The Open-Empathy Organization
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Authors
Dev Patnaik
Peter Mortensen
Companies prosper when they tap into a power that each of us already possesses – empathy.
Originally published in Rotman Magazine, May 2009
In 1986, manager Jack Stack and 12 co-workers staged a successful buyout of Springfield Remanufacturing Center from its parent company, International Harvester. The engine rebuilder had been losing money to the tune of $2 million a year, and Stack and his team believed that they could revive the moribund unit. Realizing the need to make massive operational changes, they revamped SRC’s system for financial reporting and decision making, and in the process, they helped spawn a management revolution: open-book management.
Stack and his colleagues realized that the only way to successfully make a multitude of changes quickly was to enlist the help of every single person in the company. Every employee needed to think and act like an owner. They needed to understand the business consequences of their actions and make better decisions. To achieve this, each employee was taught how to read the company’s financial statements, including all the numbers that were critical to tracking performance.
Then the managers made the books public. Stack posted the company’s financials on break room walls, in handouts, and on the computer network. Training courses and regular meetings taught everyone what the numbers meant. Suddenly, a machinist on the shop floor could see the effect of finishing a part faster, reducing raw material, or shaving some time off of a job. The results were astounding: SRC’s sales grew 40 per cent a year in the first three years, and operating income rose by 11 per cent. When other manufacturers heard of SRC’s turnaround, they too overhauled their decision structures. By 1995, Inc. magazine had devoted an entire issue to the phenomenon called open-book management.
As successful as open-book management has been, it’s clear that numbers aren’t everything. Short-term financial success doesn’t prevent a firm from being blindsided by new threats, especially in a fast-moving sector; operational efficiency doesn’t guarantee a firm’s ability to discover and leverage new ways of providing value to the customer; and acumen alone can’t mobilize a large group of people. For today’s companies, value creation depends on knowing as much as they can about the people they serve. More complex than providing an open book, creating value for people requires the creation of an open channel to the outside world.
Empathy = Growth
Companies prosper when they tap into a power that each one of us already possesses: empathy, the ability to reach beyond ourselves and connect with other people. Human beings are intrinsically social animals. Our brains have developed subtle and sophisticated ways to understand what other people are thinking and feeling. Simply put, we are ‘wired to care’.
We rely on this instinct to help us make better decisions in situations that affect the people around us. Unfortunately, this instinct seems to get short circuited when we get together in large groups. We lose our intuition, our gut sense for what’s going on outside of that group: corporations become more insular; colleges start to feel like ivory towers; and political campaigns take on a ‘bunker mentality’. This sort of isolation can have disastrous effects, because institutions depend on the outside world for revenues, reputation and votes.
By contrast, people in organizations with a widespread sense of empathy possess a shared and intuitive vibe for what’s going on in the world that helps them see new opportunities faster than their competitors, long before that information becomes explicit enough to read about in the Wall Street Journal. They have the courage of their convictions to take a risk on something new, and the gut-level intuition to see how their actions impact the people who matter most: the folks who buy their products, interact with their brand, and ultimately fund their 401(k) plans. This intuition transcends what is traditionally referred to as market research.
A widespread sense of empathy starts to influence the culture of a place, giving it a sense of clarity and mission. People spend less time arguing about things that ultimately don’t matter. Empathy can even start to ensure more ethical behaviour in a way that no policies and procedures manual ever could.
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