Critique of Moral Intelligence, Enhancing Business Performance & Leadership Success

Moral Intelligence: Enhancing Business

Performance and Leadership Success

Doug Lennick Fred Kiel, Ph.D.

PEARSON EDUCATION, INC.

Praise for Moral Intelligence

“Moral Intelligence is excellent reading for new entrants to the business world

as well as experienced managers. I found numerous examples that were right

on point with actual events that I have experienced in over 40 years of manag-

ing. It was also helpful to have the topics presented in the context of current

events that hold the readers’ interest. This book should be on the reading list of

every student regardless of their career choice.”

—Larry Pinnt, Chairman, Cascade Natural Gas

“At a time when capitalism faces questions of legitimacy brought on by poor

leadership behaviors, this book provides a healthy way of thinking of the inter-

nal compass that can avoid corporate atrocities.”

—Mike McGavick, CEO & Chairman of Safeco Corporation

“This book identifies the traits which identify value-oriented corporate leaders

and provides a practical primer to a business person to identify and emulate

these critical traits. It is essential reading for anyone who believes that this is

the way the world is going.”

—Mike Phillips, Chairman, Russell Investment Group

“In their new book, Doug Lennick and Fred Kiel bring to the business world a

much needed moral guidance system. Given the worldwide erosion of trust in

American business, the authors’ user-friendly tools and concepts arrive not a

moment too soon.”

—Keith Reinhard, Chairman, DDB Worldwide and President, Business for

Diplomatic Action

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Moral Intelligence

In the face of accelerating turbulence and change, business leaders and policy makers need new ways of thinking to sustain performance and growth.

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Moral Intelligence Enhancing Business Performance and Leadership Success

Doug Lennick Fred Kiel, Ph.D.

Library of Congress Number: 2004117574

Publisher: Tim Moore Executive Editor: Jim Boyd Editorial Assistant: Kate E. Stephenson Development Editor: Russ Hall Marketing Manager: Martin Litkowski International Marketing Manager: Tim Galligan Cover Designer: Alan Clements Managing Editor: Gina Kanouse Senior Project Editor: Kristy Hart Copy Editor: Chrissy Andry Indexer: Julie Bess Compositor: Jake McFarland Manufacturing Buyer: Dan Uhrig

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To our wives, Beth Ann Lennick and Sandy Kiel, who have helped us fine-tune our own moral compasses over the years—and to our children, who

always lovingly challenge us to live in alignment! Alan, Mary, and Joanie (Doug) and Kelly, Amy, Bryn, Anna, Jordan and Freda (Fred)—and to our

parents, whose early nurturing provided our foundation—Albert and Martha (deceased) Lennick and Orville and Mabel Kiel (both deceased).

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Foreword xxiii

Introduction xxxi

PART ONE MORAL INTELLIGENCE

Chapter 1 Good Business 3

Chapter 2 Born to Be Moral 19

What the Best Leaders Believe 20 A Visit to the Nursery 21 Nature Versus Nurture 22 Growing Up Moral 23 Learning to Be Responsible 23 When Things Go Wrong 24 Inside Your (Moral) Brain 25 It’s All in Your Head 26 The Moral Map of Your Brain 29 Why We’re Good and Why We’re Bad 30 So What Went Wrong? 31 Moral Software 33

CONTENTS

xi

Chapter 3 Your Moral Compass 37

Embracing Universal Principles 41 Discovering Your Values 43 The Morality of Values 45 Beliefs 49 Identifying Your Beliefs 51 Goals 53 Why Leaders Love Goals 57 Your Goals 58 Put It in Writing 58 Behavior 59

Chapter 4 Staying True to Your Moral Compass 63

PART TWO DEVELOPING MORAL SKILLS

Chapter 5 Integrity 79

Acting Consistently with Principles, Values, and Beliefs 80

Telling the Truth 82 Standing Up for What Is Right 87 Keeping Promises 89

Chapter 6 Responsibility 93

Taking Responsibility for Personal Choices 95 Admitting Mistakes and Failures 97 Embracing Responsibility for Serving Others 100

Chapter 7 Compassion and Forgiveness 105

Actively Caring About Others 106 Letting Go of Your Own Mistakes 109 Letting Go of Others’ Mistakes 112

CONTENTS xii

CONTENTS xiii

Chapter 8 Emotions 115

Self-Awareness 117 Understanding Your Thoughts 119 Personal Effectiveness 121 Deciding What to Think 121 Self-Control 123 Nurturing Emotional Health 123 Interpersonal Effectiveness 127 Empathy 128 Misplaced Compassion 129 Respecting Others 132 Getting Along With Others 135

PART THREE MORAL LEADERSHIP

Chapter 9 The Moral Leader 141

Chapter 10 Leading Large Organizations 157

The Fabric of Values 157 Is There Such a Thing as a Morally Intelligent

Organization? 159 The Morally Intelligent Organization—

An Aerial View 160 Morally Intelligent Policies 161 The Principles that Matter Most 163 Organizational Integrity 163 The Responsible Organization 166 The Compassionate Organization 173 The Forgiving Organization 176 Recruiting for Values 178 Reinforcing Values Starts at the Top 179 The Power of Formal Rewards 180 Success Stories 182 Ideal Versus Real 183 Values and the Global Organization 183

xiii

Chapter 11 Moral Intelligence for the Entrepreneur 185

Moral Values in Small Organizations 190 Last Words About Business Start-Ups 204

Epilogue Becoming a Global Moral Leader 207

Raising the Stakes 208 Watch Your Wake 209 Give Back 210 Create the Future 211 A Global Business Opportunity 212 Conclusion 214

Appendix A Strengthening Your Moral Skills 215

A Look in the Mirror 216 Using the MCI 217 The Right Frame of Mind for Completing the MCI 217 Scoring and Interpreting Your MCI 217 Prioritizing Your Moral Development Efforts 218 The Road Less Traveled 219 The 80/20 Rule 219 Your Moral Development Plan 220 Putting Your Moral Development Plan into Practice 222 Breaking Bad Habits 223 Reward Yourself for Positive Change 223 Surround Yourself with Positive People 224 Do I Really Need to Change? 224 Books, Audio, and Video Media 225 Workshops 226 Personal Counseling 226 Executive Coaching 226

Appendix B Moral Competency Inventory (MCI) 227

CONTENTS xiv

CONTENTS xv

Appendix C Scoring the MCI 235

Moral Competencies Worksheet 238 What Your Total MCI Score Means 238

Appendix D Interpreting Your MCI Scores 241

Total MCI Score (Alignment Score) 242 Highest and Lowest Competency Scores 243 Individual Item Scores 243 Reality Testing 244 Do Your Scores Matter? 245 Now What? 246

Index 249

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Doug Lennick

Doug Lennick’s career as an executive, sales manager, and a developer

of people is legendary. Today, in addition to his work as a founding

member of the Lennick Aberman Group, Doug continues to work

directly with Ken Chenault, CEO of American Express and Jim

Cracchiolo, CEO of American Express Financial Advisors. Although no

longer full time, Doug retains the title of EVP at American Express.

As a senior advisor to Ken and Jim, Doug’s focus is on workforce cul-

ture and performance. As a leader, a coach, and a mentor, Doug has

taught thousands how to be successful in both their personal and

professional lives.

In the early 1990s, Doug was one of two (the other being Jim

Mitchell) senior managers at American Express responsible for cham-

pioning, developing, and implementing the Emotional Competence

training program that was recognized by the Consortium for Research

on Emotional Intelligence in Organizations as a model program. Doug’s

work and American Express’s Emotional Competence program were

recognized in Daniel Goleman’s Working with Emotional Intelligence

ABOUT THE AUTHORS

xvii

and in Tony Schwartz’ Fortune magazine article on the same topic. In

The Power of Purpose, Richard Leider referred to Doug as the “spiritual

leader” of the company.

Doug lives in Edina, Minnesota, with his wife, Beth Ann, and their

youngest daughter, Joan. Doug’s son Alan is an actor and a financial

advisor living in New York City with his wife Sari, and Doug’s oldest

daughter, Mary, attends Trinity College in Hartford, Connecticut.

lennickaberman.com

612-333-8791

[email protected]

Fred Kiel, Ph.D.

One of the “founding fathers” of the field of executive coaching, Fred

began challenging senior executives in the mid-1970s to improve their

leadership skills. Trained as a Ph.D. counseling psychologist, he left the

private practice world in the mid-1980s and has since devoted his full-

time career to the field now known as executive coaching. He serves as

the coach to several CEOs. He is working on his next book, What CEOs

Believe and How It Impacts the Bottom Line.

In 1987, he formed a partnership with Eric Rimmer in the UK and by

1991, he and Eric joined forces with Kathryn Williams to form KRW

International, which has grown into a boutique of mostly Ph.D.-level

coaches, internationally recognized for their expertise in the leadership

demands of the C-Suite.

Fred lives on his organic farm in Southeastern Minnesota, in the midst

of cold running trout streams and Amish farms, along with his wife,

Sandy and youngest daughter, Freda. Sandy is the innkeeper for the Inn

at Sacred Clay Farm—their country inn bed and breakfast with five lux-

ury guest rooms and meeting space for small groups.

krwinternational.com

612-338-3020

[email protected]

ABOUT THE AUTHORS xviii

Special Acknowledgment for Our Collaborating Writer

Kathleen Jordan, Ph.D.

Kathy has worked with us over the past two years and without her spe-

cial help, we would not have been able to complete this book. Kathy has

brilliantly taken our ideas and rough drafts and worked her magic so

that we have one “voice.” She is an extraordinary person and personally

demonstrates a great deal of moral intelligence.

Kathy has a Ph.D. in Counseling and Human Systems from the

University of Florida. After working for large organizations (AT&T

Bell Laboratories and later Harvard Business School Publishing

Corporation) she has flourished as an independent consultant and is

now a partner with the Lennick Aberman Group.

Kathy lives and kayaks in the Boston area. Her daughter Erin is a

senior at Vassar.

ACKNOWLEDGMENTS

xix

We wish to give a special thanks to Orlo Otteson, our original “cracker-

jack” researcher who, over four years, helped us successfully tackle the

mountainous job of reviewing the vast literature on this subject.

We wish to thank all of our colleagues and friends who have been

so important in helping us sharpen our thinking on moral intelligence.

Just as important, they encouraged us to continue our research efforts

when the word “moral” was not a word one easily used in public

discourse.

These people also inspired us by their own demonstration on a day-

to-day basis of what it means to live in alignment!

A partial list from Doug: Kay May, my assistant and friend for a

quarter century and now one of my business partners; John Wright, the

best man at my wedding and my partner in launching my writing career

more than 20 years ago with The Simple Genius (You); the CEOs I have

been fortunate to work for and learn from—in order of their appearance,

they include Harvey Golub, Jeff Stiefler, Dave Hubers, Jim Cracciolo,

and now Ken Chenault; my partners at Lennick Aberman—Rick

Aberman, Jim Choat, Kathy Jordan, Kay May, Fred Mandell, Judy

Skoglund, Ben Smith, and Chuck Wachendorfer; the talented team of

senior executives I was privileged to lead at American Express

Financial Advisors before changing roles in September 2000—Teresa

Hanratty, Brian Heath, Jim Jensen, Marietta Johns, Steve Kumagai,

Becky Roloff, Sam Samsel, Norm Weaver, and Mike Woodward; Steve

Lennick, my cousin, friend and confidant; Carol Lennick, my sister;

Bob Day and Tom Turner, the two men who took a chance on me when

I was eager to start my business life at the ripe old age of 21—they

trained and developed me; Roy Geer, Row Moriarty, Richard Leider,

Larry Wilson, and Doug Baker Sr—all five are mentors and friends for

many years; and, very importantly, all the people I’ve had the opportu-

nity to serve as either their leader or their follower or both.

ACKNOWLEDGMENTS xx

A partial list from Fred: Kathryn Williams, Eric Rimmer, and Kelly

Garramone, my partners at KRW International and my other valued

KRW colleagues—Meg Armstrong, Randi Birk, Cari Bixel, Lauren

Culbert, Tom Crystal, Ann Depta, Mark Edwards, Dolly Etheridge,

John Ficken, Dannie Kennedy, Rita Mendenhall, Kim Merrill, TC

Moore, Marsha Nater, Nikky Shaffer, Liz Shamla, Alison Sharpe,

Heather Smallman, Ed Starinchak, Mark Tobin, and Don Waletzko and

my close personal friends of many years—Frank Verley, Tom

McMullen, John Manz, Dwight Cummins, Paul Harris, Bruce

McManus, Michael Nation, Paul Brown, and Dave Strofferahn.

Finally, we wish to acknowledge each other, Esmond Harmsworth,

and Jim Boyd. This book has been a labor of love, and we have loved

laboring together.

ACKNOWLEDGMENTS xxi

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There are few issues with more significant impact on life in and out of

organizations today than that of moral action. Crusades and jihads are

moral righteousness taken to harmful and even evil extents—hurting

others and demanding homogeneity of beliefs. The moral righteousness

involved in trying to fix, save, or punish others has led to some of the

most horrible episodes in human existence. Beyond the tragic loss of

life, there is the subjugation of the human spirit. There is the loss of

dreams and possibilities—the loss of spirit. Ironically, this travesty of

moral imperialism comes at the same time as people worldwide are

voicing the need for more spirituality and religion.

Most of us know right from wrong. In hundreds of studies of the

characteristics that differentiate outstanding from average leaders from

their less effective counterparts (both average and poor performers),

integrity has never appeared to distinguish high performers. Is this evi-

dence of a morally bankrupt system? No. It is that the moments of “out-

tegrity” are so egregious and shocking that we become preoccupied

FOREWORD BUILDING A BETTER CULTURE

xxiii

with them. In the process, we miss the many tests of our morality and

humanity that we face each day. For example, deciding how to promote

a product or service is enacted in the context of one’s values and an

organizational culture that encourages consistency with a set of shared

beliefs and norms.

The essential challenge of moral intelligence is not knowing right

from wrong, but doing versus knowing. There are people who are suf-

fering from mental illness and a small percentage of the population that

are psychopaths or sociopaths. All of these people may not “know” right

from wrong. But most of us are not in that category. So why don’t we

act appropriately more often? Most of us do—most of the time. Of the

hundreds of decisions we make each day, most of us consider what is

“right,” what will be better and help our community, organization, and

fellow humans. But we don’t always agree on what is right.

Values and Operating Philosophy This is where values and philosophy come into play. Our values are

based on beliefs and determine our attitudes. A value typically includes

an evaluation (i.e., good or bad designation) of an object or subject. Sets

of values form proscriptions and prescriptions (i.e., statements of what

not to do and what to do) that guide our daily life. Values also affect

how we interpret and perceive things and events around us. But decades

of research on values have shown little correlation to behavior.1

To understand people’s actions, we have to look behind specific val-

ues to uncover how an individual determines value. This can be called a

person’s “operating philosophy.” Research into typical operating

philosophies has resulted in a test that allows us to measure a person’s

xxiv MORAL INTELLIGENCE

1. Michael Hechter. “Values research in the social and behavioral sciences.” In Michael Hechter, Lynn Nadel, and Richard E. Michod, (eds.). The Origin of Values. New York: Aldine de Gruyter, 1993.

relative dominance among three different ways to determine the value

of a act, a project, a decision, how to spend your time, and so forth.2 Our

philosophy is the way we determine values.

For example, a consultant lists “family” as a dominant value, but

still spends five days a week away from his wife and two children, trav-

eling for his job. He says he’s enacting his value by providing enough

money for his family’s needs. By contrast, a manufacturing manager

who also lists “family” as his dominant value has turned down promo-

tions so he can have dinner each night with his wife and children.

The difference between those two men might be in how aware they

are of their true values, how aligned their actions are with those values,

or in the way they interpret their values. Accordingly, they reveal deep

differences in how each values people, organizations, and activities.

Such differences may reflect disparate operating philosophies—the

most common of which are pragmatic, intellectual, and humanistic.3

And although no one philosophy is “better” than another, each drives

people’s actions, thoughts, and feelings in distinctive ways.

FOREWORD xxv

2. Gordon W. Allport, P.E.Vernon, and Garnder Lindzey, Study of Values. Boston: Houghton Mifflin, 1960.; Chris Argyris and Don Schon, Theory in Practice Learning. San Francisco, CA: Jossey-Bass, 1982.; Clyde Kluckhohn. “Values and Value-Orientations in the Theory of Action.” In Talcott Parson and E.A. Shils, eds. Toward a General Theory of Action. Cambridge, MA: Harvard University Press, 1951. pp. 388-433.; Florence Kluckhohn and Fred Strodtbeck. Variations in Value Orientations. Evanston, IL: Row, Peterson & Co, 1961.; Milton Rokeach, The Nature of Human Values. New York: Free Press, 1973.; Shalom H. Schwartz, “Universals in the Content and Structure of Values: Theoretical Advances and Empirical Tests in 20 Countries,” Advances in Experimental Social Psychology, volume 25. NY: Academic Press, 1992. pp. 1-65.; Michael Hechter, “Values Research in the Social and Behavioral Sciences,” In Michael Hechter, Lynn Nadel, and Richard.E. Michod, eds. The Origin of Values. New York: Aldine de Gruyter, 1993. pp. 1-28.

3. “Assessing Your Operating Philosophy: The Philosophical Orientation Questionnaire” measures the relative dominance of each of these three for the person. Richard E. Boyatzis, Angela J. Murphy, and Jane V. Wheeler, “Philosophy as a Missing Link Between Values and Behavior,” Psychological Reports, 86 (2000): pp. 47-64.

The central theme of a pragmatic philosophy is a belief that useful-

ness determines the worth of an idea, effort, person, or organization.4

People with this philosophy often measure things to assess their value,

and believe that they’re largely responsible for the events of their lives.

No surprise, then, that among the emotional intelligence competencies,

pragmatics rank high in self-management. Unfortunately, their individ-

ualistic orientation often—but not always—pulls them into using an

individual contribution approach to management.

The central theme of an intellectual philosophy5 is the desire to

understand people, things, and the world by constructing an image of

how they work, thereby providing them some emotional security in pre-

dicting the future. People with this philosophy rely on logic in making

decisions, and assess the worth of something against an underlying

“code” or set of guidelines that stress reason. People with this outlook

rely heavily on cognitive competencies, sometimes to the exclusion of

social competencies. You might hear someone with an intellectual

philosophy say, for example: “If you have an elegant solution, others

will believe it. No need to try to convince them about its merits.” They

can use a visionary leadership style, if the vision describes a well-

reasoned future.

xxvi MORAL INTELLIGENCE

4. The Pragmatic Operating Philosophy emerged from “pragmatism” (as reflected in the works of John Dewey, William James, Charles Sanders Peirce, and Richard Rorty, ), “consequentialism” (as reflected in the works of C.D. Johnson, and P. Pettit), “instrumentalism” (as reflected in the works of John Dewey), and “utilitarianism” (as reflected in the works of Jeremy Bentham, and John Stuart Mill). See the Boyatzis, Murphy, and Wheeler article cited earlier for the full references.

5. The Intellectual Operating Philosophy emerged from “rationalism” (as reflected in the works of Rene Descartes, Gottfried Wilhelm Leibniz, Benedict de Spinoza), and the various philosophers claiming rationalism as their etiological root, such as Georg Wilhelm Friedrich Hegel and Jurgen Habermas, as well as the philo- sophical structuralists (Claude Levi-Strauss and Jean Piaget), and postmodernists (Friedrich Nietzsche). See the Boyatzis, Murphy, and Wheeler article cited ear- lier for the full references.

The central theme of a humanistic philosophy is that close, per-

sonal relationships give meaning to life6. People with this philosophy

are committed to human values; family and close friends are seen as

more important than other relationships. They assess the worth of an

activity in terms of how it affects their close relations. Similarly, loyalty

is valued over mastery of a job or skill. Where a pragmatist’s philoso-

phy might lead her to “sacrifice the few for the many,” a humanistic

leader would view each person’s life as important, naturally cultivating

the social awareness and relationship management competencies.

Accordingly, they gravitate toward styles that emphasize interaction

with others.

Each one of us believes in these three value orientations (i.e.,

pragmatic value, intellectual value, and human value). But most of us

will prioritize three value orientations differently at different stages in

our lives.

The point is that we have to be more aware both of our values and

how we value—our philosophy. We need to be sensitive to those who

have different values and different philosophies if we are to live

together and make the world a better place. And we need to be sensitive

to such differences if we are to have adaptive, resilient, and innovative

organizations. Diversity brings us innovation, but only if we are open to

it and respect it.

In this book, Doug Lennick and Fred Kiel define moral intelligence

as, “the mental capacity to determine how universal human principles

should be applied to our values, goals, and actions.” They argue we are

“hard wired” to be moral but often stray from the path. Within each of

us are the values and basis for our moral compass. Each of us should

pay attention to our moral compass often—more often than we do.

FOREWORD xxvii

6. The Human Operating Philosophy emerged from “communitarianism” (W. F. Brundage), “hermeneutics” (Hans-Georg Gadamer), “humanism” (Francesco Petrarch and R.W. Sellars), and “collectivism” (R. Burlingame and W.H. Chamberlin).

Lennick and Kiel’s exploration of this topic could not have come at a

more important time.

Cultural Relativism and Moral Horizons of Significance We are exposed to the vast differences in the world on the Internet, tel-

evision, movies, and newspapers. We see it in our organizations and

schools. We see it walking down the street of most cities of the world.

Is every culture and subgroup within it assured that its values and phi-

losophy are “OK” with the rest of us? Maybe not.

In his 1991 book, The Ethics of Authenticity, McGill University

Professor and prominent philosopher, Charles Taylor, claimed that cul-

tural relativism and postmodernism both violated basic ethical stan-

dards.7 He claimed that cultural relativism (“everyone has their own

morality based on their situation and culture”) taken to its ultimate con-

clusion becomes moral anarchy. It breeds a form of egocentrism and

selfishness. It suggests everyone is in their own world. Similar to the

argument in Moral Intelligence, Taylor suggests that there are, among

humans and society, “moral horizons of significance.” These are the

universals that Lennick and Kiel propose are so crucial to organiza-

tional success. We know it is wrong to kill another human. But we can

be brought to that point by contingencies. Is it acceptable to kill some-

one to defend your family? To get food for yourself? To take their shirt

or sneakers because you like them and cannot afford to buy them?

Because they annoy you? Because they have insulted your faith?

Taylor’s concept is central to the application of the ideas in this book.

How do we determine what exceptions to moral universals are justified

and which show a lack of moral intelligence?

xxviii MORAL INTELLIGENCE

7. Charles Taylor. The Ethics of Authenticity. Cambridge: Harvard University Press, 1991.

But this brings us back to whose values and philosophy are right or

more right than the others? Without a high degree of moral intelligence,

Lennick and Kiel illustrate in their book with marvelous and moving

stories, we fall back into fighting to defend our own views as best—and

imposing them on others.

In deconstructing the components of moral intelligence, Lennick

and Kiel show us how four clusters of skills integrate to form this

capability: integrity, responsibility, compassion and forgiveness, and

emotions. They offer many ideas as to how we can use our moral

intelligence to evoke moral intelligence in others. Their combined effect

will be more effective organizations. Why? First, we will be proud of

where we work and for what it stands. Therefore, we will feel more

committed to the organization, its culture, and vision. Third, we will

access and utilize more of our own talent (and that of others around us)

because we are free from guilt and shame. And fourth, it is the right

thing to do!

Believing and Belonging There is another crucial business impact from values, philosophy, and

collective moral intelligence—they form the basis of our organizational

vision, purpose, and culture. We want to believe in what we are doing.

We want to feel that we are contributing and our work has some mean-

ing. But looming labor pool demographics and skill shortages suggest

that, as McKinsey and Company said, we are in a “war for talent.”8 This

will become a battle for the hearts and minds (and even the spirit) of

people your organization wishes to attract, keep, and motivate. Over the

course of the next decades, an organization’s vision, sense of purpose,

and culture will become even more significant recruitment differentia-

tors to discerning job applicants.

FOREWORD xxix

8. Elizabeth Chambers, Mark Foulon, Helen Hanfield-Jones, Steven Hankin, and Edward Michaels, III. The War for Talent. The Mckinsey Quarterly, #3, 1998.

Moral Intelligence In the following pages, you will be provoked into reflecting on your

own beliefs and style of using them. You will be inspired by reading

about effective executives with high moral intelligence. You will be

ashamed and embarrassed reading about ineffective executives who do

not seem to be able to spell moral intelligence, nonetheless, live it. The

apparent simplicity of their argument and smoothness of their writing

style should not be misunderstood. This material is deep and significant.

The impact of moral intelligence is much more than the long-term

success of your organization. It is the preservation of our civilization

and species.

—Richard E. Boyatzis

January 31, 2005

xxx MORAL INTELLIGENCE

George Kline was a venture capitalist. For those who knew him in the

business world, he seemed to be a person of high integrity and truly

“Minnesota nice.” But in 2003, George was sentenced to six and a half

years in federal prison and fined $5.25 million for insider trading. His

two sons were also convicted of felonies. News reports at the time

recounted how trading stock tips over coffee breaks at the IDS Center in

downtown Minneapolis had mushroomed into a massive deception that

engulfed George, his sons, and several business associates.

Contrast this to Craig Ueland’s story. Craig is the CEO of the

Russell Investment Group in Tacoma, Washington, a highly respected

and admired international financial services company with over

$125B in assets under management. It is owned by Northwestern

Mutual in Milwaukee. Craig told us that when he was in college, it

occurred to him that it would be useful for him to decide what princi-

ples and values he would honor as he entered his business career. He

was an undergraduate at Stanford at the time and said he can still recall

where he was walking on campus when he had this insight. Craig

explained, “I decided that I would live by three principles. First, when

INTRODUCTION

xxxi

faced with a major decision, I would try to do what was best for society,

next what was best for the business and finally, I would consider my

own needs. Secondly, I decided that until I was 30 (later he changed this

to age 35), when faced with a career decision, I would choose the

opportunity that allowed me to learn the most and secondarily would

consider the money involved.” Then Craig told us his third principle. “I

vowed that I would take all my vacations!” This formula has obviously

worked very well for Craig. He’s at the peak of his career, is happily

married, and is a very engaged father for his two small children.

When George and Craig were both young college students, we

imagine it would have been difficult to see any major differences

between them—both from good homes, both very ambitious, and both

excited about moving into a business career. But Craig deliberately

charted his life course in a way that George apparently neglected.

One is now the CEO of a major global business and the other is partic-

ipating in a government-sponsored residential program—a federal

prison camp!

In the mid-1990s, well before the scandals of Enron and WorldCom

and before the dot.com bubble burst, we had a conversation both

authors vividly recall. Doug was then executive vice president, Advice

and Retail Distribution for American Express Financial Advisors. Doug

was well-known for developing a high performing sales force of

approximately 10,000 financial advisors and was an early champion of

emotional intelligence skills training at American Express. Fred, a

pioneer in the field of executive coaching, was a psychologist and

co-founder of a leading executive development company and then as

now, actively engaged in helping senior executives improve their per-

sonal performance as leaders.

As we talked, we realized that we had some common ideas about

the ingredients of high performance that we were both struggling

to conceptualize. We agreed on the importance of emotional intelli-

gence—the constellation of self-awareness, self-management, social

xxxii MORAL INTELLIGENCE

awareness, and relationship management skills that are now commonly

regarded as critical to success in the workplace.1 We discovered, though,

that neither of us thought emotional intelligence was sufficient to assure

consistent, long-term performance.

In the course of nearly 30 years, we had collectively worked as

business executives, entrepreneurs, and leadership consultants to chief

executives and senior leaders of Fortune 500 companies, large privately

held companies, and start-ups. We had each coached hundreds of lead-

ers. The most successful of them all seemed to have something in

common that went beyond insight, discipline, or interpersonal skill. We

also spoke about noted public figures with masterful emotional intelli-

gence skills who would sway like reeds in the wind when faced with

morally loaded decisions. We hypothesized that there was something

more basic than emotional intelligence skills—a kind of moral com-

pass—that seemed to us to be at the heart of long-lasting business

success. We decided to label this “something more” moral intelligence.

Moral intelligence is “the mental capacity to determine how uni-

versal human principles should be applied to our values, goals, and

actions.” In the simplest terms, moral intelligence is the ability to dif-

ferentiate right from wrong as defined by universal principles. Universal

principles are those beliefs about human conduct that are common to all

cultures around the world. Thus, we believe they apply to all people,

regardless of gender, ethnicity, religious belief, or location on the globe.

Our shared notion that moral intelligence was key to effective lead-

ership led us to wonder: How do leaders get to be moral—or not? Are

people born that way? Does our human “hardwiring” predispose us to

be concerned for others? What accounts for the wide differences in

moral behavior among leaders? Have we learned anything new about

human nature over the past few decades that could help us understand

the impact of moral sensibilities on leadership behavior? What do the

INTRODUCTION xxxiii

1. These skills were highlighted in Goleman, D. Working with emotional intelli- gence. New York: Bantam Books (1998).

fields of philosophy, social biology, developmental psychology, cultural

anthropology, and the neurosciences have to say about these questions?

Before progressing to further develop our hypothesis, we hired

crackerjack researcher, Orlo Otteson, to help us review the academic lit-

erature on the moral dimensions of human nature and experience. Orlo

first reviewed over 1,800 article abstracts referencing moral leadership

from the fields of business, religion, philosophy, anthropology, sociol-

ogy, and political science but found few in-depth moral leadership dis-

cussions. Most articles focused on a specific kind of leadership

(business, political, religious), on a specific leadership problem, or on

the general need for honest and upright leadership. He then surveyed

nearly 400 books and articles on morality from the disciplines of phi-

losophy, psychology, biology, and neuroscience, distilling their insights

as they applied to leadership and organizations.

Meanwhile, we began to organize our observations of the many

hundreds of leaders we had encountered in our work. As our conviction

about the importance of moral intelligence grew, we conducted in-depth

interviews with 31 CEOs and 47 other senior executives to learn the

precise ways that they deployed their moral intelligence to achieve

important personal and business goals. We also discussed our ideas with

many talented leaders and colleagues whose penetrating feedback

helped us deepen and refine our approach to moral leadership.2

Scientific research supported our initial notions about the impor-

tance of moral intelligence for individuals, organizations, and societies.

But it was our interviews and observations of leaders that taught us

exactly how the best of them used their moral intelligence to overcome

obstacles, consistently outperform their rivals, and quickly pick up the

pieces when they occasionally missed the mark.

Having analyzed their experiences, we concluded that strong moral

skills are not only an essential element of successful leadership, but are

xxxiv MORAL INTELLIGENCE

2. List of those we interviewed and with whom we discussed book concepts appears at the end of the Introduction.

also a business advantage. Indeed, the most successful leaders in any

company are likely to be trustworthy individuals who have a strong set

of moral beliefs and the ability to put them into action. Furthermore,

even in a world that occasionally rewards bad behavior, the fastest way

to build a successful business is to hire those people with the highest

moral and ethical skills you can find.

Business leaders have gotten a bad rap in the first years of this

decade. Yes, of course, there are the “bad eggs,” and they get a lot of

press. But most business leaders are not like those in the newspapers.

Consider, for example, a story we heard from Peter Georgescu,

chairman emeritus of Young & Rubicam, who built a large advertising

and marketing company and is widely known as an inspiring leader.

“Back in the 1980s, Warner Lambert approached us because they

wanted to diversify their consumer products by selling sunglasses. They

already had a celebrity spokesperson lined up, and they wanted us to

advise them on how to roll out the new product. They told us we were

competing with five other agencies to produce the best campaign. After

we did the research, our group concluded that Warner Lambert wasn’t

going to be able to get enough market share to make the new product

line successful. We had significant debate about whether to present a

campaign anyway, but finally our group went to Warner Lambert and

said, “We know this isn’t what you want to hear, but we think the sun-

glasses line is a bad idea.” We explained our reasoning. They looked a

little surprised, said, “Thank you,” and that was the end of the meet-

ing—we had no idea what they thought.

Then a few weeks later, Warner Lambert called us and said, “You

know, we agree with your analysis. No other agency was smart enough

or honest enough to tell us, but you did. We have decided not to launch

the line. Because of your honesty, though, we are going to give you

some other business with us, and you won’t have to compete for it.”

Of all the executives we have queried about their beliefs and values,

not one has hinted that they are driven to get to the top at all costs or that

diddling with the books is a reasonable tactic for achieving results.

INTRODUCTION xxxv

Likewise, none have stated that their work is only about increasing

shareholder value. True, we might have been hearing politically correct

answers, but with only a little bit of further questioning, we discovered

all the leaders we interviewed have a moral compass—a set of deeply

held beliefs and values—that drives their personal and professional

lives. They revealed beliefs such as being honest no matter what; stand-

ing up for what is right; being responsible and accountable for their

actions; caring about the welfare of those who work for them; and own-

ing up to mistakes and failures. They told us vivid stories about how

such beliefs played into the choices they made and the way they

behaved. For some, it was the first time they had spoken out loud about

their moral compass and its contribution to their business performance

because many of those we interviewed think they shouldn’t wear their

beliefs on their sleeves and that discussions of moral values don’t

belong at work. We think work is exactly where moral values should

be—and be discussed.

Why? All the leaders we interviewed recognize the importance of

values to their business success. But the courageous ones who routinely

communicate about their core beliefs and values—personal values as

well as universal human principles they endorse—have discovered a

great source of organizational energy. When a leader is explicit about

what he or she believes and values, it becomes much easier for others to

hold him or her accountable. Furthermore, it allows others who share

those beliefs and values to say to themselves, “Hey, I agree with that.

This is why I come to work, too! This is a place I can be myself and

really be inspired to produce results.” When a leader is explicit about

what he or she believes and values, creates a vision, strategy and goals

aligned with those values, and then behaves in alignment with all of

that—followers respond with deep trust of their leader.

Four years into our research and experimentation with moral intel-

ligence tools, the new century began and with it the corporate account-

ing scandals that dominated its headlines. We realized it was time to go

xxxvi MORAL INTELLIGENCE

public with our findings about the relationship between morality and

business performance. While business practitioners were now defen-

sively eager to discuss compliance-based ethics, no one we knew was

focusing on the personal character, principles, and moral skills that

must be baked into every leader and every organization that wants to

ensure long-term sustainable results. The research that forms the basis

of this book is largely observational and case study-based. Over the next

several years, we plan to conduct quantitative research in partnership

with academic and business institutions. We will be studying the rela-

tionship between leaders’ moral intelligence and the long-term financial

performance of their companies. But leaders who face today’s urgent

business challenges can’t afford to wait for further research to confirm

the importance of moral intelligence to their success. Countless leaders

we have coached and trained in the last few years have told us that our

methods for enhancing moral intelligence are making a difference in

their own performance, helping them inspire higher performance in

their workforces, and contributing to better financial results.

We offer this book as a roadmap for leaders to find and follow their

moral compasses. Although we believe that doing the right thing is right

for its own sake, we are convinced that leaders who follow their moral

compasses will find that it is the right thing for their businesses as well.

This book is not about telling you what is right or wrong. It’s not about

helping you try to become a moral paragon. We are all imperfect, none

more so than your authors. Though we all want to be our best, most

ideal selves, we face daily obstacles and temptations that threaten our

performance as leaders and our integrity as human beings. In this book,

we hope you will find the tools to become the best leader you can be.

You—and your organization—deserve nothing less.

INTRODUCTION xxxvii

Leaders Interviewed We are deeply indebted to the large group of leaders who contributed to

our thinking and research. Our interview subjects were especially gen-

erous with their time and candid in their self-assessments.

Douglas Baker CEO, Ecolab Inc.

Dan Brettler CEO and Chairman, Car Toys, Inc.

Kenneth Chenault CEO and Chairman, American Express Company

Paul Clayton CEO Jamba Juice

Michael Connolly Former CEO, Heartland Juice; former CEO, Great Clips

Stan Dardis CEO and President, Bremer Financial Corporation

Lynn Fantom CEO, ID Media

Paul Fribourg CEO and Chairman, Conti-Group Companies

Peter Georgescu Chairman Emeritus, Young & Rubicam

Harvey Golub Chairman of the Board of Directors, Campbell’s Soup Company and Chairman and CEO (retired), American Express Company

Brian Hall CEO, Thomson Legal & Regulatory Group

Don Hall, Jr. CEO and Vice Chairman, Hallmark Cards

Dick Harrington CEO, The Thomson Corporation

David Hubers CEO (retired), American Express Financial Advisors

Ken Kaess CEO, DDB Worldwide

David Kenny CEO and Chairman, Digitas, Inc.

Mike McGavick CEO and Chairman, Safeco Corporation

Rowland Moriarty, Ph.D. CEO and Chairman, Cubex Corporation; Founding Director, Staples; Founding Director, PetsMart

Mark Oja CEO ACTIVEAID

Larry Pinnt Chairman, Cascade Natural Gas

Michael Phillips Chairman, The Russell Investment Group

xxxviii MORAL INTELLIGENCE

Keith Reinhard Chairman, DDB Worldwide

Spenser Segal CEO, ActiFi

Dale Sperling CEO, Unico Real Estate Company

Jay Sleiter CEO and Chairman, BWBR Architects

Mayo Shattuck CEO and Chairman, Constellation Energy

Lynn Sontag CEO, MENTTIUM Corporation

Craig Ueland CEO and President, The Russell Investment Group

Charlie Zelle CEO and Chairman, Jefferson Bus Lines

Ed Zore CEO and President, Northwestern Mutual

Jim Berrien President, Forbes Magazine

Brenda Blake Senior Vice President, Global Leadership Marketing, American Express

Walt Bradley Financial Advisor, Thrivent Financial for Lutherans

Sam Bronfman Former Senior Vice President, Seagrams, Inc.

