renaissance as traders in the Netherlands—those frugal Dutch—were sending valuable but fragile ships to fetch precious cargo in far away lands. The risks and rewards were great. How to even out the odds? Insurance was born. 

In our own time, one can see the irrationality, the unempathic response, and gaming of the system by special interests in health insurance in the USA where attempts were made to exclude the sickest people from the insurance pool through penalties for preexisting illnesses, combined with charging monopoly rents to the healthiest participants. 

Insurance is often a “good bet” when an outcome that is highly unlikely but catastrophic can be managed by everyone (or a large group) incurring a small cost to spread the risk. But how to get everyone at risk into the pool? When told that people have no health insurance, some politicians are supposed to have said: “Let them pay cash!” In another context, in one the most spectacular breakdowns in empathic responsiveness in modern European political history, the French Queen, Marie Antoinette, was told that the people had no bread, and she is supposed to have said: “Let them eat cake!” Same idea?

Saying that the purpose of business is to make money is like saying the purpose of life is to breathe. Keep breathing—and make money—by all means. But the purpose of life is to find satisfaction in one’s work, raise a family, write the great American novel (it’s good work if you can get it!), experience one’s efforts as contributing to the community and making a difference. 

Likewise with business. Business is about delivering human value and satisfying human demands and goals, whether nutrition, housing, transportation, communication, waste disposal, health, risk management, education, entertainment, and so on. Even luxury and conspicuous consumption are human values, which show up as market demands. 

In conclusion, business people “get it”—empathy is good for business. Profit is a result of business strategy, implementation, and operations, not “the why” that motivates commercial enterprise. And if profit shows up that way (as the “the why”), then you can be sure that, with the possible exception of index derivative hedging, it is a caricature of business and a limiting factor. Business prospers or fails based on its value chain and commitment to delivering value for clients and consumers. However, as noted, some of the things that make people good at business make people relatively poor empathizers. 

Business leaders lose contact with what clients and consumers are experiencing as the leaders get entangled in solving legal issues, reacting to the competition, or implementing the technologies required to sustain operations. Yet empathy is never needed more than when it seems there is no time or place for it. This is a challenge to be engaged and overcome.

What to do about it? Practice expanded empathy. Empathy is on the critical path to serving customers, segmenting markets, positioning products (and substitutes), psyching out the competition—not exactly empathy but close enough?—building teams and being a leader who actually has followers. Empathy makes the difference for contributors to the enterprise at all levels between banging on a rock with a hammer and building a cathedral. The motions are the same. When the application of empathy exposes and strengthens the foundation of community, then expanding empathy becomes synonymous with expanding the business. Building customer communities, building stakeholder communities, building teams that work, are the basis for product innovation, brand loyalty, employee commitment, satisfied service level agreements, and sustained or growing market share. Can revenue be far behind? Sometimes leaders don’t need more data, leaders need expanded empathy, though ultimately both are on the path to satisfied buyers, employees, and stakeholders. If the product or service is wrappered in empathy, has an empathic component as part of the service level agreement, gets traction in the market, and beats the competition’s less empathic offering, then we have the ultimate validation of empathy. We do not just have empathy. We have empathy Capitalist Tool!


Notes

[i] Katja Battarbee, Jane Fulton Suri, and Suzanne Gibbs Howard. (2012). Empathy on the edge: Scaling and sustaining a human-centered approach in the evolving practice of design, IDEO

http://liphtml5.com/gqbv/uknt/basic [checked on 03/31/2017].

[ii] William Gentry. (2016). Rewards multiply with workplace empathy, Businessolver: http:// http://www.washingtonpost.com/sf/brand-connect/businessolver/rewards-multiply-with-workplace-empathy/ [checked on 03/31/2017].

[iii] Roman Krznaric. (2014). Empathy: Why It Matters, and How to Get It. New York: Perigree Book (Penguin): 120.

[iv] C.W. Von Bergen, Jr. and Robert E. Shealy. (1982). How’s your empathy? Training and Development Journal, November 1982: 22–28: http://homepages.se.edu/cvonbergen/files/2012/11/Hows-Your-Empathy.pdf [checked on 03/31/2017].

[v] Research Staff. (2016). High Resolution Leadership, Data Dimensions, Intl.: http://insight. ddiworld.com/High-Resolution-Leadership [checked on 03/31/2017].

[vi] William Gentry, Todd J. Weber, Golnaz Sadri. (2007). Empathy in the workplace: A tool for effective leadership, http://www.ccl.org/wp-content/uploads/2015/04/EmpathyInTheWorkplace.pdf [checked on 03/31/2017].

[vii] Bernard E. Harcourt. (2015). Exposed: Desire and Disobedience in the Digital Age. Cambridge, MA: Harvard University Press.

[viii] Daniel Kahneman. (2011). Thinking, Fast and Slow. New York: Farrar, Straus, and Giroux. 

(c) Lou Agosta, PhD and the Chicago Empathy Project