Be an Ethical Entrepreneur, Marketer, and Business Builder

All Great Businesses are Inherently Moral

This fact has been proven time and time again by modern business and human psychology experts.

No business that exists exclusively for profit, without the advantages of corporatism or cronyism, will ever be very successful and certainly not over the long-term.

This is not my opinion. This law of business is as well established as the laws of gravity.

By a great business I very simply mean a profitable enterprise that lasts for an extended period of time. An unethical business can fool people for a short time however it cannot fool them for very long, particularly in the age of social media.

Business experts from a few decades ago called this vision and mission. Brad Sugars in Instant Team Building insists on vision, mission, and culture points. Tony Hseih in Delivering Happiness calls on vision and culture statements. Mike Michalowicz in The Pumpkin Plan has his immutable laws. Sam Carpenter references his Rules of the Game in Work the System.

Jim Collins in Good to Great discusses the requirement of all great businesses to have a “Hedgehog concept.”

One of the primary findings in, Built to Last, that contradicted the teachings of many MBA programs, is that businesses that have survived and excelled over time were often the ones that were centered around a core business concept, not a great product.

Let me summarize a major portion of all of those books very succinctly…

The compass for lasting business success always points you in the same direction.

The compass for long-term business success will always point you in the same direction.

Every great business expert knows that a business MUST be motivated by something more than profit to inspire your team, stay focused and even maximize profits.

If you’re still not convinced, pick up a copy of The Loyalty Effect by Frederick F. Reichheld and read about the numerous studies that have shown that companies who downsize in the interest of short-term profits rarely ever recover and often their stock prices suffer for a very long time. Obviously there are necessary times to downsize and appropriate ways to do so, but to simply improve next quarter’s earnings is not one of those times. As a general rule, downsizing is best treated as a last resort.

In The Millionaire Mind, Thomas Stanley discovered that the #1 thing millionaires attribute to their success is “being honest with all people.” (And 88% of the millionaires he surveyed achieved their wealth through entrepreneurship.)

Marcus Buckingham’s research in First, Break All the Rules: What the World’s Greatest Managers Do Differently demonstrated that pay is not even in the top 5 reasons people stay at or leave a job. Through 20 years of research with 20,000 managers and over 80,000 interviews, he has developed 12 questions that do show what motivates people and pay doesn’t even make the list.

In other words, money is not the primary motivator for people and all businesses are run by people.

Dan Pink takes it a step further in the below video. Through extensive research in the psychology of motivation he shows that for someone to truly excel they need Autonomy, Mastery and Purpose. If your boss, the corporation, or the government is dictating what you should do, there goes Autonomy. If your “hedgehog concept” is to maximize profit, then you’ve thrown Purpose out the window.

A non-crony entity that exists primarily for profit will never be a very successful business and every great business leader knows this. The idea that companies should be immoral is as old as Machiavelli and it was as wrong then as it is now.

If you work for someone who runs an immoral business, start educating them that there is a better, more prosperous way. As a matter of fact, help every business leader and employee you know appreciate the long-term business benefits of running an ethical, moral business.

It’s truly the only path a business can take to succeed over the long-term.

To your ethical business building success,
Bryan

P.S. My team’s number one culture point is Love and we try to live it as best we can. It’s not easy and we don’t always succeed but it is our most core value. I highly recommend you infuse it into your culture.

What 8 CEOs/Presidents have to say about Leadership and Ethics

The inspiration for this site was a research paper I wrote in December 2004 for Professor Redekop’s Senior Seminar “Business Ethics” class at Kettering University. I was going to break up the paper into 2 separate sections but decided it flows better as a single piece and you can easily jump to the bold headers in the sections that most interest you. I make no claims of perfect grammar or APA approved references. 🙂

All of the books that are referenced in the paper can be found at the bottom of the blog.

Introduction

Kettering/GMI has a long history of successful alumni. Kettering claims that 1 in 6 Kettering/GMI graduates are CEO’s or President’s and that Kettering sends a higher percentage of students to the University of Harvard’s MBA program than any other undergraduate school in the country. This essay analyzes the leadership and ethical underpinnings of several of these CEOs and corporate executives to get a better understanding of the skills employed by Kettering/GMI’s alumni to achieve such high levels of success.

