Why Businesses Need Strong Ethical Leadership

If the world were perfect, I wouldn’t be writing this particular blog nor would our newspapers and other media be filled with cautionary tales of how top managers let their ethics slide causing their companies, employees and society at large suffer the consequences.

When we read the lurid accounts of these ethical lapses, you begin to get the feeling that all of business is just one, giant morass of despicable and unethical behavior. The surprising question to many, however, is how and why so many business and employees allow their ethical standards to slide—and what can be done about it.

 Ethical or unethical behavior in organizations is a function, as I see it, of both individual characteristics and cultural actors. On the individual side, managers expect as a minimum that employees will know right from wrong. To state the obvious, they won’t steal from the company, they won’t lie to customers, and they won’t kill co-workers. These are easy ethical decisions because they’re painted so blatantly black and white. But decisions concerning ethical behavior- in the real world – are often bathed in hazy shades of gray.

The cultural factors are a different story. And I’m reminded here of the old PBS TV program Media and Society, moderated by Arthur Miller. A Harvard law professor, Miller would offer his panel of experts from various disciplines hypothetical scenarios and generate truly riveting discussions about ethics in journalism and other media.

I am so reminded because, in real life, ethical lapses—while they seem so black and white to outside observers, are often cast in painfully vague shades of grey to the would-be perpetrator. When that happens all choices seem “right” given their unique set of circumstances.

A case in point: One of the players in the recent credit meltdown confided on national TV that his mortgage business began to suffer because so many would-be applicants were getting sub-prime mortgages from other, less ethical companies. Sure, he knew that sub-prime mortgages “could be” an unsuitable product for their financial situations, but he faced a real life dilemma: If he didn’t write sub-prime, he may be driven out of business.

So what is his ethical decision? Should he be guided by the paternal ethics of putting food on his table, paying his own mortgage, and clothing his children, or should he capitulate and go with the sub-prime flow because “everybody’s doing it”?

Moreover, if I were Arthur Miller, I would start adding nettlesome ethical considerations to this fellow’s predicament. Let’s say he has a daughter badly in need of a life-saving surgery and a mother who lives in a nursing home which he pays for. Without a solvent mortgage business, he has no income, no insurance. Without insurance his daughter may perish; without income his mother may wind up living in his basement. Now what should he do? After all, everybody else is writing these risky mortgages.

A real life example of the ethical quandary is how the Bush Administration dealt with the interrogation of those believed to be high-level terrorists. From the President on down, those responsible for protecting America from terrorist attacks to this day – despite all the “enhanced interrogation tactics employed – did and do believe themselves to be ethical.

It boiled down to a simple ethical question. If there was an honest belief that a terrorist had direct information as to a potential attack on America that could kill thousands of innocent individuals, is it ethical to violate the laws and all this country has stood for in order to secure the information and prevent the attack?

Also knowing that in the event the information was not secured and thousands of individuals lost their lives, then those who possibly could have prevented the attack and did not do so would be severely criticized.

Was it ethical for Abraham Lincoln to suspend many of the individual protection rights of the U.S. constitution to jail thousands of individuals who he believed were a threat to the Union?

Gray Areas Demand Ethical Leadership

My point here is not to paint impossible ethical puzzles but to reaffirm the crucial need for managers to define the gray areas of business life because the black and white areas will usually take care of themselves (unless you work for the Post Office). It is important to do this before the issue arises, not after.

Gray areas, of course, lurk everywhere in an organization: in sales, public relations, accounting, you name it. And the duty of a business leader is to put ethical skin and bones on these vague areas so that all employees know the right ethical decision to make in situations where, like the owner of the mortgage business above, they are unsure what is “right.”

In simple terms, I used to refer to these as “rules of engagement.” These are actions or non-actions to be discussed and agreed to by the management leaders and then broadly communicated to the entire organization. Then the test of leadership is to stand by and enforce these rules of action.

Leadership is the most important element of an organization’s ethical culture. Ethical culture starts at the top and is conveyed by example. The CEO and senior department heads and managers should live their lives with great personal integrity” and they ought to ‘‘do what they say they’re going to do.”

Leaders create and support an ethical culture in their organizations. They illuminate, communicate, and role model high ethical standards. In other words, ethical business leaders ‘‘talk the talk” and ‘‘walk the walk.”

Leadership, most notably senior management, must embody the organization’s values in their own behavior and must articulate those values in a way that is compelling for employees and all other stakeholders. Or as I like to say, everyone must work “in parallel” to everyone’s benefit.

But building and sustaining an ethical culture is also a two-way street. It requires senior management to demand ethical conduct at every level of the organization. It also must allow questions of ethics to flow from the bottom up without fear of reprisal or “shooting the messenger.”

