Value Systems : The Integrity-Based Business

Mark Goulston is Senior Vice President of Emotional Intelligence at Sherwood Partners, a Palo Alto, California-based turnaround and growth consulting firm.

Author of 'Get Out of Your Own Way: Overcoming Self-Defeating Behavior', Goulston is also a professor at UCLA. In his work, he helps leaders and teams quickly recognize, accept, correct, and learn from mistakes.

Mark can be contacted through his website, or by e-mail;

Integrity is one of the four characteristics of successful leaders. And it's important in every aspect of your business.

With almost all of a difficult year behind him, a CEO (who asked that his name not be used in this article; let's call him John) and I sat down for one of our regular Friday meetings. It was halfway between Thanksgiving and Christmas. John, the 53-year-old grandson of the founder of a third-generation manufacturer of high-quality socket and ratchet tools looked 10 years older than his age -- perhaps because the firm had been losing its market share progressively for those 10 years. As the end of the year drew nigh, John just wanted to talk. When I asked him where he wanted to be at this time next year, he said, "Next year, I'd like to feel hopeful and proud instead of afraid and ashamed, like I feel this year."

We began a heartfelt discussion about how he might turn his fear into hope and shame into pride. We kept going back to the same word -- integrity. Our conversation developed an idea for an integrity-based business, one that had an excellent chance of getting John out of the sad place he found himself now -- and into the place he wanted to be.

After meeting with John, I realized that although baring his neck so completely was unusual, it was not surprising. The ache to transform fear into hope and shame into pride is felt by many presidents, CEO's, COO's, and other high-level leaders whose companies are going through hard times. Our plan for an integrity-based business has a good chance of working for John, and it may work well for other leaders facing the same dilemma.

Integrity of Vision
Create the greatest-value service or product. By exceeding customers' expectations, you will satisfy them -- and instill pride in your employees. If you do good business, it's good for business. Don't rest on your organizational laurels and risk losing your commitment to customers and clients, much less the possibility of being exposed as mediocre. In John's case, this meant improving the design, quality, and reliability of the tools his firm manufactured to match what they had been in the company's heyday 25 years earlier. So prized were its earlier tools that they had become collectibles, and John envisioned developing new markets for a younger generation that could become just as crazy about these tools as their parents had been. Creative pricing strategies could then be developed by looking at and learning from the pricing leaders in the tool and other industries that are known to give customers great value for their money.

Integrity of Mission
Make your business' quality and value the best that it can be regardless of whether you're contemplating selling your business. Work to increase your company's value by improving every aspect of it. Cut costs wherever possible without cutting quality. Avoid cutting corners and half-hearted efforts, and you won't have to be concerned that your competition has already passed you by. For John's company, this involved a long-overdue update of the engineering and design departments to utilize new technologies -- and encouraging the sales department to enthusiastically reconnect with current clients while still going after new markets. The company pursued a rigorous cost-benefit analysis of expenditures, leading employees to ask a question they'd been avoiding for years: "Is what we're getting worth what we're paying?"

Integrity of Functions
All functional units need to be the best that they can be. A strong engine won't make up for a weak transmission. Work together toward mutually agreed upon goals to correct departments' previous practice of acting like prima donnas with disregard for other departments, to expose inadequate departments that try to hide their incompetence, and to counter leaders' fears that a laissez-faire attitude may already have caused too much damage. In John's company's purchasing, engineering, and service departments worked together to develop higher-quality products and improve customer satisfaction.

Integrity of Team Members
Each person needs to do his or her best in all aspects of their job. People show strength of character and commitment by giving their best effort to every responsibility in their job, even when they don't want to. It's called professionalism. If you don't feel confident in an area, seek assistance or training. Don't do anything behind anyone's back. Avoid the counter-productivity of excuses, blame, not meeting commitments or keeping promises, and counter concerns of inadequacy by directly addressing deficiencies. Employees who raised criticisms and complaints at John's company now helped find realistic solutions -- and committed to taking action. Supervisors and team leaders helped hold everyone accountable.

Integrity of Financial Compensation
Tie pay to performance. Basic compensation includes salary and benefits. Bonuses need to be saved for sustained performance above and beyond the call of duty rather than an assumed part of compensation. Prolonged impaired performance needs met with disciplinary measures and financial consequences. Set quarterly goals and develop an objective performance evaluation method that involves the COO, supervisors, and employees. Bonuses and raises tied to popularity, political savvy, and squeaky wheels are less effective than bonuses tied to productivity. If the health and success of the company is at stake, confront overpaid, overextended, high-level executives -- perhaps including yourself.

Integrity of Non-Financial Compensation
Respect, gratitude, and recognition should also be tied to performance and attitude. Don't treat employees who stroke their bosses better than conscientious and loyal workers. If you favor undeserving workers who flatter their superiors and play politics, conscientious and responsible workers may become demoralized, which could result in sloppy work. Supervisors at John's company began to track the progress of their team members, offering recognition and praise for good work and positive attitudes.

Integrity of Security
Develop a plan that shores up the stability and security in the face of the changing needs, abilities, and stamina of devoted, conscientious, long-term employees. Don't allow executives to claim excessive perks or treat employees like commodities; if you do, insecure workers could retaliate by stealing, lying, or doing poor. If you take advantage of people, how can you expect people not to do the same to you? At John's company, some highly technical work required skills that some devoted employees in their mid- to late-50s were having trouble learning. But those same people fully understood another aspect of the busines -- what the tools were all about. They were true "tool guys," so leaders designed a program to develop the managerial skills of these mid-career employees so they could coordinate the work of younger workers while imparting their tool wisdom to the more technologically adept but less seasoned workers.

The higher road of being dedicated to integrity at all levels of his company appealed to John enormously. Even though, John, too, would have to change how he worked, he looked forward to relieving the gnawing feeling in the pit of his stomach. After we completed our list, he looked it over, turned to me, and said, "Now that's the kind of company I want to lead, work for, and buy from. I haven't felt this way in years!"

Usable Insight: If you tell the truth, you never have to remember anything. (Mark Twain)

This article formed the third part of a five part series by Mark Goulston, originally published in Fast Company earlier in 2004.  The other four articles are available to read within the Value Systems section of the LeaderValues website.

Ó Copyright Mark Goulston 2004

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