To keep employee morale high, make sure they know they are working for a place that honors honesty, integrity and dignity.

So, if you thought effective leadership was all about cracking the whip and relentlessly focusing on financial results, think again. A people-centered approach is far more effective. A two-year study published by UK employment organization The Work Foundation argues the best leaders have an “almost obsessive focus on people” which they ally to “a drive for high performance.”

In my last column I asked if you were the right person to lead in a down economy. I gave examples of what good companies do to protect the psyche of their workers. When employees are happy and feel that upper management cares about them, they are more productive.

Some say the American workplace has arrived at a pivotal moment in history-indeed, the pursuit of the American Dream is showing signs of backlash. Some question whether or not the American Dream is still viable. While productivity gains continue, in large part because of information technology, the American worker is becoming disenchanted, burned out, dissatisfied, and insecure.

There is no question that unproductive workers are a drain on a business. I do believe everyone has to carry their own weight and it is sometimes necessary to lay people off. But that decision should not be done lightly or be the only alternative.  

After 9/11, the airline industry suffered greatly. Hurt the worst were short trip carriers because short haul route costs more to run. Southwest chose not to lay workers off when passenger ridership dropped 20%. USAir, however, furloughed almost 25% of their employees and declared all contracts null and void. They chose to provide no severance, no benefits, and no insurance to furloughed workers, all because of financial exigency.  Then Southwest CEO Jim Parker said, “Clearly we can’t continue to do this indefinitely, but we are willing to suffer some damage, even to our stock price, to protect the jobs of our people.”

Five years later, September 2006, Southwest Airlines stock was at about 92% of pre-9/11 value, but USAir was barely at 20% of value. Money on Wall Street was highly coordinated with people-focused practices, thus showing improvement in positive practices is a strong predictor of improving financial results.  

As business owners or managers, we all carry a heavy load on our shoulders; of making sure the business survives and caring for the well-being of those who make it survive and thrive.   

Research shows that in 80% of organizations that downsize, productivity drops. So what do the others do (20%) that causes theirs to flourish? Maybe it is the kindness and empathy with which the layoffs are handled. Is there a bottom line impact for being kind and people focused? Is there evidence of virtuous behaviors (practices) affecting the bottom line?

Does organizational “virtuousness” pay? Does treating your employees with respect improve performance or just make them soft? Dr. Kim S. Cameron, department chair at the Stephen M. Ross School of Business at the University of Michigan, has found there are statistically significant relationships between organization virtuousness (integrity, optimism, forgiveness, compassion, gratitude, kindness and trust) and the productivity of employees.  

How do you help executives change their behavior when they have been successful being a jerk? Why would they change their behavior if it has worked for them for so many years? Judging by the current press, you’d believe most executives are crooks or jerks. However, most businesspeople are honest and treat people with respect…they just don’t get the same press as jerks.

Thankfully, you don’t have to be lying, conniving or abusive to succeed. Dr. Cameron found that companies perceived as trusting, compassionate and high in integrity perform better and have higher profits than less virtuous firms even when downsizing. “We found that a positive association exists between the extent to which organizations foster and facilitate virtuousness and the performance of organizations.”

“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.”

People-focused, virtuous practices cultivate extraordinary individual human strength, resiliency, and healing; as well as organizational performance; which lead to flourishing outcomes and the best of the human condition. Additionally, these practices enable virtuous behaviors and emotions such as compassion, forgiveness, dignity, respectful encounters, optimism, integrity and positive affect.

Many organizations are ignoring this fundamental lesson-people find work a source of pride and meaning. A workplace managed as such fulfills workers sense of happiness and health, which in turn is more productive.

One employee quoted as working in a people-focused workplace said, “Until someone has been in our work environment where the individual is valued, encouraged, challenged, guided, given freedom to perform and is loved, it is difficult to comprehend the power of the trust that exists here.” What are your employees saying? Are you listening?

Great companies pursue quality and profit with empathy. They work hard to be more efficient and to provide the highest levels of service, but they do it in a way that not only preserves but also enhances their employees’ dignity.

For example, good leaders are those who would give time to others or tend to focus on work, whereas people-focused leaders would focus on people as a route to success or seek to understand people and motives.

In the UK study, what came across was this incredibly strong sense that outstanding leaders were deeply people-centered who they focused a lot of attention on their employees.

Seeing people as the route to performance is the essence of a people-focused strategy.

Nothing kills your company’s culture like layoffs. You want to show your people that you value them, and you’re not going to hurt them just to get a little more money in the short term. Furloughing people with empathy and kindness breeds loyalty. It breeds a sense of trust. As a leader, it makes you feel better about yourself. How are you, and your company’s staff feeling?