Why It Pays To Lead With Character

A book written in 2015, well before the world drastically changed, is even more relevant today.  In “Return on Character: The Real Reason Leaders and their Companies Win,” Fred Kiel, a renowned business consultant, revealed an undeniable and dramatic link between a CEO’s character and the company’s bottom-line.  (I had the pleasure of speaking with Fred over breakfast, during which he described the components of character and explained how we can all build character ourselves. This article reflects much of what I learned from him.)

Kiel defined character as a composite of four key principles:  integrity, responsibility, forgiveness and compassion.  Leaders with character stand up for what’s right, care about the social good, move on from mistakes and show empathy.  In stark contrast, CEOs without character are ‘self-focused’, which means they lie to get ahead and are willing to throw others under the bus for their own gain. It’s always about them.

For more on why character matters in both life and work, read Personal Character.

A road map to find the currency of character.

Kiel surveyed CEOs and employees at 84 U.S. companies and nonprofits to determine how consistently their CEOs and management teams embodied the principles of character and how often leaders displayed traits of being self-focused.  Then, he compared those numbers against each organization’s financial data.  He found that CEOs with character outperformed the self-focused CEOs on financial metrics by five times, and they received higher employee ratings for strategic vision, focus, accountability, and executive team character. (He surveyed 79 CEOs and 8,000 employees.)

Further, work done by Daniel Goleman, psychologist and author, who noted that nearly half of one’s success in business is based on emotional intelligence, reinforces Kiel’s findings.

Fred’s Key Points

• High character leaders are better at sustaining above average levels of financial performance.
• What creates value in business is not just the business model – it is the character of those who manage and lead the firm.
• Character can be taught.
• There are four moral principles of character – two in the Head and two in the Heart. From the Head we generate Integrity and Responsibility; from the Heart, we generate Forgiveness and Compassion.
• Employees who work in organizations with high degrees of character feel safe, are treated well, can depend on their boss, and behave according to the four principles of character above.
• CEOs with high levels of character earn a return on assets of 8.4% vs. a negative ROA for those with character traits below the median. In addition, when you divide the groups in half, those in the top half return ROAs 5.35% above average while those in the bottom half yield ROAs 1.9% below the average!

Apply these Essential Elements of Character

1. Notice how you treat people when there’s no gain for you. (Watch how others treat strangers.)
2. It is a matter of life experiences and becomes a behavioral habit. (See how consistent people are when speaking to and treating others.)
3. Strengthen moral habits through every day practice. (Take pleasure in letting others know you value them.)
4. Hone your common habits, primarily around your Empathy habit (i.e. sense others, feel what others feel); your Outside habit (think beyond yourself; it’s not always about you); and the habit to admit I Screwed Up (nothing is more disarming or honest than admitting you’ve made a mistake – it communicates that you are human and commands respect and trust and gives you a sense of freedom).

Learn to develop and grow your character by practicing empathy, allowing others to come first, and start owning up to your own mistakes.  The outcome will be good for you, good for the people you work with, good for your family, and terrific for the bottom line.

Executive leadership coaching can help you put these principles into everyday practice.

If you found this article interesting, take a look at Fred’s TEDx talk here: