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Five Standards of Excellence Practiced by Ethical Leaders

January 6, 2005
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Related Topics: Ethics, Featured Article, HR & Business Administration
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For quite some time, picking up The Wall Street Journal meant reading stories rife with indictments of CFOs, CEOs and accountants. Though many leaders practice good principles, clearly it is time to inspect closely what it means to lead with ethics. The world is full of strong leaders; however, leadership is a neutral term. It can be good or bad. Stalin, Hitler, Mussolini, and Mao Tse Tung were regarded as good political leaders at some point in time by a certain element of the population. History has proven, however, that each was guilty of an immoral use of the tremendous power his leadership afforded him.

    What will history tell us about our current leaders of industry? Are they leading their companies in an ethical way? Perhaps the best barometer of achievement in this regard is the sustainable success of an organization over the long haul. For when you whittle commerce down to the point of its raison d’être, you find its ethical basis. Is it not the mission and ethical imperative of every publicly held establishment to absorb the cost of doing business, produce a quality product for its customers, provide sustenance for its members, and turn a profit that can be reinvested to make the company stronger for lean times?

    One company has been doing this well for more than 120 years. General Electric’s recent declining stock values may trouble investors, but it still was recognized as one of Fortune’s 2002 Global Most Admired Companies and received the highest marks for its quality of management. Compare it to the relatively young MCI WorldCom, a company struggling in a quagmire of ethical issues, and the sustaining success of GE is clearly manifested.

    The following discusses the following five components of ethical leadership: communication, quality, collaboration, succession planning, and tenure.

Ethical Communication
    Ethical leaders set the standard of truth for every employee they lead. The moment people take leadership positions, they have an opportunity to place the highest premium on truthfulness. Recent cases of fiscal malfeasance at Enron, WorldCom and Arthur Andersen illustrate the need for every form of communication leaders put forth to be an accurate representation. Yet, leading by example cannot be the only process by which this standard is relayed. It must become a company slogan, from the accounting office to the shop floor, that "Truth is Job 1." Truthful information is quality information to the CEO, board of directors, and investors.

    Jim Collins, a noted researcher on leadership, advises leaders to "conduct autopsies, without blame," and cites companies such as Philip Morris whose executives talked openly about the "7-UP disaster." Even when statistical evidence does not reflect well on a division or the financial status of the entire company, a plan of action to thwart disaster may be implemented and several lessons learned through open communication to ensure the sustainability of the organization.

Ethical Quality
    An ethical leader understands that three factors ensure the global market competitiveness of an organization: a quality product, quality customer service, and quality delivery. Leaders must champion the processes of quality throughout the organization, benchmarking successful organizations, incorporating innovations in quality, and setting standards and measurements in every department. Leaders have several tools to ensure quality. They don’t have to be Master Black Belts in Six Sigma or understand all the intricacies of lean manufacturing or supply chain management to see how each improves quality. They are sold on the merits of having a quality. They know that cutting waste translates to saving time and money for the organization.

    It is the leader’s responsibility to drive, steer, and fund the quality initiative throughout the organization. For only when top leaders fully endorse a quality initiative does it have a chance of becoming fully implemented and the harvest days of savings can occur.

    Bob Galvin, Chairman of Motorola, implemented Six Sigma throughout the company in the early 1980s. Just two years after launching Six Sigma, Motorola was honored with the Malcolm Baldrige National Quality Award. Even the federal government is investigating the merits of this management tool. Several local government agencies are already using Six Sigma, and the federal government may employ Six Sigma in its war on terrorism. With a failure rate of 3.4 per million products/actions or 99.99966 percent accuracy, agencies would be better informed and lives could be saved if only one of every 294,000 vital pieces of information…[was]…erroneously discarded.

Ethical Collaboration
    Ethical leaders need many advisors. They pick the most astute within their organizations and hire some from other companies, but they surround themselves with answers. Wise leaders collaborate to incorporate best practices, solve problems, and address the issues facing their organizations.

