The ROI Of Empathy: Improving Business Results And Workplace Culture

Empathy can be defined as showing people that you understand them and care how they feel. That sounds simple enough. But why is showing empathy—especially in the workplace—so hard?

Everyone in the workplace values empathy and recognizes empathy as key to driving performance outcomes. The top four perceived benefits of being an empathetic organization are:

1. improved job satisfaction
2. employee motivation
3. productivity
4. improved culture

Yet, for as much as these benefits are agreed upon in theory, demonstrating empathy is quite difficult to do in practice. To better understand this knowing/doing gap, I sat down with Rae Shanahan, Businesssolver’s Chief Strategy Officer, discussed the Businessolver’s 2024 State of Workplace Empathy report and the implications of its findings.

Understanding Empathy in the Workplace

Businessolver’s core business is creating Human Resources software that facilitates organizations to help their employees enroll in workplace benefits. In the past 25 years, the company has grown from 10 employees to 1600 employees. Part of the Businessolver’s business growth can be attributed to understanding empathy. As Shanahan explains, “Benefits annual enrollment used to be thought of as a one-time thing, but our technology is about understanding that the ‘right’ benefit is not a one-size-fits-all solution. Right is a personalized journey: the right benefit for me may not be the right benefit for you. Our business philosophy is founded around understanding each person’s position where they are and then being able to offer benefits that support where they are in their place in life. This led to our desire to research empathy.”

Empathy in the workplace isn’t merely about kindness or being “soft”—it’s about genuinely understanding the needs and perspectives of others. As Shanahan explains, “Empathy transcends not just a belief of a leader, but also needs to live in the core and fabric of an organization. It’s difficult to exhibit empathy in an organization if your organization is not an empathetic culture.”

This idea reflects the broader scope of empathy beyond individual acts; it must be baked into the structure of an organization for it to truly thrive. When leaders and teams cultivate an environment of empathy, the ripple effects can be transformative, from increased employee engagement to improved retention and stronger performance.

Overcoming Barriers to Empathy

Despite the clear benefits, why do so many leaders struggle with empathy? The 2024 State of Workplace Empathy report found that 42% of employees and 63% of CEOs find it difficult to show empathy in the workplace.

The top self-reported barriers to demonstrating empathy at work include:

• I’m too busy with work
• My manager or leadership doesn’t support being empathetic at work
• My colleagues aren’t supportive when I try to be empathetic
• I’ll be viewed as weak
• Culturally I wasn’t raised to show empathy
• I’m not sure how to express empathy

If all this was not enough, 37% CEOs say empathy doesn’t have a place in the workplace.

According to Shanahan, fear plays a substantial role. Leaders, particularly at the executive level, often feel the need to project strength, which can lead to hesitation in showing vulnerability or empathy. As Shanahan recalls, “Many CEOs don’t want to be wrong. They want to be able to say, ‘I said this, and I’m going to hold to this.'”

This mindset creates a barrier where leaders are unwilling to change their perspectives, even when change might be necessary. Shanahan advocates for what she calls “holding your ideas lightly,” encouraging leaders to be adaptable and open-minded: “One of the very strong traits I’ve seen in successful CEOs is they have the capacity to change their mind.”

Empathy is often misunderstood as a sign of weakness in leadership. Yet, Shanahan’s perspective on vulnerability is transformative. She argues that showing vulnerability is not a detriment to leadership; rather, it’s a critical component of building trust and connection. Leaders who admit they don’t have all the answers are more likely to inspire loyalty and respect among their teams.

As Shanahan shared, “If I give anybody actionable feedback around leadership, it is number one, be vulnerable. It’s okay to show vulnerability.”

The Mental Health Crisis: A Call for Empathy

One of the pressing issues where empathy is sorely needed is the ongoing mental health crisis in workplaces. The 2024 State of Workplace Empathy report reveals a staggering reality: 55% of CEOs and 65% of Gen Z workers experienced a mental health issue in the past year. What exacerbates this problem, according to the study, is workplace toxicity and the persistent stigma surrounding mental health. Shanahan emphasizes the importance of shifting these harmful perceptions: “Companies view someone with mental health issues as weak or a burden.”

