Marshall Goldsmith Blog

How important is integrity in a business environment?

Enron’s leaders did a wonderful job of preaching the value of challenging the system…so did Andersen’s…so did NASA’s. Everyone seems to know that encouraging upward challenge is a key to maintaining corporate integrity. This is relatively easy to understand; it is just hard to do. After corporate meltdowns, it is amazing how many people claim that they knew there could be huge problems. It is even more amazing how few people effectively expressed these concerns before the problems were reported in the news.

Warner Burke has pointed out that “knows how to influence up in a constructive way” scored last place on managerial effectiveness in all items when people evaluated their managers in NASA – immediately before the Columbia space shuttle exploded. While lack of effective upward challenge was not the only cause of the explosion, it was a clear contributing factor. The same story is true in almost all organizational disasters and examples of corporate wrongdoing.

I’d like to suggest some organizational guidelines aimed at encouraging upward challenge and preserving corporate integrity. None are a reinvention of the wheel, and they certainly are not all encompassing, but I have seen them work in highly respected companies and I hope they can provide you with a good discussion point for reviewing your own organizational processes. While some of them may seem extreme, the organizational cost of integrity violations is — and should be — huge. If the last two years have taught us anything, it should be that ethical violations can kill even the most successful companies. The cost of preventing ethical problems will never exceed the cost of dealing with ethical problems.

Suggested Guidelines for Managers and Employees:

• If you are ever asked to do anything that you believe may be unethical, it is not your right to express your concern – it is your responsibility.

One of the world’s most highly-respected service companies clearly communicates this guideline to all employees, and it is a major message in their new employee orientation. I cannot think of any organization that should not communicate this same clear message, yet very few do.

All employees need to express their concerns if the decision may be unethical. In many cases directives that appear to be unethical are just that. Even the perception of an ethics lapse can be damaging to the entire company. Therefore, employees at all levels need to take responsibility to ensure that their organization engages in ethical business practices. After all, managers cannot read their employee’s minds.

• Employees that are not satisfied with their manager’s response to any ethical challenge should have the responsibility to continue this challenge to the next level of management.

If a resolution cannot be reached with the immediate manager, the employee should continue to challenge up. This type of challenge should not be viewed as an indictment of either the manager or the employee. Honest, well-meaning people can have very different views of the ethical dilemmas that surround the same decision.

• Any manager that threatens concerned employees or knowingly discourages upward challenge should be fired.

If only one employee is punished for honestly expressing ethical concerns, the word will quickly spread throughout the organization. Honest upward communication cannot be treated as an option. It needs to be a requirement. Managers at all levels need to understand that there are severe and immediate consequences for blocking the flow of vitally needed information.

• Consideration of integrity violations should be conditions of employment and have nothing to do with job performance.

One of the organizations that I respect the most has a clear rule: “All employees who knowingly lie, cheat or steal will be immediately dismissed, regardless of their performance on the job.” In this organization, every employee is taught that even the best performer, if found to have committed an ethics violation, will still be fired. Their logic is simple — If we allow small amounts of lying, where do we draw the line? Many of the well-publicized corporate scandals happened not merely because of one event. They happened because of the “creeping dishonesty” that can occur when small violations are ignored and increasingly corrupt practices evolve over time.

• Employees who do not feel comfortable using the normal chain of command should be provided with an alternative mechanism for upward communication.

In spite of the best corporate guidelines, the best training, and the best intent, some individual managers may still be very intimidating. Every employee needs a way to go around the system when they feel threatened by line management. They must be trained on how and when to use these alternate channels.

• Managers should proactively ask for suggestions on how to improve the organization, rather than passively waiting for employees to express concerns.

As Peter Drucker has said, “The leader of the past knew how to tell. The leader of the future will know how to ask.” If employees don’t feel free to communicate openly on business concerns, it is highly unlikely that they will feel free to communicate openly on ethical concerns. If they have an open dialogue about business concerns, any ethical concerns will probably emerge as part of the ongoing conversation.

• Both managers and employees should be trained on how to encourage and provide upward challenge.

