Why Moral Leadership Is Good Business
The last 15 years of business behavior have revealed itself to be a prolonged period of corporate malfeasance, misconduct, and broken trust. Today, 7 out of 10 employees are disengaged and 1 out of 10 is actively sabotaging your business efforts (Source: Gallup, Towers-Watson). At the same time, accelerating adoption of social platforms such as Linkedin, Twitter, Facebook and mobile devices have empowered the average individual and sparked a social revolution. This social revolution is now squarely facing leaders and their business organizations which in turn is making morality much more profitable today.
Most jobs in the developed world are services or intangible-based businesses. Traditional coercion and carrots & sticks motivators are not enabling greater risk-taking which results in innovation and greater financial performance. Before risk-taking will take place, you need to nurture an organizational culture of high relationship capital trust. Anything a business leader wants more of that is good or less of that is negative for the business improves with a high-trust do-the-right-thing organizational culture
- More Innovation
- More Satisfied Customers
- More Sales Growth
- More Profits
- More Recommendations as Employer
- Less Malfeasance
- Less Employee Turnover
High trust requires leaders to create and nurture business cultures of purpose, performance, and relationship capital. An organization’s culture can be assessed on the following attributes. When these 4 attributes are high, relationship capital trust is high.
- Good Intent
Ethics is foundational to building high relationship capital in an organization and to sustain a business in this hyper-connected and transparent social world. The challenge with practicing ethical leadership is that it is difficult to define “right”. Ethical leadership is composed of two sections:
- The leader must act and make judgments ethically,
- Second, the leader must also lead ethically in their actions, perceptions, and interactions.
Traditionally, the view of leadership has been that the main goal is to increase production and profits. This traditional view of leadership is fading, as more thought leaders in the 21st century are asserting that leaders also have the responsibility for adhering to open standards of moral and ethical behavior. Good leadership refers not only to competence but also to ethics and changing people.
“Ethics is knowing the difference between what you have a right to do and what is right to do.” –Potter Stewart
All leadership is responsible for influencing supporters to achieve an action, complete a task, or fulfill a commitment in a specific way. Effective leaders influence method, encourage change in employee’s attitudes and values, bolster followers’ principles, and nurture the adoption of the leaders’ vision by leveraging strategies of empowerment.
It is understood that the encouraging aspect of leaders can elevate organizational cultures and employee values to high levels of ethical consideration. Ethical leadership requires ethical leaders. If leaders are principled, they can ensure that principled practices are carried out throughout the organization.
Leaders who are ethical demonstrate a level of integrity that is important for stimulating a sense of leader trustworthiness or relationship capital, which is important for followers to accept the vision of the leader. These are critical and direct components to leading ethically. The character and integrity of the leader provide the basis for personal characteristics that direct a leader’s ethical beliefs, values, and decisions. Individual values and beliefs impact the ethical decisions of leaders.
Leaders who are ethical are people-oriented, aware of how their decisions impact others, and use their social power to serve the greater good instead of self-serving interests. In ethical leadership it is important for the leader to consider how his or her decisions impact others.
Motivating followers to put the needs or interests of the group ahead of their own is another quality of ethical leaders. Motivating involves engaging others in an intellectual and emotional or Relationship Capital (RC) commitment between leaders and followers that makes both parties equally responsible in the pursuit of a common goal. These characteristics of ethical leaders are similar to inspirational motivation, which is a style component of transformational leadership. Inspirational motivation “involves inspiring others to work towards the leader’s vision for the group and to be committed to the group”. Likewise, ethical leadership “falls within the relationship of inspiring, stimulating, and visionary leader behaviors that make up transformational and charismatic leadership”. Ethical leaders support followers in gaining a sense of personal competence that allows them to be self-sufficient by encouraging and empowering them.
“The first step in the evolution of ethics is a sense of solidarity with other human beings.” –Albert Schweitzer
Characteristics of Ethical Business Leaders
Ethical behavior, in its simplest terms, is understanding and doing what is right. The difficulty is in defining “right.” Different individuals, different cultures, and different religions define it in different ways. The general treatment of women and mindsets toward slavery in different cultures during different times in history provide prime examples of how what’s “right” can vary.
Ethical business leaders distinguish themselves by doing that which may be difficult, disliked, and even unprofitable in the short-term for the creation of long-term vitality and value. They view the world as interconnected and develop end-to-end solutions to address complex problems that appear in the course of business operations. Rather than routinely extending payment terms to a supplier during economic downturns, ethical leaders study the financial strength of the supplier and/or partner, possible negative impacts to the supplier (as well as to the supplier’s employees and its suppliers — and to the company itself) if payment terms are lengthened.
Ethical business leaders also consider other solutions (e.g., sharing best practices with suppliers and partners) that may require an investment but generate more value over the long term. Ethical leaders extend relationship capital trust to their employees, creating an empowering environment necessary to enable employees, suppliers, partners, and even customers to take the required risks to produce breakthrough innovations. For example, the Ritz-Carlton’s leadership team authorizes each employee to spend up to $2,000 to resolve customer issues at his or her own judgment.
What’s more, ethical business leadership is a renewable energy source and for this reason, represents one of the most efficient and practical assets an organization can put to use.
“Leadership is much more an art, a belief, a condition of the heart, than a set of things to do. The visible signs of artful leadership are expressed, ultimately, in its practice.” –Max Depree
Source: Dov Seidman
In organizational communication, ethics in leadership are foundational. In their decision-making, business leaders must consider how it will affect other people, not just how it will benefit them. The greatest leaders display their values and their ethics then evangelize them in their leadership style and activities. These activities consists of articulating comprehensive and truthful information, where there is a personal, professional, ethical, or legal obligation to do so. When leaders practice ethics, they gain the earn relationship capital trust (respect and admiration) from employees; with the gratification of understanding they are making the most moral choice. If a leader never reveals to others, the “why” in their actions or decisions, this can be viewed as a sign of mistrust.
No longer are ethics and moral decisions separate from the business plan. As we have shown the social revolution is disrupting business models. Why? Well, business and personal use to be separate spheres, but those worlds have fused together. As Dov Seidman, CEO of LRN, a leading corporate sustainability company has so eloquently stated: “Everything is personal. Just ask the 1.2+ Billion people on Facebook. If business and personal spheres have fused and everything is personal, then we need to reawaken morality in our personal relationships.” Because all personal relationships are morally-interdependent.
As business leaders, let’s start the journey and rewaken morality with our stakeholders. Not just because it makes the entity more money or sustains a growing business (and that is important), but because it is the right thing to do.