Much of the research performed for this essay was centered on eight personal interviews with very successful leaders in corporate America who have graduated from GMI or the General Motors Institute. These individuals oversee hundreds of thousands of jobs and account for billions of dollars in sales around the world. They were presented with several questions on business ethics and leadership and their responses are compared with additional research to provide a more complete understanding of Kettering/GMI alumni. The questions are listed at the beginning of the sections where they will be addressed. They were purposely designed to be vague and broad-reaching. This vagueness was necessary to determine these leaders’ initial reactions and allow them to very subjectively state the items of most importance to them for each topic. The questions were also structured in a manner to allow for email interviews to be conducted where responses back and forth for clarification would not be necessary. The alumni’s answers to questions about leadership were extremely varied however all the questions dealing with ethics were met with similar responses. The reasons for the resounding successes of these individuals are excellent leadership qualities such as hard work, adroit communication skills, consistency, and the ability to command respect. A foundation based upon high ethical and moral standards is also essential to their success. Not surprisingly, this formula for success is also common for independently wealthy individuals in general, not simply within Kettering/GMI alumni.

Defining Leadership

Before embarking on an understanding of what makes a good leader, leadership must be defined. Bob Reiss, an entrepreneur and the first Bio-Medical Engineer, who sold his third privately owned company for $650 million, provides a definition that will be used in this essay to define leadership. He states, “Leadership is the ability to have a meaningful vision of what the future could be and concurrently being able to define a pathway to the fulfillment of that vision” (Reiss 2004). A leader should provide a very clear and vivid image for what an organization can accomplish and be a person everyone can rally around and understand (Coventry 2004). Unfortunately, this is one of the most elusive qualities found in corporate executives today and therefore is being adamantly pursued and even tested for when looking for people to fill executive positions (Coventry 2004). Baltasar Gracian, a 17th century Jesuit monk and philosopher, provides an even more eloquent definition of what he calls a “Natural Leader.”

Natural leadership. It is a secret force of superiority not to have to get by artful trickery but by an inborn power of rule. All submit to it without knowing why, recognizing the secret vigor of natural authority. Such magisterial spirits are kings by merit and lions by innate privilege. By the esteem that they inspire, they hold the hearts and minds of those around them. If their other qualities permit, such people are born to be the prime movers of the state. They perform more by a gesture than others by a long harangue. (Gracian 1653)

Gracian may attribute these unique traits of character to an “inborn power,” however it becomes quite apparent that, though leaders may possess certain natural abilities, they tend to follow a common formula. It is important to note, the alumni unanimously agree poor advice for leading was given by Machiavelli when stating, “It is essential, therefore, for a Prince who desires to maintain his position, to have learned how to be other than good, and to use or not to use his goodness as necessity requires” (Ciulla 2003: p 39). Therefore, the definition of leadership as described in this paper will focus on leading others in a healthy and moral manner.

Defining Business Ethics

Ethics can be interpreted and understood in a variety of ways and therefore needs clarification. Often when faced with the idea of business ethics, the classic John Mill interpretation of utilitarianism is brought to mind.

The creed which accepts as the foundation of morals, Utility, or the Greatest happiness Principle, holds that actions are right in proportion as they tend to promote happiness, wrong as the tend to produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain; by unhappiness, pain and the privation of pleasure. (Ciulla 2003: p 143)

It is essential to note, in this definition Mill points out that unhappiness is not only pain, but “the privation of pleasure.” More succinctly, utilitarianism teaches one to take a course of action to promote the greater good of society and over one’s own personal benefits. Though this may be a great point often contemplated by corporate executives, it may be possible with this understanding to justify short-term behaviors to promote a greater good that would otherwise be unacceptable in the long-term. As Dr. James John, President of Kettering University for the past 14 years and the only person interviewed without a GMI/Kettering degree, points out, the utilitarian teaching leaves too much room for justification of poor actions for the greater good (John 2004). All of the respondents felt very strongly that one should only follow a course of action that would never violate their personal moral convictions.

Interestingly, the high moral principles of the alumni followed a distinct pattern. All three of the entrepreneurs interviewed, Mr. Barefoot, Mr. Reiss, and Mr. Schickler, felt very strongly that Judeo-Christian values were the necessary basis for moral actions. For instance, Mr. Reiss has always kept a copy of the Ten Commandments on his desk (Reiss 2004). John “Jack” Schickler, founder and CEO of Fleetcross, indicates that, “I’m firmly in the belief that [Christian] principles are the key to leading a balanced and wholesome existence while being surrounded by an array of unwholesome forces” (Schickler 2004). Don Barefoot who is currently the President of Covenant Partners Consultancy (Don Barefoot 2004), goes on to further explain this view of ethics,

Ethics need to be clearer and of a higher plane than just meeting the current prevailing legal standards of the land…these standards are too variable across the judicial/geographic landscape. Of course, you must also perform financially. But financial performance without trustworthy, sustainable practices is just fool’s gold. We are accountable before God, and His standards are clear for those who care to understand them (Barefoot 2004).