Providing traditional ethics training may be a waste of time for many employees. The vast majority of employees are probably ethical in the first place! They merely need to learn how to recognize potential integrity issues and effectively communicate these in a way that can prevent ethics problems.

The corporate scandals of the last few years have resulted in a lack of trust for major organizations. The conditions that led to ethics issues will not be fixed by having employees attend training programs or listen to motivational talks. Organizations that establish and implement clear processes for encouraging upward challenge can do a great deal to prevent problems involving ethic, integrity and values. Trust is easy to lose and hard to regain. For many employees and for the public at large, it may take years of concerted effort to rebuild the credibility of large corporations. From both a business and values perspective, it is worth it!

Life is good.

Marshall

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In Leader to Leader’s Premier Issue, I discussed retaining high-impact performers.

The workplace is changing. Job security isn’t what it used to be. We tend to focus, understandably, on the profound impact these and other workplace changes are having on the lives of individuals. But too often leaders overlook the equally profound impact these changes are having on their organizations.

The fact is, the “new work contract”- employees taking responsibility for their own careers, and corporations providing them with career-enhancing but impermanent opportunities-can be as difficult for organizations to manage as for individuals. We as leaders still understand little of the mechanics of retaining essential high-performers in turbulent times.

Our task is complicated by four additional, less widely acknowledged trends:

* The reduced status of working for a “Fortune 500″ corporation.

* The frequent lack of connection between pay and contribution.

* The decline in opportunities for promotion.

* The rise in the influence of the “knowledge worker”.

Peter Drucker has noted the dramatically increased importance of the knowledge worker in modern organizations. Yet we are often still unsure what that means for how we should lead. Bill Gates has said that Microsoft would do “whatever it takes” to attract and retain the brightest software developers in the world.

Innovative high-technology corporations (such as Sun Microsystems) pay employees large bonuses to recruit top talent. In tomorrow’s world the “intellectual capital” brought in by high-knowledge employees will be a major, if not the primary, competitive advantage for many corporations. As the perceived value of key knowledge workers increases, the competition to hire these workers will intensify.

A Strategy for Retaining High-Impact Performers

Leaders can no longer afford to let the vagaries of the job market determine who leaves and who stays with the organization. We must learn to manage our human assets with the same rigor we devote to our financial assets. The following seven steps can help you accomplish that task:

1) Clearly identify whom you want to keep.

In recent years many organizations have focused on those people they should get rid of rather than those they should keep. Many downsizing “packages” give all employees with similar levels of experience the same incentive to leave. Unfortunately-for the organizations-the employees who decided to leave were often the high-impact performers who could find other work quickly.

2) Let them know that you want to keep them.

Amazing as it may seem, many high-impact performers who are asked why they’ve left an organization report, “No one ever asked me to stay! ” Many organizations have deliberately not told high-impact performers that they were special in any way for fear of alienating others. In the future it will become increasingly easy to retain “average” performers and increasingly difficult to retain high-impact performers.

3 ) Provide recognition.

Although compensation is an important factor for retaining high-impact performers, several studies indicate that it is currently not “the” most important factor. Typically, the chief reasons great people leave major organizations are lack of recognition, lack of involvement, and poor management The CEO of a leading telecommunications company has recently embarked on an innovative approach.

Division-level executives provide a quarterly report on high-impact performers who should be recognized. The CEO calls these individuals personally, thanks them for their contributions, and asks for their input on how the corporation can increase effectiveness. The CEO believes this process not only helps retain key talent but also generates great ideas for continuous improvement.

4) Provide opportunities for development and involvement.

One of the world’s largest consulting/ accounting firms has embarked on an original program to identify and cultivate high-potential leaders. As part of the process, young leaders engage in an “action learning” project in which they work on real-life problems facing the firm.

This gives young leaders a fantastic developmental opportunity and gives the firm valuable input on solving real problems. It also enhances the young leaders’ commitment to stay with the firm. The firm’s leaders say that such a process would not have been tried just a few years ago, for fear of alienating other partners, but that today the firm has no choice but to identify and retain high-impact partners.

5) Challenge the compensation plan.

