By Neal St. Anthony • neal.st.anthony@startribune.com
A decade ago, Fred Kiel, a onetime counseling psychologist who became one of the first executive coaches in the 1980s, wrote a well-received book with businessman Doug Lennick, "Moral Intelligence: Enhancing Business Performance and Leadership Success."
It was a defense of capitalism, which has brought widespread albeit varying levels of prosperity to owners, managers and workers based on the desire to create a good product or service and make a buck.
In "Moral Intelligence," Kiel noted that Adam Smith, in his "The Wealth of Nations" (1776), said the free market is the best way to obtain the greatest good. Kiel and Lennick also noted in decrying capitalist criminals and excesses, that Smith argued that capitalists must be guided by "moral sentiments" and ethics and fairness in business toward employees and customers.
Kiel, a founding partner of KRW International, a leadership consulting firm, was bothered when an associate criticized "Moral Intelligence," asserting it was too "soft" and that "as long as you stay legal and make money, that's all that matters."
Kiel applied statistical research to develop his latest book, "Return on Character: The Real Reason Leaders and Their Companies Win."
The book concludes that corporate leaders of high integrity and compassion provide better financial returns for their shareholders than self-absorbed CEOs. And the book has gotten favorable reviews from Harvard Business Review, Fortune and other publications.
Kiel studied 121 CEOs of publicly held companies, 84 of whom also allowed him to survey a representative sampling of employees on what they thought of the boss.
"The most valuable data was not from the CEOs, but from surveying the random samples of employees, " Kiel said.
More than 8,000 individual surveys illuminated several years of research into public documents, behavior and performance by the executives.
"The most surprising finding was that 'virtuoso' leaders of strong character bring five times as much to the bottom line as do low-character leaders, " Kiel said last week. "The level of workforce engagement was 26 percent higher for high-character leaders."
"Return on Character" argues that values-driven leaders of integrity, compassion and accountability also can forgive mistakes and continue to gain wisdom and maturity. These companies tend to foster more innovation in product and practice and achieved an average return on assets of about 9.5 percent, five times better than those led by low-character CEOs.
Moreover, surveyed employees like working more for ethical leaders who share the credit. And there is also a lower cost to ethically-led organizations in terms of audit fees, lawsuits and expensive turnover.
Most of the CEOs who participated requested anonymity.
However, Kiel is quick to laud several virtuoso CEOs. They include Sally Jewell, formerly of REI and since 2014 the U.S. secretary of the interior, and Jim Sinegal, the retired CEO of Costco, who paid $10 starting hourly wages years ago, provided benefits and whose stock has outperformed that of most big-box retailers. And Sinegal lost little to employee theft, a bane of retailers. Another favorite of Kiel's who agreed to be identified is Dr. Charles Sorenson of Intermountain Healthcare of Utah.
Minnesota CEOs who "generously gave of their time and allowed employees to be surveyed" included Archie Black of SPS Commerce, Jeff Ettinger of Hormel Foods, Bill Evans of AmeriPride Services, Sally Smith of Buffalo Wild Wings, and retired CEO Will Oberton of Fastenal and Charlie Zelle of Jefferson Lines, who now serves as Minnesota transportation commissioner.
Kiel signed a guaranty with the 84 CEOs that he would not divulge the results, except for Jewell, Sinegal and a couple of others.
The 10 "self-focused" CEOs who received the lowest scores were most concerned about their prominence and financial success.
"The employees were seen as a replaceable resource," Kiel said. "They were treated as human capital, not people."
We suspect some of them, not all of whom are still around, can be found battling shareholders over executive compensation, dismissing subordinates or fighting regulatory or consumer litigation.
Kiel acknowledges that creating value for shareholders depends on more than just character, including business models, economic growth and competition. However, his research indicates treating employees well can be a game changer.
"A workforce that feels cared for is more productive than one that feels neglected, and that translates into bottom-line financial results, " Kiel notes.
So why do so many CEOs and their teams fail to create a work environment that promotes this kind of workforce engagement?
"Unfortunately, we … have seen that many senior leaders simply don't know how to go about it and are afraid to try," he said.
Many of those self-absorbed leaders over the seven years of the study experienced major disruptions, significant financial losses in some years and underperforming stock prices. In his research and interviews with them Kiel found them as a group to be lonely, pessimistic, sometimes combative and distrustful and less willing to learn and mature.
Neal St. Anthony • 612-673-7144
