20. How Compassion and Forgiveness Can Be Competitive Advantages

Why empathy and accountability build trust, loyalty and resilience

1. Introduction

When businesses face pressure, the instinct is often to harden, to push harder, move faster, hold tighter. But the most enduring businesses in times like these are often those that soften. Not in discipline, but in approach. They respond with empathy, repair with honesty and lead with a longer view.

This article begins Pillar 6 - Regenerative Business. It explores how compassion and forgiveness are not just nice to have - they’re strategic. They build trust, invite loyalty and allow people to move through difficulty without permanent damage. In a market defined by uncertainty, these qualities are rare and therefore powerful.

2. Representative Narrative

Marama manages a team of 12 in a small design and printing company in Auckland. During the past year, one of her longest-serving employees began missing deadlines and making uncharacteristic mistakes. Clients noticed.

Her first instinct was frustration. But instead of reacting, she paused. She remembered a talk given by John Luxton from RegenerationHQ, where he described forgiveness not as forgetting - but as creating space for growth.

Marama sat down with the employee and asked, not accusingly, but with care, “Is everything alright?” What followed was a conversation about burnout, personal grief and unspoken fear of letting the team down.

They agreed on a reduced workload, peer support and a timeline to review. Four months later, the same employee was thriving again and more loyal than ever.

3. Recommended Actions

• Normalise compassionate conversations
  Ask how your people are really doing. Don’t assume. Invite honesty without consequence.

• Build forgiveness into your culture
  Allow space for mistakes followed by learning. Don’t punish people twice - once in failure and again in judgement.

• Hold accountability with care
  Forgiveness is not avoidance. Be clear about expectations but separate the person from the behaviour.

• Apply the same to yourself
  Owners often carry guilt —-about bad decisions, missed chances or being stretched too thin. Let go of perfectionism. Review, learn, reset.

• Remember - your tone sets the tone
  Compassion isn’t weakness. It’s leadership. People follow those who make them feel safe, not afraid.

4. Expected Outcomes as Narrative

Marama’s team noticed the shift. People began speaking up earlier, asking for help and owning mistakes. Instead of blame, there was clarity. Instead of silence, connection.

One client even commented, “Your team just seems really together, even under pressure.” The business didn’t just recover - it became stronger through the storm. Staff turnover dropped. Customer retention rose. Culture deepened.

As John often says, “Forgiveness is a business strategy when it restores capability without shame.”

5. Red Flags & Mitigating Strategies

Red Flag 1 - Treating compassion as optional, not structural
Mitigation - Bake empathy into meetings, reviews and daily leadership

Red Flag 2 - Confusing forgiveness with lowered standards
Mitigation - Stay clear on expectations — but support the path back when needed

Red Flag 3 - Avoiding hard conversations out of fear of discomfort
Mitigation - Use open questions, quiet spaces and simple language to start difficult discussions

6. HR Best Practice

Compassion doesn’t mean inconsistency. It means fairness with context.

• Have structured return-to-performance plans after setbacks

• Make space in performance reviews for personal reflection, not just KPIs

• Offer mental health support or external check-ins

• Reward honesty - not just output

 John encourages owners to write this on a post-it near their desk - “People don’t need perfection - they need to feel seen.”

7. Psychological Perspective

Many owners were taught to leave emotions at the door. But emotions are already in the room - whether named or not. Compassion defuses shame. Forgiveness diffuses fear. Together, they help people stay engaged.

Resentment builds when there’s no room for error. Burnout builds when there’s no room for being human. High-functioning teams are often high-trust teams and trust is built through how failure is handled.

8. Recommended Owner's Mindset

Lead with accountable compassion. Know your standards. Communicate them clearly. Then respond to setbacks with curiosity, not judgement. Trust that growth comes when people feel safe enough to stay in the room - even when they’ve made a mistake.

9. Reflective Questions for the Owner

• Do people in my business feel safe raising mistakes or asking for help?

• When was the last time I forgave someone and told them so?

• Am I harder on myself than I am on others and is that serving anyone?

• How do I respond to failure and what does that teach my team?

• What story does my leadership tell - one of fear, or one of understanding?

10. Suggested Ongoing Actions

• Make time for monthly one-on-one conversations that go beyond performance

• Include space for reflection in team meetings - not just updates

• Keep a private “forgiveness journal” - moments when you let go instead of clinging to blame

• Work with someone like John Luxton to explore the regenerative role of leadership in your business

• Acknowledge recoveries, not just wins - celebrate comebacks

Critical Takeaway - Compassion and forgiveness aren’t soft - they’re strong enough to carry a business through what numbers alone never could.

If you’d like a confidential, free of charge, free of obligation conversation about your business, here’s how to get me.

📞 Phone +64 275 665 682
✉️ Email john.luxton@regenerationhq.co.nz
🌐 Contact Form www.regenerationhq.co.nz/contact

If you’d like to read more RegenerationHQ thinking on SME business and other things, go here – www.regenerationhq.co.nz/articlesoverview

🔹 RegenerationHQ Ltd - Business Problems Solved Sensibly.
Supporting NZ SME Owners to Exit Well, Lead Better and Build Business Value.