Stand: An Essay on Character

march-blog-post-1-imageBy: Louise Korver, Sr. Consultant, Executive Development Associates, Inc.

Are you ready to take a stand?

A recent edition of the WSJ Business & Finance Section contained eight articles about the policy-level, global implications of deceit and reputational risk at some of the world’s most renowned brands and firms. And that didn’t include the cover story of the weekend edition about the VW engineer that admitted to the diesel scam (Viswanatha, 2016) that charged him with conspiring to defraud the U.S., commit wire fraud, and violate the Clean Air Act. Is this simply another example of their “fit of absence of mind?” (Seeley) Unlikely.

And the category of old news, the AIG ex-chief’s case also finally come to trial recently, but remember that it was brought by the former New York state attorney general Elliott Spitzer, who since has had a number of his own ethical problems. While it should be of considerable interest to every member of the Board of Directors and top leaders at every company, the real issue isn’t whether they think of this every day or not. It’s that people in leadership often measure risk by being on the front page of the WSJ. What does this say? These eight articles are unfortunately not unique. They are just the ones who got caught.

Measuring the financial risks of character such as these caught my attention two years ago after conversations with the partners of KRW, a global consulting and coaching firm and Partner Fred Kiel’s groundbreaking study captured in his 2015 “Return on Character: the real reason leaders and their companies win,” by Harvard Business Review Press. Fred researches and counsels boards of directors and senior executive teams on the implications their personal leadership habits have on not only the degree of risk behavior within the organization but also on company stock price, employee engagement, and overall potential to better execute strategy.

The pervasive nature of character flaws of leaders at all levels of our organizations is mind-numbing. Is it a personality disorder? Not according to Kiel. “Personality in and of itself doesn’t determine our character.” (Kiel, 2015, p. 44) So if not, what is it and how do we get a handle on it and fix this? According to Fred Kiel, the “journey from cradle to corner office” forms the keystone habits of leadership that shapes his or her ability to develop as an integrated person who demonstrates the best of those attributes and behaviors.” (Kiel, 2015, p. 6). According to the Wall Street Journal on Tuesday, September 13th in an article (page B6) about the breaking news about Wells Fargo’s sales ethics lapse quoted Richard Bove, a research analyst, saying “This problem is a serious one and indicates that the company is feeling an intense pressure to perform that it cannot meet.” If you are not familiar with this news, Wells is paying $185M in fines for opening 565,000 credit card accounts that customers may not have wanted. For a U.S. bank that was best known for customer service quality and cross-selling capabilities, this is a low blow. Even Warren Buffet was quoted as saying “somebody is doing something today at Berkshire that you and I would be unhappy about if we knew of it.”

How do you get at this character flaw?

You could rely on deontology: the ethical obligation, responsibility, and operating vision and ethics of your own leadership. As Kiel says, “from casual conversations between peers to a consultant’s in-depth confidential interviews, we can put together an assessment of who we are as a person (the strength of our character habits and the worldview expressed by our behavior) as well as what our leadership behavior says about our character (How often do we ask for help when we personally need it? Do we forgive well-intentioned individuals when they screw up and continue to trust them?) How do we define character? It’s an “individual’s unique combination of beliefs and character habits that motivate and shape how he or she relates to others.”

We need that kind of data “in order to eliminate our blind spots so that we can truly see and understand how other people experience our leadership and perceive our character on a daily basis.” (Kiel, 2015, p. 165). The unexamined (leadership) character is subject to ignorant bliss that “it’s not about you” that these ethical violations are occurring deeper in your organization. Don’t fool yourself.

Recently, the St. Louis Business Journal covered the Monsanto whistleblower settlement of $22.5 million from the SEC. (Barr, 2016). Since 2011 when the SEC whistleblower program was conceived, $107M has been paid to thirty-three whistleblowers “who became eligible by voluntarily providing the agency with ‘original and useful information’ that led to a successful enforcement action, officials said. “The more I think about it, the more I see how character is cultural and that it’s all about the tone at the top. The corporate culture dictates the degree to which an individual can be transparent, truthful, and honest about what’s working and what’s not. That makes the difference. So how can you really measure the integrity of your organization’s culture? How deep might something like this go in your own company, and how can you become- as Monsanto claims to be – “committed to operating its business with the utmost integrity and transparency …” when you haven’t taken the step to evaluate your own leadership habits?

Reflect on the importance of understanding your leadership team’s reputation for integrity, responsibility, forgiveness, and compassion with the workforce. Fred’s research has been featured on CNBC Squawk Box, Forbes, HBR magazine, Huff Post Live, Strategy + Business, and many others. Many companies are quietly getting a handle on the top team’s impact on the leadership culture, and most especially, the ethical integrity of leadership decision making. The research shows documented, measurable impact between the character reputation of the senior team and the bottom line. Who can afford to leave leadership character reputation unmanaged? The source of your unique competitive advantage unexplored?

What leadership factors drive Return on Assets?

According to KRW’s research, the size of the organization and the leadership team’s reputation for integrity, responsibility, forgiveness and compassion drive ROA. KRW research shows that strong character outperforms self-focused leaders across the board. The “Return on Character [ROC] research’s bottom line is that high-character “virtuoso” executives and their teams generate nearly 5x return on assets over their “self-focused” counterparts. That’s a lot of money to leave on the table. The execution-ready culture has a handle on its character reputation versus it’s intent. Fred’s “Keystone Change Summary” gives you tactical and actionable recommendations to move your character reputation up the character curve, allowing you to realize your organization’s potential. It doesn’t happen overnight any faster than you might expect your stock price to improve. But then again, you’re working on that all the time. Why wouldn’t you want to work on this?

About the Author:

Louise Korver is a Sr. Consultant, Executive Development Expert and C-Suite Coach with EDA. She has an extensive background in executive education academically, as well as practical experience working for large organizations such as Ingersoll-Rand, Bank of America, EMC Corporation, H. J. Heinz, and AT&T. She currently provides executive assessment and coaching, working primarily with global general managers and senior women leaders. Her book on mid-career onboarding offers fresh ideas, tools, and a troubleshooting guide to help mid-career leaders make a successful move.

*This article was originally published on the Face The Music Blog, and can be viewed here: http://bit.ly/2grJ2dM

References:

Barr, D. (2016, August 30). Monsanto whistleblower gets $22.5 million from SEC, lawyer says. St. Louis Business Journal. Retrieved August 30, 2016, from http://www.bizjournals.com/stlouis/news/2016/08/30/monsanto-whistleblower-gets-22-5-from-sec.html

Kiel, F. (2015). Return on Character: The Real Reason Leaders and Their Companies Win. Boston: Harvard Business School Press.

Seeley, J. R. (n.d.).

Viswanatha, A. a. (2016, September 11). VW Engineer Admits Diesel Scam. Wall Street Journal, pp. A-1.