Virtuous Firms Perform Better
ANN ARBOR, Mich.---Companies perceived as trusting, compassionate and high in integrity perform better and have higher profits than less virtuous firms---even when downsizing, according to a new study by the University of Michigan Business School.
“We found that a positive association exists between the extent to which organizations foster and facilitate virtuousness and the performance of organizations,” said Kim Cameron, professor of organizational behavior and human resource management at the Michigan Business School. “Specifically, virtuous organizations perform significantly better on indicators such as profitability, customer satisfaction, quality, and so on.”
In a study appearing in an upcoming issue of the journal American Behavioral Scientist, Cameron and colleagues David Bright of Case Western Reserve University’s Weatherhead School of Management and Arran Caza of the Michigan Business School developed a statistical model to measure organizational attributes and behaviors of more than 800 employees at 18 companies based mostly in the Midwest.
The researchers found that higher levels of perceived organizational virtuousness
---forgiveness, trust, integrity, optimism and compassion---are positively related to higher levels of real and perceived organizational performance when performance is compared with the industry average, best competitor, past improvement and stated goals.
“Our findings suggest that even in organizations expected to suffer from the deleterious effects of downsizing, a positive relationship exists between virtuousness and organizational performance,” Cameron said. “Performance does not deteriorate.”
Cameron and colleagues explain the impact of virtuousness on the following five measures of organizational performance:
- Innovation: Because exposure to virtuous behavior produces feelings of inspiration, awe, gratitude and other positive emotions, people broaden their interest in and accessibility to new ideas and information.
- Customer Retention: Customers are more effectively served and are more loyal to the organization when employees encounter positive experiences at work, such as caring, empowerment and various forms of virtuousness.
- Turnover: Virtuousness in organizations reduces turnover and fosters employee longevity.
- Quality: Exposure to virtuousness in organizations helps employees make better decisions, more effectively process information, support one another and, hence, make fewer quality errors.
- Profitability: Enhanced employee innovation, expanded social capital development, increases in pro-social behavior and the development of resiliency all serve as mechanisms by which organizations achieve profitability, even in the face of a downsizing environment.
The researchers say that while research on virtuousness and performance is scarce, a primary objective of their study was to introduce the concept of organizational virtuousness and to begin to uncover its importance in relation to performance.
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