Why the Golden Rule is Good Business

Treating people well is not only right, but profitable.

By Fred Reichheld

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This post was originally published on LinkedIn.

The Golden Rule—treat others as you would want to be treated—is a pillar of most of the world’s great religions. It lies at the heart of secular ethics. It is an expression of the basic human instinct to bond with others, say business ethicists Paul Lawrence and Nitin Nohria.

But read company annual reports or sit in on MBA classes, and you’ll often find ethics treated as an alien concept, shoehorned into special sections or seminars and sounding slightly fluffy next to the mathematical rigors of GAAP accounting and ROI calculations.

That makes no sense. When a company treats you right or sells you a terrific product, you feel happy. You feel loyal. You’re likely to buy more from that company. You’re likely to recommend that company’s products and services to friends, family and colleagues. And here’s some math: In most industries, companies that are the loyalty leaders have a compound annual growth rate that is more than twice that of their competitors.

The reverse is true as well. When customers feel mistreated or misled, they give what they got. They leave—if they can—and complain if they can’t. They demoralize your employees. And they badmouth your company, alienating your prospects. They’re costly.

In other words, the Golden Rule isn’t just some sort of annual report afterthought. It is a Golden Business Strategy. Treat people well. It’s the right thing to do. It’s the profitable thing to do.

Unfortunately, too many companies focus on maximizing short-term profits because they are a reliable metric for which executives can be held accountable. But if Golden Rule behavior is a vital driver of long-term profits (and viability), then it too must be measured.

The Net Promoter System^®, which my Bain & Company colleagues and I developed several years ago, is designed to do just that. It shows everyone in a company how many customers or employees are enthusiastic recommenders—"promoters"—and how many are detractors. The system focuses the entire organization on generating more promoters and fewer detractors.

The long-term economic benefits of loyalty are obvious. But in my work, I find it’s the inspirational dimension of the system that really motivates both executives and employees: The system provides them with a practical way to measure how consistently they treat people right. In today’s global, electronic and highly automated business world, it taps directly into the basic human instinct to bond with others. You might call it the Golden Ruler.

How does your company measure up?

Net Promoter^®, Net Promoter System^®, Net Promoter Score^® and NPS^® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.