Return on Character

The Real Reason Leaders and Their Companies Win

Fred Kiel

• Publisher: Harvard Business Review Press
• Year: 2015
• Print ISBN: 9781625271303
• eBook ISBN: 9781625271327
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Does the character of our leaders matter?You may think this question was answered long ago. Countless business authors and analysts have assured us that great leadership demands great character. Time and again, we’ve seen that truth play out, as once-thriving organizations falter and fail under the guidance of leaders behaving badly. Why, then, do so many executives remain skeptical about the true value of leadership character? A winning strategy and a sound business model are what really matter, they argue; character is just the icing on the cake.What’s been missing from this debate is hard evidence: data that shows not only that leadership character matters for organizational success, but how it matters; and concrete evidence that it leads to better business results. Now, in this groundbreaking book, respected leadership researcher, adviser, and author Fred Kiel offers that evidence—solid data that demonstrates the connection between character, leadership excellence, and organizational results.After seven years of rigorous research based on a landmark study of more than 100 CEOs and over 8,000 of their employees’ observations, Kiel’s findings show that leaders of strong character achieved up to five times the ROA for their organizations as did leaders of weak character. Return on Character goes on to reveal:• How leadership character is formed, how it creates value, and how that value spreads throughout the organization
• How low-character leaders undermine the success of even the best business plans
• How leaders at any level can develop the habits of strong character and "unlearn” the habits of poor characterThe book also provides a character-building methodology—step-by-step advice and techniques for assessing your own character habits and improving your performance and that of your organization.
Return on Character provides the blueprint for building your own leadership character and creating a character-driven organization that achieves superior business results.

Part I

ROC and the
Path toward
Leadership

1

Character Defined

Populating the Character Curve

Whether they express their opinion or keep it to themselves, hardly anyone is neutral on the subject of leadership character. In meetings, seminars, professional consultations, and private conversations, the topic of character can generate strong reactions. Some of this heat may be sparked by the lack of a widely shared definition of just what character means. And many people are uncomfortable talking about character at all, because they view it as something deeply personal and largely unchangeable.

According to that common view, character is something we acquired as we were growing up, a set of ideas and operating beliefs that just sort of crept up on us while we weren’t looking and then calcified into a framework that would, ever after, influence our view of the world and our way of living in it. These ideas about character help place it, along with politics and religion, in the category of somewhat untouchable subjects. What good can come, after all, from talking about a personal quality that you don’t really understand, can’t fairly assess or categorize without bias, and, in any event, cannot adapt or influence in any meaningful way? Any talk of “morals” or “values” became suspect in the last decades of the twentieth century, as a series of religious, political, and business leaders who claimed great reverence for those ideals revealed themselves to be not even loosely bound to them. Doug Lennick and I stumbled into that minefield when we published our book, Moral Intelligence, in 2005.¹ In that climate, character and the morals that shaped it had become topics best left undisturbed.

In less than a decade, however, attitudes have shifted. A 2014 Google search on the phrase “morality and business” yields over thirty-one million results. From business analysts to academicians, economists, and everyday citizen investors and consumers, people worldwide are paying increasing attention to the morals demonstrated in the character of business, political, and religious leaders. But while today’s business world may be much more open to a conversation about the value of character than it was ten years ago, all of the vague and unfounded ideas that circulate around the concept of character continue to cloud the discussion with misunderstanding and controversy. So my KRW research team and I prepared to enter a social minefield when we decided to study the connection between leadership character and business results—a study whose findings formed the basis for the ideas and processes of Return on Character or ROC.

As business consultants with many years’ experience working with CEOs and senior executives, we were convinced that character shapes leadership decisions, tactics, and workplace behavior—all of which play a direct role in business results. To map the connections between all of those factors, we structured a research project aimed at bringing crystalline clarity to our understanding of what constitutes character, how it’s formed, the role it plays in our self-concept, and how it shapes our interactions with the world. (See appendix A for a detailed description of the research design.) We may have been venturing into explosive territory, but we knew that beyond it lay the answer to the big question: Is the strength of a leader’s character an important driver of business success?

Our first step in that journey was to arrive at a workable definition of the term character. That single task triggered an entire series of questions: What is character? How do we demonstrate our character through our actions, and—most particularly—how does leadership character make itself felt in the workplace? Further, just what role does character play in the CEO “value equation”? These are just some of the questions we’ll be answering in this chapter, as we begin our discussion of ROC.

Coming to Terms with Character

When you think of the term character, what definition comes to mind? Many people immediately respond with answers such as “honesty” or “truthfulness,” but human character actually encompasses much more than those fundamental elements. It’s also much more than loyalty, or integrity, or spiritual beliefs, fairness, or any other single value or principle.

Of course, there are many definitions of character, but American biologist, naturalist, and author E. O. Wilson offers one in his book, Consilience: The Unity of Knowledge, that effectively reflects the many facets of this complex concept (emphasis mine):

True character rises from a deeper well than religion. It is the internalization of the moral principles of a society, augmented by those tenets personally chosen by the individual, strong enough to endure through trials of solitude and diversity. The principles are fitted together into what we call … the integrated self, wherein personal decisions feel good and true. Character is in turn the enduring source of virtue. It stands by itself and excites admiration in others. It is not obedience to authority, and while it is often consistent with and reinforced by religious belief, it is not piety.²