The other five alumni, who currently work in corporate America or academia, feel very strongly about adhering to the highest moral principles but they do not directly attribute this to Christian teachings. Religious views were never questioned during the interviews so it is difficult to determine if their ethical views were influenced by a particular religious persuasion or if the politically correct atmosphere of corporate America prevents these details from being relinquished. Steve Dickerson points out that he often tells people, “I have learned almost as much in Harvard’s MBA program as I did in Sunday school” (Dickerson 2004). Joe Spielman, who will be assuming the position of General Motors’ vice president and general manager of manufacturing for North America on January 1, 2005, offers several litmus tests for evaluating ethical decisions (GM to streamline… 2004). Before making a decision with ethical implications Mr. Spielman will consider what a lawyer trying to prosecute him could say about the situation, whether he would be proud to tell his father, assuming he was a minister of any faith, about his actions, and whether he can look at the man he’s shaving every morning and be happy with what he sees (Spielman 2004).

It appears the most simplistic understanding of ethics in life as well as business was taught by Jesus when informing his disciples that, “You shall love your neighbor as yourself” (New American Standard Bible Matt 22:39). Mr. Reiss points out, in reference to another religious teaching, “whether one chooses to view [the Ten] commandments as divine revelation or a statement of ancient wisdom is irrelevant” (Reiss 2004). So it is in this context, of ancient wisdom, upon which this essay will construct a reference foundation for ethics and ethical decisions. In other words, if a decision is made counter to the above teaching of Jesus, it can be interpreted as an unethical choice. The reason for this is because of its broad-reaching applications and the inclination of those interviewed to view ethics in a manner that is very simplistic and definitive.

Traits of a Leader

The following leadership questions were presented to the interviewees: What characterizes leadership for you? In other words, what are the most important or crucial aspects/traits/habits of a good leader?

It is first, important to understand that leadership is a very elusive subject because of changing business climates, individual styles, and a leader’s necessity to always be learning from those both above and below him (Coventry 2004). With that in mind, it’s of little surprise that no two people provided the same answer. Steve Dickerson, a Vice President at Metaldyne, a manufacturing supplier for the automotive industry with annual sales of approximately $2 billion (Leuliette 2004), believes proper motivation, character, integrity, high ethical standards, hard work, respecting individuals, facilitating communication and commanding respect are all traits found in good leaders (Dickerson 2004). Bob Reiss indicates that, “Some very important traits for a person who aspires to a leadership position include humility, trustworthiness, honesty, constancy, discernment, dependability, problem identification and problem solving skills and hard work” (Reiss 2004). Bruce Coventry presented a bit different approach. For him, these traits can all be summed up in a person who can provide a very clear and vivid image for what the organization is trying to accomplish and then articulate that image well enough to have people follow him or her with enthusiasm (Coventry 2004). Mr. Barefoot is also a proponent of visionary leadership and believes leadership involves:

Defining ‘reality’ for your organization by integrating/promoting/reinforcing a vision for the enterprise; building unity, transparency and teamwork around the pursuit of that vision; ensuring company-wide adoption of sound core values which build trust and predictability in relationships; developing a highly competitive sustainable enterprise; being an effective steward of the potential/opportunity/resources that the Lord has provided you; diligence (i.e. vision without execution is ‘just talk’); setting up sound metrics, delegation/authority/accountability, and compensation methods (with ‘pay for performance’ elements built-in); and serving others by modeling what you promote and equipping them to succeed (i.e. enabling committed ordinary
folks to achieve extraordinary results as a team) (Barefoot 2004).

Dr. John leads Kettering University with a definite vision and believes firmly that a leader needs confidence. People are resistant to change and a leader will be met with adversity, detractors, and other negative influences. Therefore, the leader must always have a plan and enough confidence in himself and the plan to follow it through to the end (John 2004). Mr. Reiss tempers this need for confidence:

A big ego, or a sense of over-inflated self importance, are the most common defects in people who never make good and effective leaders because nobody wants to follow them. In a large company people will tolerate these kinds of people just to have a job but nobody willingly joins their team and proclaims these types of people as their leaders, boss maybe but not leader (Reiss 2004).

