When Private Equity Meets Employee Ownership: Leadership Lessons from KKR’s Experiment

The employee ownership (EO) sector continues to show that shared ownership can drive business performance while building more equitable workplaces. Private equity giant KKR’s experiments across its portfolio offer valuable lessons for organizations at any stage of their EO journey.

The Surprising ROI of Empathetic Leadership

KKR introduced employee ownership in 2011, starting with a Minnesota-based industrial company where factory workers received equity stakes. Initially aimed at improving morale, retention, and safety, the model’s early success led KKR to roll it out across more than 65 companies in its portfolio, including publishing giant Simon & Schuster.

Yet success rates varied widely. After controlling for factors like industry, geography, size, and unionization, KKR identified a surprising commonality: companies with empathetic leaders performed markedly better.

Pete Stavros, KKR’s Co-Head of Global Private Equity is the driving force behind its employee ownership campaign. He is also Founder & Chairman of Ownership Works, a non-profit organization promoting broad-based employee ownership “to unlock new levels of success for companies while creating a pathway to wealth creation for workers.”

Stavros observed that leaders with life experiences fostering empathy—often women, immigrants, those from low-income backgrounds, or those with deep religious faith—produced better results in cultural metrics. This led to a collaboration with Stanford psychologist Jamil Zaki to investigate the role of empathy in leadership success.

The findings were clear: CEOs scoring high in empathy correlated with lower quit rates and higher employee engagement—1.5 to 2 times stronger than industry benchmarks. This confirmed that empathetic leadership creates measurable business value in employee-owned companies.

Key Lessons from KKR’s Experience

Regardless of where your organization is on its employee ownership path, these lessons from KKR can help strengthen your approach:

1. Empathy Can Be Learned

KKR's research with Dr. Zaki revealed that empathy isn't fixed or limited to certain personality types—it can be learned and developed. The firm is now piloting three training programs to build empathy skills among leaders:

· Active listening training

• Community immersion to understand employees' financial realities

• Cross-hierarchy improvement sessions (kaizen-style)

As Stavros puts it, empathy is a skill—and one leaders can actively develop.

2. Measure What Matters

KKR's approach is noteworthy for tracking not just traditional financial metrics but also employee-centered data like quit rates and engagement scores. According to Kathy Bolhous, CEO of Charter Next Generation (a KKR portfolio company), KKR "was the first owner to ask about the company's people metrics."

This expanded view of business performance recognizes that employee ownership doesn't automatically create an ownership culture—it requires measurement and management like any other business objective.

3. Different Types of Empathy Matter

Zaki's research identifies three components of empathy that leaders can develop:

• Emotional empathy: sharing what people feel

• Cognitive empathy: understanding others' experiences and perspectives

• Empathic concern: desire to improve others' well-being (compassion)

Understanding your strengths and weaknesses in these areas can guide your development as an empathetic leader.

4. Psychological Safety Drives Performance

Zaki emphasizes that leadership conversations should avoid self-centeredness and instead create space to truly listen. Psychological safety doesn’t lower performance standards; instead, it unlocks employees' willingness to seek help and improve efficiency.

5. Empathy Aligns with Business Performance

While emphasizing the human elements of employee ownership, KKR maintains that this approach drives tangible business improvement. The firm reports that its employee ownership model is producing "higher-than-average investor returns" based on exits to date.

As Massimo Bizzi, CEO of KKR-backed Fortifi Food Processing Solutions, puts it: "When you lead with culture and you clarify the culture that you want, you don't have to accept any trade-off... results are what matters, but it's also a world where results must be achieved the right way."

Broader Implications for the EO Sector

KKR’s experience offers important lessons:

• Ownership alone isn’t enough: Without empathetic leadership, equity distribution won’t create the desired culture or performance outcomes.

• Leadership development is essential: Organizations should deliberately build empathy skills.

• Culture and performance reinforce each other: They’re not competing priorities but interconnected goals.

• Empathy is now mainstream: If KKR -  a firm once dubbed a "barbarian at the gate" - embraces empathetic leadership, it’s a strong signal that these skills are essential, not optional.

For organizations considering or already practicing employee ownership, KKR's story offers both encouraging evidence of EO's benefits and practical guidance for maximizing its impact through leadership development focused on empathy.

A Broader Perspective: Private Capital and Employee Ownership

KKR’s approach marks a meaningful evolution in private equity, combining human-centered leadership with strong financial outcomes. This approach challenges traditional assumptions about the incompatibility of financial engineering and human-centered management.

However, this case study also invites a larger conversation about private capital's role in the employee ownership ecosystem.

As Justin Flores of the Private Equity Stakeholder Project, a watchdog group that’s criticized private equity’s effects on workers and society, notes in the article, empathetic leadership, while valuable, isn't a substitute for "living wages, generous severance or policies against union-busting tactics.". Flores notes that KKR’s employee ownership model currently extends to only a portion of its 250 companies and 850,000 workers.

This invites bigger questions:

• How sustainable is partial or transitional employee ownership under private equity ownership?

• Can private equity’s short-term return expectations align with the long-term orientation often associated with employee ownership?

• Can the employee ownership model fundamentally reshape private equity's approach, or remain a niche experiment within it?

KKR’s story shows that employee ownership and private equity can coexist—but navigating the tension between broad-based ownership and shareholder returns requires intentional leadership. As Stavros acknowledges, empathetic leadership "guides you away from investment theses centered on mass layoffs."

As the employee ownership sector continues to grow and evolve, these experiences from a major private equity firm offer both encouragement and an invitation to deeper dialogue about the diverse paths toward more democratic workplaces and inclusive economies.

This article draws on insights from KKR's research with Stanford University psychologist Jamil Zaki, as published in Bloomberg, April 2025.

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