Such leaders emphasize attention to goals other than economic. They program ‘‘ethics discussion” with workers and maintain the long-term view of relationships both within and outside the organization. Top managers create and maintain an ethical culture by consistently behaving in an ethical fashion and encouraging others to behave in such a manner as well.

I still say making these kinds of ethical decisions might be easier than it appears. We just have to ask ourselves, “Is this decision in parallel with my customers, my shareholders, my employees, and my other stakeholders?” If it’s not, don’t do it.

Setting Goals and Realizing them is Critical to Success . . . Maybe

Sometimes the worst thing about having a goal is attaining it.

We live in a goal-oriented society. All of us – individuals and organizations – are expected to delineate, plan and commit to achieve certain specific, end-point goals. And if we don’t have these detailed goals or can’t explain what they are, it must be because we are a laggard at best, a shirker at worst. Not only that, but we are expected to advertise our goals like they were plastered on a sandwich board as we hawk our plans down Main Street.

The problem with all this frou-frou is that sometimes the worst thing about having a goal is attaining it.

Don’t get me wrong, specific objectives are important; they cause us to focus our vision and effort on a specific path to reach a predetermined goal. But as helpful as goals can be to identify what we want to accomplish, they can also inhibit our ability to achieve our true potential which is likely to be much greater.

This happens all the time when goals are viewed like a pot of gold at the end of the rainbow: When we find it, there’s nothing to do but sit back and enjoy the spoils of success. In other words, all too often we mistakenly believe that achieving goals is the end of the effort, when goals  should be treated only as signposts on a long road that ends only when the future ends. In fact, the only goal that should be so finite is the goal to stay alive till we die.

The Ghost of Goals We Relied On


All too often we witness an individual or organization marshal their ideas, plan  their plans and work diligently to achieve the goal of success as they define it. Then, when the goal is reached and success achieved, they give it all back.  I call this the “agony of success.” What most don’t realize (especially those who have not been successful) is that as difficult as success is to achieve, it is even more difficult to maintain. Once a goal has been achieved, there is a natural inclination to ease up the throttle and become complacent. If you need any evidence of this phenomenon, just compare a list of the top 50 Fortune 500 companies of today with the same list 10, 15 or 25 years ago. This list is in a constant state of flux and new companies edge out old ones that have lost their way.
And it’s easy to identify individuals or companies who have lost their way. They are the ones that have set and attained specific goals for success, but then let up and lose it by falling prey to that aforementioned “agony.” They find that they are too busy with success to take the time to do the important little things they took the time to do in the past. They become smugly satisfied with what worked to achieve yesterday’s goals, rather than trying to find new things that will work tomorrow. They become more interested in process and procedure, than in performance. They begin to define success by what they have done, rather than what they could do.

Avoiding the Agony

The only way to avoid the “agony of success” is to set goals that are clear and understandable, but not actually attainable. Specific objectives should be set to measure explicit progress toward a goal, but the goal itself should always be illusive and just out of reach,  forcing you to always strive for more and to never be satisfied.

One example of just such a goal that would provide a target to aim for and, at the same time, inoculate against the “agony of success,” would be:

                     Always make history.

That means being focused on always doing something new, discovering a better way to do things, finding new challenges and never being satisfied with the history that you have already made. It is important to understand that if you are not making history, you are history. So having a goal of always making history imbues one with the understanding that continued success is not based on what you have done in the past, but what you will do in the future. The fact is, if your goal is to always “make history,” you will continue to win because you will never be content with what has been won.

Another example of a goal that is not specific or attainable, but which clearly offers an aiming-point for success is:

                       Always try to get better.

If you are constantly focused on the goal of “getting better” at everything you do, you will always be moving forward toward success. But because you have not limited yourself with a predetermined definition of success, the goal will always be in front of you; challenging you to do more and be better. If your goal is to always get better, no matter how successful you become, you will never fall prey to the “agony of success,” because success will be defined by how good you can be, not how good you have been.

Another big advantage that comes from having goals that can never be specifically quantified, copied or attained is that you are able to write your own rules and define your own success, rather than being influenced or controlled by the attitudes, expectations and actions of others. The most obvious example of this is the dreaded “peer group pressure.” Individuals and companies shackled to the traditional concept of setting specific, end-game goals become obsessed comparing their performance with those of peers in their group. Peer group comparison becomes an artificial – and often misleading – way to determine if their goals will lead to success, because it is a success defined by what others are doing. As if that were really important.