Millionaires attribute some similar factors to their financial success. Their top ten factors, in order of importance, are:

  1. being honest with all people
  2. being well disciplined
  3. getting along with people
  4. having a supportive spouse
  5. working harder than most people
  6. loving [their] career/business
  7. having strong leadership qualities
  8. having a very competitive spirit/personality
  9. being very well organized
  10. having an ability to sell [their] ideas/products and making wise investments (tied for tenth) (Stanley 2000)

At first glance it appears that not only is leadership very elusive, it’s unique to each individual. Certainly leaders carry out and express there leadership styles through their own personalities and personal strengths, however several factors seem to permeate all of the alumni’s definitions. These traits are high ethical standards, hard work, consistency, superb communication skills, the ability to define a goal, the skills to confidently inspire others to achieve a common goal and the ability to command respect. More importantly, it has to be a life-long process where you are continually learning from those all around you. Larry Burns, a General Motors’ executive who leads the GM Research and Development Center, located in Warren, Michigan, and oversees GM’s global research programs, indicates, you should also do your best to surround yourself with excellent leaders from whom you can learn. Particularly as you are beginning your career it is extremely important to put yourself in a position to learn from great leaders (Burns 2004). Amazingly, all of these traits and characteristics can be learned and not one respondent claimed superior intellect or an excellent college education was a necessary requirement for leadership. This is not to imply that it is not beneficial, but it appears to be of little real importance. Two of the greatest businessmen in present day corporate America, Michael Dell and Bill Gates are both college drop-outs. It is also interesting to note that there is no significant statistical correlation between SAT scores, class rank in college, or GPA in college and net worth for individuals between 45 and 64 years of age (Stanley 2000: 120).

Importance of Ethics

The ethical questions posed to the interviewees are as follows: What role, if any, does business ethics play in your organization or for you personally? Have you witnessed poor ethical behavior in competitors, or in your industry? Do you think that proper ethical behavior pays off for businesses? Are the short or long-term effects of ethical choices different?

Every person in business will be confronted with ethical choices. According to my interviewees, these choices should be met with a single solution. Always choose the ethical solution. The ethical solution will ALWAYS be more profitable personally, for the company, for the employees of the company, for the customers and for the community. Everyone interviewed has certainly viewed unethical actions in their workplace or industry and yet their reactions were much the same. Bruce Coventry and Steve Dickerson firmly indicated that, as an employee, if asked to perform an unethical act, you address the issue with your superiors in as adroit a manner as possible and let them understand your feelings. If still asked to carry-out the unethical action, there is no other recourse but to leave the job (Coventry 2004; Dickerson 2004). Mr. Schickler also agrees and goes on to explain the benefits of such actions:

It has been my experience that unethical business practices always catch up with the offender in a very unpleasant manner and usually from a least expected direction. Sometimes it might be years later. I can say that all of the experiences I can remember wherein I was initially harmed by unethical practices ended up as wonderful blessings and opportunities for my business. It takes a lot of faith to believe that those results will be forthcoming, but it happens to work out that way (Schickler 2004).

Larry Burns feels, “Things that are not consistent with high integrity should never be done. When an ethical issue arises, you must step up to it, deal with it and stop it or it will spread like a cancer” (Burns 2004). He goes on to reference the tragedy at Enron that seems so unbelievable. Enron was, “Lead by a group of people who walked a pretty fine line between what’s right and wrong and you must have ethics that don’t allow you to even get close to the line” (Burns 2004). Mr. Reiss indicates that, “Proper ethical behavior not only pays big dividends in the business world it is the only path to enduring success. Short term and long term success is, in the end, the same thing” (Reiss 2004).For those truly pursuing God’s standards for living and leadership, there can be no difference between how short-term and long-term decisions are considered with regard to making ‘right’ decisions” (Barefoot 2004).

Often when considering business ethics, stories of Enron, Global-Crossing, Tyco or Conrad Black come to mind. Fortunately these stories come to mind more likely because of the media’s sensational view of them, and not because they are the accepted norm in corporate America. Every person interviewed was very adamant about pursuing, teaching and setting an example of high ethical standards and moral conduct. This view on ethics is certainly not the exception with millionaires stating the MOST important factor of success is “being honest with all people,” with 90% of millionaire respondents considering it either important or very important (Stanley 2000: 43).

