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The Currency of Success - Interpersonal Intelligence™

Virtuous Companies Perform Better

Does organizational “virtuousness” pay? How do you help executives change their behavior when they have been successful despite their negative attitude? These are questions I come across often in my own professional career, with many executives struggling to establish virtuous behavior in today’s competitive corporate atmosphere. The good news is that recent studies have shown virtuous companies experience greater success and profitability than their low-hitting counterparts.
Judging by the current press, you’d believe most executives are crooks or jerks. This couldn’t be further from the truth, but the media likes to distort the picture because it primarily reports what sells: scandal. Luckily, there are a few ways for leaders to avoid scandal by understanding the impact virtue will have on their company and how encouraging behavioral changes through positive reinforcement can help when encountering a difficult executive.

Changing Scandalous Behavior

Most business executives are honest and treat people with respect, but it’s not uncommon to find a few bad apples in the bunch every now and then. Many of these “scandalous” executives have experienced success in their careers despite their negative characteristics, which only serves to further enable their behavior. Leaders today are often left wondering what they can do to salvage the situation and change the executive’s behavior.
Why would an executive change their behavior if it has worked for them for so many years? Finding a solution to this question is not going to be easy. Moving executives away from scandalous behavior and aligning them with the company’s virtues is hard work. It requires sufficient motivation and dedication on the executive’s part, as well as patience and trust in the process.
Motivating difficult executives can be accomplished through either enlightened self-interest or fear, with many leaders using the “carrot and stick” method to achieve change. Using the carrot (enlightened self-interest) and the stick (fear) to get people to change entrenched behaviors is a balancing act, and it’s important to acknowledge that you will have to use multiple carrots to motivate the executive to change.
One very powerful carrot is to provide them with information and research that shows there is a better way. The stick is generally the threat of job loss, but this can result in negative results according to recent findings by leading researchers on the subject.

The Carrot Approach

I want to concentrate on the carrot side of the equation for this article, and some research from Kim Cameron, Ph.D., at the University of Michigan Business School. Dr. Cameron found that “virtuous firms perform better,” which gives credence to the idea that if you treat people well and act with integrity, you should achieve higher performance (profitability). Dr. Cameron’s research gives ethical business practices hope. You don’t have to be a lying, conniving or abusive executive to succeed.
Cameron and colleagues also found that higher levels of perceived organizational virtuousness — forgiveness, trust, integrity, optimism and compassion— are positively related to higher levels of real and perceived organizational performance. How?

The Impact of Virtue:

Dr. Cameron found that companies perceived as trusting, compassionate and high in integrity perform better and have higher profits than less virtuous firms even when downsizing. Cameron and colleagues explain the impact of virtuousness on the following five measures of organizational performance:
Innovation: Exposure to virtuous behavior produces feelings of inspiration, awe, gratitude, and other positive emotions. This inspires executives to broaden their interest in and accessibility to new ideas and information.
Customer Retention: Customers are more effectively served and are more loyal to the organization when employees encounter positive experiences at work. Leaders can foster a more positive work environment by showing care and support to empower their team.
Turnover: Virtuousness in organizations reduces turnover and fosters employee longevity. Employees are more likely to stick around and be more productive when they feel valued and inspired.
Quality: Exposure to virtuousness in organizations helps employees make better decisions, more effectively process information, and support one another. This leads to fewer quality errors in their work.
Profitability: Enhanced employee innovation, expanded social capital development, increases in pro-social behavior and the development of resiliency all serve as mechanisms by which organizations achieve profitability, even in the face of a downsizing environment.

Key Takeaways from Cameron’s Research.

The character of employees is more important than ever, and Dr. Cameron’s seminal research shows that companies led by executives of virtuous character outperform their competitors in many areas. A conscious plan to help employees change their scandalous ways and develop the virtues that are important to your company can vastly improve a company’s culture, as well as reduce its costs. Acting with virtues such as honesty and integrity inspires higher performance and greater commitment not just from employees, but from your customers as well.