Written by
Changeboard Team

Published
22 Nov 2013

Dave Ulrich on ethical leadership

22 Nov 2013 • by Changeboard Team

Implicit/explicit moral code

Few days ever go by without an ethics decision making the business news headlines. Behind every commercial decision lies an implicit or explicit moral code that shapes who we are and what we do.

Ethics is a part of:

  • business strategy – as leaders make trade-offs about whether to locate businesses in emerging or mature markets and about how to cut costs while maintaining high quality
  • human resources – as leaders exploit or empower labor
  • manufacturing – as leaders respond to design flaws in products
  • information – as leaders deal with issues of privacy and transparency
  • finance – as leaders determine and report results of their work.

Value focuses outside, values come from within. Value emphasizes what others get from our efforts; values emphasize who we are. Value can be created and developed through innovation and hard work; values are generally inherited and may be honed through self-awareness and experience. Value can be measured by impact; values are measured by the strength of our character. Value derives from the worth of our work to stakeholders; values reflect the worth of our work to us.

Both value and values matter to communities, organizations, individuals. Unless an organization creates value for those who use its products or services, it loses its right to exist. Organizational value is defined by the customers, investors, and communities in which organizations choose to operate.

Organisational culture

Think of a company where you work or visit. What is its culture? What does it feel like to participate with this company? Traditionally, an organization’s culture is defined as its norms, expectations, patterns, unwritten rules and rituals. These internal patterns shape our experience and determine if we are inside or outside the company. When we talk about culture, we would rather explore it from the outside in. Hold up your iPod. With this product, how does Apple want to portray itself to its customers? That it’s a leader in design innovation and application. Culture might be better defined as an organization’s identity in the mind of itsbest customers, made real to every employee every day.

The value of an organisation’s culture is not the identity of those inside the organization looking out, but how that identity captures the mind, feet, and heart of the customers we serve.

An airline I worked for wanted to define its ‘culture’ as things it did well, from the inside out. They had a list of values that would show up on posters and cards in almost any company with words such as ‘respect for the individual’, ‘teamwork’, ‘serve’, ‘integrity’, ‘accountability’, and so forth. But when we started to discuss values through the eyes and expectations of their most frequent customers, their generic list became much more focused: on-time arrivals, quick response when things go wrong, good in-flight services (food, movies, and staff). The value of the airline was not found in the aspirations of its executives but in the needs and experiences of its customers. Value is defined by the receiver more than the giver.

Likewise, leadership is not just about what we do, but how what we do as leaders meets and exceeds customer expectations. Any leader is successful when their daily actions reflect customer expectations. Apple leaders act to foster creativity that will result in better products for customers, Walmart leaders demonstrate efficiency to keep prices low for cost-conscious families and Marriott leaders model service to ease the hassles of travel for others. For organizations to fully deliver value, internal organization or HR practices should model the values of the customers. We want to be the employer of choice hiring employees our customers would choose and we want to offer training that will increase customer confidence in our services. Our criteria for compensation should align with the reputation we want from our best customers and the messages we share with employees should be similar to those we share with customers.

Organisational trust

The essence of an organisation’s values is trust. This requires leaders whose personal values are in line with organisational value they are trying to create. Too many leaders of large and small companies violate that trust through personal greed, illegal and immoral acts and bad judgment. Losing organization trust leads to lost customer and investor confidence and previously great companies such as Enron, Arthur Andersen and Worldcom end up discarded in corporate landfills.

More than 50% of the top 20 companies in the Fortune 500 are new every 10 years. Those that are merged away or fall out of this list define value from the inside out or have either not articulated a clear and accurate set of values or they have values rhetoric without action. Leaders who only articulate but don’t act on values will not lead their organizations for long-term success. A leader who advocates customer service but spends little time with customers lacks congruence.

Self-interest vs selfless service

In many cases the success of companies and countries causes leaders to respond with arrogance and hubris, taking credit for the prosperity, seeing themselves as invincible or focusing more on enjoying the present windfall than learning for the future. This arrogance may be described as the pride before the fall. Leaders whose personal values include a sense of humble service continue to improve and respond to changing conditions. They ask more questions than give answers, want to learn more than lecture, and spend time outside with customers. And they focus on the future not the past and work for selfless service not self-interest.

Within the organizations where we work, learn and play, we need to recognize and deliver value to the customers and investors who give us the right to exist as a company, and we need to make sure that our personal values ensure a legacy of goodness.