Senior leadership ‘character’ impacts on bottom line

The character reputation of a senior leadership team has an impact on a business's bottom line

The character reputation of a senior leadership team has an impact on the bottom line of a business, according to a seven-year study by the KRW Research Institute.

In the study of more than 100 CEOs and senior teams in US companies, organisations where senior leaders were perceived by employees to have a ‘strong character’ demonstrated a five times greater return on assets, 26% higher employee engagement scores and lower levels of corporate risk.

KRW executive director and co-founder Fred Kiel told HR magazine that “developing people impacts the bottom line dramatically, if you develop their character”.

Kiel and his colleagues used anthropologist Donald Brown’s inventory of human behaviours and characteristics to come up with a list of four universal moral principles: integrity, responsibility, forgiveness and compassion.

They then asked employees at 84 companies to rank how their CEOs and senior teams performed against these traits, resulting in ‘character scores’.

The research found a clear link between those leaders with higher scores, termed “virtuous CEOs” in the study, and higher business performance.

“Character is the dimension that either magnifies or undermines leadership skills,” said Kiel. “Strong character sends employee engagement and the bottom line way up.”

He called on business schools and learning and development leaders to focus on teaching character and behaviour as much as skills.

“Business schools only teach the what; skills around finance, strategy and so on,” he said. “There is little focus on how people are as people. That is seen as the soft stuff – but it is no longer soft. Our planet needs better leaders. How many billions of dollars in fines do global banks have to pay, for example, before they realise the importance of behaviour?”

Kiel advised HR leaders to focus on “strengthening the character of the leadership bench”. “Help leaders go through a process of connecting their heads to their hearts,” he said. “Integrating the two helps them to make better decisions. Helping people to strengthen their character should be the foundational programme in all leadership development programmes.”

He said that analysing the behaviours and characters of a senior team collectively can be a good starting approach, as it can be “less threatening” to discuss these issues on a group level.

But he added most people “welcome” feedback on their character “if it is positioned in the right way” and they “see the connection between changing habits and being more successful in their jobs”.