Monday, January 19, 2009

How Integrity Pays Leaders

An insurance company executive once told me that he knew his executive team had integrity because they talked about issues in meetings the same way they talked about those issues at the bar at night. Socrates would have agreed. He defined integrity 2,500 years ago as, "May the inner and outer man be one." How much integrity do you and your team have? Does it pay?

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Everybody talks about how important integrity is, but Professor Tony Simons from Cornell University has actually measured the impact of integrity on the bottom line. (1) He and his colleagues surveyed more than 6,500 employees at 76 hotels to assess the consistency, or lack thereof, between what a leader said and what they did. Thy evaluated integrity by asking questions such as "My manager delivers on promises" and "My manager practices what he preaches." They then correlated the employee responses with the hotels’ satisfaction surveys, personnel records, and financial records.

The impact of integrity on profits was astounding! An improvement of a mere .125 in the hotel’s score (1/8th on a five-point scale) increased the hotel’s profitability by 2.5% of revenues. This translated to a profit increase of more than $250,000 per year per hotel. Walking the talk pays!

The researchers pointed out that although integrity is a simple concept, maintaining it is quite difficult. Here's six reasons why:

  • Sticky Labels. It takes a long time to earn the reputation as a “straight shooter,” but one misstatement to become labeled a “hypocrite."
  • Conflicting Stakeholders. Leaders must constantly manage the competing and often contradictory demands made by numerous stakeholders. This can create the perception of inconsistency. For example, you might be working with your front-line supervisors to improve quality, while at the same time discussing staff reductions with your boss in order to meet financial objectives. When word gets out to the rank-and-file, all they see is low integrity.
  • Change. When people are bobbing around in a sea of uncertainty, they look for stability. They cling to the security of the old, the tried and true, and the way we were. New policies, initiatives, management teams... are changes that feel like inconsistencies to employees.
  • Management Fads. The average US company committed to 11.8 of the 25 current popular management tools and techniques. Unfortunately, the majority of these fads fade quickly. For example, 90% of the fortune 500 companies adopted quality circles when they were popular in the early 80’s. Within five years, 80% abandoned this initiative. Healthy skepticism quickly succumbs to employee cynicism when management dabbles with every unproven "flavor-of-the-month."
  • Shifting Priorities. Adjusting to a complex, dynamic economic environment is critical to a leader’s success. This often requires adjusting goals and priorities. Unfortunately, if not communicated well, employees perceive these adjustments as evidence for lack of follow-through.
  • Blind Spots. We seldom see our own inconsistencies. That's because we have a natural tendency to view our behaviors as consistent with espoused values. If there is an inconsistency, we rationalize in order to diminish it. This is the essence of the theory of cognitive dissonance, which states that people are motivated to reduce any disconnect between what they do and their attitudes, beliefs, and values.

What can you do to make sure you and your team profit from maintaining high integrity? Here are six tactics science says work:

1. Create a straight shooting team. Invite your team to help define what integrity means and looks like in your specific unit. Involve them in the establishment of integrity norms and methods to promote high standards.

2. Communicate. Use all forms of communication to inform your team that integrity must not be compromised to meet goals. Discuss difficult issues that could cause lapses in integrity in your meetings on a regular basis. Strive for transparency. Preach only what you practice.

3. Discipline everybody. Employees must see that senior executives, middle managers, and front-line employees are all held to the same high standards. Punish anyone who violates established standards.

4. Reward everybody. Applaud those who successfully meet a difficult challenges or crises with integrity. Discuss integrity issues during performance reviews. Use bonuses and pay raises to reinforce the importance of integrity.

5. Establish systems. Make it easy and anonymous for employees to report financial, legal, and ethical concerns. In addition, conduct an annual employee survey that consists of questions such as, "Is integrity compromised by business pressures?" and "Are the leaders verbal commitments to integrity reflected in action?"

6. Minimize change. Employees suffer from change fatigue when leaders introduce new policies, initiatives, or management fads. Although changes are necessary in today's competitive and global marketplace, too often they are neither strategic nor carefully thought through.

These are the common causes of low integrity and what to do about them. Which ones might payoff for you?

Keep eXpanding,

Dave

1. Tony Simons; The High Cost of Low Trust, Harvard Business Review, September 2002, 18 -- 19.

2 comments:

Zoomerang Blog said...

You made some compelling points, thanks for sharing them. Employee satisfaction and loyalty should always be a major focus, even more so during economically challenging times. Surveys are one of the best ways to gain insight into your employee’s mindset.

Zoomerang offers an easy way to do a little research to find out how what matters to them most – especially when you can do the research for very little $$ or even for free.

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