George Brushaber President, Bethel University

Mike Campbell President, Safeco Financial Institution Solutions

Cindy Carlson Former President, Capital Professional Advisors

Kevin Carter Vice President, Diversity Iniatives, Safeco Corporation

Rick Clevett Vice President of Human Resources, The Carlson Companies

Eric Drummond-Hay Vice President, Chief Actuary, SBI, Safeco Corporation

Dave Edwards Senior Vice President, International Information Management, American Express

Patrick Grace Former Senior Vice President, The Grace Corporation

Jim Greenawalt Senior Vice President Executive Development, Thomson Legal & Regulatory Group

Kim Garland Vice President, National SPI Auto, Safeco Corporation

INTRODUCTION xxxix

Jim Swegle Vice President, National SPI Property, Safeco Corporation

Maurice Hebert Senior Vice President and Controller, Safeco Corporation

Brian Heath Senior Vice President and General Manager, American Express Financial Advisors

Lori Kaiser Former Senior Vice President, Cray Computer Co.

M’Lynn Hoefer Senior Vice President, MENTTIUM Corporation.

Mike Hughes Senior Vice President, SBI Regular , Safeco Corporation

Gary Kessler Senior Vice President of Human Resources Honda America

Diane Kozlak Vice President, MENTTIUM Corporation

Ken Krei President, Wealth Management Group, M&I Bank

Jeanne Lind Director of Automation (SBI), Safeco Corporation

Karen Lane Former Governor’s Staff, State of Washington

Mike LaRocco Co-President, Product, Underwriting and Claims, Safeco Corporation

Dale Lauer Executive Vice President, Claims, Large Commercial, SFIS and Surety Safeco Insurance

Harvey Leuning Associate Pastor, Gloria Dei Lutheran Church, St. Paul, MN

Ann Levinson Deputy Director, Seattle Monorail Authority

Don MacPherson Co-President, Modern Survey

Christine Mead Co-President, Service, Technology and Finance and Chief Financial Officer, Safeco Corporation

Pam Moret EVP of Products and Marketing, Thrivent Financial for Lutherans

Eric Morgan Former Senior Vice President, Lawson Software

Allie Mysliwy EVP of Human Resources and Operations, Safeco Corporation

Gary O’Hagen President of Coaches Division, IMG

Carla Paulson Senior Vice President of Human Resources, Bremer Financial Group

xl MORAL INTELLIGENCE

Tom Perrine Vice President, Cardinal Health

David Risher Former Senior Vice President, Amazon.com

Pat Roraback Vice President, M&I Bank

Jim Ruddy EVP and General Counsel, Safeco Insurance

Joe Schlidt Vice President, M&I Bank

John Schlifske Senior Vice President, Northwestern Mutual

Tom Schinke Managing Division Vice President, Thrivent Financial for Lutherans

Jim Thomsen Senior Vice President of Distribution, Thrivent Financial for Lutherans

Kim Vappie President and Chief Operating Officer, MENTTIUM Corporation

Mike Woodward Senior Vice President, American Express Financial Advisors

Thought Partners We greatly appreciate our many colleagues and mentors whose input

has helped sharpen our thinking about the moral dimensions of leader-

ship. They include

Rick Aberman, Ph.D. Psychologist, emotional intelligence expert and coauthor of Why Good Coaches Quit—and How You Can Stay in the Game

Reuven Bar-On, Ph.D. University of Texas Medical Branch, in the Department of Psychiatry and Behavioral Sciences, where he directs research in emotional and social intelligence

Richard Boyatzis, Ph.D. Professor and Chair of the Department of Organizational Behavior at the Weatherhead School of Management at Case Western Reserve University, and co-author of Primal Leadership: Realizing the Power of Emotional Intelligence

INTRODUCTION xli

Kate Cannon President, Kate Cannon and Associates

Robert Caplan, Ph.D. Director, Beach Cities Health District, an organization charged with promoting mental and physical wellness in three adjacent communities in Southern California

Cary Cherniss, Ph.D. Director of the Rutgers University Organizational Psychology Program, professor of Applied Psychology and coauthor of The Emotionally Intelligent Workplace

Stephen Covey, Ph.D. Author of The 7 Habits of Highly Effective People whose conversations with Doug in the early 1990s reinforced early versions of our alignment model

Vanessa Druskat Associate Professor, University of New Hampshire,Whittemore School of Business and Economics

Robert Emmerling, Ph.D. Consultant and researcher specializing in the application of emotional intelligence concepts in the workplace

Jim Garrison President and co-founder (with Mikail Gorbalhev) of the State of the World Forum and author of America as Empire

Roy Geer, Ph.D. Psychologist, consultant, and co-author (with Doug Lennick) of How to Get What You Want and Remain True to Yourself

Daniel Goleman, Ph.D. Co-director of the Consortium for Research on Emotional Intelligence in Organizations at Rutgers University, author of Emotional Intelligence, Working with Emotional Intelligence, and co-author of Primal Leadership: Realizing the Power of Emotional Intelligence

Marilyn Gowing, Ph.D. Vice President for Public Sector Consulting and Services with the Washington office of AON Consulting

Darryl Grigg, Ph.D. Psycholgist

Dorothy Hutcheson Head of School, Nightingale-Bamford School for Girls

xlii MORAL INTELLIGENCE

Jennifer Hugstad-Vaa, Ph.D. Professor, St. Mary’s University Minnesota

Ruth Jacobs Director of Research and Technology at McClelland Center for Research and Initiatives, The Hay Group

Stuart Kantor, Ph.D. Co-founder and principal of Red Oak Consulting, an executive development firm

Carol Keers Co-founder, Change Masters Inc

Kathy Kram, Ph.D. Professor of Organizational Behavior at the Boston University School of Management

Richard Leider Founding partner of The Inventure Group and author of Repacking Your Bags, the Power of Purpose, and Life Skills

Jim Loehr, Ph.D. Performance psychologist and co-author of The Power of Full Engagement: Managing Energy, Not Time, Is the Key to High Performance and Personal Renewal and author of Stress for Success

Fred Luskin, Ph.D. Senior Fellow at the Stanford Center on Conflict and Negotiation, co-founder of the Stanford University Forgiveness Project, and author of Forgive for Good

Stephen Kelner, Jr. Global Knowledge Manager, Egon Zehnder International, Inc.

David Kidd Partner, Egon Zehnder International, Inc.

Matthew Mangino Consultant Director, Johnson & Johnson

Jim Mitchell Executive Fellow, Leadership at the Center for Ethical Business Cultures in Minneapolis

Tom Mungavan President and co-founder, Change Masters, Inc.

John Nicolay, MBA MBA instructor, University of Minnesota

Hy Pomerance, Ph.D. Co-founder and principal of Red Oak Consulting, an executive development firm

Richard Price, Ph.D. Professor of Psychology and Business Administration at the University of Michigan, and Senior Research Scientist at the Institute for Social Research

INTRODUCTION xliii

Fabio Sala, Ph.D. Associate Director, Learning and Development, Millennium Pharmaceuticals, Inc.

Tony Schwartz Co-author of The Art of the Deal and The Power of Full Engagement: Managing Energy, Not Time, Is the Key to High Performance and Personal Renewal and author of What Really Matters: Searching for Wisdom in America

Hersh Shefrin, Ph.D. Professor of Finance at the Leavey School of Business, Santa Clara University, and author of Beyond Greed and Fear

Judy Skoglund Partner, Lennick Aberman Group

Lyle Spencer, Ph.D. President, Spencer Research and Technology, co-founder of Competency International, Cybertroncis Research Fellows, Director, Human Resource Technologies, author and independent

Therèse Jacobs Stewart, Master Psychologist Ph.D.

Jeff Stiefler CEO, Digital Insights

Redford Williams, Ph.D. Professor of Psychiatry and Behavioral Sciences, Professor of Medicine, and Director of the Behavioral Medicine Research Center at Duke University Medical Center

Larry Wilson Founder of Wilson Learning and Pecos River Learning Center, author of The One Minute Sales Person and Changing the Game: The New Way to Sell and co-author of Stop Selling, Start Partnering

xliv MORAL INTELLIGENCE

Part One MORAL

INTELLIGENCE

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Gary O’Hagen is a division president of International Management

Group, the world’s largest sports marketing and talent representation

agency. Gary is an intense, competitive, and imposing man who looks

like the football player he once was. As a young man, he was drafted

and then cut by the San Francisco 49ers, then picked up and cut by the

New York Jets. Gary was devastated but determined to find another

route to high achievement. He got a job as a financial trader with

Solomon Brothers and attended law-school classes every weekday

night. When his grandfather died, Gary was expected to attend the

wake, the funeral, and a host of other family gatherings. Gary was anx-

ious about falling behind at work and school, so he thought he could

attend the funeral, make a quick appearance at the after-funeral lunch,

after which he’d head back to work. But when he got to the restaurant,

GOOD BUSINESS

1

3

the significance of his family’s loss finally registered, and Gary realized

that his priorities were out of whack. He called his boss and told him he

wasn’t coming in to work. His boss was concerned and upset, but Gary

stayed. He knew that if he didn’t have the compassion to help his fam-

ily in that moment, he would never amount to much either personally or

professionally.

Gary O’Hagen is only one of the many leaders we know with high

moral intelligence, those who do their best to follow their moral com-

pass. They do it because they believe it’s the right thing to do. A funny

thing happens when leaders consistently act in alignment with their

principles and values: They typically produce consistently high per-

formance almost any way you can measure it—gross sales, profits,

talent retention, company reputation, and customer satisfaction. We

think this is no accident. The successful leaders we know always attrib-

ute their accomplishments to a combination of their business savvy and

their adherence to a moral code. Doug Baker, CEO of Ecolab, a $4

billion dollar cleaning-products manufacturer, tells us that “living by

my personal moral code is one of the key reasons I have this job.” Ed

Zore, CEO of Northwestern Mutual, says, “Being moral—which to me

means being fair, predictable, up-front and not devious—all of this has

been very important in my career. Everybody knows what I stand for.

People know that we will never, ever be deceitful. We won’t leave a

nickel on the table, but in the end our word is our bond, and this is a real

advantage in business because people want to deal with us and want to

deal with me.” Gary Kessler, a vice president with the Honda Motor

Company, credits his principles and values for his career success. “I

was VP of a business unit at Bausch and Lomb when I was 36 and at

Honda when I was 45. I think I had the good fortune of working with

people who recognized that I had sincerity and a conviction to do the

right thing along the way.”

4 MORAL INTELLIGENCE

A Special Kind of Intelligence. Each of these leaders and others you

will meet throughout this book are morally gifted. They are high in

moral intelligence. Most of us are familiar with other kinds of intelli-

gence, such as our cognitive intelligence (IQ) and our technical intelli-

gence. IQ and technical intelligence are undeniably important to a

leader’s success. Leaders need to be good learners (IQ) who have

expertise about their particular business (technical) areas. We call cog-

nitive and technical intelligence threshold competencies because they

are the price of admission to the leadership ranks. They are necessary

but not sufficient for exceptional performance. They don’t help you

stand out from the competitive crowd because your rivals’ leadership

teams have as much basic intelligence and business savvy as you do.

Intelligence that Makes the Difference. To outpace your competition,

you need to cultivate different kinds of intelligence we call differentiat-

ing competencies. Moral intelligence and emotional intelligence are two

types of intelligence that are difficult for your competition to copy.

Many corporate leaders ignore these differentiating competencies

because they are soft skills that are difficult to measure. In recent years,

however, an increasing number of organizations have realized the per-

formance benefits of emotional intelligence. Daniel Goleman deserves

enormous credit for bringing emotional intelligence out of the academic

closet and into the tough-minded halls of commerce. His books on emo-

tional intelligence provide a rich and compelling case for the impor-

tance of emotional skills to corporate leaders.1

Although emotional intelligence is widely recognized as a business

tool, its definition is still evolving. In 1990, Professors Peter Salovey

of Yale University and John Mayer of the University of New Hampshire

first coined the term. Their original definition of emotional intelligence

CHAPTER 1 • GOOD BUSINESS 5

1. For example, Daniel Goleman. Emotional Intelligence: Why It Can Matter More Than IQ. New York: Bantam, 1995, and Working with Emotional Intelligence. New York: Bantam, 1998.

was “the ability to monitor one’s own and others’ feelings, to discrimi-

nate among them, and to use this information to guide one’s thinking

and action.” They identified the components of emotional intelligence:

• Appraising emotions in self and others

• Regulating emotions in self and others

• Using emotions adaptively

Salovey later expanded those into five domains, which Dan Goleman

adapted in 1995 in Emotional Intelligence: Why It Can Matter More

Than IQ:2

• Knowing one’s emotions (self-awareness)

• Managing emotions

• Motivating oneself

• Recognizing emotions in others

• Handling relationships

In 1997, Salovey and Mayer recharacterized emotional intelligence as

“the ability to perceive, appraise, and express emotion accurately and

adaptively; the ability to understand emotion and emotional knowledge;

the ability to access and/or generate feelings when they facilitate

thought; and the ability to regulate emotions in ways that assist

thought.” The revised components became

• Perceiving and expressing emotion

• Using emotion in cognitive activities

• Understanding emotions

• Regulation of emotions

6 MORAL INTELLIGENCE

2. Ibid.

Other experts in the field of emotional intelligence offer slightly differ-

ent twists, but the definitions are consistent with those of Salovey,

Mayer, and Goleman.

Moral intelligence is new to the playing field. Just as emotional

intelligence and cognitive intelligence are different from one another,

moral intelligence is another distinct intelligence. Moral intelligence is

our mental capacity to determine how universal human principles—like

those embodied by the “golden rule”— should be applied to our per-

sonal values, goals, and actions. This book focuses on four principles

that are vital for sustained personal and organizational success:

• Integrity

• Responsibility

• Compassion

• Forgiveness

Integrity is the hallmark of the morally intelligent person. When we act

with integrity, we harmonize our behavior to conform to universal

human principles. We do what we know is right; we act in line with our

principles and beliefs. If we lack integrity, by definition, we lack moral

intelligence.

Responsibility is another key attribute of the morally intelligent

person. Only a person willing to take responsibility for her actions—

and the consequences of those actions—will be able to ensure that her

actions conform to universal human principles. Compassion is vital

because caring about others not only communicates our respect for oth-

ers, but creates a climate in which others will be compassionate toward

us when we need it most. Forgiveness is a crucial principle, because

without a tolerance for mistakes and the knowledge of our own imper-

fection, we are likely to be rigid, inflexible, and unable to engage with

others in ways that promote our mutual good.

CHAPTER 1 • GOOD BUSINESS 7

Compassion and forgiveness operate on two levels: first in how we

relate to ourselves and second, in how we relate to others. Since we

have yet to meet a person with perfect moral intelligence, putting prin-

ciples into action requires that when we make inevitable mistakes, when

our behavior fails to conform to universal human principles, we need to

be able to treat ourselves with compassion and forgiveness. If we are

not gentle and forgiving of ourselves, we will not have the energy to

move forward to build our moral capacity. Similarly, to inspire others to

enhance their moral intelligence, we need to treat others with compas-

sion and forgiveness.

Research tells us that emotional intelligence contributes more to

life success than intellectual or technical competence. Emotional intel-

ligence can help you behave with great self-control and interpersonal

savvy. But emotional intelligence alone won’t keep you from doing the

wrong thing. Moral incompetence surfaces in moments when personal

or business goals conflict with core values. Just about everyone has

worked with someone who had great interpersonal skills but dropped

the ball on a moral issue—perhaps an employee who let a colleague

take the blame for something that was undeserved or a manager who

gave an inflated performance rating to the boss’ nephew. But until now,

no one has paid much attention to systematically developing moral

intelligence—even though the best leaders know it’s their secret

weapon for lasting personal and organizational performance.

Some competencies that appear on lists of emotional competencies

have a definite moral flavor, such as the ones listed here (from Daniel

Goleman’s Working with Emotional Intelligence):

• Have a guiding awareness of (personal) values and goals

• Voice views that are unpopular and go out on a limb for what is right

• Act ethically and are above reproach

• Build trust through their reliability and authenticity

8 MORAL INTELLIGENCE

• Admit their own mistakes and confront unethical actions in others

• Take tough principle stands even if they are unpopular

We believe it is more accurate to describe them as moral competencies.

They are aspects of the four principles we describe and, in this book, we

explore these attributes as well as the other competencies we see pres-

ent in integrity, responsibility, compassion, and forgiveness. Perhaps it

has been safer to think of these clearly moral competencies as emo-

tional competencies because the culture of business in the last half

century has discouraged all of us from talking about the “m” word. If

there is a silver lining to the recent corporate scandals, it is that

moral lessons are inescapable. The time has come to openly acknowl-

edge the contribution of moral intelligence to effective leadership and

sustainability.

Although both emotional intelligence and moral intelligence come

into play when moral decisions are at stake, they are not the same.

Emotional intelligence is values free. Moral intelligence is not.

Emotional skills can be applied for good or evil. Moral skills, by defi-

nition, are directed toward doing good.

Emotional intelligence and moral intelligence, though distinct, are

partners. Neither works in a truly effective way without the other. In

Primal Leadership: Realizing the Power of Emotional Intelligence,

Goleman and his co-authors, Richard Boyatzis and Annie McKee,

tackle the boundary between emotional and moral intelligence when

they discuss how good and bad leaders can use the same emotional

competencies:

Given that adept leaders move followers to their emotional

rhythm, we face the disturbing fact that, throughout

history, demagogues and dictators have used this same

ability for deplorable ends. The Hitlers and Pol Pots of the

world have all rallied angry mobs around a moving—but

destructive—message. And therein lies the crucial differ-

ence between resonance and demagoguery…

CHAPTER 1 • GOOD BUSINESS 9

Demagoguery casts its spell via destructive emotions, a

range that squelches hope and optimism as well as true

innovation and creative imagination (as opposed to cruel

cunning). By contrast, resonant leadership grounded in a

shared set of constructive values (our emphasis) keeps emo-

tions resounding in the positive register. It invites people to

take a leap of faith through a word picture of what’s possi-

ble, creating a collective aspiration.3

Without a moral anchor, leaders can be charismatic and influential in a

profoundly destructive way. As Primal Leadership emphasizes, truly

effective leadership is “grounded in a shared set of constructive val-

ues.”4 Without knowledge of those values— in other words, moral intel-

ligence—the skills of emotional intelligence are ultimately ineffective

in promoting high performance.

Moral intelligence is not just important to effective leadership—it

is the “central intelligence” for all humans. Why? It’s because moral

intelligence directs our other forms of intelligence to do something

worthwhile. Moral intelligence gives our life purpose. Without moral

intelligence, we would be able to do things and experience events, but

they would lack meaning. Without moral intelligence, we wouldn’t

know why we do what we do—or even what difference our existence

makes in the great cosmic scheme of things.

A Renewable Asset. The more you develop your moral intelligence, the

more positive changes you will notice, not only in your work but in

your personal well-being. Staying true to your moral compass will not

eliminate life’s inevitable conflicts. Will you have to compromise some-

times between your beliefs and the demands of your work environment?

10 MORAL INTELLIGENCE

3. Daniel Goleman, Richard Boyatzis, Annie McKee, Primal Leadership: Realizing the Power of Emotional Intelligence, Harvard Business School Press, 2002.

4. Ibid.

Yes! Will you make mistakes? Will you sometimes say the wrong thing

out of jealousy or greed? Definitely! But staying the moral course will

give you singular personal satisfaction and professional rewards.

Your “Moral Positioning System.” Think of moral intelligence as a

“moral positioning system” for your life’s journey, analogous to the

global positioning system used in some cars as a navigational tool. You

can be a great driver, and your car can have a powerful engine and four-

wheel drive, but when it’s dark and you’ve never been in this neck of the

woods before, you have directions that were given you by someone who

doesn’t know street names, and you cannot see the map you got from

AAA, you are lost. Despite all your tools and resources, you have no

idea if you are headed in the right direction. But if your car had a global

positioning system, it would be virtually impossible for you to get lost.

Like having a GPS for your car, your moral intelligence allows you to

better harness all your resources, your emotional intelligence, your

technical intelligence, and your cognitive intelligence, to achieve the

goals that are most important to you—whether on the job or in the rest

of your life. Unlike today’s GPSs, moral intelligence is not optional

equipment. It is basic equipment for individuals who want to reach their

best creative potential and business leaders who want to capture the best

efforts of their workforce.

What Does Moral Intelligence Look Like? Most successful leaders

are morally gifted, but very few of them are moral geniuses. They all

make mistakes from time to time and, earlier in their careers, they typi-

cally made moral mistakes more often. But because of their high moral

intelligence, they were quick studies. They held themselves accountable

for their moral lapses, learned from them, and moved on. Consider Jay

Coughlan’s story. Today, Coughlan is the CEO of Lawson Software, but

no one would have predicted his rise to that top spot back in 1998 after

he fell asleep while driving intoxicated, causing a devastating accident

that left him seriously injured and his father dead. The accident was the

CHAPTER 1 • GOOD BUSINESS 11

beginning of a remarkable personal transformation marked by a

reawakening of his religious faith, a stronger relationship with his fam-

ily and involvement in the community, and an intensive commitment to

Lawson. Coughlan pleaded guilty to vehicular homicide and was

sentenced to one month in jail, five months of house arrest, and 10 years

of probation. But because of Coughlan’s honesty and the support of the

community, the judge reduced his offense to a misdemeanor after he

had served over three months of his sentence. Meanwhile, during his

absence from Lawson, the health care division that Coughlan had

launched was flourishing. “That’s when I learned I actually was suc-

cessful as a leader,” he told The Wall Street Journal, “when you can pull

yourself out of the machine and it can still run.”5 His financial results

were impressive and likely were the most significant factor in his sub-

sequent promotions. The accident would have been a career-ending

event for most people in Coughlan’s shoes, but his response to the acci-

dent was extraordinary. “Jay, to his credit, stood right up and took

responsibility; there was no hesitation,” says Richard Lawson, the

company’s chairman and former CEO. “To me that is what counts. It’s

not the mistakes you make, it’s how you react to those mistakes.”

Lynn Fantom, CEO of ID Media, the largest direct response media

service company in the U.S., is another morally gifted leader. It is late

in the afternoon one cool spring day when Lynn walks back to her

corner office in a New York City skyscraper. The Empire State Building

is visible out one window, the Met Life and Flat Iron building out the

other. Lynn barely notices the spectacular view. She goes straight to her

desk and opens an e-mail from a Human Resources manager at her

parent company, Interpublic. HR, it seems, is worried about how over-

loaded she is. They wonder if it is the best use of her time to respond to

the employee comments and questions she gets on the “Ask Lynn” col-

umn on the company’s intranet. Her public relations folks are also

concerned about her schedule. They’ve recommended that she stop

12 MORAL INTELLIGENCE

5. Reported in Marcelo Prince, “Manager Discovers Leadership in an Accident’s Aftermath,” The Wall Street Journal, April 5, 2002.

spending precious time posting her thoughts on media and marketing

trends on the intranet. But Lynn thinks her personal responses to

employees are an important part of the ID Media culture. She thinks

that “Ask Lynn” gives her an opportunity to demonstrate that she cares

about her workforce. She thinks that she has a responsibility to her

workforce to share her business insights. To her, it’s time well spent.

Lynn is certain that employees like knowing they can ask her about any-

thing and that she will give them an honest response. They also like

knowing that she understands market trends and shares her understand-

ing with them. “In exchange,” says Lynn, “I really get their commitment

to help us succeed.” Lynn is sticking to her principles. She won’t be giv-

ing up her intranet contributions anytime soon.

Moral Intelligence and Business Success. Though leaders may attrib-

ute their companies’ success to their commitment to moral principles,

their evidence is based only on their personal experiences. So far, there

has been no quantitative research that specifically studied the business

impact of moral intelligence. But there are objective indications that

moral intelligence is critical to the financial performance of your busi-

ness. One measure of the influence of moral intelligence on business

results comes from American Express Financial Advisors, an American

Express company that implemented a highly effective emotional

competence training program. American Express defined emotional

competence as “the capacity to create alignment between goals, actions,

and values.” The program emphasized development of self-leadership

and interpersonal effectiveness and demonstrated how those emotional

skills led to business and personal success. The bottom line impact of

the program was impressive, with participants in a pilot group produc-

ing sales that were 18 percent higher than a control group that didn’t

have the benefit of the training—no small change in a company that

managed or owned assets in excess of $232 billion at the time. At the

heart of the program was a special subset of skills that helped people to

discover their principles and values and then create goals and action

CHAPTER 1 • GOOD BUSINESS 13

steps that flowed from those deeply held principles and values.

American Express Financial Advisors’ leaders came to realize that it

was this overriding moral framework, that is, the emphasis on princi-

ples and values, that accounted for much of the success of the

program. American Express had already found from internal studies

that the most successful advisors were highly confident, resilient under

adverse circumstances, and, most importantly, acted from a strong core

of principles and values. To form trusting partnerships with clients,

advisors needed to be genuinely trustworthy. To be seen as trustworthy,

advisors had to act in accordance with worthwhile personal values. If

advisors practiced the self-management and social skills they learned in

the training, but failed to operate from moral principles and values, they

would fall short of sustainable success.

While American Express’ data demonstrates the importance of an

individual advisor’s moral intelligence to financial performance, other

businesses have discovered that they produce the best results when their

company overall is known for its moral intelligence. Market research

tells us that consumers judge a company’s reputation mainly on the

basis of its perceived values. A company’s reputation translates straight

to the bottom line: Consumers prefer to make purchases from compa-

nies who are known for their ethical practices.6

The business case for moral intelligence gets another boost from a

study done at DePaul University in Chicago. Researchers from the

School of Accountancy and MIS compared the financial performance of

100 companies selected by Business Ethics magazine as “Best

Corporate Citizens” with the performance of the rest of the S&P 500.

Corporate citizenship rankings were based on quantitative measures of

corporate service to seven stakeholder groups: stockholders, employees,

customers, the community, the environment, overseas stakeholders, and

women and minorities. The study found that overall financial perform-

ance of the 2001 Best Corporate Citizen companies was significantly

14 MORAL INTELLIGENCE

6. Cone/Roper Cause Related Trends Report, 1999.

better than the rest of the S&P 500. The average performance of the

Best Citizens, as measured by the 2001 Business Week rankings of total

financial performance, was more than 10 percentile points higher than

the mean rankings of the rest of the S&P 500. According to Strategic

Finance magazine, which reported the study, “It casts doubt on the

persistent myth that good citizenship tends to lead to additional costs

and thus negatively impacts a firm’s financial results.”7

Moral Intelligence and the War for Talent. Everyone agrees that

talent is a key corporate asset, no matter what the state of the economy.

A company’s best employees can walk out the door at any time. They

are much more likely to take their expertise and potential elsewhere

if they don’t like the ethical or moral tenor of their workplace.8

Sometimes, this manifests itself as a reaction to an organization that

fails to embrace universal human principles; at other times, the talent

walks simply because their immediate supervisor or boss is lacking in

moral intelligence. Several years ago, a young man we know abruptly

quit a job that he had been thrilled to get only a few months before. He

loved the work and loved the product—selling sports hospitality pack-

ages of high-profile sports events to large corporations—but couldn’t

tolerate the moral climate. Some years before beginning his job, his

company had run afoul of a major sports association for using mislead-

ing and unethical tactics to get people to buy tickets for a major golfing

competition and was now under a court order that prevented them from

lying to get people to buy tickets. The company’s solution was to create

two sales scripts for the golfing competitions—an “official” sales script

for marketers to keep by the phone and show to the CEO if he stopped

by. The actual sales script used by the marketers was the same kind of

misleading pitch that had gotten the company into hot water in the first

place. The final straw for this young man came when he was asked to

start selling tickets for a major tennis event. There was a huge surplus of

CHAPTER 1 • GOOD BUSINESS 15

7. Strategic Finance, Vol. 83, No. 7, p. 20, January 2002.

8. National Business Ethics Survey 2000, www.ethics.org/2000survey.html.

tickets for this event because the company’s usual big-spending corpo-

rate clients were not buying, no doubt in the wake of a weak economy

and the public furor over corporate accounting irregularities. The sales

script he was told to use was essentially this: “WorldCom originally

signed up for a block of tickets and had already made their first pay-

ment of 50%. They have now backed out, for obvious reasons. So you

can get the full deal by paying only half of the original cost.” In fact, the

company never had a deal with WorldCom, but was fabricating a plau-

sible story to avoid embarrassment and encourage sales.

It’s not just your current employees who expect a morally intelli-

gent workplace. First-time job seekers increasingly rate the ethical

character of prospective employees as a consideration in their decisions

about where to work.9 Patrick Gnazzo, vice president of business

practices for the manufacturer, United Technologies Corp. in Hartford,

Connecticut, reported in a The Wall Street Journal article that a growing

number of their job candidates apply for positions with UTC based on

the job seekers’ research into the company’s ethics program.10

Moral Stupidity. The business advantages of moral intelligence may be

hard to quantify, but the business costs of moral ignorance are undeni-

able. We have all seen more than enough images of corporate executives

being carted off in handcuffs. But by now, it’s clear that the corporate

accounting scandals of 2001–2002 were more than blips on the business

radar screen. At the time of this writing midway through 2004…

• Mitsubishi Motors’ former president and 10 other senior leaders are in jail on charges related to systematic suppression of wide-

spread vehicle defects. Five of those were charged with negli-

gence related to a fatal accident caused by a known defect in one

of its automobile models.

16 MORAL INTELLIGENCE

9. Reported in Kris Maher, “Wanted: Ethical Employer: Job Hunters, Seeking to Avoid an Enron or an Andersen, Find It Isn’t Always Easy,” The Wall Street Journal, July 9, 2002.

10. Ibid.

• Former Adelphia Communications CEO, John Rigas, and his son Timothy were convicted of hiding more than $2 billion in debt

while embezzling cash for numerous extravagances.

• The Securities and Exchange Commission has charged Lucent Technologies with “fraudulently and improperly” recognizing

more than $1 billion in revenues and $470 million in pre-tax

income during fiscal 2000.

• After a two-year investigation, former Enron CEO Ken Lay has been indicted on several counts of fraud.

• Richard Scrushy, former chairman and CEO of health-care serv- ices provider, HealthSouth Corporation, faces trial in 2005 for

$2.5 billion in accounting frauds. More than a dozen HealthSouth

executives have already pleaded guilty in the case.

Corporate moral dysfunction does more than hurt stock performance.

Remember those consumers who like to purchase from ethical compa-

nies? They also hesitate to buy from unethical ones, and they don’t

hesitate to make their displeasure known. More than 70 percent of

American consumers have, at some point, punished companies they

view as unethical either by avoiding a company’s products or speaking

negatively about the company to others.11 Mitsubishi is feeling the

effects of consumer punishment: It expects its Japanese sales to drop 40

percent in fiscal year 2005 in the wake of its recent scandal.

The evidence is clear—moral intelligence plays a big part in corpo-

rate success. Without it, your organization risks devastating financial

failure. The implications for your leadership effectiveness? If you pay

attention to your own moral intelligence and encourage development of

moral intelligence throughout your organization, you inspire the best

efforts of everyone—and your performance will outpace your rivals’. It

is possible to get ahead without moral intelligence—everyone knows of

CHAPTER 1 • GOOD BUSINESS 17

11. Millennium Poll on Corporate Social Responsibility, Environics International Ltd., May 1999.

powerful executives who have done well despite notable moral lapses.

But they could do even better if they tapped into their moral smarts.

Without moral intelligence, long-term business success

is ultimately not sustainable. Fortune magazine rated Enron one of

its “globally most admired” companies the year before its infamous

collapse, and Arthur Andersen, arguably once the gold standard in

accounting firms, is defunct.

Of course, moral intelligence isn’t the only determinant of sustain-

able business performance. You also need solid business skills, and you

need a product or service that people want to buy. What’s more, moral

intelligence won’t immunize your company from the financial ups and

downs of doing business in a volatile economy. But you need it to stay

in business over the long haul.

Take your leadership to the next level—go beyond the usual

formulas for leadership success and become the kind of leader who

inspires the very best efforts of everyone who works with you.

But how do you begin? Exactly how does moral intelligence produce

better business performance? What are the specific moral skills

you need to inspire the best efforts of your workforce? How can your

organization—whether large or small—use moral intelligence to create

high-performing work environments? You find answers to these ques-

tions in the pages that follow.

18 MORAL INTELLIGENCE

What makes a leader effective? Turns out, the best leaders are not the

charismatic or heroic types lionized in years past. According to the

latest research, they are “quiet leaders” who accomplish great things

modestly and without fanfare.1 Leaders at the helm of the perennially

great companies all share a common trait—humility.2 They inspire high

performance in others through their sensitivity to their followers’

needs.3 The best leaders think “we,” not “I.”4 They are, quite simply,

good people who consistently tap into their inborn disposition to be

moral. They follow a moral compass—even when it’s tempting not to.

BORN TO BE MORAL

2

19

1. Joseph Badaracco, Jr. Leading Quietly, Boston: Harvard Business School Press, 2002.

2. Jim Collins. Good to Great: Why Some Companies Make the Leap…and Others Don’t, New York: Harper Collins, 2001.

3. Dan Goleman, Richard Boyatzis, Annie McKee. Primal Leadership: Realizing the Power of Emotional Intelligence, Boston: Harvard Business School Press, 2002.

4. Peter Drucker. “What Makes an Effective Executive,” Harvard Business Review, June 2004.

They make hard choices between right and wrong, or even between two

different “rights.” Great people—and great leaders—share common

moral values. They believe in honesty and in being responsible for them-

selves and others. They show compassion for their fellow humans and

know how to forgive others—and just as important—themselves.

What the Best Leaders Believe The most effective leaders hold to a common set of principles and con-

sistently use those principles to guide their day-to-day actions. The

principles business leaders follow are the same set of principles that all

human societies throughout time have believed to be “right.” These

fundamental beliefs have been embedded in human society for so long

that they are now widely recognized as universal.

It’s no coincidence that good leaders, no matter what their style or

personality, all seem to follow the beat of the same drum. They don’t

make up their values as they go along; they listen carefully to the call of

moral values that already lie within all of us.

Universal Principles. Noted anthropologist Donald E. Brown found in

his research that the moral codes of all cultures include recognition of

responsibility, reciprocity, and ability to empathize.5 Other studies have

confirmed his findings. 6 The major world religions preach common val-

ues: commitment to something greater than self, responsibility, respect,

and caring for others. Genuine differences in behavior in different cul-

tures may distract us from what we have in common with all people—

a universal moral compass. Consider a study that compared children

20 MORAL INTELLIGENCE

5. Donald E. Brown. Human Universals, Philadelphia: Temple University Press, 1991.

6. R.T. Kinnier, J.L. Kernes, and T.M. Dautheribes. “A Short List of Universal Moral Principles,” Counseling and Values, October 1, 2000.

in India with American children.7 The differences in values were

predictable: Indian children displayed more deference to elders and

acceptance of tradition, while American children valued personal auton-

omy and freedom. But their moral codes were virtually identical. Both

groups of children believed that it was wrong to lie, cheat, or steal, and

both thought that it was important to treat the sick or unfortunate with

kindness.

Stephen Covey, author of The Seven Habits of Highly Effective

People, offers more evidence of universal principles. “From my experi-

ences in working with different people and cultures,” he says, “I find

that if certain conditions are present when people are challenged to

develop a value system, they will identify essentially the same values.

Each culture may express those values differently, but the underlying

moral sense is always the same.”8

Good leadership is not a function of some rare talent for inspiring

others. Each one of us can be a good person and a great leader because

we are all “hard-wired” to be moral. We were born that way. A glance at

the news headlines might make that hard to believe, but here’s why we

think it is so.

A Visit to the Nursery Walk into a hospital nursery, and you enter another world. It’s bright

and bustling, and its residents—most not more than a day or two old—

are amazingly social. In the nursery, there is no such thing as one cry-

ing infant. When one begins to cry, the others join in. Psychologists who

study newborn behavior call this “neonate responsive crying.” The new-

born is crying in reaction to another person’s distress. How can a baby

only a few hours old respond to someone else’s pain? Researchers

CHAPTER 2 • BORN TO BE MORAL 21

7. Reported in Damon W. “The Moral Development of Children,” Scientific American, August 1999.

8. Covey SR. “Universal Principles,” Executive Excellence, May 1, 2000.

aren’t sure how, but they have ruled out other explanations for the

infant’s response. It seems newborns don’t cry when they hear a record-

ing of their own crying—so it can’t be the noise itself that’s bothering

them. Many psychologists believe that neonate responsive crying is the

first indication of an inborn capacity for empathy. To become compas-

sionate moral beings, we first need the ability to see the world through

others’ eyes (or hear their world through their cries!). Empathy is a key

step in which infants appreciate that others exist independently of them

and that others have their own separate needs. Yet the simple apprecia-

tion that others have emotions and physical needs and are completely

separate from us is not sufficient to make us moral beings. We can still,

as many children (and adults) do, decide that the search for our own

pleasures justifies our causing others pain.

Nature Versus Nurture The explanation? Moral hard-wiring is not enough. We also need moral

software, the programming that our moral hardware relies on to make

moral choices. Like any other human capacity, morality is a combina-

tion of our biology (our nature) and our experiences (our nurture). Take

language, for example. You speak at least one language fluently. But

you couldn’t speak a word when you were born. You had to learn to

speak. We know that speech is a learned proficiency because children

invariably speak the language of their caregivers. But we also know that

language requires an inborn capacity to speak and comprehend.

