UK: Can nice guys finish first.

UK: Can nice guys finish first. - The world of business is a jungle, we are constantly told, but does this mean we must behave like beasts to survive? Studies suggest that caring may now be the key to success, writes Matthew Lynn.

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Last Updated: 31 Aug 2010

The world of business is a jungle, we are constantly told, but does this mean we must behave like beasts to survive? Studies suggest that caring may now be the key to success, writes Matthew Lynn.

Ask the average person what thoughts are conjured up by the word 'business' and you would probably get a list that includes such terms as cut-throat, hard-nosed, ruthless, aggressive and brutal. It is unlikely the word 'nice' would be among them.

Businessmen, in the popular imagination, are meant to be driven and determined, take-no-prisoners people who are set upon succeeding at any cost. And yet, despite that, management philosophy has now elevated softer, more caring virtues almost to a creed in themselves. Listen to most companies, and most chief executives, and they will tell you that creating the right sort of working environment and looking after their staff are among their main priorities.

Which prompts the question: can nice guys be winners in business? Someone like Peter Mead certainly thinks so. One of the founders of Abbot Mead Vickers, the advertising agency recently acquired by Omnicom, Mead lectures regularly on the need for the organisation to care for its staff. For example, even during the last recession, which hit advertising hard, he refused to lay off any staff, a decision that might well have hit profits in the short term. The agency refused to work for South African companies during the apartheid era, and still turns down contracts to generate cigarette advertising.

Or take the example of someone like Michael O'Leary, the chief executive of Ryanair, the cut-price airline, who gave the staff share options worth £4 million when the airline was floated on the stock market. He contends that the style of a company must be set by the employees, and argues that management should not be trying to rule through fear. 'A company where the employees, within reason, dictate the style of working, and feel they are a valued part of the organisation, is one that is more likely to succeed,' he said recently. The same is true at a company such as Asda, which prides itself on inclusive, caring policies towards its staff, all of whom are referred to as 'colleagues' rather than workers.

Neither example is exceptional: the gospel of looking after and caring for staff has become one of the mantras of modern business, repeated universally.

The question is: is it really true or is it just PR-waffle, served up by people who not only want to be very rich but also want to be liked and admired as well? As much as companies may talk about how much they care about their people, and about wider ethical issues, it does not usually tally with most people' s day-to-day experiences of their bosses. If companies are becoming more caring, then why is it that stress levels are increasing? And if companies are becoming nicer, why do most people complain they are working for complete ogres?

Right now there is a fascinating debate raging about whether 'niceness' can really be a winning strategy, or whether, in fact, the world of work is becoming a more brutal, unforgiving place. 'I think the truth is that most companies would like to be nice, and to be more caring, but in practice they find that very difficult to achieve,' comments Professor Andrew Kakabadse at the Cranfield School of Management.

The idea that companies should be more caring has been gaining strength for more than 20 years. As far back as 1975, J Willard Marriott, who founded the American hotel chain of the same name, was telling people: 'You can't make happy guests with unhappy employees.'

The message that employee satisfaction will be reflected in good customer service is now a central part of any self-respecting MBA course, and it certainly makes a lot of sense. You can't expect people to grin and say 'Have a nice day' for eight hours on the trot through gritted teeth - it is a lot better if they actually mean it, at least in part. It is a philosophy that does not apply only to service companies - it applies just as forcefully to manufacturing business. The people on the factory floor can do their jobs well or badly depending on how they feel about their jobs and their company.

That view of the way to run a company has been pushed forward by the gurus of 'total quality management', such as W Edward Deming, and by management experts such as Tom Peters, one of the co-authors of In Search of Excellence.