Addressing Machiavelli

Machiavelli has proposed a rather unethical view of leadership and the following question was presented to better understand the applications of his ideas. Do you agree with Machiavelli that sometimes leaders need to do “bad” things for the good of the company?

As seemingly elusive as leadership may seem, the lessons purported by Machiavelli are almost unequivocally met with the same response. “There is no justification for ever doing bad things, the end never justifies the means. PERIOD!” (Reiss 2004). This sentiment was echoed by everyone interviewed and, though it is certainly not unanimous throughout the corporate world, it appears to be the prevailing wisdom. Mr. Coventry and Mr. Burns point out that it depends on how you define “bad”, but if you are doing something that is morally or ethically wrong you HAVE to change that situation (Coventry 2004; Burns 2004). Dickerson also feels very strongly about this issue and points out that:

Leaders should always do good things in the best long-term interests of the company and its stakeholders (not just shareholders). Sometimes these necessary things, such as reduction in work force due to loss of business or canceling the Christmas party because there is no money, are not popular. As a manager you must take thousands of actions, some easy and some difficult. I believe it’s the way that you communicate and execute difficult things that makes them either “good” or “bad” (Dickerson 2004).

Mr. Spielman doesn’t adhere to Machiavelli’s teaching at all. For him leading through ethical behavior encompasses the very essence of his leadership. Bill Reno, a union official, illustrates Mr. Spielman’s motivations in the following manner:

If you have an issue or problem about work or your personal life and you lay it out straight to Joe he will do everything he can do to help you. Now if you come back, on the other hand, and you are playing games and telling half-truths or lying, Joe will tear your heart right out from your body (Spielman 2004).

Mr. Spielman knows that ethics in a corporation are transparent and even the look of impropriety such as going to a baseball game with a supplier is not acceptable. He will help his employees, provide resources, give advice, talk with them, support them and protect those valuable employees who may once in a while stumble and make a mistake.

All good leaders seem to be in agreement on this subject. Machiavelli has no practical applications in the real world. Moreover, adherence to Machiavelli’s teachings is foolish, unproductive and unprofitable and a good way to ensure a very short-lived, if any, success.

Live It!

Summarizing all the bits and wisdom of some of the top businessmen in the world is certainly not an easy task. Over 2 hours of phone or personal interviews, 23 pages of notes and collectively hundreds of years of experience cannot be taught in a short research paper or in a lengthy book. The alumni and, in particular, the only person interviewed employed by an institute of higher learning, Dr. John, emphasizes the necessity of life-long learning. Learn from all of those around you and learn from life experiences. Dr. John points out that GMI has had a long history of ethical leadership and Albert Sobey, the first president of the General Motors Institute, was a major proponent for ethical teaching (John 2004).

The reasons for the success of Kettering/GMI alumni are many. Their abilities to lead, inspire others, and their incessant, almost relentless, pursuit of high ethical standards in their lives and businesses are major contributors to their long-term and continued success. Probably more important, is the willingness of these individuals to give back to their communities and the numerous benefits one can reap from this style of servant leadership. Many of them are on Boards of Trustees, involved in church activities and other voluntary work. Obviously all of them have taken time out of their extremely busy schedules to provide some invaluable bits of wisdom to help students through this paper. Giving up their time speaks volumes about the character, work-ethic and dedication these individuals have to both their businesses and livelihoods, but also to their communities. Enduring success appears not to be the ability to make money, but the ability to enjoy one’s job while being a productive part of a community and living a balanced life with God, family, and friends. All of these individuals possess that balance and have made an indelible mark on me. I have every belief that they will not only continue to succeed, but that they will inspire others to do the same.

In conclusion, Bob Reiss, who has spent much of his business life studying leadership and the best ways to motivate a work force, offers sage advice that should be learned by everyone hoping to achieve success:

You are advised never to forgo your principles for a short term gain while promising yourself that over the long haul you would not in fact give in to unprincipled behavior. Once you act unethically you have begun the long slide to infamy. When you are desperate you must know that these temptations will rise to the surface. That is the time to vow that you would rather go down to short term defeat than violate your principles. When you violate them they are lost forever! (Reiss 2004).

 

Referenced Books
The Millionaire Mindby Thomas Stanley
Gracian’s Manual: A Truth-Telling Manual & the Art of Worldly Wisdom by Baltasar Gracian, translated by Martin Fischer
The Ethics of Leadership by Joanne B. Ciulla