Development of our morality follows a similar path. No one could teach

us right and wrong unless we were wired to acquire, and act on, a moral

compass. But just as we don’t come out of the womb spouting

Shakespeare, we are not born with a fully operational moral compass. It

takes time—and the right set of experiences—to become fully moral.

22 MORAL INTELLIGENCE

Growing Up Moral Let’s pick up the story of our moral development as we leave the nurs-

ery. Our newborn crying response sets the stage for a more mature

empathy that emerges gradually during our early childhood. By the time

we are two or three months old, we begin to respond to the emotional

expressions of our primary caregiver. We play with our parents by mak-

ing faces and exchanging excited noises with each other. By five

months of age, we can tell that there is a difference among different

emotional expressions of others. By the time we are one year old, we

can tell that facial expressions or changes of voice intonation have par-

ticular emotional meanings. We then know that other people have feel-

ings that are distinct from our own. If you have been around one-year

olds, you may have seen them checking out other people’s reactions to

figure out how they themselves should respond to a situation. Parents

often take advantage of this habit to prevent a child from getting upset

over a minor tumble. If a child falls down, she will look to her parent to

see how that parent is reacting. If the parent stays calm, it is likely that

the child will also. Empathy development continues at a rapid clip

throughout the second year. By 15 to 18 months of age, we share, coop-

erate, and give care, as long as the situation is not too stressful. Think of

the 16 month-old who tries to pat someone who is crying. By two years

of age, we are very empathic people. We try to comfort people in dis-

tress. We express sympathy. We make suggestions. We bring a tissue to

someone who is crying.

Learning to Be Responsible But more than empathy is developing. By age two, we begin to show

some grasp of justice, responsibility, and blame. We have all heard chil-

dren as young as three or four respond to real or imagined injustice with

an emphatic, “That’s not fair!” Many of us begin at an early age to do

CHAPTER 2 • BORN TO BE MORAL 23

things we know will be upsetting to others. Being negative is an impor-

tant part of learning to be moral. If we didn’t do bad things once in a

while, it would be difficult to understand the difference between right

and wrong behavior. Think of the earliest time you can remember doing

something wrong. How old were you? What did you do? How did you

know it was the wrong thing to do? Most of us can recall getting in trou-

ble with our parents for some early childhood infraction. They used

those incidents to teach us some version of the “golden rule”— treat

others as you would wish to be treated. Think of others. Don’t take

something that belongs to someone else. Tell the truth. We learn to be

moral, not just from being scolded for bad behavior, but by being loved

unconditionally for who we are. We grow morally through the interplay

between our biological disposition to be empathetic and through our

loving relationship with our parents. Because they love us, we love

them, and because we love them, we work to please them. Eventually,

we adopt our parents’ values because we want to be like them.

Throughout our preschool years, we grow in empathy and in our moral

sense. By the time we are six or seven years of age, we can tell right

from wrong and feel guilty if we do something we know we shouldn’t.9

When Things Go Wrong We tend to take the natural process of moral development for granted

until we see a situation where it doesn’t happen. It can’t happen, for

instance, if we are born with certain neurological problems. Moral

development also goes off course if our caregivers are not willing or

able to provide the right kind of early nurturing. Our parents don’t need

to be perfect. They do need to be “good enough” to treat us well most of

the time.10 They need to be consistently affectionate and dependable.

24 MORAL INTELLIGENCE

9. Jerome Kagan and Sharon Lamb (eds.). The Emergence of Morality in Young Children, Chicago: University of Chicago Press, 1987.

They must show us how to be empathetic, and they must help us

develop positive beliefs about ourselves.

If our parents don’t provide that kind of support, we won’t be able

to develop into those amazingly empathetic two year-olds and, later on,

into morally competent adults. Again, moral development is much like

language development. If you happened to be raised by wolves for the

first five years of your life (as a rare number of people have been),

you’ll learn how to howl, but you’ll probably never learn to speak nor-

mally. No amount of inborn ability to develop language can help you

if you weren’t also exposed to the right set of experiences at the

right time.

Inside Your (Moral) Brain In the previous section, we looked at our moral development from the

outside in. We saw that our moral development, like language develop-

ment, depends on both biology and learning. We saw that our relation-

ship with our parents is key to our growing moral understanding. But

we can’t learn positive values and altruistic motivation before we are

neurologically ready to acquire them.

Let’s recall once again the crying babies in the hospital nursery.

The empathic response of newborns happens so immediately that it

is most likely genetically based rather than learned.11 Think about the

biological priorities involved: Before we can crawl or speak, we can

respond empathically to our peers. Empathy must be incredibly

important.

CHAPTER 2 • BORN TO BE MORAL 25

10. English Pediatrician D.W. Winnicott’s concept of “good enough” parenting as described in Robert Cole’s The Moral Intelligence of Children, New York: Random House, 1997.

11. Interpretation of Martin Hoffman’s work on empathy by author William A. Rottschaefer in The Biology and Psychology of Moral Agency, Cambridge, UK: Cambridge University Press, 1998.

We also learned that by age two, those of us who have been

exposed to “good enough” parenting spontaneously demonstrate help-

ing behavior. What is going on in our brains at age two? The brain of a

normal two year old who has had “good enough” parenting also hap-

pens to have a normal limbic system—the part of the brain that is

involved in emotional processing. But if we haven’t had “good enough”

parenting, our brains do not grow normally. When a child has been

abused or neglected, the cortical and subcortical areas of the brain are

roughly 20 to 30 percent smaller than normal. In addition, the brain

“wiring” isn’t as dense or complex so that abused or neglected children

are lacking some brain organization that would allow them to make

strong connections to other human beings.12 Without those connections,

no empathy is realized, and without empathy, you have impaired

morality.

It’s All in Your Head Scientists who study the relationship between brain function and behav-

ior are beginning to chart the “moral anatomy” of the brain. They’ve

learned how the brain affects moral behavior by studying both normal

and brain-injured individuals. Perhaps the most famous case of moral

impairment caused by brain damage happened over 150 years ago.

Phineas Gage headed up a group of men who were laying track for a

new rail route across Vermont. Admired by family and friends, Gage

also had a great reputation as a strong, intelligent, and efficient worker.

But something went wrong one hot summer day in 1848, when the

group was preparing to blast through rock to pave the way for the new

track. The explosive went off prematurely, propelling a 13-pound iron

rod through the prefrontal cortex of Gage’s brain. Miraculously, Gage

survived with his faculties intact—or so the doctors thought. He

26 MORAL INTELLIGENCE

12. Bruce Perry and Ronnie Pollard. “Altered brain development following global neglect in early childhood.” Society For Neuroscience: Proceedings from Annual Meeting, New Orleans, 1997.

remained conscious, was able to speak and walk immediately after the

injury, and survived a serious infection around the wound. Within two

months, the doctors considered him cured. Gage looked the same as he

always had, but his personality was completely altered, and his family

and friends soon realized that the man they had known was gone. No

longer able to work as a railway foreman, Gage began a downward spi-

ral of impulsive, aggressive, and socially disconnected behavior that

ended with his death from severe epileptic seizures in 1861.

Gage’s chroniclers don’t tell us whether his value system was

destroyed by his prefrontal injury or whether he was simply unable to

act on a value system that survived his injury. For practical purposes, it

did not matter—either way, Gage could no longer function as a moral

being. But there is a big practical distinction between moral intelligence

(our internal moral compass) and moral competence (our ability to act

in alignment with what we know is right). Most of us know what’s

right. Sometimes, though, it’s a struggle to do what we know is right—

when we lack the moral competence to act in alignment with our moral

compass. Researchers have discovered that our brain makes the same

distinction. When neuroscientists compared the behavior of two adults

who had suffered prefrontal brain injuries as infants with patients who

had suffered similar injuries as adults, they found a striking difference

in their post-injury capacities.13

One patient, a woman, was run over by a car when she was 15-

months old. Although she recovered from her physical injuries, her par-

ents were dismayed to discover that by the time she was three-years old,

she simply did not respond to verbal instructions or even physical pun-

ishment. Although her intelligence was normal, her behavior became

increasingly disruptive, and she could not function in a regular school.

CHAPTER 2 • BORN TO BE MORAL 27

13. Steven W. Anderson, Antoine Bechara, Hanna Damasio, Daniel Tranel, Antonio R. Damasio. “Impairment of Social and Moral Behavior Related to Early Damage in Human Prefrontal Cortex,” Nature Neuroscience, Vol. 2 No. 11, November 1999.

As a teenager, she shoplifted, stole, lied, and was verbally and physi-

cally abusive. She showed no remorse for her behavior, blamed her mis-

deeds on others, and seemed incapable of empathy. The second patient,

a man, had surgery for a brain tumor when he was three-months old. He

seemed to recover fully from his surgery, and his parents were relieved

that his physical development was normal, given that he began to walk

and talk on a typical timetable. He seemed a little behind academically

in early elementary school, and by age nine, his overall behavior was

becoming cause for concern. He was generally unmotivated, had few

social contacts with peers, and lacked normal expressiveness, although

occasionally he would lose his temper. He got through high school, but

after graduation, his behavior deteriorated. He sat around watching TV

or listening to music, ate his way into obesity, and neglected his per-

sonal hygiene. He could not keep a job and he committed numerous

petty crimes. Like the first patient, he showed no guilt or remorse for his

bad behavior and seemed incapable of empathy for others.

What actually caused the behavioral problems of the two brain-

injured individuals? Both came from middle-class homes with attentive,

college-educated parents, so we can assume they had “good enough”

parenting. Neurological testing showed that both were normal on tests

of basic mental ability. But when they were tested on tasks that required

them to use reasoning to guide social behavior, they had trouble. Their

moral capabilities were severely impaired. On moral reasoning tasks,

they were only able to think about moral situations from the perspective

of avoiding punishment, much like that of children before 9 years

of age. They lacked any capacity for moral reasoning based on the

“golden rule” or any ability to consider what is fair from an empathetic

perspective.

Because the two suffered their brain injuries so early in life, their

moral capabilities were more severely affected than those of people

who suffer brain injuries later in life. People whose brains are injured as

28 MORAL INTELLIGENCE

adults show different levels of moral impairment. People with adult-

onset injuries have already acquired their moral reasoning ability as part

of normal childhood development. They may have had years of experi-

ence in applying moral judgments in actual life situations before

becoming injured. If you ask people who have suffered an adult-onset

brain injury to respond to a hypothetical moral reasoning scenario, for

example, should someone steal a drug to save someone’s life, they are

quite able to tell you what the morally correct decision should be. In

real life, however, they don’t seem able to put their abstract moral sense

into practice. Researchers speculate that the part of the brain that holds

emotionally related knowledge essential for good moral decision mak-

ing has been disabled or disconnected by the adult-onset brain injury,

even though the individual retains factual knowledge of moral rules.

Young children who suffer a prefrontal brain injury apparently never get

the chance to learn the moral rules because the part of their brains that

would have allowed them to develop moral reasoning has been unalter-

ably damaged. The impact of the time of injury is considerable. Adult-

onset brain injury patients suffer impairments in their social and moral

behavior but generally do not display the kind of anti-social or criminal

behavior characteristic of people who suffered prefrontal brain damage

in infancy.14

The Moral Map of Your Brain Studies of brain-damaged individuals tell us what general area of the

brain is involved in moral reasoning and decision-making. They don’t

tell us exactly how our brains typically function when confronted with

a moral decision. To find out, scientists have been studying the brains of

normal individuals (if you can call college students who are the most

common research subjects “normal”) using a technique called “func-

tional magnetic resonance imaging (fMRI).” Functional MRIs resemble

CHAPTER 2 • BORN TO BE MORAL 29

14. Ibid.

the MRI procedures that you might have undergone to diagnose an

injury or illness. Regular MRIs produce “snapshots” of thin slices of

body tissue, while functional MRIs use an advanced scanner that

detects changes in blood flow to areas of the brain. When a particular

part of the brain is involved in a certain activity, the fMRI image of that

area “lights up.” For example, if you were put under an fMRI scanner

and you heard a loud noise, the area of your brain that processes sound

would show a lot more activity. fMRI technology is now being used to

chart the unique parts of the brain involved in our moral intelligence.

One study, for example, found that viewing pictures with moral content

(such as physical assaults, poor children abandoned in the streets, war

scenes) activated distinct areas of the brain that were not activated by

any of the other types of pictures, including those with strong emotional

content.15

Why We’re Good and Why We’re Bad It’s clear we are programmed to be moral. But why? Though many

philosophers and psychologists believe that truly moral emotions are

uniquely human, anthropologists have found evidence of altruism, fair-

ness, and empathy in other species. A whale, for instance, might go to

the aid of a sick member of the pod, or a squirrel might risk its own

safety by giving a warning call about a nearby predator. Perhaps the

reason we are programmed to be moral comes not from our uniqueness

as a species, but from what we have in common with other species such

as whales, squirrels, or chimpanzees—we all live in social groups.

As members of social societies, we need others to help us survive and

prosper.

30 MORAL INTELLIGENCE

15. Fabio Sala. “Do Programs Designed to Increase Emotional Intelligence at Work- Work?” Research Report, Hay/McBer Group and Consortium for Research on Emotional Intelligence in Organizations (http://www.eiconsortium.org/research/ do_ei_programs_work.htm).

Most of us are familiar with Charles Darwin’s theory of natural

selection, the idea of “survival of the fittest.” Darwin believed that

plants and animals with physical characteristics that help them survive

are more likely to reproduce—carrying their survival-friendly genes

forward into future generations. Similarly, it is likely that altruistic and

cooperative behavior is part of basic human behavior today because it

was crucial to the survival of our early human ancestors.16 People who

banded together were better able to master the elements, fight off pred-

ators, and acquire food. Individuals who cooperated and helped others

tended to live longer. They were more likely to procreate and thereby

get their traits into the gene pool. As an example, the tendency to

provide care for helpless infants would be an advantage to our species,

protecting us from extinction. Because early humans lived in small

groups of related individuals, we would expect to see in our own behav-

ior today a tendency to care for our relatives. Given the complexity

of contemporary society, it’s likely that evolution has favored the genes

of those who extended their cooperation beyond their immediate kin.

What would have guided those cooperative relationships of our earliest

ancestors? It’s not hard to see how the Golden Rule might have

evolved—treat others as you would like to be treated—is a practical

principle for living harmoniously and working for the common good.

So What Went Wrong? If it is true that we have been wired over eons to follow the Golden

Rule, how then can we explain all of its flagrant violations? We could

try to write off crime and cruelty as mutations of normal human nature.

Most of us, however, realize that there is a dark side to our own nature.

There are times when selfishness prevails, when other needs overtake us

and we will not, or think we cannot, do what we know is right.

CHAPTER 2 • BORN TO BE MORAL 31

16. E.O. Wilson, author of Sociobiology: The New Synthesis. Cambridge, MA: Belknap Press, 1975, a pioneer of sociobiological theory.

According to Harvard Business School professors Paul Lawrence and

Nitin Nohria, we all have four basic human drives created by evolution

to improve survival.17 Our drives can sometimes conflict. For example,

the competitiveness generated by our drive to acquire will often act at

odds with our desire to cooperate, driven by our desire to bond. We see

the conflict play out in young children who want exclusive use of a new

toy at the same time that they want to play with their friends. We see it

in corporations where senior managers rake in salaries that are 100 or

1,000 times greater than that of some employees, while preaching to

their employees—and honestly believing—that “we’re all in this

together.” In the battle between competing drives, selfishness often wins

out. We may want to live by the Golden Rule, but in some cases, the

drive to acquire or defend overtakes our drive to bond. Lawrence and

Nohria also point out that there is a “dark side” to each drive. Even the

drive to bond, arguably the foundation of human morality, has a dark

side, setting us up to define an “in group” and an “out group.” We bond

with our “in group.” It is a series of short steps from connecting with

our own group to demonizing an “out group.” Early humans flourished

by expanding their definitions of their “in group.” At this time in his-

tory, our survival may depend on expanding our “in group” to include

all the people of the earth. With the inevitable march of globalization, in

which economic trouble in one country reverberates throughout the

global economy, the need to recognize the importance of interdepend-

ence is even clearer. Radioactive material from nuclear warfare or HIV

and SARS viruses do not recognize cultural or governmental bound-

aries. Balancing competing drives and managing the dark side of our

human nature is the essence of moral intelligence. Choosing among

competing desires is the essence of morality. There is no morality with-

out choice. Making decisions between our sometimes competing drives

requires us to make moral choices. It is our moral intelligence, the abil-

ity to balance competing drives, that makes us truly human.

32 MORAL INTELLIGENCE

17. Paul Lawrence and Nitin Nohria. Driven: How Human Nature Shapes our Choices. San Francisco: Jossey-Bass, October 2001.

Moral Software By now, you should have a flavor for the compelling evidence that we

are biologically wired to be moral. We have used the analogy that our

innate moral disposition is our “moral hardware.” We come into the

world with rudimentary skills, such as empathy, which are the building

blocks for our moral intelligence. Before we are two years of age, we

seem naturally to help others in distress, and by the time we are four or

five, have a good idea of what our parents and caretakers think is right

and wrong. Our moral hardware is preinstalled, and the upgrades come

online surprisingly quickly. We turn now to our “moral software,” the

content of our moral compass that we use to make moral decisions. If

you and I were to compare our moral software, we would find that some

of our software is identical, while other aspects of our software are spe-

cific to the culture or family we grew up in. We live in an age where cul-

tural diversity is increasingly respected. There has been a great deal of

academic research documenting the customs and rules of conduct of

different ethnic groups and societies, as well as concern about the

homogenization of cultures as a result of the enormous economic influ-

ence of the United States across the globe. It has been far less fashion-

able lately to look for the principles all people share in common. But we

think it is important to pay attention to the moral principles we all hold

in common. It is not that we think everyone should have identical moral

beliefs. But we do think that the existence of universal moral principles

offers yet more proof that we are wired to be moral. Beyond the biolog-

ical implications, the existence of universal principles may be our best

hope for surviving and thriving in an inescapably intertwined global

community. If all people of the earth share a small list of critical princi-

ples in common, together we will be better able to make decisions that

could determine the survival of the planet.

What are the universal principles, and how do we know that they

are indeed universal? Anthropologist Donald E. Brown is one of the

most reliable sources for information about the human activities that are

CHAPTER 2 • BORN TO BE MORAL 33

found in all societies and cultures. Human universals, he says, “com-

prise those features of culture, society, language, behavior, and psyche

for which there are no known exception.” In his book, Human

Universals,18 Brown provides an exhaustive list of universals, including

the ability to distinguish right from wrong, and notes that universally

peoples’ morality includes recognition of responsibility, reciprocity, and

ability to empathize. In another study, researchers Richard T Kinnier,

Jerry L Kernes, and Therese M Dautheribes identified a short list of uni-

versal principles by analyzing earlier lists and examining the official

tenets of major world religions.19 Their rationale was that the principles

held in common by major world religions are the ones most likely to be

universal and enduring. They found the following principles espoused

in common by all or most religions, as well as by secular organizations

including American Atheists, Inc., the American Humanist Association,

and the United Nations Declaration of Rights:

• Commitment to something greater than oneself

• Self-respect, but with humility, self-discipline, and acceptance of personal responsibility

• Respect and caring for others (that is, the Golden Rule)

• Caring for other living things and the environment

Finally, noted psychologist Martin Seligman and his colleagues in the

field of “positive psychology” have conducted research that led them to

identify six “universal virtues” honored in all cultures in the world:

wisdom, courage, humanity, justice, temperance, and transcendence.20

Although the labels might vary slightly and though each culture may

34 MORAL INTELLIGENCE

18. Donald E. Brown. Human Universals, New York: McGraw-Hill, 1991.

19. R.T. Kinnier, J.L. Kernes, and T.M. Dautheribes. “A Short List of Universal Moral Principles,” Counseling and Values, October 1, 2000.

20. Christopher Peterson and Martin E.P. Seligman. Character Strengths and Virtues: A Handbook and Classification, Oxford, UK: Oxford University Press, 2004.

express these principles differently, the underlying moral sense is

always the same. We believe that these universal principles exist, even

though we know they are not universally applied. We believe that living

in alignment with these principles is crucial to our individual and orga-

nizational survival and success.

Libraries are crowded with hundreds of books offering detailed

explanations for the emergence of moral intelligence in the human

species. They lend weight to the notion that it is as important to be

moral as it is to drink, eat, breathe, or be active. How we exercise our

moral intelligence is as critical to our health and happiness as eating

well and staying physically fit. In the next chapter, consider a concrete

framework for understanding your personal moral compass and the role

it plays in your effectiveness as a leader.

CHAPTER 2 • BORN TO BE MORAL 35

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As we’ve just seen, nearly all of us have an inborn “talent” to be moral.

But talent is never enough. Think of the major league baseball teams

who spend fortunes on rookies and then send them off to farm teams for

a few years to hone their skills. Professional ball players begin with

baseball intelligence, but they must train hard to turn their baseball

intelligence into on-the-field baseball competence. So they practice

technical skills such as batting or pitching, along with non-technical

skills such strategy, judgment, and emotional composure. Why do they

work so hard? Because they want to satisfy their goals and desires.

Maybe they like winning, or money, or adulation, or they love playing

the game. Successful ball players know that getting what they want

means doing whatever it takes to reach their goals. In other words, the

best ball players make sure that their talents, skills, and actions are

aligned with their goals.

YOUR MORAL COMPASS

3

37

Reaching our own personal goals also requires alignment. When

we decide to start a daily exercise program but never get on the tread-

mill, we feel uneasy because our actions are inconsistent with our goals.

If we want to go on vacation, we feel good when we book the flight

because we’re doing something to reach our goal. Similarly, most of us

want to be moral because we crave that experience of consistency

between our moral values, our goals, and our actions. We call that state

of moral consistency “living in alignment.”

Think of living in alignment as the interconnection of three frames:

38 MORAL INTELLIGENCE

Moral Compass

Principles

Values

Beliefs

Goals

Purpose

Goals

Wants

Behavior

Thoughts

Emotions

Actions

Living in Alignment

FIGURE 3.1 Living in Alignment

The first frame contains your moral compass—basic moral principles,

personal values, and beliefs. The second frame holds your goals. Your

goals range from the lofty (your life’s purpose) to the ordinary (a new

house). The third frame contains your behavior, including inward

thoughts, emotions, and external actions. Living in alignment means

that your behavior is consistent with your goals and that your goals are

consistent with your moral compass. Living in alignment keeps you on

course to accomplish your life purpose and achieve the best possible

performance in all your life roles.

Dale Lauer is an executive vice president with Safeco Insurance

Company. Living in alignment is key to his success and longevity with

his company. “The fact that I work for Safeco,” says Dale, “and that I’ve

been here for a long time is because the company aligns well personally

with my own moral code. You need to work for a company that you’re

aligned with or you’ll have stress every day.” Dale believes that align-

ment was at the heart of Safeco’s heralded turnaround. According to

Dale, “The turnaround at Safeco is a clear financial result of practicing

values of trust, honesty, loyalty, and responsibility. People on the front

line, who really make the company what it is, responded because the

leadership exhibited those values.” But living in alignment isn’t always

easy, especially when personal values conflict. Dale had to lay off a

number of people he’d worked with for years, including a close friend

and weekly golf partner. Balancing personal loyalty with his responsi-

bility to his company was painful. It meant doing the right thing for

Safeco’s future and, at the same time, doing whatever he could to ease

laid-off employees’ transition to other employment.

Living in alignment may sometimes be difficult, but it doesn’t

require superhuman acts. It is about the day-to-day steps we take to do

what we need to do to reach our goals. One of our colleagues used to

avoid speaking engagements before large audiences, preferring to work

with people one on one or in small groups. Eventually, he realized that

he could not effectively communicate his values and beliefs if he lim-

ited himself to small group presentations. So he joined Toastmasters,

the worldwide organization that helps people develop their public-

speaking abilities. Our friend’s desire to have a positive impact on the

world led him to work on overcoming the anxiety of large group pre-

sentations.

Living in alignment is not accidental. It requires doing things on

purpose and for a purpose. How to begin? Living in alignment is a two-

part process: First, build your own personal alignment model:

• Moral Compass—What do you value, and what are your most important beliefs?

• Goals—What do you want to accomplish personally and professionally?

• Behavior—What actions will allow you to achieve your goals?

Then, after you’ve built your own alignment model and know what ide-

ally should be in each frame, you do your best to maintain alignment

among your frames.

CHAPTER 3 • YOUR MORAL COMPASS 39

Your Moral Compass. Your moral compass consists of principles, val-

ues, and beliefs that guide your aspirations and your actions. Everyone

has one. Suppose we asked you to tell us about your moral compass.

What would you say? What is the set of values that anchors you? How

would you want others to think of you? Our guess is that you would

describe an interesting and accomplished person, one whose actions are

guided by a set of admirable values, not unlike the ones we heard

earlier.

Everyone is predisposed to be moral. That doesn’t mean that we

always act in accordance with our values, just that it is very difficult to

find someone who doesn’t have positive values, even where you would

least expect to find them—behind prison walls. Consider this dialogue

from a personal effectiveness seminar conducted for inmates in a

work/study program at a maximum security prison in Minnesota:

Seminar Leader: “How many of you know people in here that

you would describe as having praiseworthy values?”

Inmates: All raise their hands.

Seminar Leader: “What do you suppose it was that you found in

each other that caused you to feel this way?”

An Inmate: “I think what we found was the little boy in each

other.”

This exchange is touching but not surprising if you factor in what psy-

chologists tell us about the formation of values. Most people, assuming

their brains are intact, have developed good core values by the time they

reach the age of four. Nearly everyone, no matter how they actually

behave, wants to be a good person. As we saw earlier, everyone with a

normally functioning brain has one, and nearly everyone’s moral com-

pass bears a striking resemblance to everyone else’s. That’s because our

moral compass is based largely on universal principles.

40 MORAL INTELLIGENCE

Embracing Universal Principles

CHAPTER 3 • YOUR MORAL COMPASS 41

Moral Compass:

Principles

Values

Beliefs

As we discussed in the last chapter, researchers have identified several

overlapping principles that they judge to be universal. You might want

to use the following worksheet to chose the words that describe univer-

sal principles that you embrace.

WORKSHEET 1 Embracing Universal Principles

Please look at the list and identify the principles that you embrace—the

ones that clearly resonate with you as being very important or even the

most important to you in your daily life. If you feel important values are

missing, feel free to add your own at the bottom of the list. Select a total

of four. Then, rank the four you selected in the box to the right.

Integrity Responsibility Compassion Forgiveness Generosity Commitment to a transcending power Justice Temperance/Self-Discipline Humility Care for living things and the environment Wisdom Courage

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11 12.

Now, list your chosen

principles in rank

order:

1.

2.

3.

4.

After you list the principles, check out your understanding of the princi-

ples with a trusted colleague, friend, or family member. Most of us don’t

make a habit of discussing universal principles in the course of a normal

day, but if you do, you will discover the similarities in your and others’

lists. You will validate the universal quality of the principles and will

likely forge deeper connections with the people around you.

Universal Principles. When you wrote down your guiding principles,

how many of these did you include in your top four—integrity, respon-

sibility, compassion, forgiveness? The leaders studied and interviewed

for this book consistently demonstrated the importance of these princi-

ples. They were at their most effective when acting in alignment with

principles. When they ignored them, business results suffered. Integrity

and responsibility are essential minimum requirements for effective

leadership. Ed Zore, CEO of Northwestern Mutual , for example, attrib-

utes his personal success to his decision to work in a business that he

thought added value to society.

Compassion and forgiveness may not be absolutely necessary, but

they make the difference between a good leader who is essentially moral

and a great leader who inspires exceptional performance in others.

Consider the following examples of the business value of compassion.

Don MacPherson, co-president of the measurement company, Modern

Survey, tells this story:

We lost a big client and went through some difficult times.

One of my partners was getting married, and we were cut-

ting salaries, including his. I knew he was facing a lot of

stress. I left a note on his desk for him and his fiancée,

along with a cash loan to help with the wedding expenses.

They were both elated. He could have left the company

during that difficult time, but he chose not to. Our business

got healthy again. His salary was restored. He’s a valuable

part of our company to this day, and he has repaid

the loan!

42 MORAL INTELLIGENCE

Lynn Sontag, CEO of MENTTIUM Corporation, which helps compa-

nies nationwide coordinate mentoring programs for women with high

potential, recalls:

Everyone here knows we walk our talk. We are both pas-

sionate and compassionate and that comes through. One of

our women employees has had some health problems. She

is a single parent with no extended family nearby. Other

employees take her to medical appointments and we all

chip in to make sure her work gets done when she can’t be

here. Another employee’s husband had cancer requiring a

bone marrow transplant. We agreed to and supported her

working from home for six months. We’ve gained tremen-

dous loyalty from our employees because of our approach.

Our workforce is fully engaged, which contributes signifi-

cantly to our company’s performance.

Discovering Your Values

CHAPTER 3 • YOUR MORAL COMPASS 43

Frame 1

Moral Compass:

Principles

Values

Beliefs

When we grew up, we learned a set of values, those qualities or stan-

dards that parents or caregivers considered important to our well-being

and that of others. Over time, we came to adopt those values as guides

to our own behavior. Families vary in the weight they place on certain

values. Lori Kaiser, former VP for supercomputer maker Cray, Inc.,

came from a large family where grandparents, great aunts and uncles,

and even older siblings all got involved in teaching moral lessons. They

emphasized that telling the truth was not about avoiding getting caught

in a lie and that the most important persons she had to answer to were

herself and her higher power. When Lori was young, her mother once

caught her telling a lie. Instead of punishing her like many parents

might, Lori’s mother simply told her, “That’s your issue, not mine! Now

what are you going to do about it?” Like Lori, most of us were raised to

value honesty. Families often emphasize a variety of values, such as

helping others, creativity, knowledge, or wealth accumulation. We may

begin by adopting our families’ values, and as we mature, we often add

our own. By selecting, interweaving, and prioritizing our values, we

define who we are—or at least who we want to be. Just as we recognize

people by their physical characteristics such as hair color, height, or the

way they laugh, we also come to know people by the values they

embody. As we get to know friends or colleagues, we begin to recognize

what means the most to them. Do they crave excitement, care about the

environment, or seek status? We evaluate others based on how well our

values mesh. You might value personal time for creative work more than

social activities, while I might value relationships and family time more

than professional recognition. We feel comfortable around people who

share our most important values and often avoid those who don’t.

Unlike universal principles, which by definition apply to everyone,

values are individual. They are personal. There is an especially urgent

reason for identifying your most important values. Life is finite. Values

help us to be selective about how we spend our precious time. Without

values, how would we decide what goals are worth having? From all the

opportunities that life presents us, which are most important to us?

While values can help us tell right from wrong, they can also help us to

decide right from right by guiding our choice from among more than

one attractive option. Suppose you had a choice between a job with a

high salary and a lower paying overseas assignment that offered con-

siderable opportunities for adventure and growth. How would you

decide? Now suppose that both jobs would require that you spend a

considerable amount of time away from your family. What would

44 MORAL INTELLIGENCE

your decision be? Neither option is necessarily right or wrong in itself.

To make the right decision, you would have to weigh the relative

importance of personal values such as wealth, personal development,

adventure, and family.

The Morality of Values Not all values are created equal, as in the previous example. Without

some context, values are neither moral nor immoral. It is only when we

need to make decisions that have moral consequences that values take

on moral significance. Being moral means more than honoring your

personal value system. Because we choose our values, it is possible that

personal values may be out of alignment with the principles. Try to

imagine the contents of Osama bin Laden’s moral compass. No one

would deny that bin Laden has a strong value system, one that probably

includes some admirable beliefs. But his willingness to harm innocent

victims, including members of his own Islamic faith, in pursuit of his

values, violates the universal principle of compassion. Osama bin

Laden “walks his talk;” that is, his goals and actions are consistent with

his values, but some of his values violate our universal moral compass.

We don’t have to travel half-way around the world for examples of

values misalignment, as demonstrated in 2004 when several bankrupt

U.S. airline companies used Chapter 11 to skip mandatory pension con-

tributions, putting retirees’ livelihoods in jeopardy.

When we make a decision that does not have any particular moral

significance, as in deciding where to go on vacation, we might indulge

our desire for adventure without a second thought. But when we are

making a decision that involves others, as is the case when considering

a career move that would affect family members, the priorities we

assign to our values must be consistent with universal principles. In that

instance, we must honor the principle of responsibility. We may realize

that our desire for adventure, growth, or more money would come at the

cost of our responsibility to family.

CHAPTER 3 • YOUR MORAL COMPASS 45

Identifying Your Values. As with every element of effective leadership,

good decision-making requires clarity about your personal values. You

can use the following worksheet to better understand your values and

their relative importance in your life.

WORKSHEET 2: Identifying Your Core Values

Please circle the number at the left of each personal value you believe

to be one of your core values. If you feel important values are missing,

feel free to add your own at the bottom of the list.

46 MORAL INTELLIGENCE

Now, select five you

believe to be your most

important core values

and list them here:

1.

2.

3.

4.

5.

This short list of five most important values probably represents the

aspects of life you hold most dear. That does not mean you will always

behave in ways that are consistent with your ideal values. But if you

consistently behave in ways that are in conflict with what you say you

value, it may be useful to reexamine your values statement. Do you

espouse a value because it is politically correct in your organization or

because you were brought up to believe in it?

1. Achievement 2. Power 3. Affiliation 4. Thriftiness 5. Creativity 6. Wealth 7. Autonomy 8. Status 9. Comfort 10. Safety 11. Wisdom 12. Enjoyment 13. Friendship 14. Health 15. Security 16. Service 17. Community 18. Independence 19. Loyalty 20. Growth

21. Curiosity 22. Spirituality 23. Altruism 24. Perseverance 25. Order 26. Inner Peace 27. Gratitude 28. Open-Mindedness 29. Meaningful Work 30. Competence 31. Influencing Others 32. Stability 33. Challenges 34. Competition 35. Economic Security 36. Cooperation 37. 38. 39. 40.

What Your Decisions Reveal About Your Values. Sometimes, we

don’t actually value what we say we do. If, over time, you find yourself

behaving inconsistently with your espoused values, you have a choice.

You can learn to better align your behavior with your values by devel-

oping your moral and emotional competencies, or you may simply

accept that you value some things that you did not realize were impor-

tant to you. Either path is fine, as long as your actions don’t violate the

universal principles.

To find out what your outward behavior can tell you about your val-

ues, keep a running log of all your decisions over the course of a few

weeks. For each decision:

• Write down the values that influenced your decision.

• Ask yourself, “If people who did not know my inner motivations saw the outcome of this decision, what value or values would

they think this decision reflected?

SAMPLE VALUES LOG

Problem and What Values Drove What Values Others Decision Your Decision Might Think Drove the

Decision

Example: Responsibility to Power—being seen as a take- Financial shortfall in preserve jobs for the charge leader. division led to laying most by stabilizing off the three newest the division. Financial gain—for company employees. and for manager’s bonus.

Loyalty to longer term employees.

Example: Responsibility to Friendship—in this case was A senior employee with reward and promote more important than merit many years of loyal loyalty to organization. in promotion decisions. service but a mixed reputation for comp- Compassion. Order—making promotions etence is promoted predictable. to a new position.

CHAPTER 3 • YOUR MORAL COMPASS 47

This exercise can give you some insight into personal motivations that

you might not have admitted to yourself before. Consider whether the

values others might attribute to your decision may actually have some

bearing on your choices.

Uncovering Values Conflicts. After you identify what you value,

ideally and really—look at your list of values and compare it with the

universal principles. To ensure that your values are consistent with prin-

ciples, ponder questions like these:

• Is my desire to achieve financial results so strong that I behave as if the end justifies the means?

• Does my desire for high achievement lead me to lack compassion for an employee whose family crisis takes him away from work

at a critical time?

• Does my need for economic security discourage me from speak- ing out with integrity about an unethical corporate practice?

If you accept that universal principles universally apply, you must—as

a morally intelligent leader—reprioritize your values in line with the

principles. We are not saying that you should not value what you value.

But in some cases, it will be important to find a way to honor your val-

ues while upholding principles. You can honor both principles and

personal values when you look for answers to questions such as, “How

can I arrange my financial affairs so that I am protected if my ethical

position gets me fired? Or, “How can I creatively allocate resources to

preserve or improve group productivity while an employee is out

on leave?”

It should be clear by now that values can be applied in a morally

bad, neutral, or positive way. We are not encouraging you to abandon

your values in favor of certain values that may have a more obvious

moral veneer.

48 MORAL INTELLIGENCE

CHAPTER 3 • YOUR MORAL COMPASS 49

Power’s Value

Power often gets a bad rap. Power has the potential to be seductive, intoxicating, or lead to abuse. When power is abused, individuals and organization suffer. But like most other values, power can be leveraged for good or ill. Power that is used to promote universal principles is a tremendous force for organizational success and global advancement.

“The problem of power is how to achieve its responsible use rather than its irresponsible and indulgent use—of how to get men of power to live for the public rather than off the public.”

—Robert F. Kennedy (1925–1968), “I Remember, I Believe,” The Pursuit of Justice, 1964

Beliefs

Moral Compass:

Principles

Values

Beliefs

Beliefs are the third component of our guidance system. For each of us,

our beliefs are the “executive summary” of our individual world view.

Beliefs represent our self-understanding about what we think is impor-

tant and how we think of ourselves in relation to the outer world. They

are the condensed version of our moral compass. Beliefs capture our

larger list of principles and values in a streamlined form that is easier to

communicate. Beliefs are the language we use to describe our values

and our understanding of principles to ourselves and others. They con-

nect our understanding of principles with our choice of values. You

can’t really know what your values are unless you can make a statement

about what you believe.

50 MORAL INTELLIGENCE

Notable Beliefs

Kites rise highest against the wind—not with it.

