Doing What’s Right Makes Money

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The ethical lapses of business, religious and political leaders isn’t a new concern. A 1999 Public Agenda survey of adults reported that the most significant problem facing America’s youth was that they “are not learning values.”
More recently, the Feb. 19, 2004, issue of the Wall Street Journal summarized a survey of 22,000 Americans where three-quarters rated the image of big corporations as “not good” or “terrible.”
However, not all news is bad news. Microsoft received high marks for “leadership, vision and financial performance,” while its chairman, Bill Gates, was praised for his philanthropy. As it is for Microsoft and Gates, it is for Enron’s Kenneth Lay: the reputation of a company and its leaders are of the same cloth. Indeed, the issue of corporate malfeasance is an issue of leader character.
It has been our experience that the stronger and clearer the character of a company’s leaders, the more intensely the company’s culture and reputation will mirror it. That’s because a leader’s character is an expression of personal morality or, as French philosopher Comte-Sponville put it, the capacity “to act as though you loved.”
It’s this moral sense that determines what a leader will do when faced with a moral dilemma, including owning up to being a steward of the company.
An under-developed moral sense and lack of courage explain the behavior of the disgraced leaders currently in the press. Their greed and fear of detection caused their frantic and often simple-minded efforts to hide their tracks and protect their carefully crafted reputations.
It’s obvious that they know what people of character have always known: Earning a reputation for goodness takes years, while its destruction takes moments. And once destroyed, it takes forever to re-earn, whether it’s the reputation of a company or its leaders.
If there is one lesson that leaders can learn from the leaders who destroyed their reputations and capacity to be trusted, it’s this: The most important asset of leadership is the trust of followers, including a company’s stakeholders.
Moreover, if leaders do not act in the interest of all stakeholders, then government and the judiciary will make them act — and always at a personal and financial cost that exceeds what simple self-responsibility would have cost.
On the other hand, leader and corporate character pays dividends. For example, several studies of our customers’ stakeholders consistently show that being values-based and keeping stakeholder promises positively affects the bottom line.
For example, in one study, managers who expressed pride in their company were nearly seven times more likely to be committed to a career with the company than managers who were not.
Similarly, employees who said the company’s values were practiced, employee turnover was one-half of what it was among employees who said the values were not practiced. Moreover, customers of values-living business units were seven times more likely to return than the customers of the none-values living units.
Finally, the values-practicing units had an average of 8.9 percent higher sales, 26 percent better cash flow, and 48 percent higher profit before tax than the non-vision-living units.
These findings support the fact that values pay; indeed, they pay both emotionally and financially. However, another reason for building a company of character boils down to an opinion on our part: leadership is a privilege. With privilege comes the special responsibility to honor the trust that has been awarded by stakeholders. We have recast this responsibility as six leadership commitments:
1) Clarify your values through words and actions — this is leading by example.
2) Be truthful about your company’s products and services — this is corporate integrity.
3) Honor your commitments — this is personal integrity.
4) Honor the spirit and letter of the law — there are no ethical dilemmas.
5 ) Make employee satisfaction a priority — employees will make your company’s success a priority.
6) Be civil — “please” and “thank you” are much appreciated from someone who doesn’t have to say them.
The fourth commitment makes our stand clear: There’s no such thing as an ethical dilemma because there is always a right and wrong.
However, there are values dilemmas because right and right choices are common. For example, it’s right to encourage your employees to honor their commitments to family and it’s right to encourage them to stay late and finish promised work.
The choice you make is neither right nor wrong. Instead, it’s a statement of your values as both choices cannot be equally supported.
Over time, the pattern of the choices made reveals the values of a company’s leaders to its employees and other stakeholders and determine its culture. Thus, the values of a company’s leaders are the values of the company.
Tom Decotiis and Marta Erhard are principals with Corvirtus, a consulting company to Fortune 300 companies based in Colorado Springs.