Organizations unwilling to make performance rather than mere seniority the key driver of pay will face an increasing challenge in keeping top talent, especially young talent. One Fortune 500 industrial company recently refused to implement a variable, performance-based compensation plan because half the employees felt uncomfortable with the concept.

The corporation neglected to measure which half felt uncomfortable with more differentiated pay; but my guess is that it was the lower performers. High-impact performers of the future will be able to demand and receive substantially more pay than their lower performing peers. A “socialistic” compensation plan combined with lowered potential for promotion leads to an “average” workforce.

6) Relax the culture.

In addition to reducing bureaucracy, high- performing, high-tech companies like Netscape, Sun Microsystems, and AT&T Wireless (formerly McCaw Cellular) are known for providing freedom in dress code, scheduled hours, and lifestyle choices. While employees work very hard, they appreciate the lack of rules, regulations, and restrictions that can inhibit their freedom without increasing their productivity.

7) Provide intrapreneurial opportunities.

Gifford Pinchot (inventor of the term intrapreneur) has shown how major corporations can provide opportunities for semiautonomous enterprises to operate within the larger corporate structure.

By allowing high-potential leaders to “run a business” inside a larger business, corporations can gain commitment while simultaneously developing people. People who see opportunities for “ownership” and personal development are much more likely to stay with the organization.

In the past when a high-impact performer in a major corporation was offered a position at another company, the employee was likely to say no. Most managerial and professional jobs offered good pay, job security, promotion potential, and status.

Today the high-impact employee is much more likely to say yes. To retain such talent in the future, organizations will need to take decisive action.

Only those organizations able to create a dynamic new human resource model will retain the high-knowledge talent needed to succeed in tomorrow’s globally competitive environment.

Life is good.

Marshall

UPCOMING EVENTS:

July 25, 2008: Join me for a special live conversation on Friday July 25th with Learn From My Life. This 60 minute will be driven by your questions and will enable us to drill deeper into the key behavioral changes that will make you a better leader and more accomplished individual.

August 1, 2008 - Dartmouth - Tuck Executive Program

August 25-26, 2008 - Indian School of Business - Hyderabad

September 15, 2008 - New York - SHRM - contact Marshall if interested

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Our greatest challenge as leaders isn’t understanding the practice of leadership; it’s practicing our understanding of leadership.

The consistent and ongoing misassumption of almost all leadership development programs is “if they understand, they will do.” This assumption is not valid in any aspect of our lives, and leadership development is no exception.

If the “understanding equals doing” equation were accurate, everyone who understood that they should go on a healthy diet and work out would be in great shape. Almost everyone in America knows what we are supposed to do. Over the years our knowledge of the importance of diet and exercise has gone up dramatically. Why is it then that Americans weigh more than we have ever weighed in our history? Why is obesity considered the “new epidemic”? We all know what it takes to get in shape, we just don’t do it. I live in California. I think it was Gov. Arnold Schwarzenegger who wisely noted, “Nobody ever got muscles by watching me lift the weights!”

Companies have invested millions of dollars in developing profiles that describe the behavior of their desired leader of the future. I have probably reviewed a hundred of these profiles. I have helped write about 70 of them. Most make a lot of sense. They usually suggest that leaders should have high integrity, focus on customer service, deliver quality products, develop great people and encourage innovation. Some of these profiles are organized around values and some around competencies. Many say basically the same thing – but in a language that fits their corporation’s culture. Most corporations know what their leaders should do and do a fine job of communicating this message.

Leaders who are not working for a company that describes desired leadership behavior can still read books on the topic. One of my books, Global Leadership: The Next Generation (with Cathy Greenberg, Alastair Robertson and Maya Hu-Chan), describes research findings (sponsored by Accenture) involving over 200 specially selected high-potential leaders from 120 global organizations. This book, like others of its type, paints a clear picture of desired behavior for future leaders. Kouzes and Posner, Zenger and Folkman, the Center for Creative Leadership, Personnel Decisions Incorporated and several others have written books on this topic. My guess is that any leader whose behavior even approximates the behavior that is described in any of these books will be viewed as an outstanding role model. Anyone who reads these books can understand what to do.