—Sir Winston Churchill (1874–1965)

I am a strong believer in luck and I find the harder I work the more I have of it.

—Benjamin Franklin (1706–1790)

I really do believe I can accomplish a great deal with a big grin, I know some people find that disconcerting, but that doesn’t matter.

—Beverly Sills (1929–)

I believe in God, only I spell it Nature.

—Frank Lloyd Wright (1869–1959)

The probability that we may fail in the struggle ought not to deter us from the support of a cause we believe to be just.

—Abraham Lincoln (1809–1865)

There are admirable potentialities in every human being. Believe in your strength and your youth. Learn to repeat endlessly to yourself, “It all depends on me.”

—Andre Gide (1869–1951)

Life is not easy for any of us. But what of that? We must have per- severance and above all confidence in ourselves. We must believe that we are gifted for something and that this thing must be attained.

—Marie Curie (1867–1934), two-time Nobel prize winner in Chemistry

CHAPTER 3 • YOUR MORAL COMPASS 51

I was brought up to believe that how I saw myself was more impor- tant than how others saw me.

—Anwar el-Sadat (1918–1981)

Believe me! The secret of reaping the greatest fruitfulness and the greatest enjoyment from life is to live dangerously!

—Friedrich Nietzsche (1844–1900)

I believe that unarmed truth and unconditional love will have the final word in reality. That is why right, temporarily defeated, is stronger than evil triumphant.

—Martin Luther King Jr. (1929–1968), Accepting Nobel Peace Prize, Dec. 10, 1964

Identifying Your Beliefs You probably have 10,000 beliefs about yourself, your world, and

human nature. But most people have a relatively short list of beliefs that

they hold as their “convictions”—beliefs they use to guide decision-

making when the going gets rough. Many of these might even operate

at an unconscious level most of the time, but with a little thought, most

people can bring them up to the surface. What do you believe? You can

use Worksheet 3 to record your “top ten” beliefs.

WORKSHEET 3 My Top Ten Beliefs

Please take a few minutes to record your “top ten” beliefs in the follow-

ing spaces. Remember…try to focus on your beliefs about yourself,

your world, and human nature.

52 MORAL INTELLIGENCE

1. I believe...

2. I believe...

3. I believe...

4. I believe...

5. I believe...

6. I believe...

7. I believe...

8. I believe...

9. I believe...

10. I believe...

By this point, you have identified the key elements of your moral com-

pass. You have chosen the universal principles you embrace, you have

articulated your values, and you have summarized your beliefs.

Understanding your moral compass is essential to effective decision-

making. Living in alignment means that you hold yourself accountable

for decisions consistent with your moral compass. But before you take

action, you need to understand your goals and wants.

Goals

CHAPTER 3 • YOUR MORAL COMPASS 53

Goals:

Purpose

Goals

Wants

Scientists who study behavior tell us that humans have an innate need to

make sense out of our lives. We constantly develop theories to explain

why things happen as they do.

Say you see a cloud-like substance billowing out of a window.

Maybe you hypothesize that something is on fire. If you’re an astute

observer, you might notice that the substance is pale and there is no

smell of smoke and realize that it’s actually steam. Whether you’re right

or wrong about the nature and origin of the billowy substance, in both

cases you are trying to create meaning out of your observations. We

have a similar need to attribute meaning to our lives. How do our day-

to-day events combine to create a coherent whole? What is the point of

doing what we do? If we can begin to answer those questions, we have

the beginning of our highest goal—our life’s purpose. Not everyone

develops and follows a life purpose. People who were injured or

severely neglected or abused might lack the capacity to formulate a

meaningful purpose. But most of us are hungry to make sense out of our

lives, so we create goals. Everyone’s life purpose is distinctively theirs,

but each must be consistent with universal principles of integrity,

responsibility, compassion, and forgiveness. Albert Schweitzer once

said, “I don’t know what your destiny will be, but one thing I do know:

the only ones among you who will be really happy are those who have

sought and found how to serve.” Oprah Winfrey, who created one of the

wealthiest entertainment empires in the United States, says this about

purpose: “I’ve come to believe that each of us has a personal calling

that’s as unique as a fingerprint—and that the best way to succeed is to

discover what you love and then find a way to offer it to others in the

form of service, working hard, and also allowing the energy of the uni-

verse to lead you.”1 So take a few minutes to reflect on your life purpose

using the following worksheet.

WORKSHEET 4 My Purpose2

Be patient. The discovery of purpose can take some time. But when you

come to “feel it,” you’ll know it was worth the wait.

These questions might help:

1. What are my talents?

2. What am I passionate about?

3. What do I obsess about, daydream about?

4. What do I wish I had more time to put energy into?

5. What needs doing in the world that I’d like to put my talents to

work on?

6. What are the main areas in which I’d like to invest my talents?

7. What environments or settings feel most natural to me?

8. In what work and life situations am I most comfortable express-

ing my talents?

54 MORAL INTELLIGENCE

1. Oprah Winfrey, O Magazine, September 2002.

2. This worksheet is based on material from Richard J. Leider. Repacking Your Bags: Lighten Your Load for the Rest of Your Life, San Francisco: Berrett-Koehler Publishers, 1995).

Now, draft your purpose statement:

CHAPTER 3 • YOUR MORAL COMPASS 55

My purpose in life is…

What Do You Want for Yourself? WDYWFY (pronounced “widdy

wiffy”) is a process developed to help people clarify their goals.3

WDYWFY is an acronym for “What Do You Want for Yourself?” First,

let us dispose of a myth. Wanting is ok. Being moral does not mean that

you must be an anti-materialistic saint. Wanting is part of human nature.

Being human means that you are a wanting being. In their book, Driven,

Harvard Business School professors Paul Lawrence and Nitin Nohria

argue that fulfillment in life depends on finding ways to satisfy our

inborn instinctual drives.4 It’s the way we satisfy our instinctual drives

that makes the difference between being morally intelligent and morally

impaired. For example, as humans, our sex drive is instinctual, but

there’s a big difference between consensual love-making and date rape.

3. Doug Lennick and Roy Geer. How to Get What You Want and Remain True to Yourself, Minneapolis, Minnesota: Lerner Publications Company, 1989.

4. Lawrence and Nohria, ibid.

Getting what we want is good. But if we don’t channel our instinc-

tual drives, we get in trouble. That is why goal-setting is vital to living

in alignment. Without goals, it’s hard to create meaning out of our

actions. Without goals, our ability to fulfill our life’s purpose would be

a matter of chance. Setting deliberate goals allows us to satisfy our

wants in a way that is aligned with our moral compass.

Not only does your goal frame help you satisfy your wants within a

moral framework, paying attention to goals also increases the odds that

you will actually accomplish what you desire. If you don’t work on

your goal frame, there is a random occurrence of achieving your goals.

Career expert David Campbell made that point famously in his book

If You Don’t Know where You’re Going, You’ll Probably End Up

Somewhere Else.5 Apparently, it’s not enough to have a set of goals in

your head. You will boost your ability to achieve your goals when you

write down your goals and your plans to achieve them. Why do written

goals have such a positive impact? The most basic reason is that we

tend to forget things. The physical process of writing helps our brain

retain and recall the things we want to accomplish. When we write

down goals, we have an opportunity to reflect carefully on what we

really want and consider the best ways to accomplish them. When we

record our goals, we can use our list as a reminder to stay on track. The

process of writing down goals enhances our commitment and capacity

to be responsible for the choices we make. We have all known of highly

intelligent individuals who never lived up to their potential. Similarly,

moral intelligence is wasted unless you use it in service of positive

results, and goal setting will help you leverage the power of your moral

intelligence to have a positive impact on your organization and the

world.

56 MORAL INTELLIGENCE

5. David Campbell. If You Don’t Know Where You’re Going, You’ll Probably End Up Somewhere Else. Notre Dame, Indiana: Ave Maria Press, 1990.

Why Leaders Love Goals Every effective leader we know has crystal clear goals. Goals are cru-

cial to effective leadership because they move you beyond awareness or

good intentions to specific actions. Effective leaders accept responsibil-

ity for their choices by “getting on the record” with their goals.

Effective leaders have goals that they really care about. They also

encourage their followers to develop personally satisfying goals. One of

the most powerful motivational tools of a good leader is to show that

you care about the wants and goals of the people who work with you.

Employees with that rare boss who shows genuine interest in their

goals—and who spends time helping them chart a course to reach those

goals—respond with loyalty and commitment. Brian Heath, General

Sales Manager of American Express Financial Advisors, is a body

builder who does a mean impression of Arnold Schwarzenegger.

Brian’s sheer size and dominating demeanor fool some people into

thinking he’s nothing more than a tough guy. But Brian is also a people

builder. When Brian was a regional vice president, he spent a lot of time

listening to his employees. He learned that they wanted to be very suc-

cessful but that many of them lacked confidence that they could achieve

their goals. He learned a lot about what bothered them and how their

fears got in the way of their performance. Brian decided that his

employees needed him to help them overcome their insecurities and

demonstrate confidence in their ability to accomplish their goals. So he

decided on a regional goal that would reflect the ambitions the advisors

had for themselves: They would set a goal that would require above

average performance from everybody. Going forward, they would

expect the average performance of all the division’s advisors to equal

the current level of performance of the top five percent. Brian presented

it to his group in a speech titled, “Our Ridiculous Goal”—ridiculous

because the bar was set so high. But Brian knew that all his advisors

wanted to be top performers, and in the end they achieved their ridicu-

lous goal.

CHAPTER 3 • YOUR MORAL COMPASS 57

Your Goals What exactly do you want for yourself? What are your goals? The

majority of us want to play the roles we have in life well. Most people

who are parents want to be good at it. Even terrible parents want to be

good at it. There are very few of us who don’t care about how we per-

form. How many of you want to be part of a family that you are proud

of? How many of you want to be part of an organization that you are

proud of? What do you have to do to accomplish that?

Put It in Writing Whether you are developing new goals or reinforcing long-standing

goals, writing your goals down here will make them more real. Keep in

mind that there are two kinds of goals. Some goals are a state of being

goal, such as “I have three children. I want to be a good father now.”

Another type of goal is a future based goal, for example, “I want to

retire within five years” or “I want to lose weight.” We recommend that

you include goals of both types.

WDYWFY (What Do You Want For Yourself?) Follow these steps to

decide on the goals that are most important to you:

Step 1: Goal Identification. Decide what your top three to five life

goals are and record them on Worksheet 5.

WORKSHEET 5 My Most Important Life Goals

1.

2.

3.

4.

5.

58 MORAL INTELLIGENCE

Step 2: Goal Alignment. Think about your top long-term goals.

How well do your goals fit with your principles, values, and

beliefs?

GOAL ALIGNMENT TEST

My Beliefs My Goals Consistencies Inconsistencies

Sample: Buying a vacation Between my belief If the vacation home Caring for others home in caring for others is too expensive, it

and my goal of might mean that I buying a vacation would have to home that my reduce my usual family would enjoy charitable

contributions

You don’t need to abandon any goal that would make you wildly happy.

But you will find that your overall happiness and effectiveness will be

enhanced if each of your goals is strongly aligned with your moral

compass.

Behavior

CHAPTER 3 • YOUR MORAL COMPASS 59

Behavior:

Thoughts

Emotions

Actions

The behavior frame puts the “living” in “living in alignment.” Your

behavior frame represents what you actually do, including your

thoughts, emotions, and outward actions. Your behavior frame is what

inspires people to follow you as a leader. People will not know you as a

moral leader unless you communicate what you stand for—and act

accordingly. When we act stupid, we give ourselves the benefit of the

doubt, but others might not. So keeping your behavior in alignment with

your moral compass and goals is essential for effective leadership.

Thoughts. What makes thoughts part of our behavior frame?

Psychologists recognize thoughts as a form of cognitive behavior. They

can’t be seen by the outside observer, but like outward actions, they are

within our control. We can act on them—we can change what we think.

Most important, thoughts profoundly affect your emotions and your

outward behavior. In a later chapter you will explore in greater detail

about how to manage thoughts in ways that keep you in alignment.

Emotions. Everyone has them, even the most rational and composed of

us. Emotions are neither good nor bad. They are simply emotions. But

because strong emotions, whether positive or painful, can get in the way

of effective behavior, emotions must be managed. The most effective

leaders know how to regulate their own and others’ emotional responses

in a way that promotes a positive and high-performing work environ-

ment. If leaders lack emotional control or insight into the emotional

needs of their followers, the work environment suffers. Earlier in her

career, when MENTIUM CEO Lynn Sontag was a senior leader in exec-

utive development at a Fortune 100 company, she once made the mis-

take of transferring a call from an irate executive spouse to her boss. The

caller, who had considerable clout, was having a temper tantrum about

something that the organization wouldn’t as a matter of policy give her.

Lynn realized too late that she should have prepared her boss for the call

so he wouldn’t get stuck in a political bind. She still has vivid memories

of his reaction and the impact on her subsequent performance:

I can visualize the whole thing. My office was kitty corner

from the executive director, and I could see his expressions

as he talked to her, and it was pretty visual. His door was

closed, but I could see him through his window, and I knew

where he was heading as soon as he opened the door. He

blew up in front of me and everyone else around. The next

60 MORAL INTELLIGENCE

day he calmed down, and we walked through it and

processed it so that it wouldn’t happen again. We got

through it, but I was derailed on a personal level for a long

time. I still had to work with the woman for another year

and a half. It took me more than a couple months to let go.

It hit me right where my confidence was. I didn’t trust my

own judgment, and I became unwilling to make decisions

without checking with a lot of people first.

Actions. We all know they speak louder than words. Having a moral

compass and admirable goals is worthless unless we do what it takes to

make them real. In fact, failure to act in concert with our values and

goals is worse than worthless. It does us harm. It makes us untrustwor-

thy. Whom do we trust? People who do what they say they will do.

People we can count on to behave with integrity and compassion.

In Search of Alignment. Now that you see the canvas inside each of

your frames, how do you keep your frames aligned? In the next chapter,

we turn to the skills that connect our frames and the obstacles that inter-

fere with living in alignment.

CHAPTER 3 • YOUR MORAL COMPASS 61

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Knowing who you want to be—an honest, responsible, and compas-

sionate leader—is one thing. Knowing how to become your best self is

another. Actually doing what you know you should is still another mat-

ter. That is the essence of alignment, a shorthand term that means “your

goals and your behaviors are consistent with your moral compass.” We

need three qualities to help us keep us in alignment:

• Moral intelligence—Part of us that shapes our moral compass and ensures that our goals are consistent with our moral compass

• Moral competence—Ability to act on our moral principles

• Emotional competence—Ability to manage our and others’ emotions in morally charged situations

STAYING TRUE TO YOUR MORAL COMPASS

4

63

Moral Intelligence. Can you interpret this formula?

64 MORAL INTELLIGENCE

d dx

f(s)ds = f(x)� x a

Here’s a hint: The equation here represents the “fundamental theorem

of calculus.” It expresses the fact that differentiation and integration are

inverse operations of each other. Now do you understand? If you’re like

most people, that explanation helps a little, but not much. You can tell

that the diagram is a mathematical equation, and you’ve heard of calcu-

lus, but you might not understand or remember the distinction between

differentiation and integration. For people who are mathematically

inclined, the fundamental theorem of calculus probably looks as

simple to them as 2+2=4 does to the rest of us. A complicated equation

makes sense to the mathematician because she has two qualities—

mathematical intelligence (basic aptitude) and mathematical compe-

tence (learned skills). Mathematical intelligence isn’t sufficient to be

good at math, but no amount of practice will make you a good mathe-

matician if you don’t have an underlying aptitude. Moral intelligence is

another kind of aptitude. Without it, no amount of training will turn us

into moral leaders. Recall the brain-injured toddlers. No matter how

hard their parents tried to instill positive values, they simply lacked the

basic neurological equipment to distinguish between right and wrong.

Moral intelligence is our basic aptitude for moral thought and

action. We call on it to make sense out of moral principles (the “funda-

mental theorems” of morality). Moral intelligence allows us to develop

moral values and beliefs and to integrate those values and beliefs into a

coherent moral compass. Because it’s the part of us that knows what’s

right, we use it to ensure that our goals and behavior are in alignment

with our moral compass. Like a smoke detector, our moral intelligence

sounds the alarms when our goals or actions move out of synch with our

moral compass.

When Charlie Zelle was a young New York investment banker, his

family’s Midwestern transportation and real-estate business went into a

financial tailspin. After he returned home to help save the business,

company lawyers called a meeting of management and key family

shareholders to decide the firm’s fate. When lawyers and family mem-

bers began to talk, Charlie was astonished at how glib they all seemed.

It was clear that they had already decided to throw in the towel and no

one seemed all that upset about it. Charlie got angry—his moral intelli-

gence alarms were deafening. He thought shutting down the company

was unfair and a selfish move on the part of his family. If the company

folded, 500 employees would lose their jobs, and people in the commu-

nity would lose access to the public transportation they provided.

Moral Competence. While moral intelligence involves knowing what

to do, moral competence is the skill of actually doing the right thing.

How do we do what we know is right? How do we do the right thing

even when we are scared or pressured? For that, we need moral compe-

tence. We need it to understand what goals will allow us to be true to

our principles, and we need moral competence to act in alignment with

our values and beliefs. Charlie Zelle’s moral intelligence told him that

it was selfish for his family to simply cut their losses at the cost of fair-

ness to employees and the community. But it took moral competence

for Charlie to act on that awareness. He was just a kid, but fueled by his

anger and encouraged by a mentor, Charlie found his voice. He found

some investors, formed a new company, bought the buses back from

bankruptcy court, and rehired all the employees from his family’s old

company. The odds of success were low, but with the help of a senior

vice president who knew and loved the business, they survived. Fifteen

years later, Charlie’s company, Jefferson Bus Lines, is a thriving

regional bus operator.

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 65

Emotional Competence. To live in alignment, we also need to be emo-

tionally competent. Emotional competence helps us manage our emo-

tions and the emotional quality of our relationships with others. It’s

almost impossible to be morally competent without being emotionally

competent as well. For example, most of us value honesty and most of

us have the moral competence to be truthful. After all, we’ve told the

truth countless times. But if we’re such experts at telling the truth, why

then do many of us lie so often? A UK women’s magazine survey, for

instance, found that 94% of women admitted that they tell lies, half of

them lying on a daily basis. Emotional competence helps us answer

questions like these:

• What makes it hard to tell the truth in a particular situation?

• How will others act if I tell the truth or fail to tell the truth?

• How can I tell the truth in a way that will preserve my relation- ships with others?

Emotional competence allows us to understand our own emotions,

especially those that can get in the way of doing the right thing.

Emotional competence also helps us understand and respond intelli-

gently to the emotions of others. That ability to respond to others’ emo-

tional needs in turn creates a positive work environment in which

people feel safe enough to do what is morally right—and not inciden-

tally, perform at their best.

When leaders lack emotional competence, they create a negative

climate that encourages self-protection rather than integrity. Lori

Kaiser, former vice president at supercomputer maker Cray, Inc., ran

into an emotionally incompetent manager at a previous company where

she had worked early in her career. He was a foul-mouthed senior man-

ager who routinely harassed his juniors. Everyone knew he was obnox-

ious, but no one called him on it. Lori tolerated it for years. Then while

on maternity leave, she realized how great it felt to be away from him.

66 MORAL INTELLIGENCE

When she returned from leave, she took advantage of her newfound sta-

tus as the company’s most senior woman to draw a line in the sand. Lori

told her superiors she would only return if she did not have to work with

the obnoxious manager. Her superiors agreed, but did nothing to correct

his behavior. Other employees, in part weary of dealing with him, began

to leave the company. Only then did management begin to pay attention

to his behavior, but by then, they had lost some valuable people—

largely because of the negative environment created by one emotionally

incompetent leader.

Lori faults herself for failing to act sooner. She tolerated his nega-

tive behavior for a long time because the company paid her well to do

the kind of work she wanted to do. Though she was not the source of a

negative environment, she believes she was partially responsible for

allowing it to continue. “Even though I may be able to tolerate difficult

people,” says Lori, “the people who follow me need someone who can

speak up. If I condone bad behavior in front of junior men or women,

it’s unacceptable. Now I speak up for all of the people who are junior to

me and can’t speak up, even if it makes me look like I’m not one of the

gang.”

Staying Aligned. When you consistently use your moral intelligence,

moral competence, and emotional competence, you will find that you

are spending more and more time living in alignment with your moral

compass. When your three frames are in synch, you feel as though you

are “in the zone,” and your creativity and performance are at their best.

When you are in a leadership role, your state of alignment is palpable

and appealing to followers. Your state of alignment contributes to an

emotionally positive and high-performing work environment for others.

Think of the leaders who have inspired you the most. They are

almost invariably those who consistently demonstrate their commitment

to principles that you also believe in. Lynn Fantom, CEO of ID Media,

says of her boss, David Bell, who heads parent company Interpublic, “I

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 67

would do anything for him because he shows respect to me and every-

one in the company by doing simple things like sending short e-mail

messages of appreciation.”

Moral Misalignment. The most successful leaders spend the majority

of their time in alignment. But all of us experience times when it is

hard to stay in alignment, times when our moral intelligence doesn’t

seem to be having an impact on what we want or what we actually do.

Instead of being connected to our ideal selves—who we would like to

be at our best—we disconnect from our moral compass. Misalignments

don’t usually happen because we lack moral or emotional skills.

Typically, they occur because moral viruses or destructive emotions

are interfering with our ability to use moral and emotional competen-

cies that we have successfully used in the past.

Moral viruses are disabling and inaccurate negative beliefs that

interfere with alignment. Moral viruses infect our moral compass and

lead us to adopt goals that are inconsistent with our moral compass.

68 MORAL INTELLIGENCE

Moral Viruses

Moral Intelligence Moral Competence

Emotional Competence

Moral Compass

Principles

Values

Beliefs

Goals

Purpose

Goals

Wants

Behavior

Thoughts

Emotions

Actions

Destructive Emotions

Alignment

Misalignment

Alignment

Misalignment

FIGURE 4.1 Alignment Model

Diagnosing a Moral Virus. Moral viruses are unfounded negative

beliefs that are in conflict with universal principles. Like computer

viruses that infect a computer’s operating system, moral viruses invade

your moral compass and often lead to breakdown. Moral viruses remind

us of computer “adware,” the insidious advertising software programs

that are installed on your computer via the Internet without your con-

sent. Suddenly, your computer desktop is overwhelmed by pop-up ads,

and when you try to find and delete the adware program, you find it’s

very difficult. Your antivirus software probably will not work. The

unwanted program has the ability to hide its files and to resist attempts

to remove it. Like adware, moral viruses sneak into your moral operat-

ing system. They hide themselves well: At a conscious level, you may

articulate a set of principles, values, and beliefs that are admirable,

without realizing that you are secretly harboring an unsavory belief that

affects the quality of your goals. Your “official” goals are in alignment

with your moral compass. But without your awareness, you have

adopted some “unofficial” goals that are at odds with your moral

compass. The end result is that you do things that are inconsistent with

your moral compass, and you are probably pretty confused about the

reasons why.

Consider the experience of John Simmons (pseudonym), founding

partner in a growing professional services firm. He was attending a part-

ner’s meeting for his firm. Compensation was on the agenda, and dur-

ing the discussion, John found himself insisting that his fellow owners

adopt a lot of legalistic provisions that he thought necessary to ensure

he would be compensated fairly for all his efforts. During the discus-

sion, John became increasingly rigid, frustrating his partners. Finally,

they told him he was acting as if they were his enemies rather than peo-

ple who shared his goals. John knew instantly they were right, but it

took a few hours of reflection to figure out why he had behaved with

such suspicion.

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 69

John explains, “When I was about four years old, I got into an

argument with my older brother and I bit him! My father insisted that I

apologize. I refused. Before I realized the stakes of the game I was play-

ing, my father said, “If you don’t apologize, you can’t be a part of this

family.” He proceeded to take me about a half a mile away from our

farmhouse and dump me off in the pasture. I recall running back home,

crying as I ran. My false conclusion was that when it comes to basic

needs like personal safety you really can’t trust anyone, even those

close to you. Even people who have never actually taken advantage of

you might still turn on you in unpredictable ways. Always be on guard!”

Once John uncovered his “moral virus,” he went back to his fellow

owners to own up to the negative beliefs that had infected his moral

compass and disrupted their meeting.

Common Moral Viruses

• Most people can’t be trusted.

• I’m not worth much.

• I’m better than most other people.

• Might makes right.

• If it feels good, do it.

• My needs are more important than anyone else’s.

• Most people care more about themselves than anyone else.

• People of other (races, religions, nationalities) are not as good as people of my (race, religion, nationality).

Dealing with Moral Viruses. A good way to manage moral viruses is

to scan for them in your thoughts. To figure out what you are thinking,

tune in to your “self talk”—the continuous internal conversation

that you have with yourself. Like computer antivirus software that

70 MORAL INTELLIGENCE

periodically scans for new viruses, you should regularly scan your self

talk to stay aware of the internal beliefs that are influencing your daily

actions. In addition to regular moral virus scans, we recommend that

you scan your self talk for possible moral viruses whenever you are

experiencing strong emotion, either positive or negative. Because

thoughts and emotions mutually influence each other, it is especially

important to understand the beliefs that may be the root cause of

uncomfortable emotions.

Disabling a Moral Virus. When you have detected a moral virus in

your thoughts, you have the opportunity to replace it with a thought or

belief that is consistent with your moral compass. Countering a moral

virus is effective in the moment, but it is not a permanent fix. Moral

viruses sometimes act like certain biological viruses that lurk indefi-

nitely within us. For example, the virus that causes shingles, a relative

of the chicken pox virus, is a chronic virus. After an outbreak of shin-

gles, the virus doesn’t die. It retreats to the base of a bundle of nerves,

where it lies dormant unless the affected person’s immune system is

weakened by another illness, allowing the old virus’ symptoms to reap-

pear. Similarly, when we are under stress, the symptoms of a moral

virus can once again resurface. In the example just described, John

Simmons figured out how he had been infected by a moral virus, but he

knows he may run into the same virus in the future. John is not “cured,”

but his awareness will help him to recognize moral virus symptoms and

move quickly to minimize its negative affects in the future.

Because none of us had a perfect upbringing, most of us will have

at least one moral virus lying in wait to overtake us in a difficult

moment. That is why it is important to scan our thoughts regularly and

why it is necessary to actively remind ourselves of our more desirable

frame one beliefs. A good rule of thumb is this: When you find yourself

doing something that is puzzling to you—when you say to yourself, “I

don’t know why I behaved that way…,” you are likely dealing with

some sort of moral virus. That is a good signal to talk it out with a good

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 71

friend or trusted advisor. Like a virus that thrives in the dark, moral

viruses brought out into the light often wither and die.

Destructive Emotions. Destructive emotions are the most common

culprits in keeping us from acting consistently with our goals. Emotions

such as greed, hate, or jealousy are powerful and can overwhelm our

normal ability to act in a morally and emotionally competent manner. It

is human nature to experience periodic emotional “breakdowns”—not

usually the kind that sends us off for a long rest cure, but the more com-

monplace stresses that can lead us to become emotionally over-

whelmed. Our moral compass is intact, and our goals are clear, but in

the heat of the moment, we act in a way that is completely inconsistent

with what we say we want. We lose control and allow destructive emo-

tions to take hold. Greed is an especially destructive emotion, one that

likely lies at the heart of the ongoing corporate scandals. It’s hard to

imagine that any of the executives prosecuted for accounting or securi-

ties fraud in the last four years needed more money than they already

had. For an executive in the throes of greed, however, enough is never

enough. We’re all too familiar with the impact of greed-driven schemes

—employees deprived of jobs and retirement funds, shareholders

betrayed, and companies bankrupt. Ironically, giving into greed hurts

ourselves as much as others, as Dennis Kozlowski, Ken Lay, and

numerous others have discovered.

Managing Destructive Emotions. There will always be occasions

when you feel negative emotions. Your goal should not be to eliminate

all traces of negative feelings from your experience, but rather to

develop the emotional control to manage destructive emotions so they

don’t derail you. Managing destructive emotions is vital to a successful

leadership career because left unchecked, they are a frequent cause of

career derailment among executives. A senior manufacturing executive

interviewed for this book notes the importance of managing potentially

72 MORAL INTELLIGENCE

destructive emotions: “Someone will renege on something or not do

something they promised, or they’ll misrepresent things and I just want

to get even. I’ve had to develop a lot of self-control. I don’t often lose

my temper and if I do, I try to do it behind closed doors with my team.

So the challenge is treating people the way I’d like to be treated versus

the way I’d like to treat them because they screwed me. I don’t feel like

I’ve had to be extremely sensitive so much as I’ve needed to control my

revenge motive and be professional.”

A powerful antidote to negative emotions is the deliberate cultiva-

tion of a positive emotional state. Controlling emotions must come from

within. No one having a temper tantrum—child or adult—wants to be

told by others to “calm down.” Fortunately, we can learn how to short-

circuit highly charged negative emotions. Deep breathing exercises,

deep muscle relaxation exercises, and meditation, are just a few of the

scientifically documented ways to produce more positive emotional

states.1 Depending on your personal preferences, activities as varied as

hobbies, community service, spending time in nature or with family

members, even washing the dishes can trigger a positive mental state.

They work because you cannot have two incompatible physiological

states at the same time. You cannot be angry when you are happy. You

cannot be anxious when you are calm. Regular practice of your pre-

ferred technique is key to your ability to manage your emotions.

Through practice, you can create a calm and peaceful internal state that

automatically kicks in when you need it. When you deliberately culti-

vate a positive and relaxed emotional state, you will be better able to

call upon that positive state whenever a destructive emotion is begin-

ning to take hold.

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 73

1. Many techniques for inducing positive emotional states can be found in Herbert Benson, M.D. and William Proctor’s The Break-Out Principle, New York: Scribner, 2003.

The Experiential Triangle. We each operate within an experiential tri-

angle of thoughts, emotions, and behavior, all of which mutually influ-

ence one another. Although we discussed moral viruses and destructive

emotions as though they were separate phenomena, in reality, they are

typically found together and often reinforce the negative effects of each.

Emotions are usually the product of our thoughts. When we admire

someone, for example, our happiness in seeing that person stems not

from their physical existence, but because of the ideas we have about

them. Similarly, when we are in the throes of a destructive emotion, we

have a reason. Our negative feeling is prompted by some thoughts or

beliefs we have about the situation we are in. You think, “I knew I

couldn’t trust them,” or “I should have gotten more,” and you feel terri-

ble. The worse you feel, the more likely it is that a moral virus has

invaded your belief system. Destructive emotions such as anger and

jealousy are the “fever” that often accompanies a moral virus. But emo-

tions also stimulate thought processes. When a destructive emotion

overcomes you, it can negatively influence the way you think about

yourself or others, thereby causing a moral virus. Finally, our thoughts

and emotions affect our behavior. The behavioral impact of moral

viruses and destructive emotions is widespread and obvious. For a

leader, the effects of moral viruses and destructive emotions can be

career-ending. At the very least, your performance suffers along with

that of your co-workers.

Consider these contrasting experiential triangles:

74 MORAL INTELLIGENCE

A Case of Alignment

The Situation: My boss is hiding the extent of a new product line’s manufacturing problems from the senior management group until performance reviews are completed.

Thought: I know that my boss’s actions are violating the principle of integrity and I have a responsibility to get involved.

In this example, we can detect a moral virus in the belief that one should

“mind one’s own business,” coupled with the belief that others will do

you harm if you challenge their negative behavior. This moral virus is

likely contaminating more positive beliefs about human nature and our

responsibility to do what is right. But a moral virus can deactivate pos-

itive beliefs in a difficult moment, replacing them with negative beliefs

about other’s motives and our own responsibility. In this example, we

can also see the destructive power of emotions such as fear and anxiety

that further reinforce negative beliefs and the misguided actions that

result.

CHAPTER 4 • STAYING TRUE TO YOUR MORAL COMPASS 75

Emotions: Some apprehension about challenging my boss’s deci- sion, mixed with confidence and determination.

Behavior: I confront my boss about her actions and urge her to pro- vide accurate information about production problems.

Suppose, on the other hand, that you found yourself unable to confront

your boss. Would it be because you were unaware that what she was

doing was wrong, or because you did not know how to raise the issue?

Probably not. More likely, your failure to act would be the result of your

beliefs about the situation. Your beliefs create a context, or framework,

for deciding how to respond to your boss’s actions. You might then be

operating in an experiential triangle that operates something like this:

A Case of Misalignment

Thoughts: What other people do is none of my business. Human nature being what it is, I will probably be punished for standing up for what is right. If I do get involved, my boss might retaliate and I could lose my bonus or even my job.

Emotions: Fear and anxiety.

Behaviors: I look the other way or I help my boss conceal the extent of the production line problems.

Preventive Maintenance. Staying in alignment requires regular tune-

ups to monitor and prevent damaging effects of moral viruses and

destructive emotions. But most important, alignment depends on con-

tinuously developing our moral and emotional competence. But how?

What are the practical day-to-day actions we must take to stay in align-

ment? For that, we need to be proficient in a group of specific moral and

emotional skills—as we will see in the next several chapters of this

book.

76 MORAL INTELLIGENCE

Universal principles show up everywhere. They turn up in speeches and

sermons and scoldings; they are chiseled into monuments. We know

they sound good, but what do they really require of us? Exactly what

are we supposed to do to live in alignment with principles? Fortunately,

we “know it when we see it,”—we recognize when someone is acting in

concert with an important principle. A colleague follows up with us

when she said she would. A team member owns up to a costly mistake.

A boss gives us some well-deserved “constructive” feedback and then

goes on to treat us as cordially and respectfully as before. But it’s a

challenge to bring those lofty principles down to the level of day-to-day

life. It’s our moral competence that makes our principles concrete.

Moral competence, as we’ve said, is actually a collection of competen-

cies. Each is related to one of the four universal principles that we have

found are key to effective leadership—integrity, responsibility, com-

passion, and forgiveness (see Table PII.1). In this section, we explore

the competencies associated with each principle. We also discuss

another kind of moral skill—the emotional competencies that help us in

our efforts to maintain alignment. Though we will discuss each compe-

tency in turn, keep in mind that in the real world, individual moral

Part Two DEVELOPING

MORAL SKILLS

Integrity • Acting consistently with principles, values, and beliefs

• Telling the truth

• Standing up for what is right

• Keeping promises

Responsibility • Taking responsibility for personal choices

• Admitting mistakes and failures

• Embracing responsibility for serving others

Compassion • Actively caring about others

Principles Related Moral Competencies

Forgiveness • Letting go of one’s own mistakes

• Letting go of others’ mistakes

competencies and emotional competencies are interwoven. Like a mas-

ter artist who simultaneously uses all his talents—including brush tech-

nique, composition, color perception—to create a work of art, the best

leaders seamlessly blend all of their competencies to create their

personal and organizational masterpieces.

MORAL INTELLIGENCE 78

Every individual, like a statue, develops in his life the laws of harmony, integrity, and freedom; or those of deformity,

immorality, and bondage. Whether we wish to or not, we are all drawing our own pictures in the lives we are living…

—Harriot K. Hunt (1805–1875) U.S. Physician and Feminist

To starve to death is a small thing, but to lose one’s integrity is a great one.

—Chinese Proverb

INTEGRITY

5

79

The

Integrity

Competencies

• Acting consistently with principles, values, and beliefs

• Telling the truth

• Standing up for what is right

• Keeping promises

Acting Consistently with Principles, Values, and Beliefs This is the primary moral competency that encompasses the others.

Acting consistently with principles, values, and beliefs means being

purposeful in everything you do and say. Integrity is authenticity. It is

saying what you stand for and standing for what you say. Awareness is

the first step to being able to act with consistent integrity. That’s why

it’s so important to be clear about what’s in your moral compass. Acting

consistently with your moral compass also means letting others know

the principles that are most important to you, as well as holding your-

self accountable for decisions and behaviors consistent with that.

Before becoming an advisor with financial services company

Thrivent Financial for Lutherans, Walt Bradley spent 20 years selling

cars. One day, a young woman came on the used car lot to buy her first

car. The only car she could afford had a lot of miles, a few dents, and a

leaky exhaust. Walt told her that if she bought the car, they would check

out the leak and fix it. “When we inspected it, the pipe was shot,” says

Walt. “My boss said to just patch it. I argued with him, but he said,

‘I don’t give a shit. Just get it out of the building. There’s no warranty.’

Right in front of my boss, I told the mechanic not to do that—to fix the

car right. My boss and I got into a shouting match about it, but the

mechanic fixed it.” Asked how hard was it to stand up to his boss, Walt

replies, “I hate confrontation, but the woman trusted me, and I know

that if my word isn’t any good, then my product isn’t any good.”

The High Cost of Inconsistency. Leaders who blatantly ignore univer-

sal principles do great harm to their constituencies and ultimately to

their bottom line. But just as bad are leaders who pay lip service to

integrity while ignoring it in practice. Take this example of Kevin

Reynolds (pseudonym), CEO of a $400 million dollar consumer prod-

ucts company. Kevin talked a lot about integrity in his speeches to

shareholders, employees, and his board. But Kevin’s direct reports

80 MORAL INTELLIGENCE

didn’t trust him at all, and each could cite numerous examples of

betrayal or deception on Kevin’s part. None of Kevin’s direct reports

was willing to go out on a limb for their company in the environment

that he had created. Some of them spent a lot of time planning how to

protect themselves from his treachery, while a few braver souls openly

threatened to leave if the board did not fire him. The final straw came

when, at the end of a financially troubled year, Kevin manipulated the

bonus pool to get his maximum year-end bonus, leaving his team with

unfairly low payouts. For a time, Kevin managed to conceal his bonus

scheme by withholding information and presenting confusing data, but

eventually, his mishandling of the bonus money leaked out. The board

asked for his resignation. No one mourned Kevin’s departure. His repu-

tation for dishonesty dogged him in the industry, barring him from land-

ing a top executive post anywhere else.

