Making Ethics Real Makes Leadership Real

Posted On: Friday, August 2, 2019

What is the key to effective leadership? The answer is ethics.

However, if this doesn’t seem an easy sell…stay with it. Making ethics real makes leadership real.

We’ll look at four ways to bring this home. First, some context.

Ethical Failures

When ethics isn’t a key driver in an organization, the fallout from ethical lapses can have catastrophic financial impact. (The liability for Bankrupt Pacific Gas and Electric for the 2018 “deadly wildfires” can’t yet be determined; as of October 2018, Volkswagen’s diesel emission scandal hit $33 billion since 2015.)

Ethical failures often occur because what was known or should have been known were not addressed. When ethics isn’t considered a business fundamental (like finance, operations, strategy, planning, marketing) vulnerability increases.

In addition, smart, strategic, successful and numbers-focused leaders have harmed their companies by ethical misconduct.  Some held dual roles of CEO and chairman including Les Moonves at CBS and John Stumpf at Wells Fargo. What they did or ignored put them counter to professed company values. This underscores the importance of board members integrating company values into board discussions and having a better understanding of — and acting on — how CEOs actually show up. This is even more critical  when a CEO is also chairman. If information is siloed the board can’t verify reality beyond a chairman’s assurances.

A May 2019 study by Strategy& that includes 2018 CEO turnover analysis indicated: “For the first time in the study’s (19 year) history, more CEOs were dismissed for ethical lapses than for financial performance or board struggles.” This reinforces the need for a board to be engaged with company’s values and tone at the top.

Four Recommendations for Making Ethics Real 

1/   Accept ethics as a business fundamental! Without its ongoing influence of “what we stand for” (that can inspire employee engagement and customer connection), the best strategy, marketing and financials are more vulnerable. Just as leaders invest time and increase knowledge in marketing and other fundamentals, investing time in ethics (for CEOs as well as board members) involves, among other things:

• Asking more questions, listening and observing and connecting professed values to the business of the organization. (Not limiting ethics in discussions to risk mitigation or hotline statistics.)
• Paying attention to each other, noticing whether susceptibility to CEO disease is emerging. Recognizing when someone is in self-seal and respectfully calling that out so that board and C-suite discussions can be more collaborative.

2/   Encourage in the culture Giving Voice to Values! An employee recently shared with me her discomfort when her boss told her to add a particular expense as part of his travel expenses. She’d expressed concern over its inappropriateness but he restated his reasoning. However, the next day, the leader told her he’d been thinking about her comments and saw her point. He told her not to include the expense. The experience telegraphed to her that the organization’s polices and values were real and applied to everyone.

• When leaders make it safe for employees to disagree and explain why, leaders can move beyond their own point of view to see a broader picture. Listening to information challenging their perspective can stimulate further thought and potentially avoid embarrassment and poor decisions.

3/   Share personal values as a leader! The 2019 Eldelman Trust Barometer report indicated 79% of respondents said “knowing the CEO’s personal values is important to building trust.” Many startup founders have incorporated their personal values into the companies they build. That’s been the focus for Yvon Chouinard founder of Patagonia in the company’s advocacy for the environment. However, it’s also what former U.S. Treasury Secretary Paul O’Neill did in his focus on safety as CEO and Chairman of Alcoa. Values at Alcoa under O’Neill and later at Ford under Alan Mulally’s leadership connected employees to a vision that inspired successful financial turnarounds at both companies.

• Values shared, followed by a visible focus of action, communication and accountability make them real in a culture. It also transforms the impact of leadership. It signals a direction that is relatable, authentic, trustworthy and inspiring to follow.

4/   See ethics as finance’s best ally! 

• In a conversation with Paul O’Neill about 10 years ago, he illustrated how ethics — in this caseworker safety — supports and can drive company success. In 1987, he created an accountable, transparent, global internet system of real-time reporting of workplace injuries against the advice of his legal team who feared it would invite litigation. “In the 13 years I was at Alcoa, we never had a single lawsuit about workplace injuries,” he told me, mentioning also that Alcoa had also had record profits and growth. “If you are elected to be the CEO of an organization,” he added, “why wouldn’t your leadership be about creating a wonderful, fulfilling organization that is not about money? Money is a consequence, not an object.”

Ethics is the key to effective leadership. Making ethics real does make leadership real.

Gael O’Brien is a catalyst for leaders leading with purpose and impact. She is an executive coach with a corporate and public affairs background. Gael is President of Strategic Opportunities Group.

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