For those with goals such as “always making history” or “always getting better,” there is significant peer pressure, except the pressure comes from your own performance and your definition of success. Fact is, if you are always making history and always getting better at what you do and how you perform, there will never be a need to compare yourself with others. In reality, you will become the “peer pressure” for others who will never be able to keep up, because they are mired in the limitations of specific goals. With the right type of goals, you will win, not by being on a par with the competition, but by being the competition. And you will never fall prey to the complacency that can trigger the “agony of success.”

And the Moral of the Story …

It is great to have goals, but it is never good to have goals that are just goals. If a goal becomes the end, rather than a successful path to the end, it can inhibit, even limit the potential for true, lasting success. The most effective goal is one that you can explain and understand, but is never finite and constantly challenges you to do more. This allows you to measure yourself and your success based on the ultimate potential of your commitment and talent. When you do that, there is no limit to your success, because you have not put a limit on your success.

Take this Job and Shove It . . .

“I’ve seen a lot of good folk die
Who had a lot of bills to pay
I’d give the shirt right off of my back
If I had the nerve to say .. Take this job and shove it ….”

— Johnny Paycheck

Have you ever felt this way about your job? Have you ever dragged your body out of bed on a cold, dark morning and the most positive thing you can grumble to yourself is, “This day is one day closer to the day I will never have to go to this job again”?

If so, welcome to the club. You are an official member of the largest unofficial club in America – The “Next Check Club” where card-carrying members stay at their jobs primarily to get their next check. The club even has its own secret password so members can recognize each other. You know a fellow club member when you ask a friend, “How’s work?” and the response is, “Well, it’s a job!”

Is this what you had in mind for a career when you got out of school? I doubt it.

Did you think that when you put forth all that effort to prepare yourself for a career and personal advancement that you would end up working in a corporate culture that, at best, could be described as a stagnant pond? In a company where management acts like a mafia group that collaborates among themselves; a management interested only in maintaining their own power structure?

Or maybe you were not expecting to work in a business where management comes across as all-loving and caring on the surface, but they act as though they couldn’t care less about you and your fellow employees? Do you feel frustrated to work  in a company where management acts as though the only solution to any problem is to downsize or outsource while skirting honest communication with employees? Do you sometimes find yourself just going through the motions at work and trying to keep a low profile for fear that you will be the next one to be outsourced?

Have you found yourself trapped in a corporate culture that could best be described as a hornet’s nest? Where all the rules, procedures and corporate dictates are subject to the whim of management at any given moment?

Do you feel that management is not interested in your ideas and if you offer them, they seem threatened and insulted? Have you come to recognize that your job security does not really depend upon your talent and effort, but on the Peter Principle where top managers rise to the level of their incompetence and treat you the same way?

Worst of all, do you feel totally depressed because family responsibilities, the pay you are receiving and the state of the economy has you trapped in your job like a terrorist caged in Guantanamo? (Who knows, maybe water-boarding is a trifle better than the treatment you’re getting!)

Some might read this blog and suggest it is all made up – no job environment could ever be this bad – but I bet many of you are nodding your heads “yes” in recognition of the truth. Fact is, the corporate culture I describe here is more the norm than the exception . . . and you know it!

Raise Your Hand if You Would Like Something Better

If you have not already given up and given in – surrendered your future and happiness to a group of bureaucratic, incompetent, insincere and insecure managers — you should make a solemn promise to yourself to do something about it—before it is too late.

  • If you could find a situation where you, your effort and your talent are recognized, appreciated and rewarded, would you raise your hand?
  • If you could find a place where communication was open, consistent and honest, would you raise your hand?
  • If you could find a place where your interests, the interests of management and the company were all in parallel – where no one wins unless everyone wins – would you raise your hand?
  • If you could find a place where risk-taking, innovation, creativity and interaction with management is sought and encouraged, would you raise your hand?
  • If you could find a place where you feel that you make a difference and the difference you make is encouraged and rewarded, would you raise your hand?
  • If you could find a place where you are rewarded for the value you add to the organization – rather than to whose butt you kiss – would you raise your hand?

And the Moral of the Story …

I know it may seem like these are just Fantasyland or fairytale dreams, but there have been in the past, are now and could be in the future, corporate cultures that operate in a way that would make you want to raise your hand to join. Certainly these cultures are the exception rather than the rule of corporate life, but it is worth the effort to seek them out. It might seem like a risk to join a company with this type of culture – especially if it were a new one – but be honest with yourself and recognize that it is even more of a risk to remain trapped in your current situation.

The key is to be open-minded, observant and have the nerve to raise your hand when the call is made. Will you be one of those who has the courage to break out of the trap of the business world as others want it to be and seek a situation where you have the power to make the future what you want it to be?