Fred Kiel and his team at KRW International spent seven years studying almost 100 CEOs, their executive staff and their employees. The goal? – To devise and implement a quantifiable way to answer the question: Does a leader’s character really contribute to an organization’s bottom line.
The research grew into more than just a study, and now is compiled in the book Return on Character: The Real Reason Leaders and Their Companies Win, published by the Harvard Business Review.
In Return on Character, Fred delineates the pathways of two types of CEOs and their leadership teams: The “Virtuosos” and the “Self-focused.” More specifically, he talks about leaders with and without character, and how both dispositions affect the bottom line.
I first heard of this idea of a return of character from Fred himself as I sat in the audience of his session at the 2017 ECI Annual Conference. The data he presented harkened back to something we talk about every day at NAVEX Global – the competitive advantage of ethics and the indispensable role tone from the top plays in driving a culture of ethics.
Fred was gracious enough to continue the conversation here:
Q1: Define for us the characteristics of a virtuoso leader and those of a self-focused leader.
Strong character leaders tell the truth, keep promises and own up to their own mistakes.These leaders react with curiosity when others make mistakes rather than shaming or blaming well-intentioned employees. Finally, they treat people as people, not as objects. The employees surveyed in our research rated Virtuoso CEOs as “almost always” behaving in this way. The employees of the Self-Focused CEOs, rated them as behaving this way “about half the time.”
The Virtuoso leader creates a team of strong character individuals. Together, the leadership team creates the culture – their character habits become the norm for the entire organization.
Q2: Your definition of a virtuoso leader requires not only the CEO to possess virtuous traits, but also that those traits extend throughout the executive staff. This effectively composes those who are responsible for tone from the top. Could you tell us how that tone – good or bad – may permeate throughout an organization?
Well, the tone at the top is just that! It sets the cultural norms and expectations for the entire organization. When tone from the top reflects a strong and ethical culture, employees who are personally aligned with those norms and expectations tend to be more satisfied in their jobs. They stay in the organization and produce. Those who are not personally aligned often self-select and leave.
Organizations are social entities and people tend to stay in social settings that align with their values. The better the tone from the top, the better the cultural barometer employees have to align themselves with.
Q3: Is there a way to prove an immediate value of character?
When senior leaders or teams courageously decide to “look in the mirror” and ask the workforce to rate their collective reputation, it is often a big wake-up call. Most senior leaders believe that they are people of strong character (and they most certainly intend to be that way). However, senior teams often behave unintentionally in ways that leave the workforce demotivated or mistrusting. When a senior team owns up to these unintentional behaviors and asks the workforce for help to change them, the impact on value can be quite immediate and dramatic. When a workforce suddenly becomes energized and excited about working with the senior leadership versus just complying, the productivity of the organization soars – and that most often dramatically impacts the bottom line.
Q4: Most of the CEO’s surveyed in your study rated themselves as “Virtuosos.” However, your study did not just rely on self-assessment but instead compiled CEO responses with the responses of their employees. Employees rated self-focused CEOs 15% lower than the self-focused CEOs rated themselves. How does this misalignment manifest itself within an organization?
Such a misalignment leads to disengagement and cynicism. Engagement surveys show that about 70% of employees in America are disengaged. This is undoubtedly due to this misalignment.
On the contrary, the same way employees of self-focused CEOs drastically undercut their leaders’ scores, the employees of virtuoso leaders rated their CEOs higher than the CEOs themselves. This contributes to the employees and teams of Virtuoso leaders being highly productive and engaged. The fact that Virtuosos typically underrate themselves just further inspires the workforce – everyone likes to work for leaders who are humble and do not brag about themselves.
Q5: What was the most unexpected finding that surfaced through your research?
We were surprised at how important the senior team is – high character CEOs rely heavily on their senior teams for much of the important work of their organization. It’s senior leadership that creates the culture, engages the workforce, takes down barriers to collaboration and innovation, and so on. When we started the research, we assumed that the CEO was the greatest factor. In some cases, however, we discovered a low character CEO had a high character team that protected the workforce from the CEO’s toxicity. (These organizations did not last long, however. No one wants to work long for a toxic CEO.)
Q6: Your work on character gives us a lot of quantifiable evidence that can overlap with ethics – corporate character if you will. However “ethics” can be a squishy word. Can you tell us about how you define character in a way that is more definitive?
We defined character in the same way that most people assess others’ character – by their behavior. Do they tell the truth? Keep promises? Own up to their mistakes? Treat others as people and not objects? And so on.
We don’t believe you can actually measure a person’s character – that inner world of intent and belief is accessible only to the person. BUT, you can measure the behaviors that reflect that person’s inner world – their character. This is what we did – we asked random samples of employees to rate the unique behaviors of senior leadership. Ethics, in a similar way, should be measured by behavior.
About Fred Kiel
For more than 30 years, Fred has guided Fortune 500 companies in their journey to accelerate business success through principled leadership. The foundation of KRW International’s model is a rigorous data-gathering and customized development process designed to provide transformative insight and growth. Fred is co-founder of KRW International, co-author of the influential book, Moral Intelligence 2.0 (2011, Financial Times Press), and a speaker of the popular TEDxTalk, “Psychopaths in the C-Suite.”
Fred believes in a world where leadership character is fundamental to business education programs and performance evaluation processes . . . a world where “who” a leader is receives as much attention as “what” the leader is trained to do, because it results in greater value for all.