In corporate settings, a lack of integrity usually signals a lack of

moral competence, as was the case with Kevin. But at times, a lack of

integrity stems from a deeper lack of moral intelligence. There are some

people whose moral compass is badly dented, like Jeff Walsh (pseudo-

nym), who applied for a job as regional sales manager for a large

Fortune 500 company. On paper, Jeff had a great track record in sales

and management and an MBA from a prestigious university. The vice

president of Sales was so impressed after interviewing Jeff that he was

ready to hire him on the spot. “Don’t let that one get out the door,” he

told the recruiter. But when the recruiter checked his credentials, he

discovered that Jeff had no undergraduate college degree, let alone an

MBA. In fact, he had never taken a single college course. When the

recruiter confronted him, Jeff broke into a sweat and admitted that he

had faked his resume. You might think that the sweat on Jeff’s forehead

was evidence that he knew right from wrong. But Jeff recovered his

composure quickly and promptly talked his way back into the VP of

Sales’ office to try to convince him that it really wouldn’t matter that

he did not have his MBA. Without a functioning moral compass, Jeff

CHAPTER 5 • INTEGRITY 81

completely missed the notion that lying about his credentials was a big

deal. He might sweat because he was caught—but not because he had a

guilty conscience.

Telling the Truth Susan Desimone (ficitious name) was chief financial officer for a major

division of a huge financial services firm. Her CEO, a demanding and

explosive character (in actuality a high-profile top executive), was

determined to meet Wall Street’s expectations for the quarter’s profits—

no matter what it took. The financial analysts who worked for Susan

were stressed. “The CEO is badgering us to make these numbers work,”

they complained. “If we show him the results we have right now, he will

blow his fuse.” Susan knew they weren’t exaggerating, but she also

knew she could handle her CEO’s tantrum without letting it unhinge

her. “What is the worst thing he can do to us?,” she replied. “He’ll yell

at us for sure, but he’s yelled at us before, and we are going to tell

the truth.”

Susan’s moral stance did more than keep her company out of the

scandal section of The Wall Street Journal. She provided “cover” for the

people in her finance unit and by her actions made it safer for them to

do what they knew was right. Her truthful response to the CEO’s pres-

sure was both morally skilled and fiscally smart. She motivated her

people to keep working for the company during an economic boom

when their skills were highly marketable and corporate attrition was at

record high levels.

Leading with the Truth. In organizational settings, telling the truth

often means defining reality under challenging circumstances. When

times are tough, leaders need to be able to tell the truth while providing

people with real reasons for hope and optimism.

82 MORAL INTELLIGENCE

Imagine that you are captain on a sailboat that is cruising through

the Caribbean. When you left dock a few hours ago, it was warm and

sunny with a gentle breeze pushing the boat forward. Then the weather

turns suddenly ugly. Before long, the wind is fierce, the waves are

pounding, and your passengers are afraid. What should you do? You tell

them the truth. You say, “This is a dangerous storm. Something bad

could happen. You need to keep your life jackets on and stay below deck

while I get us through this. I have been through storms like this before,

and I am very optimistic that we are going to weather the storm.”

Cindy Carlson, former president of Capital Professional Advisors

(CPA), a financial services firm, faced her own storm. Her company

was only in its second year and it wasn’t likely to see its third.

Breadwinners would lose their jobs, and she felt responsible. She had

recruited top people by convincing them that they were signing on for a

great opportunity. She promised them that the owners had the resources

and the commitment to ride a rocky start up. But the owners had a short

attention span—they were already itching to sell or, failing that, close

up shop. It didn’t matter much to them how they got out of the deal as

long as they did.

On a frigid winter morning in 2002, Cindy called her seven senior

managers into the boardroom of their Minneapolis offices. She recalls

the scene vividly. “I told them that if we didn’t have a solid buy-out

offer in the next two months, we were history. I also told them that I

believed in them and what they were doing. I said I hoped they would

stay, but I wouldn’t blame them if they left.” It was frightening to be that

upfront with them. Cindy worried that they might bolt, lowering the

company’s market value and making it that much harder to sell. But she

went ahead and told the rest of the organization what was happening.

Much to Cindy’s relief, no one on the management team left, and that

encouraged the other employees to stay as well.

Cindy admits that she was afraid to tell her staff what was going on

with the company, but she knew it was the right thing to do. She had

CHAPTER 5 • INTEGRITY 83

promised to always be truthful about the state of the company. Though

Cindy was honest as a matter of principle, she believes it paid off for her

business. Her employees stayed—and stayed engaged—because they

trusted her. She says, “I felt like I had failed them, but they stayed with

me because I was both candid about the status of our business and

optimistic about what could still happen if we found a buyer.” In a char-

acteristic stroke of modesty, Cindy adds, “It wasn’t because of me.

Everyone believed in what we were doing.” CPA owners soon found a

buyer, and within six months the sale was complete. Right on cue, the

company began to perform better. In 2004, Capital Professional

Advisors celebrated its fourth anniversary and it now is well on the road

to profitability and success.

Telling the Truth about Performance. Many of us are afraid to discuss

poor performance with a subordinate. We imagine that people will be

upset, and we don’t want to be responsible for causing them pain. Paul

Clayton, former president of Burger King North America and current

CEO of Jamba Juice, is not known for pulling his punches. The only

time he can recall when he has withheld the truth was when he had to sit

down with someone and talk about his or her performance. “I have

made mistakes in not being direct enough. I had to give a negative per-

formance review and circled around the issues, and I’ve had that happen

to me as well. I’ve always been critical of my communication skills,

but for a long time, no one said a word to me. I knew that if someone

had the courage to tell me sooner that I needed work, it would have

helped me.”

We have all heard horror stories about co-workers who got a glow-

ing performance review coupled with a bonus, only to be fired a month

later. When that happens, it is usually because the manager has not been

honest about the employee’s performance problems over some period of

time. Some managers are so non-assertive that employees who are

being given negative feedback have no idea that they are being criti-

cized. We know of several extreme examples when an employee who

84 MORAL INTELLIGENCE

was fired on a Friday showed up for work as usual on Monday because

she didn’t realize she had been terminated.

Exceptions to the Rule of Honesty. A seemingly contradictory aspect

of the competency of telling the truth is that it includes knowing when

not to tell the truth. Consider an example posed by eighteenth century

philosopher, Immanuel Kant. Imagine that a murderer comes to your

door, wanting to know where your friend is—so that he can kill her.

Your friend is, in fact, hiding in your bedroom closet. Most people

would probably agree that your obligation to your friend overrides your

general obligation to tell the truth. For some brave World War II

Europeans, this scenario was not hypothetical—they risked their lives

sheltering Jews from the Nazis. The Diary of Anne Frank is a famous

telling of the story of a Dutch Jewish family hidden by a former

employee of Ann Frank’s father. When the Nazis made their regular

sweeps of their Amsterdam neighborhood in search of Jews, the family

protecting the Franks would have failed in moral competence if they

had told the truth about what they were doing.

Honesty is often complicated for business leaders as well. At times,

a leader has information that cannot be divulged. This is common in sit-

uations involving downsizings, initial public offerings, and mergers and

acquisitions. When planning workforce reductions, for example, leaders

know that employees would find it helpful to get advance warning that

their job could be at risk. On the other hand, leaders have a responsibil-

ity to owners not to divulge information that could be harmful to the

market value of their companies. To tell the truth prematurely would be

a disservice to the business, yet to say when asked that no reorganiza-

tion is looming would be dishonest. If there are legal requirements to

withhold information, the leader should simply acknowledge that. A

leader can still be truthful by saying something like, “We do have plans

but we cannot discuss them at this time. Please know that we will

implement the plan with high regard for our employees, our customers,

and the people who own the company.”

CHAPTER 5 • INTEGRITY 85

Withholding information is also justified to protect the privacy of

employees. Consider computer programmer, Jeanetta Shaw (pseudo-

nym) who discovered that her husband and his family were all involved

in criminal activity that was about to hit the newspaper headlines. Her

distress was obvious to her co-workers, and they began to ask their

manager what was going on. The manager decided to tell the truth, but

not the whole truth. He told Jeanetta’s colleagues that there were per-

sonal circumstances beyond her control that were causing her a great

deal of stress. He expressed his commitment to help her get through a

rough time and asked others to do the same.

The Painful Truth? Telling the truth and tact are not incompatible.

Some of us pride ourselves on being honest to a fault. We might say

things others would be afraid to say, but it doesn’t necessarily add up to

more truth. Some of us use “honesty” as an excuse to vent our hostility.

We might make very cruel, competitive, or aggressive comments under

the guise of “calling it like you see it” and then excuse ourselves by

claiming, “I’m only being truthful.” According to Jefferson Bus Line’s

CEO, Charlie Zelle, the disclaimer “‘I’m just being honest’ is a classic

Minnesota passive-aggressive way of being hurtful.” When we go out of

our way to communicate a hurtful truth, we are usually not being hon-

est with ourselves. So, when we feel obligated to tell another something

“for his own good,” we need first to examine our own motivations. Are

we competitive? Are we jealous? Are we trying to even up an old score?

Good Intentions. Truth telling works best when paired with the

emotional competency of self-awareness. We need self-awareness to

understand how our own goals and desires influence what we say to

others. Leaders who limit information about pending changes should

rigorously examine their motivations. Although it is important to protect

their companies, leaders who withhold information because they put

personal stock option considerations over employee well being, clearly

violate principle of integrity.

86 MORAL INTELLIGENCE

We also need emotional competencies to understand other’s emo-

tions and be able to discuss the truth in ways that people can accept and

use productively. Employees sense when their leaders make self-serving

decisions or shade the truth about pending changes. The resulting neg-

ative impact on morale and performance can undermine the implemen-

tation of any change effort.

How Truth Fuels Performance. Truth telling has a huge impact on

leadership effectiveness and workforce engagement. When people work

for a dishonest leader, they censor information to protect themselves

from a negative or unpredictable reaction. The dishonest boss creates a

climate dominated by political intrigue. Instead of working produc-

tively, people who work for dishonest superiors spend a lot of time

wondering about their manager’s agenda, trying to gather information,

trying to jockey for power, and doing only those things they think will

keep them out of harm’s way. In contrast, leaders who are known for

being honest generate a powerful climate of trust. People who work for

honest superiors relax because they know there will be no hidden sur-

prises coming out of the organizational woodwork. People accomplish

more and are able to work with great creativity when they don’t have to

waste energy watching their back.

Standing Up for What Is Right Leaders who live the principle of integrity inevitably must take princi-

pled stands. David Risher recalls this incident during his tenure as a

Microsoft executive:

One day, we were in the middle of a meeting, and my

strong-willed boss started to beat up on a young new

employee of mine, asking her questions she couldn’t possi-

bly have answered because she was so new. My boss was

a hard person to stand up to, but in this case, I did. I

CHAPTER 5 • INTEGRITY 87

remember that it caused a bit of a commotion in the room

because people couldn’t believe I was standing up to her—

she was just that strong. When I later went to Amazon.com,

my former boss ended up working for me. She ended up

being a supporter of mine, and I think it was because she

respected me for having been willing to stand up for people.

Honda Motors VP, Gary Kessler, recalls a time 20 years ago when he

took a quiet but vital stand. He discovered that a member of his team

who was also a personal friend had fabricated his academic back-

ground. Gary knew that he could forgive his friend, and he knew he

could keep anyone else from finding out what his friend had done. But

Gary believed that to ignore his friend’s deception would be deceptive

on his part. It would devalue the efforts of others who were expected to

have a certain level of academic training. So he steeled his courage and

fired his friend.

Unlike Gary’s admirable private stand, most principled stands must

be taken in the face of stiff resistance. Don Hall, Jr. is the CEO of

Hallmark Cards. Early in his career, Don headed product development.

Don had a fine-tuned sense of what customers expected from Hallmark.

He steadfastly resisted proposals to save on production costs by cheap-

ening their product. To maintain customer loyalty, Don insisted that

quality, rather than cost, be the company’s primary focus.

Defying conventional wisdom to make a principled stand can be

challenging. In most organizations, there is a lot of pressure to agree

with popular positions. People who take unpopular stands can put their

career advancement or their livelihoods at risk. Acting with integrity

means that you accept the risks that come with taking a principled stand

because the moral consequences of looking the other way are unaccept-

able. Think of the hazards that have resulted when no one stood up for

what was right—buildings that collapse because of poor construction,

bankruptcies caused by predatory lending practices in low-income

neighborhoods, the explosion of the space shuttle Challenger after

NASA executives ignored engineers’ concerns about faulty O-rings.

88 MORAL INTELLIGENCE

Keeping Promises Keeping promises is a hallmark of integrity because it demonstrates that

we can be trusted to do what we say we will do. Keeping promises is a

competency highly valued in organizational settings, but in our wired

24/7 world, it’s a competency many of us have a hard time practicing

consistently. We have good intentions but may let our ever-expanding

“to do” list overtake our earlier promises. This was the case with Kari

Wang (pseudonym), a senior executive in a professional services firm,

whose career was in jeopardy and whose team was delivering inferior

results. Kari had lost the respect of her colleagues because of her poor

track record in keeping her commitments to them. When a high-profile

project came her way, Kari dug in and took over all the detailed work

herself, saddling herself with more work than even an overachiever like

Kari could handle. Kari resisted delegating, rationalizing that she’d be

happy to delegate if only she could find someone who could do a good

enough job. When Kari did reluctantly delegate, she routinely forgot to

provide all the information needed for the work to be done successfully.

She changed her mind about priorities seemingly every hour and then

failed to communicate those changes to her staff. Kari was incapable of

saying “no”—she agreed to do so many things that she inevitably

dropped the ball on some important commitments. People who knew

Kari well did their best to work around her bad habits, believing that

though her execution was poor, her motives were good. People who did

not know Kari personally saw only her lapses. They mistrusted her and

labeled her a liar. Her harshest critics viewed her missteps as deliberate

efforts to advance her own career by sabotaging others. Fortunately,

Kari’s boss proposed that she use a leadership coach to help her make

the transition from high-powered individual performer to leader of oth-

ers. As a result, Kari came to recognize the costs of her actions and was

able to develop the disciplined work habits that would eventually allow

her to rebuild her credibility with her team.

CHAPTER 5 • INTEGRITY 89

Keeping promises usually requires assistance from a few emotional

competencies—the self-awareness to recognize the inconsistency

between our intentions and actions and the self-control to adopt disci-

plined work habits that allow us to keep our promises.

Honoring Confidences. One of the most frequent promises leaders are

asked to keep is to preserve the privacy of others. A common complaint

about low-integrity leaders is that they have failed to keep confidences.

Some leaders betray confidences with good intentions because they

believe that sharing the information with someone else will help the

person who revealed private information. Others wrongly believe that it

is acceptable to share confidential information about a third party that

they trust will not pass the confidential information on to others. It’s

ironic that some of us expect a third party to keep a confidence that we

ourselves have betrayed. When you discuss private information about

another person with anyone, you can assume that it will become pub-

lic—and that the person whose confidence you betrayed will know that

you were the source.

When leaders betray confidences, they lose more than the respect

of their work associates. They also dry up valuable sources of informa-

tion because their employees and colleagues learn to withhold sensitive

information from a loose-lipped leader.

Leaders who pass on confidential personal information do not suf-

fer as much career damage as those who lack other dimensions of

integrity. If the leader has an otherwise good reputation, people may try

to compensate by emphasizing forcefully to the leader that certain

information must be held in confidence. When a well-intentioned leader

hears the urgency of the request, he will usually get the message.

90 MORAL INTELLIGENCE

CHAPTER 5 • INTEGRITY 91

Acting on Confidences without Betraying Them

If you hear something in confidence that you strongly believe needs to be shared with others, ask for permission to share the confidence, or work with the person who disclosed the information to find a way to communicate about the issue in a protective way.

Integrity competencies are clearly central to your effectiveness as a

leader. Recall Cindy Carlson, who kept Capital Professional Partners

afloat and secured her employees’ trust in large measure because they

knew she would always tell them the unvarnished truth about the com-

pany’s condition. Mike Hughes, a senior VP with the insurance com-

pany Safeco Corporation, is convinced that leadership integrity is his

most powerful retention tool. Mike says, “People see my leadership and

they want to be part of a team where moral leadership is shown.”

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I think of a hero as someone who understands the degree of responsibility that comes with his freedom.

—Bob Dylan

We’ve gotten to the point where everybody’s got a right and nobody’s got a responsibility.

—Newton Minow, former Chairman of the FCC

RESPONSIBILITY

6

93

The

Responsibility

Competencies

• Taking responsibility for personal choices

• Admitting mistakes and failures

• Embracing responsibility for serving others

The Buck Stops Here. That was the saying on the plaque on President

Harry Truman’s desk in the Oval Office. He referred to it on several

occasions to underscore the idea that an American president didn’t have

the luxury of passing off accountability for decisions to anyone else.

That the expression has survived for over half a century is testament to

the importance of the responsibility principle. The fact that we need the

reminder is an indication of how difficult it can be to live in alignment

with the responsibility principle.

Irresponsibility is nothing new. In biblical lore, the first human

excuse followed close on the heels of God’s creation of the species:

When God caught Adam eating the forbidden fruit, Adam promptly

claimed, “Eve made me do it.” We live in a culture that tolerates a high

degree of daily responsibility-dodging, but when it gets to the level of,

say, widespread corporate scandals, it’s the failures of responsibility

that upset us most. We know that executives of Enron, WorldComm,

and others involved in corporate scandals, lacked integrity. But the

question we heard the most after the collapse of those enterprises was

this, “How could they have done that to their employees? How could

they leave their workers stranded with no jobs and no retirement

funds?” Three years after the Enron debacle, former CEO Ken Lay

claims that he had no idea former CFO Andrew Fastow was manipulat-

ing the accounting ledger. That may be so, but it also seems that Lay

never heard about the sign on Truman’s desk. Leaders are responsible.

It comes with the job. We can shirk it, and we can make excuses when

things get tough, but we do so at our peril. We suffer and so does our

business. But as challenging as it may be to accept responsibility, the

rewards of accepting responsibly are great. As with every other moral

competency, we do it because it’s morally right and then discover that

it’s right for our business as well.

94 MORAL INTELLIGENCE

Taking Responsibility for Personal Choices The hallmark of personal responsibility is our willingness to accept that

we are accountable for the results of the choices we make. Everything

we do follows the law of cause and effect. When we cause something to

happen, there is an effect, usually more than one effect. Some of the

consequences of our actions are planned; other consequences come as a

surprise. Owning personal choice entails that we take responsibility for

all consequences of our behavior, both anticipated effects and unin-

tended consequences.

Middle managers frequently struggle with the responsibility com-

petency because they often feel caught between their responsibility for

the people they lead and the demands of their senior managers.

Frustrated middle managers often complain that they have all the

responsibility and none of the authority. That complaint may be code

for “I am not really responsible for my actions because my boss made

me do it.”

Responsibility is a radical competency because it requires that we

accept personal responsibility for everything that we do, even though

we each live in a complicated world where bosses, family members, and

friends all exert pressure on us to act in certain ways. Responsibility

means no excuses, even though none of us is perfect and all of us have

good explanations for failing to do what we know is right.

No Excuses. Mike Manning (pseudonym) loves golf. Ironically, his

passion for golf led him to a moral crossroads early in his career. Mike’s

goals at one time were to be successful in business, be a great golfer,

and be a good father. Mike was very clear about what he needed to do

to be successful in his work. He knew what he had to do to become a

better golfer—he had to get in a certain number of rounds per week to

improve his game. “The trouble is,” Mike said, “I don’t have time to be

CHAPTER 6 • RESPONSIBILITY 95

a good father if I want to do well in business and excel in golf.”

Someone suggested he kill two birds with one stone by golfing with his

kids. Mike was scornful. “That wouldn’t work at all,” he complained.

“It wouldn’t be fun, and it certainly wouldn’t help my game.” But on

reflection, Mike came to this realization: “Saying I don’t have time to

be a good father makes it sound like it’s not my responsibility, as though

time is at fault. Being a good father is a more important goal than being

a good golfer. If I want to be a good father, I have to make choices about

how I spend my time.” At first, Mike thought he would have to give up

golf, and then he realized that the idea about golfing with his kids was a

good one. He could enjoy playing golf and let go of the need to aggres-

sively improve his game. Mike admitted responsibility for his choice to

put other goals above his desire to be a good parent. Only when he real-

ized that the choice was his was he able to take steps to be a more

responsible father.

Accepting responsibility for personal choice does not mean mind-

lessly holding to decisions no matter how unproductive they turn out to

be. But neither does it mean that we have to be sure we have made the

perfect choice. Responsibility is not about making the perfect choice.

Instead, it is about making the choice you have made the perfect choice

for you. Some leaders make it a priority to find work that is consistent

with their moral compass, even if it involves declining promotions or

passing up tempting external job offers. Jim Thomsen, SVP of

Distribution with Thrivent Financial for Lutherans, says, “What has

kept me with this organization is that I can make a difference while hon-

oring my values. It’s not about the money. I’ve had opportunities to

make more money, and I’ve had opportunities that would give me more

prestige. But values have played a central role in my decision to work

where I work.” Other leaders who have been seduced by jobs, with

attractive compensation and perks, come to feel trapped in roles that

might not reflect their most deeply held values. They may sense a need

for change, but out of a misguided notion of responsibility cling to their

current position. “I took this job, so I need to see it through.” A leader

96 MORAL INTELLIGENCE

who senses he or she is in the wrong job can demonstrate responsibility

in one of two ways—help reshape the organization so it is worth

remaining, or have the courage to make a values-driven career change.

Admitting Mistakes and Failures Another important aspect of responsibility includes the willingness to

take responsibility when things go wrong. Many of us grew up naively

assuming that when we turned 21, graduated from college, got married,

or got our first job, we would then be perfect finished products. Others

have found that career success has allowed them the illusion that they

are indeed perfect. The higher you go in an organization, the less likely

it is that people around you will give you accurate feedback, so it

becomes easy to forget that you are as flawed as the most junior staffer.

What’s more, the higher you go in an organization, the easier it is for

you to confuse power with perfection. So the best advice to senior man-

agers is, “Don’t believe your PR.” The more elevated your organiza-

tional status, the more important it is for you to actively solicit feedback

on your weaknesses.

Even if you know you are not perfect and even if you realize that

you make mistakes, it may be frightening to admit it. Some organiza-

tional cultures are punitive, and the cost of failure can be very high. You

may worry about losing a raise, a promotion, or even a job if your mis-

take is discovered. The irony is that punishing mistakes dampens the

risk-taking and experimentation so crucial to sustainable business per-

formance.

If you really do work in an organization that does not tolerate mis-

takes, our advice is to get out as soon as you can.

Fortunately, most of us work in organizations that tolerate our mis-

takes, even if they aren’t happy about them. Even more fortunately,

admitting mistakes and failures will enhance our leadership reputation

CHAPTER 6 • RESPONSIBILITY 97

more often than it damages it. Don MacPherson of Modern Survey

Company can attest to the positive effects of admitting mistakes. “One

time, we had prepared a report for the SVPs of a Fortune 500 company.

We made a mistake in some top line data. We inadvertently didn’t

include all the survey responses in the results, and it seriously distorted

the picture. Of course, we realized that if we didn’t tell them about our

mistake, they would have no way of knowing that the report was inac-

curate. But we didn’t want them to make decisions based on faulty data,

so we never debated whether or not to tell them, only how we should go

about it. I called my client contact, let her know the extent of the prob-

lem, and shared what I thought we should do to fix the problem. Her

reputation was important to her and to us, and it was essential that we

take 100% of the responsibility for the error. We redid the report—of

course, at no cost—and we submitted a signed memo taking the blame.

They are now our best client, and our client contact is the same woman,

and she is fiercely loyal to us.”

Admitting personal mistakes helps an organization be healthier in

several ways. First, admitting that you have screwed up prevents some-

one else from being blamed for your mistake. It’s common in organiza-

tional hierarchies for junior staff to take the fall for their senior

managers, and few things are more demoralizing to employees than

unfair criticism. Second, admitting mistakes creates a bond with other

employees who feel that you are more approachable by virtue of your

admission of fallibility. Finally, admitting mistakes communicates a

strong message of tolerance to the organization at large. It says, “We all

make mistakes. We know that mistakes and failures are a part of the

road to success. We want you to learn from your mistakes, and we hope

in the future you will make new mistakes and not repeat old ones.”

By admitting mistakes and failures, you can help create a more risk-

tolerant climate that leads to innovation and financial success.

Rick Clevette, now at the Carlson Companies, tells a story from his

days as an executive in a large Fortune 500 company. One of the firm’s

top business heads was a pillar of a leader, long on integrity but a bit

98 MORAL INTELLIGENCE

short on patience. He had a reputation for being very hard on people.

The training department had brought in Ken Blanchard of “The One

Minute Manager” fame to talk to hundreds of top and mid-level man-

agers. Ken gave his usual entertaining and enlightening stump speech

about the importance of looking for opportunities to give employees

“one minute” of praise. Not long after, this leader blew up at a junior

manager who was making a presentation. The leader soon realized his

mistake. He apologized—in writing. He sent a memo to the manager

and a copy to the training people, asking them to contact Ken Blanchard

about adding another principle to the “One Minute Manager,”—

suggesting the need for a “one minute apology.” By apologizing in such

a public way, this leader not only admitted his own error, but modeled

the value of admitting mistakes to his whole organization.

Admitting mistakes makes sense, not only as a moral imperative,

but a practical one. Covering up mistakes takes a lot of time and energy

and often makes a situation far worse than it need be. Martha Stewart’s

conviction and prison sentence is a famous example. Stewart was not

convicted of insider trading, but of obstructing justice. When the FBI

interviewed her in connection with their investigation of insider trading,

they concluded she lied about why she had sold her ImClone stock. Had

she admitted that she sold her stock when she heard that ImClone’s

CEO was dumping his, she would probably never have been charged

with a serious crime.

As important as it is to admit mistakes, it is not a “free pass.” It

does not absolve you of responsibility for the situation you created or

magically undo the harm you may have caused. Though most people

would understandably prefer to avoid mistakes that hurt others, there

are times when admitting a mistake creates opportunities that would not

have existed otherwise. Consider this example of a mistake that trans-

formed a contentious work relationship. Faith Shanley (pseudonym)

was a bright, up and coming executive who was frequently on the oppo-

site side of issues from her colleague Louis Draper (pseudonym), a sea-

soned executive who had been with their company since its inception.

CHAPTER 6 • RESPONSIBILITY 99

At a management meeting both attended, Faith decided she needed to

make a stand about a proposal she viewed as unethical. She made her

point forcefully and, in the process, became sarcastic and confronta-

tional with Louis. Faith felt great after the meeting, proud that she had

said something important and confident that her views were well-

founded. Shortly after, Louis walked into Faith’s office and told her he

was very upset about what she had done in the meeting. In a flash, Faith

realized that she had been so caught up in standing up for what she

thought was right, that she was oblivious to the impact of her con-

frontational style on Louis and the rest of the group. Faith promptly

apologized to Louis. She admitted that she should have come to him

privately before the meeting to explain her point of view because she

knew in advance that there would be a conflict with his ideas. Faith was

grateful that Louis came directly to her to discuss her behavior instead

of gossiping behind her back. Louis was impressed with Faith’s will-

ingness to admit her mistake. Instead of avoiding each other as they had

done in the past, Faith and Louis began to meet regularly on the issues

that affected them, and over time, their once distant relationship became

closer and more productive.

Embracing Responsibility for Serving Others We are all responsible for contributing to the well-being of others. Why

is serving others an essential moral competence? Think back to the bio-

logical origins of morality. We come into the world programmed to be

interdependent. We wouldn’t be around today if our earliest human

ancestors hadn’t huddled together to help their fellow tribes people sur-

vive. If we do not work to serve others, we fail to act as morally intelli-

gent leaders. Serving others is, in fact, a great way to show integrity and

to encourage others to model it—in other words, to lead by example.

100 MORAL INTELLIGENCE

When Charlie Zelle bought out his family’s troubled transportation

business, much of his motivation was to be of service to his employees

and the community. Explaining his distress at the family’s plans to close

up shop, he added, “I just felt that some kind of moral boundary was

being violated—perhaps it is the idea that you should consider every-

one, not just yourself, in any decision.”

Suppose you don’t buy the idea that interdependence is innate. It

still makes sense to actively care about the well-being of others. Here’s

why: We all value personal happiness. We want to be happy even though

we know it is a self-centered motivation. For most of us, the happiness

we seek doesn’t happen in a vacuum. Happiness is hard to come by

without help from others. Most of us need others to help us be happy.

Gary O’Hagen agrees that service is important, but he thinks that

serving others serves himself at least as much. “Every time I’ve done

something for others, it’s given me a better feeling about myself. When

I help family or friends or even charities, I actually have stopped and

asked myself if I’m really serving others or if I’m just being selfish.”

Ignoring the needs of others keeps us from experiencing the gen-

uine pleasure that Gary experienced in helping others. The mentality

expressed by the 1990s bumper sticker, “Whoever dies with the most

toys wins,” describes fleeting pleasure but not true happiness. For most

people, lasting happiness comes from activities that give us a sense of

meaning and purpose—such as serving others. Recent studies on

longevity have found that serving as a volunteer with some worthwhile

organization adds years to our lives (not to mention life to our years).

Accepting responsibility for serving others is also a secret weapon

for leaders who want to promote high performance among their work-

force. To make their businesses successful, leaders need committed

employees. One of the best ways to encourage people to unleash their

creative energy in service to their company is for their leaders to serve

them. Employees don’t need to be coerced into doing their best work for

your organization. People have an inherent and insatiable appetite for

CHAPTER 6 • RESPONSIBILITY 101

personal growth. Left to their own devices, employees will sponta-

neously contribute to your organization as their way of growing and

succeeding in life. That is why leaders don’t need to impose goals from

on high. Much of the time and effort companies devote to complicated

performance management systems is unnecessary. The most efficient

way to elicit strong financial results is for leaders to serve their employ-

ees. When we serve our employees, we send them this message:

I know that what you are capable of producing is far

greater than what our company needs in order to succeed.

So my opportunity as your leader is to serve you as you do

what you want to do, which I already know goes beyond

what I need from you. My goal is to serve your needs and

help each of you be as successful as you want to be and help

you get out of life what you want. If I can help you accom-

plish what you want to do, then I know our company will

do very well. I don’t have to focus on the numbers. I have to

focus on you and all our people. Then the numbers will be

fine. Because together our people will perform better than

our financial targets require. I know that serving you serves

the bottom line.

The Retention Value of Servant Leadership. Imagine how your

employees will respond if you consistently demonstrate that your pri-

mary leadership job is to help employees accomplish their own goals.

They will stay. Because most businesses yield more value from experi-

enced employees than new recruits, your decision to serve employees

will translate into higher levels of knowledge and performance. Because

you respect your employees’ goals, they will be highly motivated to

give their best efforts to you and your organization.

At American Express Financial Advisors, managers are encouraged

to spend considerable time helping financial advisors to develop life

goals that include business goals and important personal goals.

102 MORAL INTELLIGENCE

Managers are also expected to find ways to support their advisors as

they reach for their goals. This approach has resulted in excellent reten-

tion and bottom-line performance. Because the company is able to keep

a high percentage of financial advisors, it generates revenue it would

have otherwise lost—while at the same time lowering expenses through

reduced turnover costs.

CHAPTER 6 • RESPONSIBILITY 103

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If you want others to be happy, practice compassion. If you want to be happy, practice compassion.

—The Dalai Lama

Forgiveness is almost a selfish act because of its immense benefits to the one who forgives.

—Lawana Blackwell, The Dowry of Miss Lydia Clark

COMPASSION AND FORGIVENESS

7

105

The

Compassion

Competency

• Actively caring about others

Actively Caring About Others When you are a leader, embracing your responsibility to serve others

flows into compassion. Actively caring about others means that you do

things that actively support the personal choices of others. Sometimes,

it means you care about others’ goals as much as they do. At times, you

might find yourself taking others’ goals more seriously than they feel

able to. Mike Woodward, SVP of American Express Financial Advisors,

is a conscientious and productive leader, but also a very private person

who, early in his career, was reluctant to share his personal goals with

his manager. After some nudging from his boss, Mike confided, “I

really want to spend more time with my daughters. I have done a lot of

hunting and fishing with my sons, but I haven’t spent as much time with

my girls, and I’m missing that.” Then, soccer season rolled around for

one of his daughters who was a strong athlete. Mike had arranged his

schedule to attend her soccer games. Then, Mike was called to a meet-

ing of the top national sales managers to be held in Minneapolis. The

meeting was running late, and Mike’s boss realized Mike would need to

leave before the meeting ended if he wanted to see his daughter’s soc-

cer game. But Mike wasn’t moving. Mike’s boss interrupted the meet-

ing. “Mike, don’t you have a flight to catch?” he asked. “Yeah,” Mike

answered, “but the meeting is going long.” His boss then demonstrated

his support for Mike’s personal goals, saying, “Leave now. Go to the

airport. Go home and see your daughter’s game.”

AEFA’s Brian Heath, the body-building executive with the

bouncer’s physique, doesn’t look like a compassionate type.

Appearances to the contrary, he is deeply compassionate. In Brian’s

mind, compassion isn’t just about taking pity on the helpless. It is about

taking people’s hopes and dreams seriously and doing what he can to

help them achieve their aspirations. He sets ambitious goals, but only

after he is sure he understands what his people hope to accomplish.

IMG President Gary O’Hagen also subscribes to the notion that

compassion means challenging people to do their best, believing that

106 MORAL INTELLIGENCE

they can accomplish their goals, and providing the tools they need to

succeed. There was a time right after Gary was cut by the New York Jets

when he coached junior varsity high-school football. There were only

25 teens on his team, and 4 of them were handicapped. He wasn’t sure

what to do. He was afraid his handicapped players would get hurt, but

they wanted to play badly, so he decided that they were going to play.

Gary explains, “The handicapped kids were offside all the time, but

we decided to work on that. With the help of the non-handicapped

kids—who were phenomenal—we instituted a special series of concen-

tration drills—that by the way had nothing specifically to do with foot-

ball. We put in some penalties for not doing the drills right. We were

very nurturing, and the coaching staff and the whole team were very

compassionate, and we converted the handicapped kids’ weakness into

a strength. We never went offside during a game that whole season.

Their progress was incredible. The solution was unique, and it allowed

everyone to contribute.”

Jefferson Bus Line’s CEO, Charlie Zelle, points out that compas-

sion doesn’t mean ignoring bad behavior—that sometimes the most

compassionate thing a leader can do is hold an employee accountable

for unacceptable behavior. A number of years ago, Charlie had a senior

manager who began to act like a loose cannon. It was a stressful time

because the company had to close down a division. In a misguided

attempt to show compassion for an employee he was letting go, the

manager started badmouthing the company’s decision during his termi-

nation discussion with her. Every employee he laid off got a different

explanation for the layoff. Then, the manager began an affair with

someone in the corporate office. Other people tried to ignore the man-

ager’s missteps, but Charlie knew he had to let him go. If Charlie

ignored the manager’s bad behavior, it would wreak havoc with the trust

other employees had in him and the company.

Three years later, the manager he had fired came back and asked

for a half hour with Charlie. Turns out, he came to thank Charlie. He

had been drinking heavily during those last few months with Charlie’s

CHAPTER 7 • COMPASSION AND FORGIVENESS 107

company and getting fired had been the wake-up call that prompted his

entry into a treatment program. If Charlie had kept the manager on

board out of misplaced compassion, it might have taken a lot longer for

him to get the help he needed. Charlie’s reaction? “This said to me,

you’ve got to do the right thing even if at the moment it feels like the

person will really hate you.”

ID Media’s Lynn Fantom has an unusual appreciation for compas-

sion. She considers it central to her leadership approach. “I take my

model for management from my mother. To me, the behavioral model

of a mother is perfect for management. A mother is very compassionate

and encouraging and forgiving. Think about how a mother behaves

when she is helping a young child learn to walk. When I became a

mother, I became a much better manager.”

Jay Sleiter, CEO of BWBR Architects, discovered that compassion

can open the door to unexpected business opportunities. In the early

1990s, due to some federal legislative decisions, the bottom had

dropped out of their specialty market designing healthcare facilities.

However, many opportunities existed in the international market, so

they decided to pursue markets in Southeast Asia. They knew that these

countries were revamping their health-care systems and didn’t have

enough regional capacity to build the required facilities. Quickly,

BWBR found that there was plenty of work if they were willing to go

along with some very corrupt business practices characteristic in the

region at that time. But they finally found a firm of Chinese and Malay

architects operating in Malaysia, whose business values were remark-

ably consistent with those of BWBR. Jay said, “So we partnered with

them. Then the Southeast Asian economy tanked. This proud Malaysian

company was now faced with laying off many of their staff. Meanwhile,

BWBR’s domestic business had come back full steam, so Jay’s com-

pany sent the Malaysian architects enough work to help them stay in

business.

108 MORAL INTELLIGENCE

Today, that relationship has grown so that the Malaysian has

become more and more a part of BWBR’s business. Because of com-

passion, what began as an opportunistic alliance has become a genuine

partnership.

