Nice Companies Really Do Finish First

Throughout our lives, we’ve been told “nice guys finish last” and that “business is a dog-eat-dog world.” Indeed, we hear constantly about how competitive and vicious we need to be to get ahead and rise to the top. Pop culture, especially reality TV, reinforces the idea that no matter what industry we work in, business is, by nature, a cutthroat world that is not for the faint of heart or the selfless.

These stereotypes, of course, couldn’t be farther from reality, as I discussed in a recent Forbes article on the costs of meanness in business. Kind business owners can be just as shrewd and forceful and hard-hitting as their ruthless, scheming counterparts. Kind owners have no problem standing up to their most mean-spirited, condescending colleagues when necessary; they simply stand up by rising above and showing compassion.

The reason smart business owners exude kindness is because they understand that kindness is more effective in business than being ruthless. Organizational psychology research has repeatedly shown that a negative, cutthroat environment leads employees to become disengaged. And a business with a disengaged workforce will experience, on average, 16% lower profitability and a 65% lower share price over time than a business with an engaged workforce, according to studies conducted by the Queens School of Business and the Gallup Organization.

In fact, there are several distinct benefits to kindness that consistently make it the more strategic, beneficial behavior. Let’s explore five key reasons that kindness is so essential to succeeding in business:

• Kindness gives you a good reputation among customers and vendors: Even if you believe you need to come across as ruthless and hard-nosed with your competitors in the business world, you absolutely cannot come across that way among your customers and vendors. People choose to do business with companies that are known for having a positive value system; when a business develops a bad reputation because it’s perceived as being too aggressive or hostile, that reputation affects the willingness and eagerness of customers and vendors to want to continue to do business with the company.
• Kindness requires less effort than being mean: As humans, we have an innate desire to please other people and to be validated by others through acts of caring and compassion. Hence, simple acts of kindness tend to come naturally to us. For example, as children, we learn to automatically say “please” and “thank you.” In our first job, we learn to automatically show restraint and deference and respect, as these characteristics are necessary to be considered for advancement and promotions. By contrast, ruthlessness in business doesn’t come naturally. We must plot and scheme, for example, to be able to embarrass, demean or belittle someone – and all of the energy we spend doing this isn’t healthy; it unnecessarily consumes our mental bandwidth.
• Kindness will open doors of opportunity: Kindness won’t just be noticed by your competition, your employees, and your customers. Kindness also will be noticed by people who have never interacted with you and are drawn to your kindness. When you are known for giving back to your community, or for investing in your employees’ futures, or simply for being friendly and approachable, you will attract like-minded people to you. These people may want to partner with you on business endeavors, or award you venture-capital dollars, or steer new customers and/or talented job candidates to you. No matter what they have to offer you, these are the people who will immeasurably enrich your life and that of your business.
• Kindness empowers your employees to provide better service: When a business makes kindness a priority, employees step up their game and make kindness a priority when interacting with customers. This translates to more customers feeling more appreciated and special – everything from heartfelt expressions of gratitude for the customer’s business, to going the extra mile to resolve a customer concern or complaint. Kindness also may translate to being generous with customers – for example, throwing in freebies and extras, or offering loyalty discounts.
• Kindness improves mental well-being: Businesses that prioritize kindness can expect to see a return on investment in the form of healthier employees. Researchers have shown that businesses that encourage mutual trust and reciprocity among employees will build “social capital” that translates to improved business outcomes. Employees who work for businesses that invest in social capital tend to feel more empowered to express themselves and to be better able to persevere and thrive during challenge and transition.

Kindness makes a big difference in profitability, too. In his book “Nice Companies Finish First,” Peter Shankman notes that research from CEB has found that employees who are most committed perform 20% better and are 87% less likely to leave. This factor makes a big difference to the bottom line.

A March 2012 study from the University of Pennsylvania’s Wharton School concludes that kind companies benefit financially when they make the effort to grow from within. This study notes that external hires were paid on average about 18% more for equivalent roles, but fared worse in performance reviews during their first two years.

Kind companies should also avoid the plague of “Myopic Loyalty” – when a leader retains a poor employee they have personal feelings towards based on history, friendship or previous help given. “You should do yourself, your other workers and the employee a favor and let that person go,” Shankman says.

“Many poor performers thrive in new environments but don’t have the courage to make the move on their own. Dismissal can be a catalyst for growth for them, too," said Robert Sher, the founding principal of CEO to CEO, in an interview in Shankman's book.

Some cynics may say that there is no such thing as true kindness in business; every kind act is really a marketing ploy that pays lip service to the real thing. While it’s certainly true that there are many strategic business advantages to kindness, we must not think of kindness that way.

The strongest companies know that kindness is essential to building a positive reputation, and fortunately, it comes quite naturally to us. Kindness in business opens doors of opportunity, empowers employees to provide improved customer service, and improves our long-term mental health and resilience as well.