Their arguments have provided powerful support for the view that business does not need to be a ruthless, cut-throat competition for survival, and that we do not all have to turn into office versions of the Terminator in order to hold down our jobs. There is now also support for this view from not only management gurus but also from the newer disciplines such as genetics and socio-biology. Until recently, most people would have imagined that genetics would predict a ruthlessly Darwinian view of the world, where genes were engaged in a fight for their own survival, and where only the fittest would make it - a struggle similar to the struggle between companies to dominate a particular industry, or the struggle between groups of executives to take control of the boardroom.

It would certainly not have been supposed that socio-biology gave any support for the notion that the frailer human qualities were of any use in devising winning strategies for survival. Any kind of Darwinian theory of human behaviour was meant to involve endless competition, usually ruthless and often very nasty.

Last October, however, in a paper published in the scientific journal Nature, Martin Novak, a zoologist at Oxford University, and Karl Sigmund, a mathematician at the University of Vienna, put forward the theory that doing good and being nice, even when there was no direct expectation of any benefit in return, could often confer an advantage over more ruthless rivals.

They examined the way that different species have developed means of co-operating with one another. Their results showed that individuals who treat others well will evolve more successfully than those who give full rein to their fiercer instincts and believe in nothing apart from pure survival of the fittest.

'We propose that the emergence of indirect reciprocity (their term for the willingness of an individual to help others, even though they might not help you in return) was a decisive step in the evolution of human societies,' Novak and Sigmund reported in their paper.

Their research involved constructing a computer programme that looked at different ways in which a group of individuals might develop according to how co-operative and altruistic they were. They built into their system the premise that those who helped others would have a good reputation among their peers and, therefore, eventually gain some benefit from their actions, even if that benefit was not immediately apparent.

At the same time, their model supposed that those who ignore others would have a bad reputation, and nobody would help them when they themselves started to run into trouble. Over time, Novak and Sigmund found that those individuals who were good at co-operating and who were willing to help one another without any direct reward were the most successful. The more ruthless individuals, who were interested only in their own immediate benefit, made short-term gains but were ultimately the losers.

Their research also predicted that the more intelligent the animal, the more likely it is to care about its reputation, and the more likely it is to develop altruistic behaviour that is of no immediate benefit, but which may turn out to be successful in the long-run.

The animal world is sometimes portrayed as a jungle of constant competition but, in reality, there are plenty of examples of 'nice' animals which manage to survive and sometimes prosper - for example, the Arabian babbler bird which is known for its random acts of generosity, or the owl monkey, one of the very few primates where fathers spend most of the time looking after their babies. Business may well have much to learn from these models - and it may well be the case that strategies based on 'niceness' may also turn out to be more successful in the medium to long term.

Companies, after all, need a reputation just as much as individuals do, and a company with a good reputation will find it easier to win long-term loyalty of customers, staff and shareholders. Companies with a reputation for toughness, like the old Hanson Trust, for example, may do well for short periods but can find themselves disappearing very quickly after they have run out of friends.

And yet the evidence does not all point in the same direction. There is also evidence to suggests companies also need to be tough to survive - evidence that may well chime better with most of our experiences of the real world. Research by Dr Rhian Silvestro of the Warwick Business School seems to question whether the link between employee satisfaction and customer satisfaction is as straightforward as many people seem to imagine.

She looked at the performance in six different stores of one of the large British grocery chains, spread across a range of high-profit to low-profit stores. 'Whilst employee satisfaction and loyalty at store level were correlated, the relationship between employee satisfaction and store profitability was quite the reverse of what was expected,' she reported.

'We found that store profitability was inversely correlated with employee satisfaction, such that where store profitability was high, employee satisfaction was low, and vice versa! And this is in a company whose strategy appears to have been based on the fashionable assumption that employee satisfaction is critical to business growth.'

She goes on to report that managers at the grocery chain did not seem too surprised that the shops where the staff were happiest were not the most profitable and, anecdotally, they thought that was probably true of most of their rivals as well.