CHAPTER 7 • COMPASSION AND FORGIVENESS 109

The

Forgiveness

Competencies

• Letting go of one's own mistakes

• Letting go of others' mistakes

The two forgiveness competencies are “mirror competencies,” clearly

very closely related. It is hard to talk about one without the other, but

they are not the same skill. Some of us are much better at forgiving our-

selves than others and vice versa. Many of us are hard on ourselves

because of perfectionism. We can let go of other’s mistakes but hold on

to our own. Sometimes, we are our own worst critics. Others of us have

an easier time forgiving ourselves because we know our own underly-

ing good intentions, while we may resist forgiving others because we

distrust their motives. Effective leaders know that letting go of mis-

takes—their own and others—clears the way for better future

performance.

Letting Go of Your Own Mistakes The founders of Modern Survey were riding high. They knew they had

developed a unique technology for providing survey-based business

information. Right out of the gate, they landed a big contract with a

Fortune 500 client and had several projects going on at the same time,

each with a different contact person. They worked hard on the various

projects and were sure the results had impressed their clients. They

geared up to bid on another project for this company. Then co-founder,

Don MacPherson, got an unwelcome call from a key contact in the

company. They were taking all their business to a competitor and

wouldn’t even let Modern Survey submit a bid. The problem? Don and

his partners had assumed that their superior technology was the only

thing they needed to be successful. Don was responsible for managing

the account, and he hadn’t spent any time cultivating high-quality rela-

tionships with his client contacts. They wanted more attentive service,

and when they didn’t get it from Modern Survey, they went elsewhere.

Don says, “My mistake was not taking good care of that relationship.

We expected the business. We felt entitled to the business rather than

understanding we have to continually work for the business. We’ve

never gotten the client back.”

Don’s partners were upset about the situation, but they didn’t blame

Don. Don, however, blamed himself. He dwelled on his mistake for

almost six months. Three years later, he still thinks about it occasionally

and gets upset. But only by letting go were Don and his partners able to

think more clearly about how to change their business practices, and

those changes have helped the company with their other clients. “Now,”

says Don, “I make sure I give all my clients the kind of service and nur-

turing that I failed to give the one we lost.”

Letting go of our mistakes doesn’t mean we have to excuse or

explain away unacceptable behavior. It is important, after all, to accept

responsibility for what you did and commit to do better going forward.

But we do have to give up the negative self-talk that can crowd our brain

when we have disappointed ourselves. Why? When we are busy talking

to ourselves about our frustration, anxiety, and guilt, there is no mental

space for learning the lessons of our mistakes. If we can’t forgive our-

selves, we stay stuck; we hold ourselves back from fresh experiences

and opportunities.

Brian Heath discovered that the hardest part of letting go of a mis-

take is first to admit that you have made one (the responsibility compe-

tency of admitting mistakes). When Brian was promoted from a

regional VP to the newly created Group VP job, he had a stellar track

110 MORAL INTELLIGENCE

record for developing high performing sales teams. Several months into

his new role, his group’s performance had slid below the national aver-

age. For someone who had never been in that territory, the experience

was shocking and debilitating. It took him a while to figure out what

was going wrong. He was frustrated in his job and missed the direct

contact he used to have with his field sales force. Now, instead of con-

centrating on developing his field team, he was spending a lot of energy

developing a new piece of the bureaucracy—a mandated coordinating

team intended to link him to the regional market groups. Finally, Brian

had an epiphany, “I was focusing more on a method than an outcome.

The evidence was there for several months, but I couldn’t or wouldn’t

see it. It was hard to let go because I was vested in my own decision

how to go about my new job. Finally, I realized I needed to be more

courageous at helping advisors and helping clients.”

In some professions, constant self-forgiveness is the only way to

survive. When Gary O’Hagen was a young bond trader with Solomon

Brothers, he found that if he didn’t quickly let go of trading mistakes,

he would be immobilized. When he made a mistake, he had to let it go,

so he’d have the courage to trade another day. Gary reminisces, “I recall

one day when I was managing the municipal bonds trading desk. For

some reason, the municipal market was lagging in spite of other bond

markets doing pretty well. I decided to take more risk and add to our

position. I didn’t find out until the day was over that Congress was con-

sidering removing tax exempt status from municipal bonds. I could

have and should have paused and dug in to find out why the municipals’

prices were dropping. Another bond house had done its homework, but

I didn’t, and it cost the firm a lot of money.” Asked what happened after

that, Gary responds, “Although we lost a lot of money that day because

of my mistake, I was able to let it go the next day, and we went on to

have a very good year!”

CHAPTER 7 • COMPASSION AND FORGIVENESS 111

Letting Go of Others’ Mistakes There is an apocryphal story about legendary IBM CEO, Thomas

Watson. A high-potential junior manager reputedly made a mistake that

cost IBM $5 million dollars. Devastated by his error, the junior execu-

tive offered his resignation, but Watson would not accept it. The young

man was confused. “I don’t understand,” he told Watson, “I made a ter-

rible mistake. Why on earth would you want to keep me?” Watson

replied, “I just invested $5 million on your learning curve. Why would

I want to waste that kind of money?”

The Forgiving Leader’s Perspective. Imagine that I have made a mis-

take that affects you or causes you harm. Forgiving you does not mean

that I endorse what you have done. In the case of serious harm, it does

not mean giving up my claim for justice. You are still accountable for

what you did. When I forgive you, what remains is a belief in your

probable good intentions (unless you are a very bad person). But when

I forgive you, I allow my resentment and anger to recede, along with my

negative judgments about you that would prevent me from considering

you as a potential resource. When I forgive you, I continue to recognize

that you have flaws, but I do not define you completely in terms of your

flaws. I allow for the possibility that you have strengths that I can draw

on in the future.

Without forgiveness, human life is virtually impossible. Intimate

relationships with friends, family, and co-workers cannot exist without

forgiveness. Without forgiveness, a leader’s organizational performance

is artificially capped. The effective leader forms a relationship with fol-

lowers with forgiveness at its core. The forgiving leader’s message to

followers is essentially this:

You might as well know in advance that I will make mis-

takes, and so will you. As your boss, there are times when I

won’t be doing my best work. There will be days when

112 MORAL INTELLIGENCE

you’re not in top form, either. If you can’t forgive me for

not always being your perfect boss, our relationship will be

ineffective. It will be not only emotionally hurtful, but

neither of us will perform as well as we should. If we can

forgive each other for not being perfect, we will both be

able to use each other as a valuable resource. We will be

able to help each other be happy and perform at our best.

In the previous three chapters, we have talked about the specific moral

competencies we need to live in alignment with our principles. Taken

together, our moral competencies are the behavioral glue that binds

together all the frames of the alignment model. Though we’ve consid-

ered them one by one, it’s rare to find moral competencies in isolation.

The moral competencies overlap because the universal principles them-

selves overlap. It’s hard to imagine someone who has integrity but lacks

responsibility or someone who has compassion but lacks forgiveness.

Our moral competencies act synergistically to keep our day-to day

actions lined up with who we want to become and what we hope to

achieve. We each have relative strengths and weaknesses in our moral

competencies. The more competent we become across the full spectrum

of moral competencies, the more we will live in alignment. The more

aligned we are, the happier we will be, and the more productive and

successful our organizations will be.

CHAPTER 7 • COMPASSION AND FORGIVENESS 113

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Usually, we know the right thing to do (using our moral compass), and

frequently, we know how to do the right thing (using our moral compe-

tencies). What then stops us from doing what we know is right? Moral

challenges usually provoke highly charged emotions. How can we man-

age our emotions in a positive way? This chapter explores how our

emotional intelligence competencies can help us reinforce our moral

intelligence. By acting together, our emotional and moral competencies

can enable us to conform more deeply to universal human principles

and gain greater moral intelligence.

Recall the potential obstacles to staying in alignment. When

destructive emotions and moral viruses threaten, our emotional skills

help us stay connected with our values. There is nothing necessarily

moral about emotional competencies. But emotional competencies are

essential tools for the morally smart leader.

EMOTIONS

8

115

Keith Reinhard, chairman of DDB Worldwide tells this story:

I can remember being excited when my boss decided that

he wanted me to be his successor. But there was a hitch.

Charlie, the guy everyone thought would get the job, fig-

ured he had it all wrapped up. So my boss decided that he

would create a new job for Charlie and sell it to him as a

promotion, thereby getting him out of the way so I could

have clear shot for my boss’s job. Then after I got my new

job, my boss would find a way to get Charlie out of the

company. I wouldn’t accept it. I told my boss that Charlie

had always been straight with me and I couldn’t do this to

him. I thought it would be better for my boss to be straight

with Charlie. I even quoted him some of his own public

statements about integrity. So he was honest with Charlie

after all, and things worked out fine.

How tempting it would have been for Keith to let his promotion play

out the way his boss originally planned. Keith could have stood by qui-

etly while his boss cleared the playing field by offering a bogus job to

the heir apparent. Keith wanted that job, and he knew he could get it

without being personally responsible for sidelining Charlie. All he had

to do was keep his mouth shut. But as much as he wanted the job, Keith

knew that his personal integrity was at stake. So he told his boss that he

wouldn’t take the job if it meant treating Charlie badly. Some executive

power players may not have taken that message kindly. But Keith was

no fool. He gave his boss a way to deal with Charlie that was aligned

with values—both his and his boss’s. Keith’s goal of advancement

could have easily overcome his values had he not tapped into his moral

and emotional skills to find a morally acceptable way to get promoted.

Keith needed the moral competencies of acting consistently with values

and telling the truth. But he also needed the emotional skill of self-

awareness to recognize two conflicting emotions—both his strong

desire for the job and his discomfort about how Charlie might be

116 MORAL INTELLIGENCE

treated. He needed the confidence that he could handle a negative reac-

tion from his boss if he challenged him about his treatment of Charlie.

He needed the interpersonal savvy to convince his boss to deal with

Charlie in a morally competent manner.

Self-Awareness Every waking moment, we face the world from within an experiential

triangle of thoughts, emotions, and actions. No matter what is going

on, we are always thinking, feeling, and doing, and we are doing all

those things simultaneously. As leaders and decision makers, many of

us are more comfortable operating in one of those three domains. Some

of us are thinking types who tend to rely on logic and ideas; others are

feeling types who tend to make decisions based on emotion, or some

are physical types who want to do, to take action, as a way of respond-

ing to a problem. Research on work styles shows that American busi-

ness leaders tend to be thinking and doing types, rather than feeling

types. It’s not that business people don’t know they have feelings. It’s

just that many feel uncomfortable expressing them. Why the discom-

fort? English-speaking cultures place a high value on the products of the

cognitive mind. No doubt thoughts are powerful. What we think cer-

tainly affects how we feel and what we do. But emotions are equally

powerful. How we feel strongly affects what we think and what we do.

Fear may paralyze us into inaction; anger may prompt us to strike out;

optimistic beliefs may give us courage. Life’s experiential triangle is an

endless loop in which thoughts, feelings, and actions are continuously

and mutually influencing one another.

Whether or not you are aware of your own experiential triangle,

people around you see the outward behavior that results. What your col-

leagues notice about you and how they interpret what they see have

enormous impact on your work relationships, for good or ill. Because

those around you can’t read your (thinking and feeling) mind, it is easy

CHAPTER 8 • EMOTIONS 117

for them to misunderstand your actions. If you want to be an effective

leader, you need your colleagues to accurately understand what you

mean and why you do what you do. Without self-awareness, you will

remain a mystery to yourself, and you’ll be in the dark about how you

come across to your colleagues. If you are unaware of your feelings,

you are at their mercy. Without self-awareness, your capacity for self-

correction is extremely limited.

Modern Survey’s Don MacPherson is seething. Earlier today, he

was presenting a software demonstration to a new client, and the demo

didn’t work. “I can be very hard on my partners. They are the ones who

create what I sell. If something goes wrong with the technology, it

upsets me. And I’m the one who has to deal with the fallout. I handle it

professionally with the client, but then I go back to my partners and get

angry with them.” Don pauses, leans back in his chair, and then contin-

ues, “I haven’t told my partners yet about the problem today, and now

that I’m talking about it I’m sure I will handle it better and not blame

them. I know they’ll get it fixed, and the fact that the demo didn’t work

won’t be a big deal. Sometimes, the software is complicated and mis-

takes happen.”

Don’s story illustrates the power of self-awareness. He recognized

that his typical pattern when angry about technical problems was to

haul off and blame his partners. But this time, he reflected on the situa-

tion. He became aware of his frustration. He had time to put some dis-

tance between how he felt and what he would do about it. That

self-conscious pause—between reaction and action—made a big differ-

ence. It allowed Don to plan how to talk constructively with his partners

about the failed demo. He was even able to change his attitude about it:

Instead of thinking “woe is me” because he had to deal with clients

when things go wrong, Don was now able to see technical problems

in a way that was both realistic and optimistic. That moment of self-

awareness will pay dividends in reduced personal stress and a smoother

relationship with his partners.

118 MORAL INTELLIGENCE

Recognizing Feelings. When a moral choice is at stake, self-awareness

is essential. Recall Keith and his promotion. Keith’s awareness—of his

excitement about a likely promotion and discomfort about the impact

on a trusted colleague—was crucial to communicating with his mentor

in a way that produced positive results. Without awareness, Keith’s

desire for advancement might have overridden any moral reservations

he had. Without sensitivity to the pain his colleague would feel at being

passed over in a manipulative way, Keith might have remained silent. If

emotions—Keith’s and Charlie’s—had been factored out of the decision

process, Keith’s promotion would have played out in a way that was

morally suspect and likely damaging to Keith’s credibility in his new

role. All business decisions have wide audiences. Keith and Charlie’s

colleagues would have known that Charlie had been manipulated.

Charlie’s closest colleagues probably would have resented Keith, even

though he was not directly responsible for Charlie’s bad fortune.

Inner Feelings Affect the Outer World. Awareness of your feelings is

also vital to your ability to create a positive work climate for your

employees. Because emotions are contagious, you need to monitor your

feelings so that the mood you project is a stable one. Leaders accom-

plish far more when they don’t put their people in a position of wonder-

ing what kind of mood their leader is going to be in each day. If you can

save your colleagues the trouble of having to navigate around your

unexamined emotions, you will liberate more creative energy for per-

formance that would otherwise be sapped by your employees’ anxiety.

Understanding Your Thoughts Tune in to your thoughts, and you will realize that you are in constant

conversation with yourself. Listen in while you head to work: You pass

a Jaguar and think, “I’d love to have a car like that.” You’re stopped at

an endless red. When the light changes you accelerate and someone cuts

CHAPTER 8 • EMOTIONS 119

you off. “What a jerk!,” you say to yourself. That constant internal dia-

logue is often called “self-talk.” Whether we are alone or not, our minds

are full of ideas and attitudes that we express in the inner language of

self-talk. That self-talk, in turn, has a major impact on our emotions and

our physical state. Thoughts are powerful. We may shed tears when we

think of a lost parent or smile when we think about our last vacation. We

did not decide to cry or smile; our physical reaction happened sponta-

neously in response to our thoughts.

Effective leaders tend to be highly conscious of their internal

thoughts, like Safeco’s Mike Hughes. Mike’s self-talk comes in the

form of frequent warnings, which he believes are key to his success.

“My inner dialogue is very, very conscious, and it’s usually geared

toward thinking about how other people feel about a situation. When

I pay attention, I am able to handle the situation with sensitivity.

Sometimes, I don’t show as much empathy as I should, but the inner

dialogue is always taking place.” Ed Zore, Northwestern Mutual’s CEO,

is constantly aware of his feelings and reactions, adding, “I sometimes

have to sort them out from the objective facts because my feelings and

the facts about a situation can be very different.”

We need to understand our thoughts so that we can monitor and

manage their emotional and physical effects. Our thoughts are not ran-

dom, and we are not at their mercy. As we’ll see shortly, we can choose

our thoughts. When we change our thoughts, everything changes.

120 MORAL INTELLIGENCE

Time Out to Tune In: A Self -Awareness Break

Pick a few times during each day to perform a mental check. Ask yourself:

• What am I thinking right now? What am I saying to myself? • What am I feeling about that? Am I excited, frustrated,

peaceful, annoyed?

• What am I doing physically at this moment? How is my breathing? Are my jaws clenched? Am I hungry or thirsty?

Personal Effectiveness We don’t cultivate self-awareness for its own sake, but because it pro-

vides us the data we need to manage ourselves and our emotions.

Managing emotions, by the way, does not mean trying not to feel, deny-

ing hurt, or even necessarily concealing strong emotions. We are not

meant to be unemotional automatons (like Star Trek’s Mr. Spock). It is

human to feel uncomfortable emotions. Personal effectiveness helps us

channel our emotions so that we are able to spend more time living in

alignment. The goal is not to increase our emotional awareness and

emotional skills per se; it is to increase these competencies so we can

achieve greater alignment and moral intelligence. Personal effectiveness

encompasses all the skills we use to perform well in the face of strong

emotions. These include

• Changing self-defeating beliefs that lead to upsetting emotions

• Deciding to behave well under trying circumstances

• Rolling with the punches when things don’t go our way

• Taking care of ourselves so we can better handle stressful situations

Deciding What to Think If your thoughts are self-critical, you will notice that your emotions are

negative, your body is tight, and you are not able to perform at your

best. If you spend a few minutes to replace your critical thoughts with

statements of realistic confidence in yourself, your mood lifts, your

body relaxes, and your work performance improves. Negative self-talk

is a program for failure, while positive self-talk frees you to do your

best. A caveat: We are not advocating that you mindlessly allow only

positive self-talk or that you ignore fears or failings. There are negative

CHAPTER 8 • EMOTIONS 121

thoughts that are realistic and must be confronted seriously. But no mat-

ter how dire the situation at hand, realistically positive self-talk is the

best way to get your mind and body ready to perform effectively. If we

think we can’t run a marathon, we won’t even try. Now imagine replac-

ing that belief with a different thought—“If I train hard, I’ll bet I can

finish the marathon.” Our new thought makes it far more likely that we

will ultimately reach the finish line. Why? Because now we have

created the motivation we need to get ready for the race.

When you are in a morally charged situation, it helps to remind

yourself of your principles, values, and beliefs. Self-talk about your

beliefs allows you to counteract disruptive emotions that can drive you

out of alignment with your moral compass. When Cray Inc.’s Lori

Kaiser is really troubled or searching for direction, she thinks about the

three principles that she tries to live by: “First, if I don’t speak up,

nobody will—don’t assume it will be handled by someone else. Second,

Winston Churchill said, ‘Never, never, ever give up!’ That kind of tenac-

ity is important in business. Third is a quote from existentialist philoso-

pher, Albert Camus, ‘In the midst of the darkest day of winter, I find

within myself the eternal day of summer.’”

Lori’s practice of mentally recalling her principles is an example of

the value of deliberately interrupting negative thought processes or feel-

ings. Once our minds are clear, we are ready to tackle the situation at

hand. Then we can ask ourselves, “What do I need to think about to

deliver what I need? There is a bonus that comes with changing our

self-talk: When we alter our internal thoughts from negative to positive

ones, any emotional and physical discomfort we may feel usually

lessens or goes away entirely.

122 MORAL INTELLIGENCE

Self-Control Effective leaders rely on self-control to maintain alignment with

principles. Most successful leaders know from experience that losing

emotional control is bad for their self-esteem, their reputations, and

their business performance. A healthcare executive we’ll call Ellen

understands the importance of emotional control. “I’ve blown up at

someone only twice in my career. In the heat of the moment, I felt there

was such an injustice, and I felt so ‘in the right’ that I justified my

actions. But in reality, I violated my moral code—I certainly didn’t treat

them the way I’d like to be treated. Of course, they were treating me

badly too, but that’s no excuse. In both cases, it damaged my relation-

ships, and that has had its costs.” Asked what she learned, Ellen says,

“When I get really angry, I now know to say, ‘I need some time to think

about this; let’s talk tomorrow.’ I’ve also learned when to consult with

someone who’s not personally involved before I decide what to do.”

An emotionally intelligent leader knows when not to trust gut reac-

tions. A marketing executive says this about self-control: “I conscien-

tiously think about exercising self-control over my emotional responses.

A few months ago, I had a job opening and knew someone in another

department would be perfect for that spot. I started to recruit him, but

then got a call from his boss telling me, ‘No way.’ My first thought was,

‘Okay, fine—someday I’ll do the same for you.’ But then my self-

control kicks in. I know better than to retaliate.”

Nurturing Emotional Health Leaders need emotional reserves to deal effectively with moral chal-

lenges. It’s hard to manage stressful situations without a baseline level

of emotional well-being. You can’t expect yourself to deal with the

demands of leading morally if your emotional tank is empty. You can’t

expect to influence others to be morally competent if they don’t respect

CHAPTER 8 • EMOTIONS 123

the way you live your life. Dan Marvin (pseudonym), CEO of a large

retailing business, told us this story of a failed executive:

Recently, I had to let go our chief operating officer. He was

probably the brightest and hardest working human being

I’d ever worked with. He is the first person I’ve ever told

that they worked too much—I’ve never been the poster

child for personal balance myself. He would come in at 9:00

AM and leave at 1 in the morning. When he got home, his

wife would get up and serve him dinner and talk to him for

an hour and then go back to bed. For the two years he was

here, he never got to a soccer game or baseball game of his

kid. He never did anything with his wife. He’d leave

early—at 11:00 at night—on birthdays and anniversaries.

People hated working for him. He’d call them at 10:00 at

night, and he did nothing to develop them. He lost three

VPs who worked for him. Though he worked a ton of

hours, he really didn’t do a good job, and he put his entire

family and marriage at risk.

Balance. One of the best emotional nutrients is a balanced life. Balance

means achieving equilibrium in the amount of time and energy you

spend on each of the many dimensions of your life. You establish emo-

tional equilibrium by allocating personal resources—such as time,

energy, and money—to life areas in a way that makes sense to you.

There is no rule for creating balance. Only you can determine how

much time and energy you spend on which areas of your life. Only you

know the right mix of pursuits for each stage of your life.

Human resources executive Judy Skoglund, was the first profes-

sional to work part-time at the financial services company IDS. Judy

was a role model for women who saw that she was highly productive

because of her decision to spend more time with her family, not in spite

of it. Today, Judy coaches women on managing their careers. “I don’t

124 MORAL INTELLIGENCE

call it work life balance any more,” Judy says, “I call it work life happi-

ness. People don’t necessarily care about balance; they want to be

happy.”

Women are not the only folks who care about the quality of their

whole lives—men do, too. Consider the case of Frank, a successful bro-

ker who makes over $200,000 per year. Although Frank works hard, he

also values family time, taking one week off every seven weeks to

spend uninterrupted time with his family. His schedule was so person-

ally rewarding that he started thinking about taking one week off every

five weeks. But after planning to reduce his work hours, he then

launched a new business partnership, a decision that would require he

keep to his current work schedule. Frank was excited about his new

business but wondered if he was copping out on his plan to spend even

more time with his family. We don’t think so. We think he made the

decision he did because he had already achieved equilibrium. His work

and family life were balanced in a way that worked both for him and his

family.

Ecolab’s Doug Baker works hard to keep his time expenditures

aligned with his values. “Family, marriage, career, and community are

all important to me. I barely have time for those four. So friends get the

short end of the stick. I may only have three golf games a year that are

just for fun with friends. Guys will call me and want to go golfing for

two days—I’d love to but can’t. I can golf or I can see my kids.”

Despite the importance of creating balance, many managers, and

executives in particular, do it poorly. Corporations may offer lip service

about work/family balance, and some companies provide flexible work

schedules or family-friendly services to enhance retention. But

American business leaders rarely recognize the positive business bene-

fits of encouraging employees to lead fulfilling and balanced lives. If

they did, balance-enhancing strategies would be mandatory rather than

tolerated.

CHAPTER 8 • EMOTIONS 125

Companies that support balanced lives among their employees

soon discover the business benefits. They attract high performing

people who are happy and productive in multiple roles. Those

content employees produce excellent business results independent of

how many hours they spend at work. Consider American Express,

which enjoys an enviable history of strong financial performance. The

company employs about 80,000 people, some of whom are undoubtedly

workaholics. But the American Express executive team doesn’t believe

it’s reasonable to base a business model on an assumption that most of

its employees are workaholics. The company bases its business model

on the assumption that people care about other aspects of their lives

beyond the office. The American Express workforce is energized

because they know that the company they work for recognizes that they

have lives and that the company’s leaders really want their total lives to

be successful and joyful—and by the way—they do want their employ-

ees to “work their butts off” when they are at work.

Recharging Your Emotional Batteries. You are your most precious

asset. When you prioritize your activities, it’s important to carve out

time for yourself. Physical fitness, for instance, is a key contributor to

emotional health. Aerobic exercise triggers the release of brain chemi-

cals that are associated with feelings of pleasure and well-being.

Evidence of the emotional importance of exercise is that medical

research has found that regular aerobic exercise (such as brisk walking)

is as effective as medication in reducing symptoms of moderate depres-

sion. Your emotional well-being will be enhanced if you choose activi-

ties that you enjoy, rather than activities that you only do because you

think they are good for you. Daily relaxation activities also can con-

tribute significantly to emotional and physical well-being. Medical

research underscores the benefits of planned relaxation—from lowered

blood pressure to faster healing and greater pain tolerance. Dr. Herbert

Benson in his best-selling book The Relaxation Response, provides an

126 MORAL INTELLIGENCE

easy and efficient method for achieving a relaxed state.1 Just as people

need a unique balance in their life endeavors, each of us differs in the

kind of activities that promote relaxation. Many people find deep

breathing and meditation to be effective in calming their minds and

bodies, while others may find it maddening to sit down and meditate,

preferring a yoga class, a massage, or a relaxing after-dinner stroll. The

important thing is to choose some daily practice that allows you to

recharge your body, mind, and spirit.

Managing Emotions for Peak Performance. The self-awareness com-

petencies and personal effectiveness competencies we have discussed

here are clearly synergistic. Taking charge of your emotions means

mustering all of your emotional resources to manage the competing

demands of work and personal life. Most of us will never get to a state

in which we perform at the absolute peak regardless of how we feel.

However, the more we practice self-awareness and personal effective-

ness skills, the more often we will outperform ourselves, and the more

often we will find ourselves conforming our behavior to universal moral

principles. Rehearsing for emotional challenges is critical to effective

performance. You cannot control what will happen to you in the course

of a day. But you can imagine it. You can prepare for it. You can get

ready to be successful. As the old saying goes, “Good luck happens

when preparation meets opportunity.” Coping effectively will keep you

from being knocked off course by destructive emotions and ensure that

your behavior stays in alignment with your goals and beliefs.

Interpersonal Effectiveness Personal effectiveness skills such as deciding what to think and self-

control are obvious aids to moral competence. We know we need emo-

tional control to do the right thing. But why do we need people skills to

CHAPTER 8 • EMOTIONS 127

1. Herbert Benson and Miriam Z. Klipper. The Relaxation Response. New York: Random House, 1993.

be morally competent? To serve the needs of others, we have to under-

stand them. To be compassionate or forgiving, we need to be able to see

the world through another’s eyes. Interpersonal effectiveness is an indis-

pensable leadership tool. Leaders get very little done by themselves—

they rely almost completely on the energy, strength, and commitment of

the people who work with them. If we want to influence others, we

must understand the complex emotional worlds of others and commu-

nicate to them in ways that satisfy their emotional needs.

Northwestern Mutual’s Ed Zore knows this as well as anyone, “If

you’re oblivious about your impact on others you’ll hurt people. So you

have to make an appropriate response, and that means first being aware

of the wake you’re leaving.”

Empathy Empathy is a kind of “as if” mental state in which you experience a

challenging situation through the eyes of another person. It is as though

you put on a virtual-reality headset that instantly gives you the emo-

tional mindset of another person. Empathy is critical to moral compe-

tence because it neutralizes destructive emotions that can interfere with

living in alignment. Take college President James Norwell (pseudo-

nym), for example. When James was the VP and Dean of another liberal

arts college, he found himself in an awkward position. The college

president at the time had been a highly popular appointment but turned

out to lack the depth needed to meet the challenges the institution faced.

Frustrated with his inadequacies, the board of trustees turned to James

as a sounding board, problem-solver, and potential presidential replace-

ment. James recalls, “It would have been easy to let the board push the

current president aside and put me in his job. But I knew how much he

was struggling and wanted to do well. And because I was able to look at

the situation from his point of view, I decided to take myself out of con-

sideration so that I couldn’t be used by the board in their attempt to

128 MORAL INTELLIGENCE

resolve his limitations. I had to lay my own ambitions aside for him to

be treated the way I would like to be treated in that situation.”

Empathy as a Conflict Antidote. When we are at odds with others,

often the last thing we want to do is to consider the situation from their

point of view. Nevertheless, empathy is a powerful tool for managing

conflict in a way that produces the best outcomes for you and your

adversary. Recall the experiential triangle of emotions, thought, and

action. If you have been clashing with a work associate, you are proba-

bly caught up in a high-energy negative emotional state that is clouding

your thinking. Without empathy, you are limited by your own subjective

view of reality. If you can see only your side of the conflict, you risk

lashing out in anger. You may decide you have to win the battle at all

costs; you may try to retaliate; you may make hurtful accusations—all

actions that are inconsistent with your moral compass, actions that will

also damage your reputation as a good leader.

After you experience a conflict from the perspective of another per-

son, it is then possible for you to stay in alignment. With the expanded

perspective that includes your feelings and the feelings of others, you

can think more clearly, and the odds that you will make an aligned

choice improve dramatically. Your ability to help your partner in con-

flict stay in alignment also improves because empathy activates both

forgiveness and compassion. If you can imagine how someone else

feels, you can understand why they acted as they did. With that under-

standing, you are more willing to let go of their mistakes and more dis-

posed to help them accomplish their goals.

Misplaced Compassion Empathy for another’s life situation often inspires us to want to

help them. It’s important to distinguish between understanding another’s

world and being controlled by another’s needs and preferences. It’s

CHAPTER 8 • EMOTIONS 129

possible to go too far in translating our empathy into unproductive care-

taking. Pam Moret, executive vice president of Marketing and Products

at Thrivent Financial for Lutherans demonstrates how to be empathetic

without compromising your business. When two companies merged to

form Thrivent, Pam decided to consolidate her dispersed workforce into

a single location. Some employees were upset by the prospect of the

move, and though Pam empathized with their feelings, she was con-

vinced of the need to locate her group together. Though her empathy

didn’t change her business decision, it did cause her to engineer softer

landings and lengthier transitions than many companies offer.

Listening. Leaders are generally rewarded for being decisive, for taking

action, for being the experts, for having something to say. That action

orientation can make it difficult for leaders to value what may seem like

the passive act of listening. Hearing may be passive, but listening atten-

tively is an active skill requiring concentration and emotional intelli-

gence. Thrivent’s Pam Moret says, “Active listening is an unbelievably

powerful personal skill. If you signal to someone that they’re fourth pri-

ority on your list…for example, by canceling one-on-ones or doing

e-mail while you’re meeting with them…it can really adversely affect

them and the situation.” To counteract her natural inclination to multi-

task when with others, Pam has established informal contracts with her

direct reports that commit her to giving them her undivided attention.

When she meets with them, she tries not to sit behind her desk, look out

her window at her secretary, or take a quick glance at her computer.

That, says Pam, keeps her from hurting someone or missing important

information.

Listening attentively is essential to moral competence. Careful lis-

tening demonstrates respect for the values, beliefs, goals, and emotions

of others. Listening skillfully also makes empathy possible because it

provides the data on which compassion and forgiveness are based. Very

little of the meaning of what is said comes from the words themselves.

130 MORAL INTELLIGENCE

What people really mean when they speak is found in their tone of

voice and the physical movements (“body language”) that accompany

their spoken words. That is why active listening is so much more impor-

tant than passively listening to words alone. You can get the message if

you get the whole message. Suppose you get a call at work that your

daughter is sick and needs to be picked up from school. As you rush out

the office, your boss says, “Are you leaving again to pick up your

daughter?” Stripped of your boss’s tone of voice, the words themselves

could represent a simple request for clarification. But you heard the way

she made that statement. Embedded in the words was a point of view.

Her tone suggests she thinks you are not getting your work done.

Listening carefully allows you to form a useful hypothesis that your

boss is not happy with you. But active listening goes a step further.

Instead of simply assuming that you have correctly assessed your boss’s

attitude, you check with your boss about what she meant. If your boss

was just asking for information, then you can let go of the anxiety that

your interpretation of her message caused. If she really is annoyed with

you, testing your assumption gives you and your boss an opportunity to

resolve a problem and keep you both in alignment.

Listening to Understand the Contents of all Three Frames. Active

listening is typically used to uncover underlying emotional messages.

But listening well can provide information about all three frames. It is

important to listen in a way that allows you to discover others’ values

and goals. If you listen only for emotional messages, you might be

missing clues that can help you stay in alignment, as well as help you to

help others to stay in alignment. If you simply listen to another’s emo-

tions without understanding their values and goals, you don’t know

whether or not they are in alignment.

Michael Connolly, Heartland’s CEO, was upset when Deborah, one

of their senior executives, left abruptly to work for another multi-unit

fast-food company. When he learned that Deborah was also trying to

recruit other Heartland employees by bad-mouthing the Heartland

CHAPTER 8 • EMOTIONS 131

management group, Michael got angry. Imagine that Michael had gone

to you for advice. If you listened only to his feelings, you might be

tempted to help him plan a counterattack that could damage his com-

pany’s reputation and encourage employees to jump ship. Now imagine

what might happen if you also listened to Michael’s goals. By asking

him about his goals, you would probably have learned that he wanted

all of his employees to stay. By carefully listening for information about

all of Michael’s frames—his values, goals, and feelings, you would then

have been able to encourage Michael to choose a strategy that would

give him the best shot at keeping all his employees. In fact, Michael did

go on to develop a plan that matched his values and goals. He called

each of Heartland’s employees and told them this: “We know some of

you are being contacted by a former employee, and we know she wants

you to consider working with her. We certainly understand why she

might want you. We want you to know we appreciate everything she

did, even though she has chosen to leave. But we are still here, and we

really value what you do. We have nothing bad to say about Deborah.

We want you to stay. And we want you to know we are committed to

making Heartland a strong and healthy company.”

Respecting Others It’s easy to work with people we like, or whose views match our own.

But we all must work with some people we don’t enjoy or who express

opinions with which we disagree. Disrespect is a product of our inabil-

ity to understand that each of us sees only part of what is true or real.

We think we have all the facts, so when someone disagrees with us, we

assume they are wrong. Respect comes when we understand that truth

has many colors and we can’t see all of them. Our view of the world is

necessarily incomplete. None of us has perfect seats in the theater of

life. When we realize that our sight lines are limited, we can then

respect those who disagree with us—because we then appreciate that

their opinion is based on seeing what we cannot see.

132 MORAL INTELLIGENCE

Respect is the glue that allows people of different backgrounds,

perspectives, and habits to work together. Moral leaders know that they

can only inspire people they respect. Respect is a tricky skill. It goes

beyond the easy task of appreciating people whose ideas you like or the

bogus politeness of “respectfully disagreeing” with someone. Respect

comes from our deep appreciation of another’s ideal self. When we say

that we respect someone, what we are really saying is that we connect

with the best intentions of that other person. When we respect another,

we establish a relationship with their ideal self, a positive relationship

that is independent of our judgments about their current opinions and

actions. Our respect for their positive intentions becomes the basis for

our work together. When you respect a coworker, you open yourself to

the possibility that your coworker—who you might not like and who

sees the world very differently—has something important to teach you

that will help both of you succeed. When you genuinely respect

another—when that other person feels respected by you—only then

is that person open to the possibility that your perspective may also

have merit.

It’s not easy to stay connected to the ideal self of an obnoxious or

seemingly wrong-headed co-worker. But you can keep the channel of

respect open if you also call on your capacity for empathy and listening.

To see what is ideal in another’s mind, you have to listen. You need to

observe. When you visit a co-worker’s office, what do you see? What is

there, and what is not there? What do those family pictures, trophies, or

pieces of art tell you about what your coworker cares about? You might

not agree with their approach to a customer’s problem, but your ability

to connect with their ideal values allows you to negotiate from a posi-

tion of respect.

Respecting Differences. Imagine that you have hired a team that thinks

a lot like you do. You like their ideas, and they like yours. Staff meet-

ings are pleasant and convivial. Decisions are made quickly, and you

are confident in those decisions because so many people agree. When

CHAPTER 8 • EMOTIONS 133

you are right, things work out very well. But because you share the

same blind spots with your colleagues, before too long you make a big

mistake that could have been prevented or you lose a significant busi-

ness opportunity that could have been identified with more diverse

views on board.

Very few leaders would deliberately hire their own clones, and

most leaders intellectually understand the value of diversity. In an

emotionally charged situation, however, it is tempting to over-rely on

the opinions you trust the most—yours. That is why you must con-

sciously cultivate an appreciation for others’ ideas. You do that by ruth-

lessly challenging your own views, while aggressively looking for the

wisdom in others’ ideas.

By doing this, you will discover that the existence of differences

creates great opportunities for synergy and gives people who work

together the potential to accomplish far more than individuals can

achieve on their own.

When financial planning was first coming into its own in the 1980s,

most financial planners were paid for selling financial products, such as

stocks or insurance policies. Industry critics had pointed out that com-

mission-based financial advisors could be tempted to push certain prof-

itable products, even if they were not in their clients’ best interests.

Martin Levy (pseudonym), division vice president of sales for a grow-

ing financial services company, vehemently objected to a proposal to

charge clients for developing their financial plans. Martin thought the

financial plan should be a free, relationship-building activity that would

demonstrate the sales person’s competence and set the stage for subse-

quent sales of financial products. Only one thing disturbed Martin’s

argument. Jerry Masters (pseudonym), one of his sales managers, was

as vocal an advocate of fee-based financial planning as Marty was an

opponent. Over time, Martin decided, “If Jerry thinks it’s a good idea, I

have to find out what he sees that I don’t see.” Martin asked Jerry to

convince him, and he did. Jerry laid out his rationale about the impor-

tance of charging for objective advice because of the integrity that

134 MORAL INTELLIGENCE

brings to the equation and the increased confidence that customers have

in the financial advice they get when they pay for objective information.

