“The truth of the matter is that you always know the right thing to do. The hard part is doing it.” Norman Schwarzkopf
A challenge to the truism that good people always finish last has come from a most unlikely place-recently downsized, publicly traded US corporations.
It turns out that being a virtuous organization is profitable, say researchers Kim Cameron and Arran Caza at the University of Michigan Business School, and David Bright of Weatherhead School of Management in Ohio.
The researchers investigated 18 companies last April (two-thirds of which were publicly traded and all but two recently downsized) from a variety of industries including retail, manufacturing, steel, automotive, public relations, transportation, business consulting, health care, power generation and social services.
They found a significant relationship between virtuous organizations – those that scored high in optimism, trust, compassion, integrity and forgiveness – and increased performance.
Companies perceived as optimistic by employees tend to develop a sense of purpose and good will amongst workers. The organization places a premium on staff being able to meet challenges with a positive, problem-solving attitude. When workers cite trust in leadership, openness to staff contributions, collaboration, and courtesy between people, as hallmarks of their company, they perceive their workplace to be trustworthy.
Compassionate organizations demonstrate caring for worker well being, offer encouragement and gratitude to staff and make acts of kindness the norm.
Being part of an organization with integrity means staff act honourably. Lying by omission or deliberately suppressing information, for example, is antithetical to organizational integrity.
Organizations that forgive are considered virtuous when mistakes are forgiven with no grudges held. Apologies are accepted when problems are acknowledged and steps are taken to improve the situation.
The researchers found that virtuous organizations were perceived by their staff members to be more innovative and quality-minded, more likely to retain staff and less likely to lose customers. Moreover, these organizations were more profitable even after suffering the negative effects of downsizing.
Ironically, a truly virtuous company, as defined by Greek philospher Aristotle, is one that chooses to do good because it is the right thing to do, not for personal or corporate profit.
Virtuousness goes beyond being a good corporate citizen, socially responsible, environmentally friendly, ethical, volunteer-oriented or philanthropically oriented. If the focus is solely on how these activities boost the bottom line or provide favourable public relations opportunities, a company is not acting virtuously.
According to Cameron, Bright and Caza, this idea goes against common business sense, finds little interest in the scientific community, is almost off limits in the business press and is rarely discussed amongst managers.
Yet businesses that have taken the courage to move beyond “what’s in it for me” thinking, have found virtuousness to be profitable and contagious within the organization.
It turns out that virtuousness in a company has amplifying effects – positive interactions at work such as random acts of kindness, helping each other out in a crunch or leading by example, can be contagious and can buffer organizational traumas like downsizing.
Virtuous behaviour in leaders and staff can inspire gratitude, inspiration and awe. Studies show that when people experience positive emotions like these in the work place, they are more likely to be creative, and explore new ideas. When innovation increases and work environments foster safe places to experiment, profits tend to go up.
The researchers reported that when employees are treated well, customer retention, loyalty and satisfaction increases and salespeople tend to be more helpful to customers if they have positive emotional experiences at work. Retail customers visit more often and spend more money when they experience enjoyable emotional relationships with an employee.
Being helpful spreads. When an employee feels cared for, supported and heard-so do customers.
Companies that have downsized usually experience such negative consequences as escalating turnover, decreased morale, loss of trust, restricted communication, loss of take-charge leaders, declines in innovation, conflict, and risk aversion.
It may be tempting to view downsizing as a symptom of a lack of organizational virtue, but if economic survival is at stake, downsizing may be the only option.
Virtuous organizations, forced to lay off a workforce, buffer the effects by caring for remaining workers as well as those who have had to leave, by helping staff with the increased workload and remaining transparent about the company’s situation throughout the process.
Research shows that a decrease in quality can be rampant in downsized organizations (as some B.C. customers of phone company Telus are currently aware of) and that virtuousness can have a mitigating effect when it fosters willpower, stamina, collaboration and resilience in staff.
According to Cameron, Bright and Caza, a virtuous organization helps employees make better decisions, process information, support each other and make fewer quality errors.
High levels of employee engagement and effective interpersonal relationships are enhanced in virtuous organizations and are related to profitability and increased quality.
Being virtuous doesn’t mean not making money, never downsizing, not being successful, never owning a fancy car or being perfect. It means doing what’s right – just because it’s right.
Dr. Jennifer Newman and Dr. Darryl Grigg are registered psychologists and directors of Newman & Grigg Psychological and Consulting Services Ltd., a Vancouver-based corporate training and development partnership. They can be contacted at firstname.lastname@example.org
Identifying information in cases cited has been changed to protect confidentiality.