“I am sure some, if not many, of you are worried about your jobs,” Gorman wrote after noting how proud he was of their performance throughout the crisis. “While long-term, we can’t be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020. Aside from a performance issue or a breach of the code of conduct, your jobs are secure.”

“Thank you,” he concluded, “for what you do every day to make this firm so special.”

“That was a pretty dramatic statement to make at the time when the pandemic was just beginning,” said Mandell Crawley, MBA ’09, chief human resources officer at Morgan Stanley. “But throughout the pandemic, there has been a great deal of thought and care taken by the leadership team to do everything we could to stay engaged with our employees.”

Several financial services firms followed suit, but with its empathy for what Morgan Stanley’s employees were feeling and gratitude for their steadfast efforts during an extraordinarily challenging time, Gorman’s memo stands out as a prime example of humanistic management in practice, leadership that conveys a fundamental respect for human worth.

Leadership in the Spotlight

If any year cast a spotlight on business leadership styles, it was 2020. With the twin crises brought on by the pandemic and the killing of George Floyd in May, which led to demonstrations against racial injustice across America and thrust the issues of diversity, equity, and inclusion (DEI) to the forefront, leadership became—and remains—a critical conversation in corporate America.

The Business Roundtable made headlines when it redefined the purpose of a corporation as serving all stakeholders—shareholders, customers, suppliers, communities, and, crucially, employees. But the old paradigm—that businesses exist primarily to serve shareholders—and the top–down leadership paradigm that goes with it are still deeply rooted in American business culture, according to Sophia Town, Ph.D., who joined the Gabelli School faculty in 2020 as an assistant professor of organizational behavior.

“I think it’s a crisis of our world-view and what we value,” she said. “Of course, profit and shareholder wealth are an important part of business, but they’re only one part. There’s also societal well-being, sustainability, and efficiency for the sake of all, not just the wealthy. We need to adopt a new model that serves all stakeholders.”

To prepare students to be leaders in this new way of running a business, Town said that business schools should equip them with at least two essential skills. The first is the ability to be a generous listener, which she defines as “listening with the intention of honoring the other person’s dignity as a human being,” as a way not only to benefit from the experiences and insights of others but also to foster well-being in the workplace. The second is integrity. By being honest with themselves and others in admitting mistakes, communicating transparently, and making hard choices for the common good, leaders create an environment in which other members of the organization feel safe in taking ownership of their own actions.

Emotions and organizing, organizational paradox, and mindfulness are key topics of Town’s research and the subjects of four scholarly papers she has coauthored in the past year. In addition to teaching and helping to redesign the core Principles of Management course, Town is currently developing a new Mindful Leadership course at the Gabelli School.

Good for Morale, Good for the Bottom Line

Research has shown that a positive, humanistic management approach boosts employee engagement and that companies whose managers lead with this approach achieve higher customer satisfaction and profitability, according to Leading with Gratitude: Eight Leadership Practices for Extraordinary Business Results by Adrian Gostick and Chester Elton. Another compelling, brass-tacks reason for leading with a humanistic approach is employee retention. Workers who feel valued are less likely to jump ship, studies have found. That directly affects the bottom line: Gostick and Elton cite a study that concluded that high turnover costs U.S. businesses an estimated $11 billion a year.

At Morgan Stanley, following the transition to conducting its business remotely, it was able to carry on more or less normally, Crawley said. In fact, 2020 was a record year for the firm, driven by the fees generated by the gyrations in capital markets.

“Because we were able to service our clients and execute on their behalf at a high level, with the exception of March’s market meltdown, we were able to bounce back quickly,” Crawley said. “Even though we normalized our operating performance, we had many of the same challenges other industries experienced.”

The company’s leaders realized they had to focus on the well-being of their newly homebound employees. In addition to CEO Gorman’s declaration that there would be no layoffs in 2020, the firm also expanded its employee benefits to cover more child care expenses, provide free COVID-19 testing, and offer access to mental-health therapists for employees suffering from depression, isolation, grief from losing loved ones, and the general stress of life under lockdown.

Beyond these formal steps, however, Morgan Stanley executives have tried to maintain the communal bonds of a workplace, Crawley said, for example, by calling employees not for business reasons but simply to stay in touch. And when the firm announced its annual promotions in January, it held a virtual celebration.

“We tried to make those promotions as special as we could,” he said. “For us, it’s really been about engagement and focusing on the well-being of our employees.”