Jerry also pointed out that other disciplines, including medicine, have

emerged as respected professions because they acquired a body of

knowledge and were then able to charge for what they knew. Martin

was convinced. Because he respected Jerry and had learned to listen to

divergent views, Martin was able to let go of a strong personal bias and

clear the way for a new product that led to significant revenues

increases in years to come.

Getting Along With Others Because leaders need others to accomplish their goals, they have to get

along with them. Empathy, listening ability, and respect are hallmarks

of individuals who get along well with others. Leaders who get along

exceptionally well with others share four additional qualities: They

show genuine interest in other people’s lives; they are open and

approachable; they are flexible in accommodating other’s preferences

and needs; and they enjoy the differences among us. When people are

skilled at getting along with us, we like them. And because we like

them, we are more apt to view their ideas positively and more likely to

cooperate with them. So personal likeability is an asset to moral com-

petence because when we need to enlist others to help us do the right

thing—especially when it’s a hard thing to do—people who like us will

be more motivated to join us. Politics is an arena where we see how per-

sonal likeability can influence actions for good or ill. Political consult-

ant and community leader Karen Lane, a native of Washington State,

recalls how former Seattle mayor Norm Rice capitalized on his personal

appeal to inspire others to do good:

Sometimes, especially in local politics, a person will come

along who genuinely cares and reaches out to people. They

talk about things in ways that tend to “make the tent

CHAPTER 8 • EMOTIONS 135

bigger.” Norm was one of those people. I used to love to go

to his political events because one saw the enormous rich-

ness and diversity of our community. People of color came

because Norm was one of them. Neighborhood advocates

came because Norm had worked for their causes. The

“movers and shakers” came because Norm had earned not

only their respect, but also their affection. It was spectacu-

lar to see what he could do by bringing everyone together.

While Norm was Mayor, the Rodney King riots broke out

in Los Angeles. He rightly recognized that, as Mayor, he

had to lead our city constructively and inclusively so that

the anger and fear caused by the verdict in the trial of the

police officers involved would be turned into opportunity

and hope for the young people of Seattle. He got on the

phone with several business leaders and, in less than a

week, raised more than a million dollars to expand summer

employment opportunities for low-income youth of all

races. He also went on TV and radio to make it clear he

would not tolerate violence of any kind against anybody. It

was a remarkable piece of leadership that kept Seattle vio-

lence-free and moved our community forward.

Being Approachable. Positive personal connections with your co-

workers fuel highly committed and creative approaches to the work at

hand. It might seem obvious that good leaders need to be approachable,

but it is striking how often leaders make themselves inaccessible. Some

maintain distance from their employees as a matter of personal style.

Others may discourage contact unintentionally because of work over-

load. As managers are promoted to higher levels, there is a tendency for

them to become invisible—they disappear to more remote offices or

spend most of their time traveling or attending meetings with other sen-

ior managers. Even when you are in a high-pressure leadership job, it is

136 MORAL INTELLIGENCE

vital to make time to deliberately cultivate warm and approachable rela-

tionships with others. We’ve all read books advocating the “open door

policy” or “management by walking around.” These are simple tools

that are very effective if actually applied.

Being an approachable leader begins with your willingness to share

the contents of your moral compass—your principles, values, and

beliefs. You add to your approachability by sharing your personal

interests and human foibles. Do you play in a rock band on the week-

ends, sing in a church choir, or fix up vintage cars? Sharing your inter-

ests and asking about others’ interests sets the stage for warm work

relationships.

Being approachable does not mean “telling all.” Each of us has a

private zone of personal information that should not be shared indis-

criminately. Neither does approachability require that you become a

raving life-of-the-party extrovert. But you do need to actively help peo-

ple feel comfortable around you because your approachability is an

important element of a positive, highly productive work environment.

Being Flexible. People who get along with others don’t get stuck on

doing things their way. Whether you are a work peer or leader, your suc-

cess depends on your willingness to let others have a say about how

work gets done. You also need to be able to accept mid-course changes

that affect how work gets done. What happens when your teammate

who was slated to give a big presentation gets laryngitis and asks you to

fill in at the eleventh hour? How do you handle an employee’s request

to work at home for the next few weeks? What if your boss asks you to

head a project that you think the company doesn’t really care about?

Rolling with the punches may not always get you exactly what you

want in the moment, but over the long term it will cement important

work relationships and help you cultivate inventive ways of solving

inevitable problems.

CHAPTER 8 • EMOTIONS 137

Enjoying Differences. People who are seen as getting along with

others usually have a diverse network of people with whom they have

positive relationships. It’s easy to get along with people we like, but if

our network is limited to people who are just like us, then we will be

seen, not as emotionally skilled, but as interpersonally biased.

Appreciating differences goes beyond respecting or valuing the

diverse perspectives that others bring to the table. It is the capacity to

savor those differences among us that makes us interesting. People who

get along well with others don’t merely tolerate differences; rather they

feel enriched by the unique personalities and perspectives that people of

different backgrounds offer.

138 MORAL INTELLIGENCE

By now, you no doubt recognize that it’s not just organizational leaders

who need moral intelligence. Leaders can’t make their businesses

succeed through their own efforts alone. They succeed by doing things

that motivate others to design, build, and deliver their companies’ prod-

ucts and services. No matter how morally intelligent a leader you are,

your moral skills are only valuable to the extent that they inspire

morally smart behavior in others. Given that many members of an

organization have non-managerial leadership responsibilities, it’s

crucial that both formal and informal leaders possess strong moral skills

that they can impart to their co-workers. In this section, we concentrate

on the strategies leaders use to create morally smart organizations.

Part Three MORAL LEADERSHIP

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Dick Harrington is CEO of The Thomson Corporation, a global elec-

tronic information company that sells the financial information systems

that help power the New York Stock Exchange. On September 11, 2001,

Dick was in London for a meeting of his Board of Directors. He was

talking on the phone with his Connecticut headquarters when he got

word of the attack on the World Trade Center. Harrington, along with

the other members of his executive team in London, was thunderstruck.

Over 2,200 Thomson employees worked in the neighborhood of the

World Trade Center, with offices of about 200 employees in the twin

towers themselves. It would be days, even weeks, before they knew for

certain that 11 of their employees had been killed, including one who

had been a passenger on the plane that struck the North Tower.

In the early hours following the terrorist attack, nothing was clear.

But Dick and his team quickly shook off their shock and prioritized:

people first, business second. They mobilized cell phones and

Blackberries to track down missing employees. They commandeered

THE MORAL LEADER

9

141

limos from Connecticut to pick up employees who had escaped uptown

or across the river to New Jersey. As they confirmed who was missing,

they contacted family members, they sent cash and catered meals, and

they arranged for transportation so family members of victims could

be together.

Beyond that, Dick and his team extended generous benefits to vic-

tims’ families that they are too modest to publicize. What’s more, even

while they attended to the needs of victims’ families, they didn’t miss a

beat when it came to serving their other constituencies—employees,

shareholders, and customers across the globe. They communicated

early and often. They comforted traumatized employees. They reas-

sured investors and customers.

The moral leadership that Harrington exhibited was the norm for

him and his fellow executives—and it was reciprocated with the same

degree of loyalty from Thomson’s employees. One employee’s first act

after escaping from the World Trade Center was to race to the back-up

facility in New Jersey. Other employees talked their way back into con-

demned buildings near Ground Zero to rescue critical financial data. By

September 13, Thomson was able to announce that the financial infor-

mation technology so crucial to Wall Street was up and running.

Other leaders demonstrated powerful moral leadership in the

crucible of the 2001 attacks. Nine days after the World Trade Center

towers collapsed, American Express CEO, Ken Chenault, gathered

nearly 5,000 New York employees for a meeting at Madison Square

Garden. Eleven American Express employees had died in one of the

towers, and the company’s headquarters across the street from the

World Trade Center had been seriously damaged. Employees were

shell-shocked and suffering from the loss of relatives, colleagues, and

friends in the financial services community. Although business contin-

uation was vital, Ken’s first priority was his employees’ well-being. The

meeting wasn’t about “busting butt” to keep the company on track.

Instead, Ken expressed his grief about those who died in the attacks and

142 MORAL INTELLIGENCE

invited his employees to share their own feelings of loss and remem-

brance. He encouraged people to reflect on all they were grateful for

and to spend time attending to the parts of their lives that mean the

most. Then he communicated his sense of hope and confidence in the

face of tragedy. He told the gathering how the company was helping

those who were affected—employees, customers, and the New York

community—in their recovery. Ken’s employees didn’t need to be told

to work hard. They needed to hear that their leaders cared about them.

That is what allowed American Express employees to move forward in

the aftermath of the attacks.

How did Ken Chenault manage to inspire and comfort his employ-

ees at a time when he was personally grieving and facing unprecedented

threats to his business? Ken made hundreds of conscious decisions—

and every one of them required not just business skills, but moral skills.

Though we all need moral skills to be effective in our lives, as leaders

we have a special responsibility to use our moral intelligence to ensure

that the people and groups we lead act consistently with the principles

of integrity, responsibility, compassion, and forgiveness. As leaders we

have influence and power that we can use to communicate the impor-

tance of moral skills to the rest of our organizations.

Not all CEOs affected by 9/11 responded like Dick Harrington or

Ken Chenault. Some had to consult professional handlers, PR firms, or

legal experts before they did anything. Some took so long that when

they finally did respond with compassion for victims’ families, it came

across as artificial and forced. Harrington and Chenault succeeded

where others dropped the ball because they both operate from a set of

principles, values, and beliefs that factor into every business decision

they make. The result? Morale and job performance has remained con-

sistently high in both companies. Thomson employees say their com-

pany is a place they’re proud to be part of. “No matter what my job

level,” said one information specialist, “I know that Dick Harrington

respects me enough to communicate about significant issues. I’m going

CHAPTER 9 • THE MORAL LEADER 143

to stay, and I’m going to recommend Thomson as a great place to

work.” With the kind of moral leadership that engages their workforce

to do their best, The Thomson Corporation has continued to produce

enviable returns during both economic recession and recovery.

Leveraging the Spotlight. When you are a leader, you are always on

stage. Everything you do is scrutinized, analyzed, and interpreted by

those around you. Celebrities and politicians recognize that visibility is

a double-edged sword. On the one hand, you can use the spotlight to

promote worthy causes. On the other hand, it’s nearly impossible to

hide bad behavior from the public eye. Sam Bronfman, former senior

executive with Seagram Company, recalls a time when he eviscerated a

marketing manager for presenting a merchandising plan that Sam

thought was ridiculous. “Everyone was shocked. I eventually apolo-

gized for it—but people still remember the incident. I hope they remem-

ber the apology, but I think people remember the outburst more.”

Sam’s incident reminds us that a leader’s high profile requires a

particular sensitivity to those emotional states (in self and others) that

have the strongest potential to stimulate either moral alignment or moral

breakdown. Greed, jealously, envy, hate, and anger can all easily disrupt

alignment, while emotions such as love, compassion, happiness, and joy

have a tremendous capacity to enhance moral competence. Leaders who

consistently display negative emotions tend to get involved in negative

behavior, and by example encourage negative behavior in those around

them. Leaders who act out of love, who demonstrate respect and regard

for people, tend to encourage moral competence in others—like the

CEO we know who spends $I,500 a month more on his commercial

cleaning service than he could negotiate with another vendor because

the woman who owns the cleaning business has been loyal and respon-

sible, and he knows that their family relies on that income.

There is an upside to your visibility as a leader—you can capitalize

on it by modeling moral skills for others in your organization. To com-

municate moral messages effectively, it might be necessary to stand up

144 MORAL INTELLIGENCE

for what is right in an exaggerated way. In live theater, for instance,

actors’ makeup is plastered on thick so that their faces can be seen

throughout the audience. You as a leader may need to “lay it on thick”

to make your values clear to all of your audience. You may think that it

should be obvious to others that certain business tactics are wrong and

that you would never approve of it. But to avoid saying so is to miss

an opportunity to underscore the importance of integrity to everyone’s

success. Harvey Golub, retired Chairman of the Board and CEO

of American Express agrees. “I made it a practice,” Golub says, “to

always model the behaviors I wanted others to show…I didn’t just hope

they observed well, but would point out behaviors to make sure they

understood.”

Leveraging Power. Power is another leadership asset that you can use

to influence your organization to adopt moral skills. Leadership and

power are virtually synonymous, as evidenced in the characterization of

leadership as “being in power.” A common definition of power is that it

is “possession of control, authority, or influence over others.” Power,

like visibility, is a double-edged sword. Certainly, you can use power to

accomplish worthy goals through others that you could not reach on

your own. But there is something about power that makes it potentially

as dangerous as it can be helpful. Power is addictive. Using power acti-

vates brain chemicals called endorphins that create a highly enjoyable

physiological state. Power can provide pleasure much like the satisfac-

tion offered by food, sex, or vigorous physical exercise. Most people in

formal leadership positions value power. But some leaders crave it. It is

easy to get accustomed to the perks of the leadership role. It feels good

to have people with less organizational power defer to our ideas and

desires, so unlike our experience with family members who treat us like

the fallible humans we actually are.

Leadership power is not just asserted by the leader—it is given to

leaders by followers. Followers allow leaders to be powerful. Because

CHAPTER 9 • THE MORAL LEADER 145

leaders have power, followers are careful about how they present infor-

mation to their leaders. Research has demonstrated that the higher one

goes in an organization, the more distorted the information they receive.

Followers provide information that they believe leaders want to hear

and censor information that they fear would upset or anger leaders. The

more heavy-handed a leader is in his or her use of power, the more dis-

torted the information they are given. But even benevolent leaders who

are careful in their use of power have trouble establishing accurate com-

munication channels because of followers’ strong tendency to defer to

the leader’s position power, independent of the leader’s actual behavior.

Deference to power affects not only the quality of “hard” business

data related to financial reports, product quality, and customer attitudes,

but deference to power also limits the amount and quality of “soft data”

available to the leader. When leaders make mistakes, it is difficult for

followers to tell them so. Many organizational cultures discourage inter-

personal feedback, even among peers, so imagine how reluctant most

followers would be to openly criticize the actions of someone with

greater power. This leaves most senior leaders operating in a feedback

void. Their accomplishments might be praised, but their personal flaws

are not brought to their attention. The absence of appropriate negative

feedback about our leadership behavior can leave us with the mistaken

notion that we are far better leaders than we really are. Without accurate

information about the business and about our own capacities, we are at

risk making a big mistake that can lead to a devastating business out-

come. Workaholism can reflect a subtle abuse of power. When you

insist on doing everything yourself rather than delegating work, you

deprive others of opportunities for development and their own share

of power.

So use power with caution. It’s not a drug you can quit cold turkey.

Like food, power can’t be eliminated completely from your life. For

a formal leader, power is inescapable; it comes with the territory.

But power, like food, can be used carefully to promote health and

146 MORAL INTELLIGENCE

well-being. You can leverage your power to accomplish morally posi-

tive goals that also produce higher business performance. As a moral

leader, you can use power positively by modeling the moral skills that

keep you in alignment. You also can use your power to encourage fol-

lowers to live in alignment with their own moral compasses.

Higher Standards. When you are highly skilled in all the moral com-

petencies, you are able to use your leadership power and visibility to

produce the best business results. We do know business leaders who are

quite effective despite some gaps in their moral competencies. But we

have never known a consistently successful business leader who was

not highly skilled in the integrity and responsibility competencies.

Many effective and honest senior executives are respected because they

demonstrate integrity and responsibility, even though they lack notable

compassion or forgiveness. But leaders who inspire their followers’ best

efforts are compassionate and forgiving as well. When followers see

that such leaders actively care about them and are willing to let go of

mistakes, they forge a bond with their leaders that just doesn’t happen

otherwise.

Why does emotional bonding between follower and leader matter?

When leaders show compassion and forgiveness, they create a safe

emotional environment. In this positive climate, followers feel free to be

creative because they know their leaders will tolerate the inevitable mis-

takes that come from creative risk-taking. When followers believe their

leaders care about them, they want to give their best efforts to the work

at hand. It is as though the integrity and responsibility competencies

come from the “head,” while the compassion and forgiveness compe-

tencies come from the “heart.” The most effective moral leaders are

those who have both the head and the heart fully engaged.

It is interesting that moral competencies of the “head” are neces-

sary and sufficient for a minimal level of leadership effectiveness, but

moral competencies of the “heart” are not sufficient for effective lead-

ership. A leader could seem to actively care for others (“I feel your

CHAPTER 9 • THE MORAL LEADER 147

pain!”), could forgive himself or others, and be open about mistakes,

but if he or she does not tell the truth, doesn’t keep promises, and

doesn’t act consistently with the values, beliefs, and principles of the

organization, then he or she will not be an effective leader. Leaders who

are known for their compassion and forgiveness, but who lack integrity

and responsibility are often considered “nice people” but by virtue of

their lack of integrity, do not command the respect and trust required for

high performance.

How Moral Leaders Look at Followers. So far, we have seen why

moral leaders need to operate at the top of the moral competence scale.

Because of their power and visibility, their behavior has a major impact

on the behavior of those around them. In addition to high proficiency in

moral and emotional competencies, the most effective leaders operate

from a central organizing belief that informs their transactions with

followers. Everything they do is inspired by a belief in the essential

goodness of people. It can be summarized as follows: Even though peo-

ple are not perfect, and even though they make mistakes, most people

have good intentions. This belief is the moral leader’s key to inspiring

the best in others because your belief that people are essentially good

has a profound impact on your leadership behavior. Knowing that the

person with whom you are working has an ideal self (who they would

like to be at their best)—and that the person would rather be their ideal

self than their current flawed real self—allows you to practice compas-

sion, forgiveness, and integrity. When you believe in a person’s essen-

tial goodness, you cannot help but commit yourself to helping them

become who they most want to be.

Belief in the goodness of people is not a “technique.” It is a potent

frame of reference that, paradoxically, allows you to be as tough as nails

in managing individual performance. Why? When followers sense your

deep belief in their ideal selves—their potential to be their best—they

are much more receptive to your feedback about their mistakes and

148 MORAL INTELLIGENCE

failures. Similarly, when good performers recognize your belief in their

ideal selves, they are inspired to give even more effort to your shared

work.

Tom Perrine is vice president, Enterprise Systems, with Cardinal

Health, the largest health care products distributor in the United States.

Tom demonstrates his belief in the goodness of people when he says,

“Helping others create who they want to be is a way of life for me.”

Tom adds, “Number one value to me is people matter most, and they

deserve to be treated with respect, consideration, understanding, and

empathy. Do you brighten their light bulbs or dim their light bulbs?

How are you managing the energy of your people? The greatest job of

leadership is not personally doing things but helping others do things,

and managing the energy of the workforce is what it’s all about. If you

do that well, you can accomplish great things as a company or in the

world.” Tom also notes the cost of temporarily losing touch with his

positive beliefs about people. When Tom was chief development officer

at Coca-Cola, he was forced to make a unilateral decision about an

important issue because the team responsible was argumentative and

uncooperative. Tom thought the resulting decision was not as good as it

could have been if the team had focused on solving the problem instead

of fighting with one another. So he convened the team and told them

what he thought of them. “No one likes to be called on the carpet,”

recalls Tom, “and I called the group on the carpet. The manner in which

I delivered the message was culturally unusual at Coca-Cola because

people there weren’t used to being reprimanded as a group. I didn’t

name names, but I was clearly angry and upset. After that, many of

them decided they couldn’t trust that wouldn’t happen again, so for

quite a while, they avoided coming to me with issues. My comments

about their poor teamwork were factually true, but I delivered the mes-

sage in the wrong spirit and mismanaged the energy of the group.”

CHAPTER 9 • THE MORAL LEADER 149

Developing Employees. The moral leader’s approach to performance

management and development is guided by the leader’s belief in the

essential goodness of the people who report to him or her. It is an

approach that encourages employees to live in alignment, releases their

positive energy, and inspires their best efforts.

As a moral leader, you hold yourself responsible for helping others

stay aligned with the ideals that are important to them. How? First, you

do so by believing in employees’ potential to do wonderful things for

themselves and your organization. Second, you can use performance

discussions to discuss the life goals that your employees care about—

not just their business goals. Third, hold them accountable for meeting

all their personal and professional goals.

When you acknowledge your employee’s whole selves—ideal and

real—they are energized by your support. Because you care about them

and believe in them, employees are inspired to give you—and your

company—their best efforts. Employees do not have to be coerced into

performing—over the long term, you can’t really force anyone to pro-

duce. You cannot create a good employee. You can only create condi-

tions that spark their talents into a bonfire of innovative thought and

action.

Developing employees is the central building block of moral lead-

ership. Why? It’s because people development is the way you create a

workforce committed to the moral principles necessary for the sus-

tained success of your organization. When a moral leader invests in an

employee’s development, he or she goes beyond the typical focus on

technical skills and behaviors that produce short-term corporate results.

Development plans that lead to lasting business performance are com-

prehensive—they include actions that help employees realize not just

business goals but all their important personal and professional aspira-

tions. An effective development plan is not the sole responsibility of

your employee—it is a shared plan for the employee’s growth to which

both you and you employee are committed. You and your employee

150 MORAL INTELLIGENCE

collaborate to achieve goals that are important to the employee and at

the same time are intended to produce desirable organizational results.

Leaders who accept responsibility for helping employees achieve

their development goals spend substantial amounts of time coaching

employees. Leaders who are too busy meeting among themselves to

spend time helping employees grow miss golden opportunities for bet-

ter business results. Investing time in developing employees may seem

daunting, but the payoff is exponential. Every hour we spend coaching

employees translates into countless hours of enhanced performance.

Each element of a performance development discussion—commu-

nicating belief in the employee, reciprocal disclosure of beliefs and

goals, contracting for mutual feedback, and mutual accountability—

should be discussed and negotiated with every employee for whom you

are responsible. If you are a leader responsible for a large organization,

it is important to ask all supervisors in your organization to use this

approach with their direct reports.

Communicating Belief in the Employee. Actions may speak louder

than words, but communicating a belief in the goodness of the follower

needs to be actively spoken as well. In reality, most of us are starved for

affirmation. We appreciate any genuine communication of caring. The

effective leader affirms an employee most powerfully by acknowledg-

ing his or her strengths. Verbal references to the employee’s accom-

plishments and abilities reinforce the notion that the leader believes in

the employee’s best self. Beyond acknowledgement of strengths, the

leader should look for opportunities to state directly: “I believe in you.

I know that you are capable of even more than you have already

achieved.” In our hard-nosed Western business culture, such a message

may sound saccharine. When an employee makes a serious mistake,

however, stating your belief in that employee’s ideal self helps him or

her deal more productively with the fallout of his or her real self failure.

Even when employees under-perform, the wise moral leader concen-

trates primarily on how to improve performance by leveraging their

CHAPTER 9 • THE MORAL LEADER 151

strengths. Emphasizing an employee’s weaknesses is rarely useful,

as London Business School Dean of Research, Nigel Nicholson,

reminds us:

…emotions can never be fully suppressed. That is why, for

instance, even the most sensible employees cannot seem to

receive feedback in the constructive vein in which it is often

given. Because of the primacy of emotions, people hear bad

news first and loudest.

Managers should not assume they can balance positive and

negative messages. The negatives have by far the greater

power and can wipe out in one stroke all the build up credit

of positive messages. In fact, because of the primacy of

emotions, perhaps the most discouraging and potentially

dangerous thing you can do is to tell someone he or she

failed. Be careful, then, of who you put in charge of

appraisal systems in your organization. These managers

must be sensitive to the emotional minefields that all nega-

tive messages must navigate.1

Reciprocal Disclosure of the Manager’s and Employee’s Respective

Moral Compass and Goals. Sharing your beliefs and goals and invit-

ing your employee to do the same provides the basis for both to support

the other’s actions. You may want to introduce this idea to your

employee by saying something like this:

In order to be a good manager, I need to know where I am

and disclose that to you. I also need to know where you are

at, and our shared knowledge of each other will give us the

foundation for a trusting relationship.

152 MORAL INTELLIGENCE

1. Nigel Nicholson. “How Hardwired is Human Behavior,” Harvard Business Review, July 1998.

Begin by sharing the principles, values, and beliefs that form your

moral compass because many employees will not have had a previous

experience with a superior who asked for this kind of information. Your

willingness to disclose personal beliefs will usually minimize any

discomfort on the part of your employee. But you also should make it

clear that your disclosure of beliefs and goals is not a formality. You are

sharing your beliefs and goals because you also want help from your

employee. You can tell your employee that you hope that together you

can be enablers of each other. After you have discussed your own

beliefs and goals, your dialogue as manager might sound something

like this:

My job as your boss is to help you develop the necessary

habits and routines that will help you achieve your goals

while honoring your principles and beliefs. I start with a

belief in you, but if we are going to work together closely, I

need to do more than imagine greatness in you. I want to

know what you really want your life to be about—the

things that really matter to you. What roles do you play,

and how good do you want to be at each of them?

Contracting for Feedback. Managers often assume that they have a

unilateral right to dispense feedback by virtue of their position.

Unsolicited feedback is neither welcome nor effective. Managers are

often frustrated to discover that negative feedback frequently results in

further performance deterioration rather than improvement. This per-

formance drop is caused by the negative emotions that uninvited feed-

back causes. Employees who receive unsolicited negative feedback feel

unappreciated, misunderstood, and powerless. These are destructive

emotions that cause further breakdown, not alignment. In contrast, crit-

ical feedback that is solicited in an environment in which the employee

feels empowered is likely to enhance performance. The manager should

seek permission to offer feedback and to solicit feedback from the

CHAPTER 9 • THE MORAL LEADER 153

employee about the manager’s own performance. Seeking permission to

give feedback and asking for feedback levels the emotional playing

field for the employee. Because receiving feedback is part of a contract

and because the employee has the opportunity to provide feedback to

the manager, the employee feels empowered rather than ashamed. If the

manager has been successful in communicating deep caring and belief

in the employee, the employee can calibrate the negative aspect of the

feedback in the context of feeling positively valued by the manager.

Finally, if the manager can characterize the feedback as an opportunity

to help the employee accomplish important personal or professional

goals, the employee will see the feedback as a performance aid rather

than an attack.

In contracting for mutual feedback, you might want to say some-

thing like this:

I know we will both make a bunch of mistakes. I want us to

agree to help correct each other. I’m going to mess up.

Would you be willing to let me know when you see me mak-

ing a mistake?

Now who would not agree to that? When you have their agreement, you

may then ask this:

If there are times when your performance is not consistent

with the goals you have shared with me, may I let you know

about that?

Now you have set the stage for discussing performance problems in the

context of goals that are important to your employee.

Mutual Accountability. Contracting for feedback sets the stage

for confronting performance gaps that will inevitably arise. Because

you have invited your employee to call you on your own behavior, the

way you respond to their first attempt will affect the quality of the

154 MORAL INTELLIGENCE

relationship going forward. In short, you need to make it easy for your

employee to offer feedback in the future, by responding well to their

feedback. Responding well to employee feedback does not necessarily

mean that you agree and instantly change your behavior. It does require

at a minimum that you actively listen to their feedback, play it back to

ensure that your employee knows he has been heard, tell them how you

plan to respond (even if you plan simply to think about it), and thank

him for the respect they showed you by offering their feedback.

When you need to give negative feedback to your employee, it is

important to reinforce the context of your belief in them. You might say

something like this:

Based on everything you’ve shared with me, I know you

want to be great at the work you do. I’m sure that you are

aware that [your performance in this area] has not been

good, and we need to focus on these few areas to help you

reach the goals you agreed were important to you.

CHAPTER 9 • THE MORAL LEADER 155

Performance Problems

Focusing on others’ strengths and goodness does not mean that the moral leader ignores performance deficits. On the contrary, it is exactly that focus on others’ ideal selves as well as the respect cre- ated by reciprocal disclosure of beliefs and mutual feedback that establishes an emotional bond between the manager and employee. That bond, in turn, allows a manager to be extremely tough in tack- ling performance issues.

When Values Collide. Caring for people and believing in their essen-

tial goodness does not necessarily make your leadership job easy.

Perhaps the most daunting challenge moral leaders face is how to man-

age individual performance in a way that reconciles competing com-

mitments to their people and their organizations. Jim Thomsen of

Thrivent Financial for Lutherans, understands the challenge well. Jim

recalls how he dealt with the performance of a direct report who was

also a close friend: “I should have decided to get him out of his job

much earlier than I did. My personal relationships with the people I

work with tend to be very strong. So it took me six months after I had

made the decision to act on it. I tried to help him see that he was in the

wrong job, but he never came to that conclusion. My decision to let him

go damaged our friendship, but letting him stay would have had nega-

tive consequences for the organization. People who weren’t close to this

person thought it was about time we held an executive accountable for

under-performing. For those loyal to him, I became the ‘evil empire.’

Emotionally, it was very hard. Out of integrity and responsibility I had

to act, but I also had to be compassionate.”

Moral leadership and management techniques. Believing in the

goodness of people and managing employee performance consistent

with that belief, does not imply abandoning any of the leadership tools

you may have found useful in the past. Most organizations provide lead-

ership training and other resources that enhance their effectiveness in

the day-to-day management of work and people. Other leadership tech-

niques work best when you begin with your employees’ ideal selves in

mind, focus at least as much on their strengths as their weaknesses, and

invite them to help you improve your personal performance just as you

are trying to help them improve theirs. Any leadership technique will be

that much more effective when you genuinely care about and believe in

your employee and his or her potential. Leadership tools applied in the

absence of caring and belief in others often backfire because employees

may experience them as mechanistic or manipulative. On the other

hand, leadership techniques infused with the spirit of caring tend to

work very well, even when not perfectly applied.

156 MORAL INTELLIGENCE

The Fabric of Values It is a blazing summer day outside the conference room in Sedona,

where American Express executives Dave Edwards and Brenda Blake

have gathered their two teams of international managers. Brenda is step-

ping to the podium to roll out the company’s two new corporate values.

Amex had long espoused six values; now it has eight. For the past two

weeks, Brenda has been pondering how to make the values memorable

so that people will be more likely to practice them.

She has decided to group the values into three categories—moral

values, social values, and business values. Pushing aside her concerns

about how her audience will react, she reminds them that success

depends on a clear sense of what American Express stands for. She

explains how values drive both business practices and business results.

LEADING LARGE ORGANIZATIONS

10

157

Then, before launching into the new values, she puts one more

PowerPoint slide up on the screen. It says this:

If you don’t subscribe to Amex’s Moral Values, you proba-

bly shouldn’t work here.

In making that claim, Brenda was out on a limb. It certainly wasn’t a

politically correct thing to say. No one had authorized her to say it. She

hadn’t even reviewed it with her superiors.

Indeed, it was only following the meeting in Sedona that Brenda e-

mailed the presentation material to her boss. It would be two weeks

before she found out his reaction. Over dinner, the night before she was

to repeat her presentation to a group in London, he approvingly quoted

the new mantra back to her: “If you don’t subscribe to Amex’s moral

values, you probably shouldn’t work here.”

158 MORAL INTELLIGENCE

Moral

Integrity Uphold the highest standards of

integrity in all of our actions

Respect for People Value our people

Encourage development Reward performance

Personal Accountability Personally accountable for delivering

on our commitments

Social

Teamwork We work together, across boundaries

Good Citizenship We are good citizens in the

communities in which we live and work

Business

Customer Commitment Develop relationships that make a

positive difference in our customers' lives

Quality Provide outstanding products and

unsurpassed service

Will to Win A strong will to win in the marketplace and in every aspect of our business

American Express "Blue Box" Values

It turns out that Brenda, one of 25 designated “culture champions” at

American Express, needn’t have worried about her presentation.

Employees at every level say that when she talks about the three sets of

values—moral, social, and business—they immediately “get it.” No one

blinks an eye at the mention of moral values. The only question asked

by some is how to reconcile conflicts between a new business value,

“the will to win,” and the longstanding value of “integrity.” The Amex

answer comes easily: Amex will win with integrity. It is not winning at

any cost. If there is a conflict, integrity comes first. So far, though, the

conflict has not come. Any senior manager at Amex will insist they can

win in their markets without sacrificing an inch of their other values.

Brenda Blake’s presentation captures lesson one about moral lead-

ership of any large organization: Effective leadership depends upon the

successful integration of moral, social, and business values. You cannot

just be a moral leader, even as you cannot just be a strategic leader. The

values that drive an organization do not work in isolation. Choices

about moral values are an intrinsic part of the cultural fabric of every

organization. Ask great business leaders about their values and you will

inevitably hear them mix “integrity” in the same breath as “beating the

competition”; “quality” along with “giving back to the community”

along with “honesty.”

Is There Such a Thing as a Morally Intelligent Organization? In the last chapter, you considered the concept that the major task of

moral leadership is to bring all of an organization’s values to life, so that

employees can connect to them personally and understand how to trans-

late those values into action. With that goal in mind, every aspiring

leader will at some time ask: Is it my job to influence individuals or

groups? Does one lead organizations, or does one lead people? Is it even

possible to talk sensibly about a morally intelligent organization?

A morally intelligent organization is one whose culture is infused

with worthwhile values and whose members consistently act in ways

aligned with those values. A morally intelligent organization’s major

characteristic is that it is populated with morally intelligent people.

After all, if you put enough morally intelligent people in one place, the

culture will eventually catch on. But moral leaders realize that their job

goes beyond simply hiring others who act in a certain way, just as a

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 159

morally intelligent organization is more than the sum of its individual

members. Moral leaders accelerate and enhance high performance by

actively encouraging everyone in the organization to apply their moral

principles to their individual actions while also creating organization-

wide policies, practices, and reward systems based on moral values.

The Morally Intelligent Organization— An Aerial View Not long ago, PBS aired a program on Italy that consisted of nothing

more than exquisite video of the Italian countryside shot from a heli-

copter. No sound track, no plot, just moving pictures of mountains, val-

leys, and water as the camera followed the curves of landscape from

north to south. Unlike the normal tourist’s eye view, the video shot from

high above the terrain gave a context for understanding the character of

the country in a way that would be impossible from the ground.

If we had an aerial view of the ultimate morally intelligent organi-

zation, what would we see? First of all, we would not see people being

simply moral, or simply social, or simply focused on the technical

aspects of their work. We would see moral values lived out in their “nat-

ural habitat,” interwoven with other social and business values impor-

tant to a successful large enterprise. We would see leaders who believe

that there are some shared human moral values that apply to humankind

all over the world and therefore apply both at work and outside of work.

We would notice leaders who speak passionately about their beliefs and

the values that their company stands for. We would also notice that the

leaders are as morally competent as they are strategically gifted.

As we rose higher, so that we could see the entire organization, we

would see job candidates being scrutinized to ensure that their beliefs

and values are consistent with the beliefs and values the company

upholds. We would see employees given opportunities to develop com-

petencies that translate values into action. We would see people solving

160 MORAL INTELLIGENCE

problems and making decisions in ways that are consistent with the

organization’s values. We would see managers at all levels sharing their

personal values and goals and inviting their peers and employees to hold

them accountable to those values and goals. We would watch as employ-

ees go the extra mile for their leaders and their company because they

feel respected and trusted by their leaders. We would observe employ-

ees being rewarded, not for being workaholics, but for results. We would

see employees who deliver superior results, while reserving adequate

time for their families, for community service, or for other passionate

interests. If we looked closely, we would even see people make mis-

takes. We would also see that mistakes are usually treated as normal

byproducts of innovation and growth and that people are given a chance

to correct them and move on without being negatively branded.

Higher yet, we would see an organization that does not abandon its

values when the economy sours, or a disruptive technology threatens, or

a natural disaster strikes. We would see a company that has a long track

record of profitable growth. We would see the organization dedicate a

certain amount of its resources to helping others in the larger communi-

ties where it is located.

If our vantage point were high enough, we would see in the global

organization the intertwined threads of moral, social, and business

values reaching across countries and continents to join together people

of different languages, social customs, and traditions in pursuit of a

shared dream of individual and professional performance.

Morally Intelligent Policies McKinsey co-founder, Marvin Bower,1 observed that virtually every

successful company codifies its culture, rather than letting it grow

through an inevitable self-molding process. Many effective leaders have

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 161

1. Marvin Bower. The Will to Lead: Running a Business With a Network of Leaders, Boston: Harvard Business School Press, 1997.

discovered the wisdom of this advice. A senior management team of a

defense laboratory attended a session on managing conflict during an

especially stressful period of organizational change. Their workshop

leader suggested that one way to prevent conflict in organizations was

to develop a “social contract”—a code of behavior that everyone in the

organization would agree to. The management team thought that was a

good idea. They asked their employees to get together in small groups

and talk about what should be in their “social work contract.”

Managers admit they were somewhat apprehensive. Most of the

laboratory’s employees had worked there for decades. They had seen

management fads come and go. Would they be cynical about the idea of

a social work contract? But when the groups met, they were thoughtful

and engaged. When it came time to merge the results of the small

groups into a social work contract for the whole laboratory, their man-

agers were surprised and relieved to see that the small groups’ propos-

als were remarkably similar.

162 MORAL INTELLIGENCE

Defense Laboratory’s Social Work Contract

Treat Others How We Want to be Treated:

• Repectfully • Fairly • Honestly • Professionally • With Appreciation • With a Positive Attitude • Responsibly

Respect others by treating them fairly and honestly. Conduct yourself in a professional manner that emanates appreciation, importance, positive attitude, and responsibility.