I recently had the privilege of working with the CEO and over 2,000 of the top leaders in one of the world’s most admired companies. The company had developed a well-thought-out profile of desired leadership behaviors. Leaders in the company received 360-degree feedback to help them understand how their actual behavior was seen as matching this desired profile. All were trained to respond to co-workers on their feedback using a very simple follow-up process. At the end of the training, leaders were asked in a confidential survey if they were going to do what was taught in the program. Almost 100 percent said that they understood and saw the value of what was being taught. They almost all vowed that they were going to follow up with their co-workers, work on their “areas for improvement” and get better.

A year later, the same leaders and their co-workers were surveyed to see what happened. Many of the leaders (about two-thirds of the total group) actually did what they committed to do and, as a group, they were seen as becoming much more effective. Some leaders, however, did absolutely nothing as a result of receiving feedback and attending training, and as a group they were seen as improving no more than can be attributed to random chance. The training that they attended produced no more change than staying home and watching sitcoms.

Howard Morgan and I published an article entitled “Leadership Is a Contact Sport” in the Fall 2004 issue of Strategy+Business that involved over 86,000 respondents from eight major corporations. Just like the 2,000 leaders mentioned above, every leader in our study received feedback. They were all given some very simple instructions on how to follow up with co-workers and how to become more effective. Our results showed that there was no correlation between understanding and doing. The leaders who did absolutely nothing understood what to do as well as the leaders who actually executed on their improvement plans. Amazingly, the leaders who did nothing rated the value of the programs just as highly as the leaders who executed. The “did nothings” not only understood what to do – they saw the value in doing it.

Over the years, I have had the opportunity to interview hundreds of leaders in the “did nothing” category. I always ask them why they didn’t do what they said they would do after their leadership development programs. Their answers never have anything to do with ethics or integrity. In spite of some terrible recent examples of ethics violations, most leaders that I meet are highly ethical people. They are not liars or phonies. They truly believed that they should change and that this was the “right thing to do”. Their answers never have anything to do with a lack of intelligence or understanding. These are very bright people. They not only saw the value in what they committed to do, they understood what to do and how to do it.

Our research paints a compelling picture. Peole don’t get better because they go to “programs”. They don’t get better because they listen to motivational speeches. They only get better if they pick something important to improve, involve the people around them and follow up in a disciplined way. Long-term change in leadership effectiveness takes time, follow-up and discipline – not just understanding.

Life is good.

Marshall

MarshallGoldsmithLibrary.com

www.MarshallGoldsmithFeedForward.com

Marshall’s Upcoming Schedule:

August 1, 2008 - Dartmouth - Tuck Executive Program

August 25-26, 2008 - Indian School of Business - Hyderabad

September 15, 2008 - New York - SHRM - contact Marshall if interested

My daughter Kelly Goldsmith and I reviewed research on goal-setting and asked ourselves questions such as:
Why do people so frequently give up in their quest for personal improvement? Most of us understand that “New Year’s resolutions” seldom last through January – much less for the entire year! What goes wrong?

We found six of the most important reasons that people give up on goals:

Ownership

One of the biggest mistakes in all of leadership development is the roll-out of programs and initiatives with the promise that “this will make you better”.

Successful people tend to have a high need for self-determination. In other words, the more that leaders commit to coaching and behavior change because they believe in the process, the more the process is likely to work. The more they feel that the process is being imposed upon them or that they are just casually “trying it out” – the less likely the coaching process is to work.

Coaches and companies that have the greatest success in helping leaders achieve long-term change have learned a great lesson – don’t work with leaders who don’t “buy in” to the process. As coaches, we need to have the courage to test our client’s commitment to change. If clients are just “playing a game” with no clear commitment, we need to be willing to stop the process – for the good of the company and for the good of the coaching profession.

In goal-setting coaches need to ensure that the change objectives come from “inside” the person being coached and are not just externally imposed with no clear internal commitment. Coaches need to let clients know that they are ultimately responsible for their own lives. As coaches we need to make it clear that we are there to help our clients do the work – not to do the work for our clients.