That is dramatically different from the standard image of leadership as a top–down exercise focused on an authority figure, and it is part of a change that is necessary in corporate culture for companies to be successful in the future, according to Town.

“Leadership needs to be bigger than yourself,” she said. “We think that creative geniuses go out and do these things on their own—the Steve Jobs and Elon Musks of the world—but it’s really relational leadership. That’s what leadership is really about and needs to be about.”

Training the Next Generation of Grateful Leaders

Preparing business students to be such leaders might benefit from a more experiential kind of learning, judging from a remarkable project Town conducted with fellow researchers at Arizona State University, where she earned her doctorate. The study, explored in a paper Town coauthored and published in the Journal of Applied Communication Research in October 2020, investigated the outcome of two semester-long classes the researchers ran on leadership. One was a traditional lecture class on leadership theory, and the second required students to learn to be leaders in their own lives by forming a team to create something they valued.

“One student created a neighborhood event to bring people together in a class-neutral setting, and another started a program to pair shelter animals with people suffering from anxiety,” Town said, noting that one of the goals of the assignment was to show that leadership is not a one-person act but about building relationships. “The projects had to be bigger than themselves and not about them. The students used all of the communication-based leadership practices that we were teaching to bring their projects to life.”

As a requirement, the students had to make what Town and her fellow researchers called “unreasonable requests”—something that was outside their comfort zone—a regular part of a real leader’s work life. Typically, that meant seeking buy-in from others, such as the medical center and animal shelter in the program to pair animals with anxiety patients. And if the students failed to follow through on a commitment, they had to admit it to their team and correct it.

“That’s a very leaderly thing to do,” Town said. “I wish more leaders were that way.”

At the end of the semester, human relations professionals evaluated which students they would be likely to hire for leadership positions. Members of the second, experiential class were found to be far more qualified than students from the conventional leadership class.

Students from the experiential class also reported higher levels of self-efficacy and belief in their ability to get things done and persuade others to come along with them.

“At the end of the course, the students were changemakers,” Town said. “They said, ‘If I can do this, if I can create this thing in one semester, what else can I do?’”

Town is now incorporating some of the techniques from the research project into her Gabelli School classes, and she is finding that students are eager to learn new forms of leadership.

“It’s really important for our millennial and younger students, who are very values driven,” she said. “There’s been an awakening in today’s students that I don’t think would have been true 10 or 20 years ago.”

Letting Employees Share their “Pain Points”

If any business objective would seem to benefit from a relational, humanistic leadership style, it is the effort to increase DEI in the workplace, an issue that was already a focus before a Minneapolis police officer pressed his knee down on the neck of George Floyd. Floyd’s death placed America’s persistent inequality squarely in the center of conversation from living rooms to board rooms.

“The consciousness of the country was shaken,” Crawley said. “Given how stark that event was, it surely catalyzed a lot of action around DEI in corporate America. At least a quarter of our employees are ethnically diverse—and I put myself in that category—and putting our arms around them and letting them know they are a critically important part of our community was imperative.”

Addressing DEI in the workplace exemplifies a core concept of humanistic management: acknowledging and expressing respect for the basic human worth of every person. At its heart, humanistic management means creating the conditions for others to fulfill their potential, including by being open to hearing their perspectives and acknowledging their contributions.

“When I think about leading with gratitude, I think about having the ability to listen and understand different perspectives,” said Patsy Doerr, GSE ’96, who led global diversity and inclusion initiatives at Credit Suisse and Thomson Reuters and is now CEO of the Association of Junior Leagues International. “Among other things, that leads to being grateful for being able to learn not only from your bosses but all of your colleagues.”

When Doerr arrived at Credit Suisse, she encountered an environment where change was needed and employees—particularly minority employees—were asking for it. From formal listening tours to scores of casual coffees and dinners, she worked to demonstrate the bank’s commitment to DEI and to build trust, an undertaking that took months.

“In order to keep employees engaged, they need to feel trusted and listened to,” Doerr said. “That leads to better engagement, retention, attraction of talent, and advancement. It really drives the entire life cycle, and ultimately, that’s what leads to success.”

Stevenson Swanson is a New York–based freelance writer. He is a former national correspondent for the Chicago Tribune.

Ojima Abalaka has illustrated for clients such as The New Yorker, Human Rights Watch, and The New York Times. Her work explores rest, people, and identity in the context of everyday life.