The Business Cost of Lack of Empathy (3rd in a series)

(This post is part of a series on the five fundamental traits and capacities a leader with great strategic responsibility must have, derived in part from a remarkable document, the Army Field Manual on Leadership. Read an introduction to the series here.  The first three posts in the series address empathy.  This post looks at the business costs of lack of empathy)

The Army Manual on leadership wisely cautions against “moral disengagement”, that is “convincing oneself that ethical standards do not apply in a certain situation”. Civilian leaders are equally vulnerable to this moral numbing. Why does this matter?  Because big mistakes get made when a company’s leaders are not tuned in to the human consequences of their actions. Plus, you might just want your business to do the right thing.

I’ll  give three examples.

The headline of a piece in the LA Times by Paresh Dave reads “Sexual harassment claims prompt venture capitalists to apologize, change policies and head to counseling”.  Besides revealing that people and business have been hurt, that’s publicity no one wants.  Chris Sacca, one of the investors called out for inappropriate behavior, had considered himself one of the ‘good guys’ until the complaints were voiced.  He is quoted in the LA times piece:

“The crucial lesson I am learning right now in real-time:  It’s the unrelenting, day-to-day culture of dismissiveness that creates a continually bleak environment for women and other underrepresented groups”.

Sacca seems to be acknowledging that he lacked empathy before, and he’s newly alert to the need to pay attention to it. He also identifies the groups whose experience is effected by the behavior in question–women and other underrepresented groups.  And the phrase “a continually bleak environment” demonstrates empathic specificity, showing he’s really gotten a grasp on the emotional consequences for the people his behavior has negatively impacted. That’s impressive, and may mitigate the damage done.

The cost of leadership failures in empathy can be translated beyond bad press to dollars lost.

Experts estimate that scandal-wracked Uber’s value may have dropped as much as $ 10 or 20 billion since February (see here and here).  At least some of the scandals can be attributed to leadership blindness to the effects of decisions on important constituents–for example, inaction on complaints of sexist and abusive communications.  A #deleteUber campaign was launched overnight when  customers perceived the company as trying to profit from President Trump’s immigration ban in late January.  While there are multiple reasons for Uber’s troubles, lack of empathy in leadership seems to lurk behind many of them.  It’s interesting to take a fresh look at some of Uber’s troubles.  Though headlines claimed Travis Kalanick yelled at an Uber driver, I looked at the video and in fact Kalanick didn’t even raise his voice to the pitch of the driver’s. But the company’s historical lack of empathy has led to a general assumption of “guilty until proven innocent” and maybe not even then.   Once a company has been tagged unempathic, it’s a hard reputation to shed. As of this writing, Uber’s very public search for a new CEO smacks of desperation. Top candidate Meg Whitman seems to have notified the Uber Board of her disinterest via Twitter, another embarrassing PR moment.



Dragging a physician bloodied and screaming off an airplane because he wouldn’t give up the seat he’d paid for earned United Airlines the dishonor of being described

parody logo by @skolanach

as having committed “one of the worst corporate gaffes” according to Bloomberg’s Christopher Palmeri and Jeff Green.  A failure of empathy was evident at every level, from the flight crew to the CEO’s first –and second–inadequate apologies.  CEO Oscar Munoz now infamously inadequate first public statement included the sentence “I apologize for having to re-accommodate these customers”.  The minimization and failure to take responsibility for an awful event outraged the public.

Munoz’s second statement hours later made things worse–it included at least one glaring error of fact ( implying that the customer was denied boarding, rather than already comfortably seated) and described the customer as defiant, belligerent and disruptive.  That’s known as “blaming the victim”.  It wasn’t until his third statement, nearly a day later, that Munoz finally got it right:  “I want you to know that we take full responsibility and we will work to make it right.  It’s never too late to do the right thing”.  He closed with “I promise you we will do better”.

United reached a settlement with Dr. David Dao for an undisclosed amount —undoubtedly less than the estimated $1 billion drop  (5 % of its market capitalization) following the incident, which had exploded on social media.  Who was negatively impacted psychologically by United’s empathy failures?–no less that most air travelers  and Asian-Americans, for starters.  The settlement and the immediate drop in share price doesn’t even account for long-term economic consequences of a displeased customer base.

Business costs of empathy failures can be significant, and include damaged reputation, decreased brand loyalty, expensive settlements, difficulty attracting talent  and meaningful declines in a company’s value.  The good news, evidenced by both the Sacca and Munoz anecdotes, is that Oscar Munoz is correct:  “It’s never to late to make it right”.  Take a look at the next post in this series, “Can you learn to be empathic?” for more thoughts on that.

Related posts:

Introduction to Leadership Series–What Kind of Human Being do You Need at the Top

Empathy—Definition and Why it is Important in a Leader

Can You Learn to be Empathic?




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