Despite the promise that we’ll soon be able to put the pandemic in the rearview mirror, the future for business leaders is looking more challenging than ever. Geopolitical unrest, inflation, and–perhaps most important–the twin issues of labor shortages and new worker demands in regards to pay, benefits, and flexibility has Axios calling 2022 the “hardest year ever to run a company.”
Just open the business section of any major newspaper and the tension felt by leaders is clear: In one column is advice to employees on how to quit their jobs and beat burnout. In another are reports that pressures from outside investors are putting human capital and environmental, social, and governance (ESG) criteria and metrics under a microscope. So, how are leaders supposed to both build happier teams while also tending to their bottom lines?
The answer is simple: Invest in women. New data compiled by global consulting firm Potential Project, where I am a partner, found that employee disengagement translates into significant organizational expense (due to absenteeism and lower productivity). But, there is a sizable difference in how this shows up in women-led teams versus those led by men. In fact, we found that by driving more engaged employees, women leaders save their organizations $1.43 million for every 1,000 employees.
What’s the secret to women’s leadership that can drive such a positive impact for shareholders? We’ve found that women are most likely to embody what Potential Project calls “compassionate wisdom,” which is the leadership style most likely to drive engaged, happy, and productive teams, reducing the negative human capital costs companies fear today. In order to tackle the unique challenges we are facing this year, leaders of all genders should look to embody compassionate wisdom.
As I wrote in my recent book, compassionate wisdom means having the ability to do the hard things required of leadership in a way that is human. And women in leadership are frequently faced with more of these “hard things” than their male counterparts. Studies over the years have repeatedly confirmed that companies in crisis are more likely to appoint women to leadership roles, in part due to a stereotypical perception that men would refuse to take such a difficult job and that women are simply better at metaphorically “cleaning up messes.” But when given the opportunity to lead through crises, women excel, as we’ve seen during the COVID-19 pandemic, where countries run by women had the quickest and most effective public health responses. In other words, women in leadership have a proven track record of tackling the hard things.
But women in general have also been found to be more willing to embrace the vulnerability and compassion that help them approach difficult decision-making with a human-first approach. This was recently visible when New York City’s newly appointed police commissioner Keechant Sewel made headlines after shedding tears at the funeral of two police officers, a moment which drew praise from her male colleagues.
Translated into a workplace setting, leaders who publicly demonstrate traits like compassion and vulnerability in turn create cultures where compassion and vulnerability are celebrated. Research tells us that when others are vulnerable with us, we are more likely to be vulnerable in turn. Similar studies have found that when we are asked to imagine a leader demonstrating vulnerability – say, sharing feelings of anxiety about a big presentation – we are more likely to perceive them as strong. Through surveys, my team confirmed that women leaders are more likely to self-report that they are highly compassionate and are also consistently ranked more highly in compassion by their employees.
While our research finds that many women in leadership already embody elements of compassionate wisdom, companies can invest in training their leaders to be prepared to make hard decisions while also honoring the humanity of their team members. Compassionate wisdom is, in fact, teachable.
Biologically, humans are hardwired to feel empathy for others. But empathizing with your team is different from leading from a place of compassion. The mark of a compassionate leader is rooted in action; leaders should be trained to be more than a shoulder to cry on and instead to harness understanding with solutions. So if a colleague shares that they are feeling overwhelmed balancing childcare with work commitments, a compassionate leader is able to not only understand that challenge, but take concrete action in offering perhaps a flexible schedule to help alleviate the challenge.
Similarly, compassionate wisdom requires the courage to take the appropriate action, even if it might not be the popular one. For example, right now many companies are struggling with competing employee emotions around the return to the office after what has been (for many) two years of remote work. While a compassionate leader may work individually with team members to determine their own personal work preferences, a leader that embodies compassionate wisdom is able to make concrete policy decisions that help promote not only flexibility, but cohesive company culture. While hybrid work policies may not be universally popular, defining these policies is an important decision every leader is going to have to undertake.
Finally, just as vulnerability on a personal level is crucial in developing compassion, organizationally compassionate wisdom is best expressed through transparency. To again use the return to office example, leaders are more effective when they’re able to not only make decisive policy decisions, but to communicate those decisions in a way that recognizes and appreciates the impact such a change can have on each individual’s life. By providing clarity around how policies are created and what the intention of those policies are, employees are more likely to be heard.
As companies race to offer new perks and benefits in order to avoid the cost of losing talent, they must avoid losing sight of the simple equation at the heart of employee engagement. The old adage that people leave managers, not companies, remains true. But in 2022, it is the leaders with the ability to do hard things in a human way who are making a serious impact in building a thriving company culture.
Jacqueline Carter is the director of North America at global consulting firm Potential Project.