Ethics and character, could there be a more important driver of sustainable success for a leader?

Learn more about KRW’s findings in Return on Character, by Fred Kiel (Harvard Business Review Press, 2015). Read Original Article Here…..

When we hear about unethical executives whose careers and companies have gone down in flames, it’s sadly unsurprising. Hubris and greed have a way of catching up with people, who then lose the power and wealth they’ve so fervently pursued. But is the opposite also true? Do highly principled leaders and their organizations perform especially well?

They do, according to a new study by KRW International, a Minneapolis-based leadership consultancy. The researchers found that CEOs whose employees gave them high marks for character had an average return on assets of 9.35% over a two-year period. That’s nearly five times as much as what those with low character ratings had; their ROA averaged only 1.93%.

Character is a subjective trait that might seem to defy quantification. To measure it, KRW cofounder Fred Kiel and his colleagues began by sifting through the anthropologist Donald Brown’s classic inventory of about 500 behaviors and characteristics that are recognized and displayed in all human societies. Drawing on that list, they identified four moral principles—integrity, responsibility, forgiveness, and compassion—as universal. Then they sent anonymous surveys to employees at 84 U.S. companies and nonprofits, asking, among other things, how consistently their CEOs and management teams embodied the four principles. They also interviewed many of the executives and analyzed the organizations’ financial results. When financial data was unavailable, leaders’ results were excluded.

At one end of the spectrum are the 10 executives Kiel calls “virtuoso CEOs”—those whose employees gave them and their management teams high ratings on all four principles. People reported that these leaders frequently engaged in behaviors that reveal strong character—for instance, standing up for what’s right, expressing concern for the common good, letting go of mistakes (their own and others’), and showing empathy. Examples include Dale Larson, who took over his family’s storm door business decades ago after his father died of cancer, growing it from about 30 employees to more than 1,500 and gaining a market share of 55%; Sally Jewell, a former CEO of REI, America’s largest outdoor retailer; and Charles Sorenson, a surgeon who moved into management at Intermountain Healthcare when the company began to grow and eventually took on the top job.

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