Let’s look more closely at Wilson’s assertion that character is the “internalization of the moral principles of a society.” He’s telling us that a morally intelligent person is one who knows what behavior is expected by his or her specific culture and context as well as by human societies in general. Fortunately, we have some idea of what kinds of moral principles shape nearly every culture’s expectations for social behavior. Various cultural anthropologists have cataloged lists of moral principles that they claim are universal for all humans, lists that typically include some forms of expression for fairness, compassion, and honesty. Anthropologist and author Donald Brown, for example, has identified nearly five hundred behaviors and characteristics that all human societies recognize and display.³ We drew from this list when we chose the four universal moral principles of integrity, responsibility, forgiveness, and compassion—principles demonstrated in a wide range of common human behaviors and attributes, including:

• Distinguishing right from wrong (Integrity)
• Language employed to misinform or mislead (Lack of integrity)
• Redress of wrongs (Responsibility)
• Self-control (Responsibility)
• Cooperation (Forgiveness)
• Mediation of conflict (Forgiveness)
• Empathy (Compassion)
• Attachment (Compassion)
• Affection—expressed and felt (Compassion)

Steven Pinker, in The Blank Slate: The Modern Denial of Human Nature, lists all of Brown’s universals and, about them, he says, “Thus while conflict is a human universal, so is conflict resolution. Together with all their nasty and brutish motives, all peoples display a host of kinder, gentler ones: a sense of morality, justice, and community, an ability to anticipate consequences when choosing how to act, and a love of children, spouses and friends.”⁴

Further evidence of these human universal moral principles comes from a study that compared American children with those in India.⁵ As my coauthor and I wrote in Moral Intelligence, “The differences in values were predictable: Indian children displayed more deference to elders and acceptance of tradition, while American children value personal autonomy and freedom. But their moral codes were virtually identical. Both groups of children believed that it was wrong to lie, cheat, or steal, and both thought that it was important to treat the sick or unfortunate with kindness.”⁶

So while societies vary in how they honor and express these moral principles—parents in one culture may have a very different way of teaching their children about truthfulness than those in another—in some form, these principles are embedded in the cultural norms of all societies.

Wilson also makes a powerful point when he says that strong character leads to the integrated self—a joining of head and heart, where thoughts, feelings, and actions are in harmony, resulting in behavior that demonstrates the character of an individual who walks the talk of his or her belief system. Indeed, character has to be expressed through behavior. Integrity, responsibility, forgiveness, and compassion don’t live inside us. Our behavior, especially as demonstrated through our relationships with others, is where our character comes to life. Which means that, despite the common wisdom, character isn’t some hidden quality that no one can really know or assess. We reveal our character all the time through observable behaviors: in the way we treat other people. As we mature, these character-driven behaviors become automatic reflexes, the character habits that express our guiding principles and beliefs.

Beyond the way we internalize universal moral principles, therefore, the definition of character that informed our ROC research includes an understanding of how we demonstrate those principles in relationship to other people. Accordingly, we define character as an individual’s unique combination of internalized beliefs and moral habits that motivate and shape how that individual relates to others.

While this definition offers some solid footing for our observations about human character, it doesn’t pave over every gap in our understanding. Each of us constantly makes decisions about how to interact with other people, and each of those decisions has the potential to either harm or enhance the other person’s well-being. So it would seem logical to assume that we are moral and have strength of character when our behavior enhances the well-being of others, and we are immoral and have less strength of character when our behavior harms or detracts from the well-being of others.

Of course, the real world is complex, and so is the nature of our character. Many of the choices we make, for example, may enhance the environment or outcomes of one person, while at the very same time wrecking the lives of others. Finding a balance, wherein our behaviors promote the most good for the most people, is the ongoing task of all principled people of strong character. Adam Smith, the widely quoted source of the “invisible hand,” which has become shorthand for the notion that the unfettered and unregulated free market operates so that everyone benefits, was not an economist but a moral philosopher.⁷ In fact, while The Wealth of Nations is currently widely quoted, it was Smith’s other book, The Theory of Moral Sentiments, that was most popular in his day. Republished in 2013, the publisher has this to say: “Without Smith’s essential prequel, The Theory of Moral Sentiments, the more famous The Wealth of Nations can easily be misunderstood, twisted, or dismissed … Smith’s capitalism is far from a callous, insensitive, greed-motivated, love-of-profits-at-any-cost approach to the marketplace, when seen in the context of his Moral Sentiments.”⁸

In general, since the days of Adam Smith, our society has recognized that honoring universal moral principles such as integrity, responsibility, forgiveness, and compassion leads to a higher standard of behavior and a safer and more secure world (which, by the way, is good for business, as the ROC research data has shown). The ROC definition of character is woven around those principles, which became the foundation for KRW’s work in assessing leadership character and calculating the value it brings to business results—and to our world.

Profiling the CEO Character

With the definition of character brought into clear focus, the research team’s next task was to use that definition to help create a means for assessing leadership character. Step 1 involved designing a character profile that encompassed the universal principles that supported our definition, along with the fundamental behaviors that demonstrate those principles.

In figure 1-1, you see the ROC Matrix, which illustrates the profile. This matrix includes the four universal principles of integrity, responsibility, forgiveness, and compassion, each accompanied by a list of the behaviors that express them.

Because the habitual demonstration of these universal principles supports and promotes all other behaviors and habits that express human character, we refer to these four universal principles as Keystone Character Habits. As the matrix indicates, the habits of integrity and responsibility are dominated by our intellect (our “head”); the other two, forgiveness and compassion, are most often expressions of our emotions, or the “heart.” ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Guide
• Preface
• Introduction
• Part I ROC and the Path toward Leadership
• Part II ROC Leadership at Work
• Part III The ROC Habits Workshop
• Conclusion
• Appendix A
• Appendix B
• Notes
• Acknowledgments
• About the Author