This negative view of mental health and a lack of psychological safety creates an environment where empathy cannot flourish. Employees in toxic workplaces are 47% more likely to report mental health issues. For many, workplace culture itself is at the root of their struggles. With 52% of employees stating that they would stay longer with their organization if it empathized with their needs, it’s clear that fostering empathy could significantly improve retention and well-being.

Small Actions, Big Impact

While the concept of empathy can feel daunting, Shanahan suggests that it begins with small, intentional actions. “It is not rocket science to stop and listen,” she says. “Empathy starts with meeting the employee where they are at. There are lots of things you can’t fix. But you can listen.”

Why are leaders challenged with listening to and valuing employees? Many leaders feel overwhelmed, particularly if they are also responsible for meeting individual goals on top of managing teams. In this constant overwhelm, leaders feel that spending time with their people is a cost that they can’t afford to make. Shanahan suggests reframing these interactions as investments rather than costs. By making time to truly listen to employees, leaders can foster stronger relationships that lead to better performance and engagement in the long run. Small, consistent gestures, like checking in with employees or offering genuine feedback, can help build a culture where empathy is the norm rather than the exception.

The Empathy-Accountability Connection

Empathy alone, however, is not enough. For an organization to thrive, there must also be a culture of accountability. Shanahan points out that “empathy and accountability do go hand in hand.” High-performing employees, she notes, don’t want to look over their shoulders and see colleagues who aren’t held to the same standards. Without accountability, even the most empathetic culture will struggle to maintain fairness and effectiveness.

Shanahan explains creating a high empathy/high accountability via the analogy of a coach. She shared, “If you think of any sport, you don’t have a coach who goes out on the field during pre-game, and then, once the game starts, hang out in the locker room, eating bonbons, and then come out at the end of the game and ask ‘How’d you do?’ The good coach is out watching the whole time. It is not micromanagement to have standards and expectations and verify and confirm that people are executing against them.”

Creating an Empathetic Culture

Building a culture of empathy requires effort, intentionality, and consistency. Shanahan highlights several initiatives Businessolver has put in place to foster such a culture. For example, the company holds weekly meetings where leadership is visible and accessible. These sessions help employees feel connected to the leadership team and foster a sense of inclusion and belonging. Shanahan explains, “We have a very intentional culture, and every Monday morning, we do a 30-minute meeting called ‘What’s Going On.’ It allows us to communicate openly and connect with the entire organization.”

Businessolver also celebrates employee anniversaries, creating opportunities for connection across departments and roles. These simple practices help break down silos and ensure that every employee feels valued and recognized. Shanahan’s belief that “everyone wants to feel a part of something” underscores the importance of connection in fostering empathy.

The Power of Open Communication

An open-door policy is one of the simplest yet most effective ways to foster empathy in the workplace. According to Businessolver’s research, 91% of employees desire an open-door policy, even more than flexible working hours or the ability to take breaks. However, an open-door policy is only effective if it’s genuinely upheld and modeled by leadership. Shanahan stresses the importance of making sure that leaders are truly accessible: “It’s not just about saying you have an open-door policy, it’s about showing up for your employees.”

This authenticity is key to creating a culture where employees feel safe to express their concerns and vulnerabilities. Without it, even the best-intentioned policies will fall flat. Shanahan notes that Businessolver actively works to break down barriers of fear and intimidation, creating a workplace where employees feel empowered to bring their whole selves to work.

Empathy: A Strategic Business Advantage

Ultimately, empathy is not just about making people feel good—it’s a strategic advantage that drives business success. Employees who feel understood and supported are more likely to stay with their organizations, perform at higher levels, and contribute to a positive workplace culture. Shanahan points out that 52% of employees would even be willing to take slightly less pay for a more empathetic employer.

In today’s competitive job market, where talent is scarce and employees are quick to leave organizations that don’t meet their needs, empathy is no longer optional. It’s a critical component of successful leadership and organizational sustainability.

The ideas shared in the 2024 State of Workplace Empathy report offers a roadmap for leaders looking to build a more connected, productive, and resilient workplace. By fostering empathy and vulnerability, leaders can create environments where employees thrive, mental health issues are addressed, and workplace toxicity is eradicated. In the end, empathy is not just a “nice-to-have”—it’s a business imperative that can make the difference between success and failure.