Silvestro wisely cautions against jumping to rash conclusions. It would be glib to take her survey as evidence that by being horrid to your workers, profits will start to go up. Managers should certainly hesitate before taking out their whips or polishing their jackboots. On closer examination, it turned out that the most profitable stores were also the biggest stores - it is generally the case in retailing that the bigger the shop, with many more customers, the better the margins. In the big shops, however, the staff had to work harder, they were supervised by managers a lot more closely, and they had a lot more customers to deal with.

All of those factors made the jobs a lot more stressful, and meant that employee satisfaction was lower. The smaller shops had fewer customers, and also a lower turnover of staff. That made them nicer places to work. But it also meant they were less profitable.

Even so, that research certainly casts some doubt on whether 'niceness' can ever be a winning strategy. In reality, the supermarket chain she surveyed may be doing its best to keep employee satisfaction high, but it is not going to start shutting down the most profitable stores and opening up less profitable stores just because those shops would be nicer for the staff to work in.

In truth, although companies are these days placing more emphasis on soft values such as corporate ethics, or caring for their staff, the workplace is also becoming more brutal. Few people imagine that they have 'nicer' jobs than their parents, for example. Most people probably think their working lives are much tougher.

'We live in a world where, in most markets, there is a huge over-supply,' points out Kakabadse. 'Companies may want to be nicer, but in most cases they also find the competitive environment in which they operate much tougher.'

In his recent book, Essence of Leadership, Kakabadse describes a workplace that has been brutalised by ferocious competition. 'Downsizing and de-layering produce the "survivor syndrome", namely low morale, lack of trust and a decline in the commitment to the organisation displayed by its survivors,' he writes. 'These outcomes have multiple and ripple effects on virtually every aspect of the business, as survivors find themselves in new and not necessarily friendly environments.'

Kakabadse points out that re-engineering and downsizing within large corporations has involved cuts in the numbers of white-collar staff ranging between 10% and 80% in the more extreme cases, while at 80% of corporations that have been re-engineered, employee motivation and morale have also declined. This, in his view, has significantly worsened the relationship between companies and staff, creating stressful and hostile working environments.

'Worried executives, concerned about their future, direct their motivation to keeping their jobs, not to achieving organisational goals, which in today's climate are likely to be constantly changing and are likely to be perceived as ambiguous,' he says. 'If over-exposure to high levels of uncertainty continues for a prolonged period of time, managers, including the leaders of the enterprise, are likely to adopt a cynical view of their circumstances, manifesting mistrust, conservatism, an aversion to risk-taking and the diminution of drive. Overall, the attitude is: Do what you can, but look after yourself first.'

Reality is no doubt a lot more complex than simplistic slogans about companies being caring towards their employees. Many executives, no doubt, do want to be altruistic, and want to create meaningful and rewarding environments in which people can work. It is certainly the case that companies place more emphasis on 'soft' values than they did in the past, and that the stereotype of the gruff businessman who took pride in being as hard as nails is no longer acceptable. Yet it is also the case that the markets in which companies operate are rougher than they used to be. Competition is tougher and the demands of customers and shareholders are higher than in the past. That makes the workplace more demanding and leaves less space for acts of altruism.

In truth, most companies are trying to be 'nicer'; they are probably also failing more regularly. So what is the best strategy? That is probably to make people think that you are nice, collect all the benefits of being known for that, while actually being ruthless and mean behind the scenes. After all, that is why companies hire public relations people.

FIVE WAYS NICE GUYS CAN BE WINNERS

1. They find it easier to build alliances with others

2. They have good reputations, which attract customers and win promotions 3. They create teams and command loyalty

4. They get early warning of difficulties ahead because they have lots of friends and allies

5. They are more relaxed, because they don't worry so much about winning or losing, and that helps them perform better

FIVE WAYS NICE GUYS CAN TURN INTO LOSERS

1. They avoid making tough decisions

2. They are reluctant to pounce on opportunities

3. They don't see people plotting against them

4. They don't try hard enough

5. Their sympathies can sometimes allow people to take advantage of them.

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