CEOs who score high on traits like integrity and compassion deliver better results for shareholders, says a new book.
We all want to work for an organization where we can trust the people at the top to do the right thing and treat employees fairly (or even, let’s admit it, generously). But can companies fit that description and still produce the profits that shareholders and Wall Street expect?
Apparently, they can. According to the soon-to-be published book Return on Character, “character-driven” leaders who display four cardinal virtues — integrity, compassion, the ability to forgive and forget, and accountability — consistently deliver return on assets up to five times larger than the ROAs produced by their counterparts with a “self-focused” leadership style, who never or rarely exhibit those four traits. The book is based on a seven-year project by author Fred Kiel, founding partner of executive development firm KRW International. He and his research team studied 84 CEOs and more than 8,000 of their employees.
How leaders’ personalities shape their organizations, and vice versa, is a slippery topic, partly because of a complicated conflict between power and basic Boy (and Girl) Scout virtues like empathy and honesty. At one extreme, our culture half-admiringly casts sharp-elbowed, ruthless Gordon Gekko types as most likely to succeed. But at the same time, as a society, we’re cautious of power’s tendency to corrupt. “Nearly all men can stand adversity,” Abraham Lincoln once said. “But if you want to test a man’s character, give him power.”
Kiel neatly sidesteps all of that by letting the data tell the story. Based on detailed interviews with employees, he and his team found, for instance, that engagement and enthusiasm are 26% higher among people who work for companies where they feel valued, respected, and fairly paid than among their less well-treated peers elsewhere. They work harder, too.
“A workforce that feels cared for is more productive than one that feels neglected, and that translates into bottom-line financial results,” Kiel notes. “So why do so many CEOs and their teams fail to create a work environment that promotes this kind of workforce engagement? Unfortunately, we … have seen that many senior leaders simply don’t know how to go about it and are afraid to try.”
Many of those fearful leaders belong to the type Kiel has dubbed “self-focused” — and the majority of them, over the seven years of the study, “failed to create significant value for their organizations, and two of them incurred major losses.”
In the most riveting pages of the book, Kiel, who has a PhD in psychology and is a longtime executive coach, quotes excerpts from interviews-cum-therapy sessions with pseudonymous “self-focused” leaders, who describe their early, formative experiences in terms that are lonely, pessimistic, and distrustful of other people.
Kiel then does a deep dive on how exactly their life stories differ from those of the “character-driven” chief executives. A significant difference: as children, the latter “sought and accepted help from many supportive adults,” which made them much more inclined to seek out mentors later on who helped advance their careers.
The book’s subtitle, The Real Reason Leaders and Their Companies Win, over-eggs the pudding a little. The CEOs Kiel holds up as exemplars, like Jim Sinegal at Costco and Sally Jewel at REI, run companies that have succeeded by doing lots of things well, not just choosing the right CEOs. And Kiel acknowledges that creating value for shareholders usually depends on a constellation of factors, from the effectiveness of a given company’s business model to how fast the overall economy is growing.
Still, Return on Character makes a persuasive case for the idea that, as Kiel writes, “’doing well’ and ‘doing good’ are most often two sides of the same coin: the creation of positive value.”
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