Return on Character | Book Review
Book of the year.
Fred Kiel persuasively answers affirmatively whether the character of a leader (and their executive team) improves financial performance in his watershed Return on Character. He defines character (p. 17) as:
“An individual’s unique combination of internalized beliefs and moral habits that motivate and shape how that individual relates to others.”
Read Appendix A before Chapter 1, setting up CEO selection criteria and note the interesting demographics as most of the companies selected were privately held with under 500 employees. Full data sets on 84 (of 121) CEOs include both the leaders and their core principals, as the author team made a significant change adding executive teams to the analysis midway through the effort.
Kiels’ team created a metric (Part I) for assessing character-driven leader behavior, starting with Edward Osborne Wilson’s concept of the integrated self (Consilience: The Unity of Knowledge) and Donald Brown’s four universal moral principles – integrity, responsibility, forgiveness and compassion. The most highly principled CEOs, labeled Virtuoso, are similar to Jim Collins’ Built to Last Level 5 Leaders, while the lowest scoring are labeled Self-focused CEOs.
Over a two-year period, Virtuoso CEO led organizations achieve nearly five times (4.84) the Return on Assets (ROA) of the Self-focused CEO led (p. 3-4 & 233-238) groups. Many of the CEOs in this research had never before received unfiltered employee feedback, suggesting Thanks for the Feedback and Corporate Compass 360 as recommended follow on reading and survey tools. This book is for those in a range of leadership roles; including board members, company officers and frontline workers (p. 8).
Influenced by Charles Duhigg’s The Power of Habit, Kiel’s findings establish the best leaders have Keystone Character Habits, merging the aforementioned unified principles and positive behaviors. The author team finds all Virtuoso CEOs are skilled businesspeople, are individuals of strong character (described by their employees), and have selected and lead an executive team of strong character (p. 22).
Look at the amazing contrast listed on pages 71 & 72; Virtuoso CEOs consistently demonstrate nine positive beliefs:
Virtuoso CEO behaviors demonstrate:
1. Most people grow and change throughout their adult life.
2. Most people want to be honest, responsible, and kind to others.
3. Most people can be trusted until they prove otherwise.
4. Leaders find meaning through growing and stretching their natural gifts and talents.
5. Leaders are driven by the desire to leave the world a better place.
6. All businesses, no matter how large or small, share a responsibility to contribute to the common good.
7. All people deserve the same respect, regardless of the size or status of their jobs.
8. All people have core strengths and talents that should be engaged.
9. The best managers have good relationship and communication skills.
Self-Focused CEO behaviors demonstrate:
1. Employees must not be treated too kindly by management or else they will become lazy and unproductive.
2. By generating conflict, one can usually find the truth about a situation.
3. Meeting quarterly goals is generally wiser than focusing on the long term, since there are so many unknowns.
4. When it comes down to it, most people cannot be trusted.
5. Most people have to be closely monitored to make sure they perform.
6. People have limitations and weaknesses, and it is pointless to try and change them.
7. In the final analysis, the only person you can depend on is yourself.
8. There is no one in the company who will look out for us – no one will “have our backs.”
9. I am afraid of change unless I am in control.
10. I really don’t know much about what drives me or gives me meaning.
11. What drives me or gives meaning is proving to those important in my life that I have succeeded.
Kiel mentions the work involved in exploring your own nature, identifying weaknesses in your character, and then working to overcome them can be difficult and even painful (page 7). Most Self-focused CEOs engage in considerable self-deception (p. 67), reminding us Johari Windows and self-evaluation help, along with impulse control (reference: Kahneman’s classic Thinking, Fast and Slow). For example, on page 93 John Kotter and Dan Cohen (via The Heart of Change) introduce Paul the CEO (pp. 92-95), who created a clear vision centered on customers. Further underscoring this process are (p. 101) significant Accountability and Executive Character ratings differences between Self-focused and Virtuoso CEOs – 15-point differences between self-evaluation and group evaluation in both cases.
Part II describes leadership in action. Four Keystone Leadership Skills (pages 82-83) - vision, strategic focus, executive team development and accountability - are introduced. The Return on Character Matrix (p. 152) delineates Head and Heart primary divisions, which may be loosely correlated to Corporate Compass 360 Leadership Competencies (Energize2LeadÔ Green & Red colors) and Character Traits (E2L Yellow and Blue colors), respectively. Kiel likewise mentions workforce engagement (pp. 118 – 123), similar to Dan Pink’s conclusions in Drive.
Part III (chapters 7 and 8) examines case studies (Mark and Heather, respectively) highlighting a process for becoming a virtuoso leader and developing a superior organization. Step one is critical, that is, acknowledging feedback as an opportunity to change. Mark (p. 174) realized he no longer needed to be the smartest person in the room, and Heather (p. 205) found the board of directors might not even care about her character-based (rather than financially-centered) strategy. Indeed the leadership path may be lonely.
Lastly, upon finding that small, private companies didn’t perform as well as medium and large sized ones, Kiel suggests (page 134) younger CEOs were less skilled than CEOs who ran larger organizations. This may further suggest younger CEOs (and their executive teams) may greatly benefit from earlier leadership development.
A breakthrough work.
JE | May 2015