Having happy, healthy-minded employees really does matter to a company’s overall performance and profitability, according to research conducted by the University of Michigan’s Ross School of Business. More companies are turning to compassion as a way to improve the bottom line.
In 2004, Prudential Financial paid $2.1 billion to acquire the full-service retirement operations of CIGNA, a global health services company based in Hartford, Conn. This acquisition, says Dr. Kim Cameron, a professor of management at the University of Michigan, “was like merging the Red Sox and the Yankees”—a severe mash-up of different cultures and different systems on a massive scale. The merger came with the usual announcement of job attrition, and Hartford expected to lose one-fourth of the jobs associated with CIGNA’s retirement business.
John Y. Kim, a former CIGNA executive who was tapped to lead the merger for the newly formed Prudential Retirement, did his best to pacify concerns with improved workforce forecasts and civic pledges to the city of Hartford—charitable contributions, economic development promises and so on. Prudential also provided temporary retention bonuses for employees who stuck around.
These are standard steps that companies take to stem the disgruntled tide, but John wanted to do something more. He had been down this road before, having managed a merger between the ING Group and Aetna Financial Services. He was acutely aware that combining companies involves not just the “hard facets” of work and product systems, but also the “soft facets” of company culture.
When culture goes bad, he says, companies might get the hard facets right and still lose customers and create miserable employees.
Can big, complex corporate mergers actually be good not just for business, but for people, too?
That’s the question John faced as he took a trip to his alma mater, the University of Michigan, about a year into the merger. While there, he learned about the Ross School of Business’s new Center for Positive Organizational Scholarship (POS), which had been founded in 2002 as the home of a new field of study that analyzes how organizations foster and achieve positive outcomes. POS was the brainchild of Kim, Dr. Jane Dutton, and Dr. Robert Quinn, three scholars at Ross who decided to take seriously some questions that no organizational studies scholars had ever quite taken seriously before, such as what good human behavior and “positive deviance” (exceptional, aberrational successes) have to do with businesses that prosper. In other words, Jane explains, POS is “about trying to reinvent professional practice in a way that’s ‘life-giving’ for both employees and the companies they work for.”
Ten minutes into learning about the group’s research, John “decided to inject it into his organization,” Kim says. With the help of Kim and Robert, John and his team began to introduce positive organizational principles into Prudential Retirement—including institutionalizing forgiveness, resilience, supportive communication and employee empowerment—with the goal of creating sustainable culture change and meeting business goals.
“Over the next four to five years, they had a lot of sessions with the senior team and salespeople. A lot of interventions occurred in which John was the champion for implementing these principles,” explains Kim.
Over a period of time, there was a systemic change at the firm—a culture change, built around positivity, which had a remarkable business impact. Prudential Retirement executives feared they could lose 50 percent of their customers during the transition, but they retained 95 percent.
“Bottom-line revenues,” Kim says, “increased by 5 or 6 percent.”
The Virtues of Victorious Companies
Kim’s area of expertise is the importance of “virtuousness” in organizations, and what he’s found since the emergence of POS is that the good guys really do win. Companies have a role to play in employee wellbeing beyond “up with people” motivational slogans—and even beyond compensation. Companies can structure themselves around the promotion and practice of good habits that engender spirits of genuine goodwill, and when they do, they’re more likely to flourish alongside their employees.
The term “virtuousness” is intentionally broad. It is inclusive of several individual virtues, including kindness, compassion, forgiveness, humility, generosity, empathy and patience. In other words, “the best of the human condition.” Kim has conducted studies that attempt to determine “if one particular virtue or cluster of virtues is especially accountable for good performance. As it turns out, none of these virtues operate independently of each other. It’s the aggregation of virtue that’s more important than any single thing.”
Kim stresses that a virtuous organization is more than just a collection of virtuous people. Businesses and other kinds of collectives possess a particular character just as an individual possesses a particular character. “You can have a whole bunch of virtuous people, and they can get into an organization where the culture or practices or routines drive out any opportunity to display virtues. The dynamics of organizations often supersede any individual attributes.”
Practicing virtues, Kim has found, can turn organizations around. “Virtuousness is its own reward,” he says. “Of course, CEOs say, ‘Show me how it will pay off.’ And unequivocally, after a dozen years of research, we can see that bottom-line performance is significantly affected by these sorts of things.”