Time

Goal-setters have a natural tendency to underestimate the time needed to reach targets. Everything seems to take longer than we think that it should! When the time elapsed in working toward our goal starts exceeding expectations, we are tempted to just give up on the goal. Busy, impatient leaders can be even more time-sensitive than the general population.

In setting goals with leaders it is important to be realistic about the time needed for them to produce a positive, long-term change in behavior. Habits that have taken 48 years to develop will not go away in a week. Let them know that others’ perceptions may seem “unfair” and that as they change behavior – others may not fully recognize this change for months. In this way when they face time challenges they will not feel like there is something “wrong” with them or with their co-workers. They will realize that this is a normal part of the change process. Ultimately, as the research shows, perceptions will begin to change and co-workers will begin to appreciate changed leadership behavior.

Difficulty

The optimism bias of goal-setters applies to difficulty as well as time. Not only does everything take longer than we think it will – it requires more hard work! Leaders often confuse two terms that appear to be synonymous – but are actually quite different – simple and easy. We want to believe that once we understand a simple concept, it will be easy to execute a plan and achieve results. If this were true everyone who understood that they should eat a healthy diet and exercise regularly would be in shape. Diet books are almost always at the top of the best seller lists. Our challenge for getting in shape – as well as for changing leadership behavior - is not understanding, it is doing!

In setting goals it is important that leaders realize that real change will take real work. Making client’s feel good in the short-term with statements like “this will be easy” and “this will be no problem for you” can backfire in the long-term when they realize that change is not easy and that they will invariably face some problems in their journey toward improvement. Letting leaders clearly understand the price for success in the beginning of the change process will help prevent disappointment that can occur when challenges arise later in the change process.

Distractions

Goal setters have a tendency to underestimate the distractions and competing goals that will invariably appear throughout the year. One good counsel that a coach can give an executive is, “I am not sure what crisis will appear – but I am almost positive that some crisis will appear!”

In planning for the future, coaches need to help executives assume that unexpected distractions and competing goals will occur. Build in time in change projections to “expect the unexpected”. By planning for distractions in advance, leaders can set realistic expectations for change and be less likely to give up on the change process - when either special problems or special opportunities emerge.

Rewards

Goal setters tend to become disappointed when the achievement of one goal doesn’t immediately translate into the achievement of other goals. For example, a dieter who loses weight may give up on his weight loss effort when women don’t immediately begin to love him.

Leaders need to personally “buy in” to the value of a long-term investment in their own development. If coaching clients think that improving leadership skills will quickly lead to short-term profits, promotions or recognition – they may be disappointed and may give up when these benefits don’t immediately happen. If coaching clients see the change process as a long-term investment in their own development – and something that will help them become more effective over the course of their careers - they will be much more likely to “pay the price” needed to achieve success.

Maintenance

Once a goal-setter has put in all of the effort needed to achieve a goal, it can be tough to face the reality of maintaining changed behavior. One of the first reactions of many dieters upon reaching their weight goal is to think, “This is great! Now I can start eating again. Let’s celebrate with some pizza and beer!” Of course this mind-set leads to future weight gain and the “yo-yo” effect that is unfortunately so common in dieters.

Coaching clients need to clearly understand – leadership is a process – not a state. Leaders can never “get there”. Leaders are always “getting there”. The only way that exercise helps people stay in shape is when they face the reality that “I have to work on this stuff for the rest of my life!” Leaders need to accept that leadership development is an ongoing process that never stops. Leadership involves relationships – relationships change and people change – maintaining any positive relationship requires ongoing effort over a long period of time. It doesn’t occur because someone “got better” and stayed in this state of “betterness” forever.

In Summary

Coaches can either help leaders set goals that increase their probability of long-term change, or help leaders set goals that may feel good in the short-term – but lead to disillusionment and “giving up” in the long-term.

Coaches that have the courage to tell the truth “up-front” and challenge leaders in goal-setting can go beyond being “highly paid friends”. Honest, challenging coaches can help leaders make a real difference – both in their organizations and in the lives of the people they lead.

Life is good.

Marshall

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www.MarshallGoldsmithFeedForward.com

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