    Regrettably, the natural tendency of leaders is to draw in a close, and more often than not, closed circle of advisors. Unfortunately, the smaller the group, the less the prospect of collectively providing the leader advice on the full range of issues facing the organization. But the leader who collaborates ethically makes better decisions for the organization. How is that possible? Leaders who use ethical collaboration keep their circle of advisors more open and fluid. The objective of the ethical leader is to reduce the risks taken by the organization by assigning trustworthy experts/advisors to every situation—from R&D decisions to customer-driven needs. Advisors’ findings determine decisions of the leader who becomes better equipped to make judgments based on two critical elements: more feasible solutions and viable processes needed to exact the solutions.

    Many states suffer the woes of underfunded education. Recently, South Carolina imposed a 15 percent budget cut, with more cuts promised in the future. The President of Clemson University, Jim Barker, pulled in campus-wide experts in their fields to provide solutions. Robert McCormick, an internationally known economist, among others, was assigned the task of creating a fiscal roadmap to ensure Clemson would sustain itself through time. While his advisors provided him with sound solutions, Barker remained focused on the overall mission of the university and its drive to become a top-20 public university. Ethical collaboration serves another important role, however. As Barker maintains an open and fluid circle of advisors while assigning the right people to the variety of issues facing the institution, he serves to broaden his and others’ awareness of promising internal successors.

Ethical Succession Planning
    If principled leaders possess a need for control, they satisfy that need by establishing strong organizational standards and operational procedures for quality and communication. Yet for the long-term success of the organization, ethical leaders must set aside issues of "turf" and let other leaders surface within the company, giving potential successors opportunities to exercise and build their leadership skills. Once identified, these few should be personally mentored by the leader, given opportunities for 360º communications, and trained for the roles they may one day assume.

    In his book, Good to Great: Why Some Companies Make the Leap…and Others Don’t, Jim Collins identifies Chrysler with many organizations that achieve greatness only to have it slip away through time. While examining the long list of organizations in his study, Collins notes that under Lee Iacocca Chrysler followed "a pattern…found in every unsustained comparison: a spectacular rise under a tyrannical disciplinarian, followed by an equally spectacular decline when the disciplinarian stepped away, leaving behind no enduring culture of discipline…"

    Arguably Chrysler faltered without Iacocca at the helm because he had failed to practice ethical collaboration to the point that a succession plan was devised.

Ethical Tenure
    How long should a leader lead? Whereas the most important leader in the American government leads for four to eight years, industry has no governing standard to length of tenure. Should leadership in industry, like its counterpart in government, have a shelf life? The answer lies on the conduct of the leader. Leadership expert Peter Block contends that "We search, so often in vain, to find leaders we can have faith in."

    Further, he notes that leadership is more often rated on the trustworthiness of the individual than on his or her particular talents, and that the mission of the ethical leader is to serve the institution and not themselves. Jim Collins identifies this category of executives as Level 5 Leaders: leaders who are able to "channel their ego needs away from themselves and into the larger goal of building a great company."

    Ethical leaders collaborate and provide their organizations succession plans that ensure the growth of the organization over time. They feel that they lead at the request of the company, customers, board of directors, and stockholders. If each of these entities’ trust in the leader remains unchallenged, the leader should lead until he or she chooses to step down. However, whereas even the best of leaders turn the company over to a new set of watchful eyes eventually, the leader who is irreparably jeopardizing the sacred trust of employees, customers, and the public at large should step aside and let a better leader take the helm.

Conclusion
    Much has been written about leadership. Regrettably, less time and thought has been afforded the concept of ethical leadership. Perhaps it is the very lack of discussion about what it means to lead with ethics that has created the current business environment of SEC investigations into improprieties, dot-com greed, and the general public’s lack of faith in the stock market. Though we would have preferred that the government did not have to force the issue of business propriety through threats and legislation, apparently for some leaders fear and not moral certitude is their personal motivator.

Excerpted from a section written by Laurie Haughey, appearing in The Business Ethics Activity Book: 50 Exercises for Promoting Integrity at Work by Marlene Carosolli. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission. All rights reserved.

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