Stanford University neurosurgeon Dr. James Doty tells the story of performing surgery on a little boy’s brain tumor. In the middle of the procedure, the resident who is assisting him gets distracted and accidentally pierces a vein. With blood shedding everywhere, Doty is no longer able to see the delicate brain area he is working on. The boy’s life is at stake. Doty is left with no other choice than to blindly reaching into the affected area in the hopes of locating and clamping the vein. Fortunately, he is successful.

Most of us are not brain surgeons, but we certainly are all confronted with situations in which an employee makes a grave mistake, potentially ruining a critical project.

The question is:  How should we react when an employee is not performing well or makes a mistake?

Frustration is of course the natural response — and one we all can identify with. Especially if the mistake hurts an important project or reflects badly upon us.

The traditional approach is to reprimand the employee in some way. The hope is that some form of punishment will be beneficial: it will teach the employee a lesson. Expressing our frustration also may relieve us of the stress and anger caused by the mistake. Finally, it may help the rest of the team stay on their toes to avoid making future errors.

Some managers, however, choose a different response when confronted by an underperforming employee: compassion and curiosity.  Not that a part of them isn’t frustrated or exasperated — maybe they still worry about how their employee’s mistakes will reflect back on them — but they are somehow able to suspend judgment and may even be able to use the moment to do a bit of coaching.

hat does research say is best? The more compassionate response will get you more powerful results.

First, compassion and curiosity increase employee loyalty and trust. Research has shown that feelings of warmth and positive relationships at work have a greater say over employee loyalty than the size of their paycheck.  In particular, a study by Jonathan Haidt of New York University shows that the more employees look up to their leaders and are moved by their compassion or kindness (a state he terms elevation), the more loyal they become to him or her. So if you are more compassionate to your employee, not only will he or she be more loyal to you, but anyone else who has witnessed your behavior may also experience elevation and feel more devoted to you.

Conversely, responding with anger or frustration erodes loyalty. As Adam Grant, Professor at the Wharton Business School and best-selling author of Give & Take, points out that, because of the law of reciprocity, if you embarrass or blame an employee too harshly, your reaction may end up coming around to haunt you. “Next time you need to rely on that employee, you may have lost some of the loyalty that was there before,” he told me.

We are especially sensitive to signs of trustworthiness in our leaders, and compassion increases our willingness to trust. Simply put, our brains respond more positively to bosses who have shown us empathy, as neuroimaging research confirms. Employee trust in turn improves performance.

Doty, who is also Director of Stanford University’s Center for Compassion and Altruism Research and Education, recalls his first experience in the OR room. He was so nervous that he perspired profusely. Soon enough, a drop of sweat fell into the operation site and contaminated it. The operation was a simple one and the patients’ life was in no way at stake. As for the operation site, it could have been easily irrigated. However, the operating surgeon — one of the biggest names in surgery at the time — was so angry that he kicked Doty out of the OR room. Doty recalls returning home and crying tears of devastation.

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Tellingly, Doty explains in an interview how, if the surgeon had acted differently, he would have gained Doty’s undying loyalty. “If the surgeon, instead of raging, had said something like: Listen young man watch what just happened, you contaminated the field. I know you’re nervous. You can’t be nervous if you want to be a surgeon. Why don’t you go outside and take a few minutes to collect yourself. Readjust your cap in such a way that the sweat doesn’t pour down your face. Then come back and I’ll show you something. Well, then he would have been my hero forever.”

Not only does an angry response erode loyalty and trust, it also inhibits creativity by jacking up the employee’s stress levels. As Doty explains, “Creating an environment where there is fear, anxiety and lack of trust makes people shut down. If people have fear and anxiety, we know from neuroscience that their threat response is engaged, their cognitive control is impacted. As a consequence, their productivity and creativity diminish.” For instance, brain imaging studies show that, when we feel safe, our brain’s stress response is lower.

Grant also agrees that “when you respond in a frustrated, furious manner, the employee becomes less likely to take risks in the future because s/he worries about the negative consequences of making mistakes. In other words, you kill the culture of experimentation that is critical to learning and innovation.” Grant refers to research by Fiona Lee at the University of Michigan that shows that promoting a culture of safety — rather than fear of negative consequences – helps encourage the spirit of experimentation so critical for creativity.

There is, of course, a reason we feel anger. Research shows that feelings of anger can have beneficial results – for example, they can give us the energy to stand up against injustice. Moreover, they make us appear more powerful. However, when as a leader you express negative emotions like anger, your employees actually view you as less effective. Conversely, being likable and projecting warmth — not toughness — gives leaders a distinct advantage, as Amy Cuddy of Harvard Business School has shown.

Read the full article "Why Compassion Is a Better Managerial Tactic than Toughness" at Harvard Business Review.