They didn’t call it a statement of moral values, but what they developed

was clearly a shared moral guidance system. With the support of their

leaders, they did the collective work of codifying how they wanted to be

treated and how they believed they should treat one another. Many

months later, it is clear that the words still mean something to this

group. Employees display copies of the contract in their cubicles and on

corridor walls—reminders of how they want to be at their best.

In a year of massive change and unremitting workload, when people

are overtired and tempers could easily unravel, there have been no

meltdowns. The people in the laboratory have kept their act together.

The social work contract has been a powerful influence on the labora-

tory’s ability to weather the organizational changes that continue to sur-

round them.

The Principles that Matter Most Earlier, we described the universal principles we believe are key to

leadership effectiveness—integrity, responsibility, compassion, and for-

giveness. These same principles are essential to organizational effec-

tiveness. The organizations whose values reflect these principles are the

most likely to be successful over the long term. Companies that embed

these principles into their cultures will succeed because they will keep

more than their fair share of the world’s most talented employees. These

are the principles that resonate strongly with employees, so that they

want to stay and are inspired to give their best efforts to the organiza-

tion. But if integrity, responsibility, compassion, and forgiveness are

absent from the life of an organization, there is dissonance between

what the organization stands for and its employees’ hopes and beliefs. If

employees’ moral compasses don’t line up with a company’s code of

conduct, it is unlikely that they will give the company their best.

Organizational Integrity How important is integrity? According to Paul Clayton, CEO of Jamba

Juice, integrity is the central requirement for sustainable performance:

Integrity is what keeps successful organizations together.

Every organization will encounter periods when integrity is

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 163

challenged. These challenges may arise in the form of hav-

ing to provide honest feedback during a performance

review, or accurately assessing the performance of a mar-

keting program for future learning or resisting the tempta-

tion to “borrow” $20 from the cash drawer. Leaders must

create an environment where integrity is an important

value and the consequences for failing to adhere are severe.

An organization that acts with integrity is more likely to have trustwor-

thy, loyal employees. But integrity is also essential because sharehold-

ers relish it. Everyone has heard enough cautionary tales about cooking

the books and the inevitable stock price slumps when accounting

shenanigans come to light. In contrast, consider this example of how a

company’s candor helped turn around a company at risk.

Mike McGavick took over as CEO of struggling Safeco Corporation in 2001. Wall Street’s confidence in the com- pany had been shaken by its recent performance and Mike knew that he needed to convince the street that Safeco would do what it said it would do. At his first reporting of results, he immediately began to talk to analysts about the need to clean up the balance sheet and reform the business. Mike and his new CFO Christine Mead decided to fully open the company books to the Wall Street community. According to Allie Mysliwy, Safeco’s Executive VP of Human Resources, “We wanted to be far more transparent to analysts, so Mike and Chris changed the way we repre- sent our numbers and changed the way we talked to ana- lysts, so they could see deeper into the organization from a numbers viewpoint and see how leaders were interacting with the numbers. Over time, I believe, analysts have grown confident in our ability to do what we say we’ll do.” Fortunately for Safeco, credibility and candor paid off. Safeco’s stock price has nearly doubled since those first few weeks when Mike started.

164 MORAL INTELLIGENCE

Cultivating a High Integrity Organization. Companies should assign

four to eight values as their “core values”—including among them the

very principle of integrity itself. Based on these core values, organiza-

tions can use three key strategies that promote and demonstrate

integrity. The first is for senior management to plot a communications

strategy in which they engage with their employees and the public at

large to identify and promote their organization’s values. Ideally, the

CEO leads this strategy: He or she should talk about the company’s val-

ues—the core of the corporate culture—at every possible opportunity.

Second, the senior team needs to practice what they preach and

enforce adherence to the company’s declared values. Managers in many

companies fail in this regard. They may not be guilty of fraud or terri-

ble dishonesty but of a common white lie: It is common for managers to

give annual performance reviews that fail to confront poor performance

or behavior that is not aligned with core values. We’ve all heard stories

of companies giving someone a bonus on Friday for “outstanding per-

formance” and then firing them on Monday, but this behavior pattern

has a high cost: Everyone in the company can see that their manage-

ment does not practice integrity or really believe in it.

The third strategy is for senior management to invite their work-

force to hold them accountable. An example of how to establish

accountability is to set up a Leadership Alignment Task Force, a group

of no more than 12 people from all layers of the organization—from Joe

in the mail room to Debbie, a marketing director, or Sam, the head of

production—to join this task force on a volunteer basis. The task force

is charged with giving the CEO and the senior team an annual “align-

ment review.” During the alignment review, the task force offers feed-

back from their workforce on their perceptions of how well the CEO

and senior managers behavior is aligned with the organization’s values.

Alternatively, companies can use intranets to collect confidential feed-

back from their workforce on senior management practices and their

integrity.

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 165

Integrity produces substantial rewards for organizations who

embrace it. All stakeholders—employees, vendors, investors, business

partners—prefer doing business with organizations that have strong

integrity. It is simply easier to engage with an organization that is hon-

est, that states its mission and values, and does not diverge from them.

It’s common sense: Organizations that attract employees and customers

by virtue of their integrity are likely to be highly successful in the

long run.

The Responsible Organization There are two hallmarks of the responsible organization. First, it

embraces its responsibility for being of service to others. Second, it

acknowledges mistakes and failures. With respect to serving others,

there are two levels of service. The first level of responsibility is that the

organization provides worthwhile products or services. This does not

mean that your organization is only a responsible one if it invents the

cure for the common cold. It is, however, important that your organiza-

tion has a socially worthwhile mission. In a 2002 letter to shareholders,

Jeffrey Immelt put GE’s mission this way: “Let me put it as simply as I

can. Customers win when we provide better products; they win when

we provide better service; they win when we can generate productivity

through information management; they win when we can provide

needed capital.”

Companies that make dangerous products or provide questionable

services put their long-term performance at risk. They may be profitable

for a time, but eventually will falter. Phillip Morris is an example of a

company that struggles with the tension between a dangerous core

product and its desire to be socially responsible. Phillip Morris sells cig-

arettes. No one can ignore the dangers of their core product. But Phillip

Morris also sponsors anti-smoking advertising aimed at children and

166 MORAL INTELLIGENCE

contributes generously to charitable causes. Admittedly, Phillip

Morris’s social responsibility efforts were court-ordered as a result of

litigation. One could argue that the company has not been as aggressive

as it should in diversifying its holdings so that cigarettes are no longer

their only revenue stream. You might dismiss Phillip Morris’ efforts to

be responsible as nothing more than a public relations smokescreen.

You might be right. But it is possible that Phillip Morris genuinely

wants to behave responsibly, rather than creating the disaster for share-

holders that an abrupt exit from their core business would provoke.

Another example of a company dealing with adverse consequences

of some of its products is Kraft Foods, maker of Oreo cookies, Oscar

Meyer bacon, and Easy Mac macaroni and cheese. In 2003, Kraft

announced that it would stop selling high-fat foods to schools and

launched a series of initiatives to promote healthy eating. As of 2003, it

had spent more than $17 million to increase the amount of fruits and

vegetables distributed by U.S. food banks. You might conclude that

Kraft is simply trying to forestall the kind of litigation first seen by fast-

food chains by some obese customers who blame the food purveyors

for their health problems. Hopefully, Kraft is making a good faith effort

to ensure that its products are used in ways that do no harm. Whatever

its full range of motives, Kraft does serve its broad customer base by

encouraging people to make wise nutritional choices.

While companies like Phillip Morris and Kraft try to be responsible

without altering their core product, other companies demonstrate

responsibility by literally changing their product into one that better

serves their customers. Harvey Golub did just that as CEO of IDS, a

financial advisory company. He transformed IDS from a transactional

services company to a company that offered objective financial planning

services. To understand how profound a change that was, recall that the

1970s and1980s were a time when the financial services industry had a

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 167

well-deserved reputation for questionable transactions. Consider the

comments of one person who worked for a brokerage house:

It was a hectic noisy place with stock brokers crowded

together talking on phones and calling out across the room

to one another. Right in front of me, I saw a man on the

phone put someone on hold, then yell out, “What do we

have for a buck with a half?” Someone yelled back, “XYZ

stock.” The man got back on the phone and proceeded to

extol the virtues of XYZ stock. As I left, I asked my friend

to tell me what a buck with a half meant. He told me that it

is a stock for which you pay a dollar for the stock with a

fifty cent load—meaning the customer paid a dollar for a

stock that was only worth fifty cents. It was obvious that

the guy who promoted XYZ stock didn’t care about goug-

ing his customer and was only interested in maximizing his

earnings.

It is no wonder people were suspicious of brokers, many of whom were

more interested in lining their own wallets than helping their customers.

It was the “me generation,” an era of excess, a time when “Wall Street”

was synonymous with greed. Enter Harvey Golub, a McKinsey con-

sultant called in by American Express to analyze a promising potential

acquisition in the financial advising business. Golub examined IDS, a

small company in Minneapolis that focused on creating wealth for its

clients by offering long term investment and insurance products.

Golub’s studies showed that IDS advisors gave good financial advice.

Clients could benefit from their advice, even if they decided to purchase

financial products elsewhere. They didn’t use hard-sell tactics. Their

first priority was helping clients reach their financial objectives. Golub

thought IDS had the right idea. IDS was small, but its principles were

scalable. So he recommended that American Express buy IDS.

American Express agreed, but on one condition—that Golub take

over as CEO. Golub grew IDS (eventually American Express Financial

168 MORAL INTELLIGENCE

Advisors) by putting its customers front and center. He made a com-

mitment that the financial planning documents prepared for clients

would be objective. IDS’s recommendations would not be biased

towards IDS products. They would recommend IDS products that fit

client objectives, but also acknowledge that clients could do well if they

chose to go to another company to purchase financial products. He also

insisted that financial planning had to be independent from the sale of

products, even though he knew the company wouldn’t be profitable if it

only sold financial planning services. But Golub said, “We are going to

be a financial planning company and help customers make financial

decisions prudently and carefully.” It was curious advice at a time when

the financial industry’s high flyers were just “doing deals.”

A lot of industry insiders thought IDS would fail, especially after

his predecessor lowered the sales charge customers paid for each trans-

action. There was a revolt in the ranks of the sales force. Many advisors

threatened to quit. But Golub was confident it was the right thing to do,

so IDS lowered its sales load. It lost some advisors, but, importantly,

kept those who understood the values that drove Golub’s strategy.

Although pundits had their doubts, Golub’s values-driven strategies

paid off spectacularly. From 1984 until 2000, IDS (later renamed

American Express Financial Advisors) increased profits by at least 15%

every single quarter, taking the company from 60 million to over one

billion dollars in gross earnings. In recent years, AEFA has helped keep

American Express profitable through the worst of the post 9/11 dol-

drums. Providing a valuable service and being a responsible organiza-

tion is no doubt the morally right thing to do—but, as the success of

AEFA demonstrates, values-based business practices are also strategi-

cally smart. At AEFA, financial advisors feel energized by providing a

worthwhile service for their clients. Most financial advisors would hate

having to pressure their clients to buy a product. Clients, in turn, value

solid advice that helps them achieve their financial goals. Being a

responsible, service-oriented organization resonates powerfully with

employees and customers alike.

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 169

There is a second dimension that marks the responsible organiza-

tion: its willingness to admit mistakes and failures. According to Paul

Clayton, former CEO of Burger King North American, and current

CEO of Jamba Juice:

We owe it to everyone, including shareholders and our-

selves, to get results, and to get consistent results; we owe it

to ourselves to have open and honest dialogue around

what’s working and what’s not. The leadership team has to

convey that it’s all right to make a mistake; it’s all right to

bring up an issue. Sometimes the best we can do is to make

sure we are honest about flawed assumptions. If you’re not,

it doesn’t take long for things to go wrong. In our business,

we are dependent on young people. If you are going to get

people to really commit, then you have to be honest about

what is working and what isn’t.

If admitting mistakes is crucial to maintaining employee commitment,

it is essential to maintaining customer loyalty as well. Some companies

seem to know this in their bones; others go down in flames trying to

hide the truth about their mistakes. Taking responsibility for mistakes

may be painful in the short run, but admitting failure and taking steps to

compensate for errors cements customer loyalty. Customers know that

they can trust an organization that tells them the truth.

In 1982, the fate of Johnson & Johnson was in the balance when

bottles of Tylenol capsules were laced with cyanide, killing seven peo-

ple. James Burke, CEO at the time, knew exactly where to look for

direction—the company’s 40 year-old “Credo,” a single-page document

that began with these words: “We believe our first responsibility is to the

doctors, nurses, and patients; to mothers and fathers; and all others

who use our products and services.” Johnson & Johnson ordered an

unprecedented recall of all 30 million bottles of Tylenol capsules in cir-

culation. They immediately stopped production of the capsules and

170 MORAL INTELLIGENCE

replaced them with tamper-resistant caplets. They communicated con-

stantly with the public and the media, and it was their openness and

concern for public safety that that helped Johnson & Johnson to over-

come its initial losses and recover its market share within a matter of

months.

More recently in 2004, drug manufacturer Merck & Company vol-

untarily withdrew its widely used arthritis pain medication Vioxx after

a three-year clinical trial showed a higher incidence of heart attacks and

strokes among users of the drug. Merck has a reputation for concern for

those who use its products. It developed and distributed at no cost a

drug that cures river blindness in underdeveloped regions of the world.

According to Thomas Donaldson, Wharton professor of legal studies

and ethics,2 Merck “has always emphasized, in effect, that the company

puts the health care of the customer first, and if we do that, we will

make money. If we ever just put making money first, we will lose our

business.” Donaldson adds, “You can question the extent to which

Merck follows this, but it’s not something that just appears [once in a

while]. It is repeated fairly consistently.”

Contrast Merck and Johnson & Johnson’s handling of product

defects with Firestone Tire’s handling in 2000 of the recall of tires that

were implicated in fatal SUV accidents. Firestone was initially very

reluctant to replace the defective tires, claiming that it was the vehicle

rather than the tire that was at fault. The media later discovered that

Firestone had prior knowledge of the problem and did nothing. It was

also reported that Firestone had earlier refused to recall another defec-

tive tire sold in Saudi Arabia because a recall would mandate reporting

the problem to the U.S. National Highway Traffic Safety

Administration. Instead, it had launched a quiet replacement program

that left the NHTSA in the dark. The result? Daniel Eisenberg, report-

ing on Firestone’s tire debacle for Time magazine concluded, “Thanks

to a generally dreadful crisis management, marked primarily by silence

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 171

2. Quoted in “Death of a Drug: The Aftermath of Merck’s Recall,” Knowledge at Wharton, October 6, 2004.

and denials, the Firestone brand has very little credibility left. The pub-

lic is becoming increasingly skittish about any of Firestone’s tires—the

vast majority of which are safe.”

To promote responsibility, CEOs should carefully consider what it

means to be a “responsible person,” communicate this to managers, and

encourage the promotion of responsible people within the organization.

A company made up of responsible people is a responsible company.

CEOs can assess managers according to the following “responsibility

checklist.”

172 MORAL INTELLIGENCE

Responsibility Checklist

Taking responsibility for personal choices

When I make a decision that turns out to be a mistake, I admit it.

When I make a mistake, I take responsibility for correcting the situation.

When things go wrong, I do not blame others or circumstances.

Admitting mistakes and failures

I always own up to my own mistakes and failures.

I am always willing to accept the consequences of my mistakes.

I use my mistakes as an opportunity to improve my performance.

I discuss my mistakes with coworkers to encourage tolerance for risk.

Embracing responsibility for serving others

I believe and show through my actions that an important aspect of my

leadership approach is to find ways to serve and support others.

I pay attention to the development needs of my co-workers.

I spend a significant amount of my time providing resources and removing

obstacles for my co-workers.

Rather than simply use this as a tool for self-examination, CEOs should

discuss this checklist with senior management and ask them to rate their

own responses on a scale from 1 (never does this) to 10 (always does

this). The CEO should then discuss his or her expectations with man-

agement: which statements are the most important, which need to be

adhered to the most closely, and work with them to improve their scores

if necessary. The managers can then, in turn, work on responsibility

within their individual departments.

The Compassionate Organization When it’s business as usual, acts of compassion are small or subtle in

the great organizational scheme of things. But when a major crisis

strikes, it is easy to see the difference between the truly compassionate

organization and one that gives lip service to values. Aaron Feuerstein

is the former president and CEO of Malden Mills, a company best

known for producing the revolutionary fabric, Polartec. On a cold

December night in 1995, a devastating fire tore through his factory in

Lawrence, Massachusetts. In a time of corporate downsizing, many of

his peers urged him to re-open operations overseas—a decision that

would lead to the loss of 3,000 jobs at home. Shunning their advice,

Aaron pledged instead to rebuild the mill at home—and to pay his

employees during the three-month reconstruction. “I think it was a wise

business decision, but that isn’t why I did it. I did it because it was the

right thing to do,” says Feuerstein.

Malden Mills battled insurance companies and government offi-

cials not just to rebuild the plant, but also to spend the additional money

necessary to build the safest textile plant possible and to take care of his

employees while the new plant was under construction. By 1997, just

two years later, he had proved to the doubters that it was the right thing

to do. Malden Mills was recording $400 million in annual sales—more

than it ever had before the fire. Although Feuerstein’s sometimes con-

troversial decision-making led to financial problems and a bankruptcy

filing, the company has recently emerged from bankruptcy intact.

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 173

Sometimes, though, despite a company’s best intentions, layoffs

must be made for the good of the company—its customers, its share-

holders, and its remaining employees. The way an organization handles

layoffs says more about its corporate character than any other activity.

It is a test of its ability to weave moral, social, and business values into

an effective whole. Answering the call of compassion in isolation might

tempt an organization to avoid a layoff at the cost of fiscal survival. But

a moral organization that doesn’t attend to its bottom line won’t be

around long enough to keep any of its workforce gainfully employed.

So the task of a moral leader facing serious financial difficulties is not

necessarily whether or not to reduce the size of the workforce, but how

to do it in compassionate way that provides a soft landing for those

affected and in a way which preserves key talent.

Not so long ago, Safeco was on the verge of extinction when Mike

McGavick took the reins. The clock was ticking, so he had to move

quickly, cutting the workforce by 10% while consolidating 15 major

offices into 5. Although the relocations and layoffs were difficult, they

did not blindside Safeco’s employees. Mike McGavick decreed that

Safeco’s leaders would tell employees what they knew when they knew

it. When it came to delivering bad news, Mike decided that was his job.

So he showed up at every regional office that was closing and told

employees what they could expect.

Allie Mysliwy describes McGavick’s visit to Indianapolis:

We needed a meeting place that could hold all of our

Indianapolis employees, so we rented out the Scottish Rite

Cathedral across the street. It was a dark, oppressive, and

enormous place, which only intensified the foreboding of

the gathering group. Mike took command of the stage. He

was completely upfront. He explained the grave situation

the company faced, how we had gotten to where we were,

and what we were going to have to do to survive. He told

them that a large number of them would lose their jobs.

174 MORAL INTELLIGENCE

Some employees would be retained, but most would not.

When he finished, the audience clapped. Even though the

news was bad, Mike communicated in a way that allowed

employees to make sense out of a really tough situation.

When jobs were eliminated soon after, reductions were made based on

comparative performance. That may have been a blow to the egos of

those who left, but it turned out to be a morale boost for remaining

employees. Prior to McGavick’s arrival, Safeco had been a haven of

entitlement. Employees’ number one complaint in their employee sur-

vey was the company’s tolerance for poor performance. Instead of

rewarding longevity, Safeco decided to keep its strongest performers,

thus solidifying the new performance-based culture it desperately

needed to get back on track. According to Allie, those who were asked

to leave were treated with compassion and respect. There were none of

the all too common layoff scenarios in which notified employees are

summarily escorted out of the building, with little or no severance or

support. Safeco provided generous severance packages by industry

standards, but also tried to individualize its severance offering to meet

special needs of employees. Employees who left appreciated how

Safeco had treated them. Employees who remained were proud of how

Safeco treated their departing employees.

In our high achieving business culture, self-recrimination is very

common. We often find that our executives are far more critical of

themselves (and less forgiving) than their bosses. One of the best ways

a morally intelligent leader can show compassion is to challenge the

executive about his or her excessive self-criticism. Of course, this

implies that the leader has enough interpersonal skills and rapport with

the subordinate to find out what their critical self-talk is all about. Yet,

this challenge can be a superb way to embrace compassion and make it

central to your organization. To the extent that an employee is spending

his or her precious energy engaging in negative and self-critical inner

dialogue, he or she is not giving it to the company in pursuit of the

strategic plan!

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 175

The Forgiving Organization Organizational forgiveness is an organization’s capacity to accept mis-

takes and failures among its workforce. Forgiveness is critical for two

reasons. First, employees need to know that they have room to fail. If

mistakes are invariably punished, the emotional climate of the organi-

zation will be unattractive to your best employees, who will go else-

where in search of a more favorable work environment. Second,

forgiveness is fundamental to innovation and growth. Innovation entails

venturing into the unknown, where no formulas exist. Risks will be

taken; mistakes will be made. Some things will work, and some things

will fail. Organizations cannot pioneer new territory unless they accept

that they will spend some time going around in circles or down dead-

end paths.

When asked whether 3M’s reputation for innovation is legitimate,

Ray Langer, a 3M project engineer, says, “Yes, it really is. We’re

encouraged to try new things in our projects, and if they don’t work out,

no one is punished. As a result, we have created many, many engineer-

ing processes that no one else in the world comes close to.”

Interestingly, the United States Marine Corps is an organization

that has institutionalized forgiveness. “Most managers like to say they

give their subordinates room to fail,” says David Freedman, author of

Corps Business: The 30 Management Principles of the U. S. Marines,3

“but the Marines practice failure tolerance to a degree that would raise

most manager’s hair. To a certain extent, they demand failure: a Marine

who rarely fails is a Marine who isn’t pushing the envelope enough,

goes the logic.”

A final incentive to practice forgiveness is that without a climate of

risk tolerance, employees will be too intimidated to acknowledge mis-

takes or offer feedback, thus perpetuating problems that may be costing

your company millions each year. When Safeco began to encourage

176 MORAL INTELLIGENCE

3. David Freedman. Corps Business: The 30 Management Principles of the U. S. Marines, New York: HarperBusiness, 2001.

employees to communicate about problems with senior management,

senior management e-mail from employees went from a few contacts a

month to 30 to 40 a day. Everyone, from Mike McGavick on down,

takes feedback from employees very seriously. In the process of encour-

aging feedback, Safeco learned from its employees about long-standing

process problems that they were finally in a position to correct. In the

last several years, Safeco has saved millions annually thanks to infor-

mation from its employees, information that they would never have felt

safe enough to relay in the old environment.

While the most forgiving companies are often the best innovators,

these companies also know how to set limits. If you want to increase for-

giveness at your company, establish “curbs” for innovative behavior—

for example, set out the percentage of work time team members can use

to engage in innovative projects that are their own or their team’s cre-

ation or set budgetary limits, allowing employees to spend a certain per-

centage of their department’s budget on innovation. But then, if you

wish to establish a truly forgiving company, make sure you celebrate

this activity—not just the positive results. Honor your team members’

mistakes as learning episodes. Edison is quoted as saying something

like, “I didn’t make any mistakes. I just tried ten thousand things that

didn’t work;” if you want to build an organization of budding Edisons,

celebrate the innovation process and the failures that come with it, not

just the results.

Another way to encourage your organization to increase forgive-

ness is for you to establish a learning organization (rather than a puni-

tive organization). Praise your team members for embracing the

learning process. Allow mistakes to be forgiven and analyzed and not

punished harshly.

But, as with all values, forgiveness cannot be practiced in isolation.

Peter Georgescu of Young & Rubicam recalls a time when some young

employees discovered racist jokes on the Internet and began passing

them around. In all likelihood, they did not intend to offend anyone;

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 177

they were just completely thoughtless. Georgescu struggled and worried

over this. Anyone could make a mistake, he realized—but the company

also had a policy of zero tolerance for such activity. People’s lives and

self-respect were at stake. In a move that he judged to be not only best

for his business, but also for the moral development of the two employ-

ees, he let them go. It was an action that won acclaim throughout the

business community. By understanding the implications of each possi-

ble choice, Peter demonstrated moral intelligence. By taking the action

he did, he demonstrated moral competence. As Peter showed, the leader

who consistently puts both skills into practice creates resonance with

those whom he or she leads.

Recruiting for Values The basic unit of your organization is its people. Your organization’s

ability to engage in principled actions rests squarely on its people.

Hiring the right people—the ones who already share your company’s

values—and have a track record of acting consistently with those

values—is the most important lever you have in creating a morally com-

petent organization.

Jim Collins, author of Good to Great,4 found that hiring the right

people was a key differentiator of companies that had significantly out-

performed the S&P over many years. When FastCompany.com asked

him what his research suggested was the best way to respond to eco-

nomic slowdown, he said this:

If I were running a company today, I would have one pri-

ority above all others: to acquire as many of the best people

as I could. I’d put off everything else to fill my bus. Because

things are going to come back. My flywheel is going to start

178 MORAL INTELLIGENCE

4. Jim Collins. Good to Great: Why Some Companies Make the Leap…and Others Don’t, New York: Harper Collins, 2001.

to turn. And the single biggest constraint on the success for

my organization is the ability to get and to hang on to

enough of the right people.5

Don’t delegate recruitment to your human resources department. Take

charge of your own hiring process as much as you can while still con-

forming to employment law. When possible, avoid anonymous newspa-

per adds. Instead, network continuously so that you always have a large

pool of potential candidates or referral sources. Let your network know

what kind of people you are interested in having work for your com-

pany. Don’t hesitate to talk about your organization’s values. Recruiting

from your personal network is likely to lead to significant jump in the

retention rate, and contribute positively to your organization’s perform-

ance Why? Because new jobholders who know you or are connected to

you through your network, are much more likely to share your values,

and are much more likely to stay when the going gets a little rocky.

Reinforcing Values Starts at the Top In Primal Leadership: Realizing the Power of Emotional Intelligence,

Daniel Goleman, Richard Boyatzis, and Annie McKee describe their

model of leadership.6 The best leaders, they say, are resonant leaders.

Resonant leaders use their emotional intelligence to create a positive

emotional work climate in which the best work happens. To that equa-

tion, we would add this: The best leaders create resonance through their

moral intelligence as well as their emotional intelligence. People natu-

rally wish to follow leaders who demonstrate commitment to moral

principles and values. When people believe that their organization and

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 179

5. Jim Collins, Web-Exclusive Interview, “Good Questions, Great Answers,” Fast Company.com, October 2001 (http://pf.fastcompany.com/magazine/51/good- togreat.html).

6. Daniel Goleman, Richard Boyatzis, Annie McKee. Primal Leadership: Realizing the Power of Emotional Intelligence, Boston: Harvard Business School Press, 2002.

its leaders practice the values they preach, they become energized.

When people work in an organization that operates from a set of beliefs

that resonate with their own, they are naturally inclined to give their

best efforts to their work.

In the real world of organizations, we never have the luxury of

working with a fully morally competent workforce. Maintaining orga-

nizational alignment with values is just as challenging as it is for any

single individual. That is why leaders should look for any opportunity

to reinforce values. Training is key to reinforcing values and enhancing

moral competencies. Senior executives may act allergic to training

sessions in the misguided belief that they are finished products who

don’t need further education. But values start at the top, so senior level

managers need to hone their moral judgment just like the rest of the

workforce.

The 2003 American Express Executive Conference is a case in

point. Held during a difficult time in the global economy, you might

expect the conference to be focused on financial challenges. But this

executive group spent little time talking about money. They talked

almost exclusively about leadership and spent an afternoon in facilitated

small groups discussing cases in ethics and their recommended solu-

tions. Think about the investment in salaries, time, and travel expense

involved in putting that high-octane group together. The message from

the top was not subtle. Ethics is important. Making principled decisions

is a key leadership competency. It takes practice, even if you are a top

executive.

The Power of Formal Rewards Psychologists tell us that people do what gets rewarded. It is critical that

reward systems reinforce morally competent behavior as well as goal

attainment. Unfortunately, corporate reward systems that violate the

principle of integrity are not unusual. Media reports of fired CEOs

180 MORAL INTELLIGENCE

laughing all the way to the bank, CEOs who get multimillion dollar

bonuses despite staggering year-end losses, and pyramid compensation

systems that routinely reward executives far in excess of their relative

contributions are common. Contrast that with Best Buy CEO Brad

Anderson, who declined 200,000 stock options in 2004. He already

owns company stock worth roughly $78 million dollars, and asked that

the declined options be distributed to non-executive employees.7

Anderson’s action was an effort to create more equity in the distribution

of corporate rewards, although no one—Anderson included—would

argue that he will feel too much of a pinch. But his recognition that he

does not need more sends a powerful message to other companies’

executives about corporate excess—while creating a richer source of

rewards for rank and file employees who do the right things.

Paul Clayton is insistent about sending positive messages through

meaningful rewards. Paul recalls a time when he was president of

Burger King North America, and had to convince his own executive

team that he was serious about rewarding employees.

At Burger King, we had a recognition program for the top

general managers. Once a year, we brought them to our

world headquarters in Miami. During the recognition cer-

emony, 600 headquarters employees would give the award

winners a standing ovation. As they entered the main

rotunda, their pictures went up on our “Wall of Fame.” As

we were giving out awards, it struck me that one GM in

particular had been the top performer for five years run-

ning. I turned to the HR person next to me and said that we

should give him a car. The HR person replied, “We can’t

do that because we don’t have budget and I don’t have

authorization.” I reminded him that I was the president

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 181

7. Reported in Patrick McGeehan, “Making a Point By Taking Less,” The New York Times, May 24, 2004. Also reported in the article was that James Parker, Southwest Airlines’ chief executive, recently requested that his salary be signifi- cantly lower than suggested by their compensation consultant.

and that I thought that I could authorize the expenditure.

When I presented the idea to the finance team, they

thought it was fine, but suggested an inexpensive car that

wouldn’t cost too much. “He’ll never know the difference,”

one finance person said. But I had a different idea. I told

them, “I’m thinking about a BMW. I don’t care about the

budget. I want people to know that we are sincere about the

contribution they make.” So when I took the stage to

announce that I was rewarding the top GM with a fully

loaded series 3 BMW, the place went crazy. The GM’s wife

ran up on stage to hug me and her husband. Then the GM

ran off the stage to call his grandmother.

Success Stories Given that moral values are embedded and intertwined with other

values in the conduct of your business, how do you link moral values to

performance? American Express does it by storytelling. The Amex team

in Australia had just won the prestigious “Chairman’s Award.” The

country manager wasted no time assembling his team to congratulate

them. He did it in a way that explicitly linked Amex values to their

success. He told stories about how individuals acted on Amex’s values

and how that contributed to their getting the Chairman’s Award. This

manager celebrated not only their accomplishments, but the values that

led to their success. Leaders in morally competent organizations never

take values for granted. They promote them, they apply them, and they

make sure that their people see how values translate into business

performance.

182 MORAL INTELLIGENCE

Ideal Versus Real Even within an organization that is committed to values, you can always

find managers who fail to apply them. Wherever there are imperfect

managers, there are cynical employees who look at them and say, “He,

or she doesn’t live the values, so…why should I follow the values if my

boss ignores them?” Or, “…why should I go the extra mile for a man-

agement that doesn’t respect me?” If employees complain about some-

one who works for you, it is your responsibility to deal individually

with unacceptable behavior. It is also critical that you convey the mes-

sage that Ken Chenault gives to his employees: “There is no excuse for

personal behavior inconsistent with Amex’s values. You can’t wait for

everyone to behave in alignment with values before you do. The only

way for people to start acting on values is to do it independently of

whether others do. Do not expect perfection from leaders.”

Values and the Global Organization More and more companies not only do business internationally, but are

actually global companies with offices throughout the world, employ-

ing local workforces in numerous countries. Imagine how difficult it

would be to communicate with a multi-national workforce in the

absence of some shared beliefs. Without common values, business

would be impossible. Common values, based in the universal principles,

can knit together a diverse global workforce. In an era marked by inter-

national conflict, we believe it will be in the world of business—rather

than in the political arena—that people from different ethnic, racial, and

religious heritages will discover their common path.

CHAPTER 10 • LEADING LARGE ORGANIZATIONS 183

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Starting from Scratch. Imagine this: You have a great business idea,

eager investors, and a prime location for your new company. With every

resource at your disposal, you now have the chance to realize your fond-

est hopes and ambitions. You also have the power to create a high-

performance culture from the ground up. No legacy employees, no

unnecessary bureaucracy, no history to overcome. How would you

begin? Would you use your newfound power to build a company based

on universal principles, with socially noble goals and a morally compe-

tent workforce? Entrepreneurs rarely launch their ventures with an

explicit moral focus. They make mistakes, and the most costly missteps

are frequently moral, not strategic or operational. When entrepreneurs

lack a consistent level of moral competence, their businesses usually

falter or fail completely. Even exceptional business models can’t sur-

vive without morally competent leadership. Entrepreneurs who want to

succeed must master not only their business challenges, but must align

their businesses with the principles of integrity, responsibility, compas-

sion, and forgiveness.

MORAL INTELLIGENCE FOR THE

ENTREPRENEUR

11

185

Morally Clueless in Minneapolis. In the 1970s, a group of entrepre-

neurs started a telemarketing business named Minneapolis Circulation,

which primarily sold subscriptions to Minneapolis magazine. Their

arrangement with the magazine was that Minneapolis Circulation would

own the subscriptions and would pay the magazine $1 for every $5 sub-

scription they sold. The company was very creative about marketing

subscriptions, but the partners’ greed and irresponsibility doomed them

to failure. The partners failed to recognize that the magazine publishers

would come to resent their meager share of the profits, and it was only

a matter of time before the publisher found a way to dry up the tele-

marketing company’s pipeline and pave the way for a better deal with

another telemarketer. When the entrepreneurs got the squeeze, they

didn’t have the financial reserves to retool their strategy. They had

naively thought of the company as their cash cow, and any money they

made after expenses went straight into their personal bank accounts.

Because their vision of the business was so limited, Minneapolis

Circulation’s owners didn’t even think about their responsibility to their

employees or to the sustainability of the business itself.

Poorer, but wiser, or so one owner thought, he launched another

company, Twin Cities Telemarketing, with a new business partner. He

had learned his lesson about trying to own subscriptions, so his new

enterprise sold subscriptions for a fee. Their first client was Twin Cities

Woman, a struggling newspaper look-alike. When Minneapolis maga-

zine got a new publisher and a new name, Minneapolis St.Paul maga-

zine, Twin Cities Telemarketing acquired their subscription sales

business, too. Then they went after business with Twin Cities magazine,

a publication that Minneapolis St.Paul magazine viewed as a competi-

tor. Twin Cities Telemarketing knew that they could sell both magazines

effectively. They recognized that a lot of customers, such as hotels and

professional offices, subscribed to both. Their game plan was to help

both clients succeed. But they carefully didn’t mention their relation-

ship with either magazine to the other. That was a fatal flaw. When the

Minneapolis St. Paul magazine publisher found out that Twin Cities

186 MORAL INTELLIGENCE

Telemarketing was working for their arch rival, he pulled the plug. The

owners of Twin Cities Telemarketing never thought of themselves as

dishonest, but they were. Integrity would have dictated that they do their

best to convince both magazines that representing the two was a win-

win scenario—before taking on the second magazine.

Both of these ventures demonstrate that business savvy relies as

much on moral intelligence as it does on a good business plan. Both

start-up companies were initially successful businesses that unraveled

because of gaps in integrity and responsibility. Like most entrepreneurs,

it took several false starts for this group to learn the importance of prin-

ciples and values. Those early business failures also point out just how

critical moral competence is to a small business. Failures of integrity or

responsibility might not be terminal in a large business which has the

resources to absorb a certain number of mistakes. But for most small

organizations, the distance between solvency and bankruptcy is

painfully short.

Driving Without a Steering Wheel. KRW International, one of the

first executive coaching firms in the country, was founded in 1990 to

offer premium consulting services to Fortune 500 executives. KRW’s

owners were strong on integrity and responsibility where their clients

were concerned, but those principles were not always extended to their

own organization. In the first few years, the owners’ attitude was, “Let’s

have fun and make money.” When demand for their services started

growing beyond what they could handle themselves, the partners did

not think proactively about the kind of organization and workforce they

needed. Instead, they reacted to the needs of the moment. They hired

contract consultants and discovered that they didn’t stick around long.

They hired administrative staff at fairly low wages, and worked them

really hard. They didn’t stay long either. It took some time for KRW’s

partners to realize that if they didn’t act responsibly toward their

employees, employees would have no reason to feel responsible

to them.

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 187

Luckily, KRW hired an administrative head, Kelly Garramone, who

became its moral champion. More than once, Kelly confronted the own-

ers, “There is too much work, too few people to do it, and deadlines are

impossible.” She successfully challenged the company to create work

processes that both consultants and administrators could live with.

Business grew consistently until 1994 when a major client company

abruptly cancelled its contract. KRW’s owners were so shaken that they

immediately decided they had to lay off most of their employees to pre-

serve the owners’ financial resources. That decision was ill-considered,

both on business and moral grounds….

It was a beautiful fall day when KRW employees were gathered for

the company’s annual Octoberfest celebration. When the owners

walked into the room, employees expected the festivities to commence.

Instead, the owners announced a major downsizing. Soon, people were

crying and running out of the room to call their spouses and friends.

KRW’s owners were open and honest, but their approach was a lot like

surgery without anesthesia. It turned out to be unnecessary surgery.

Everyone was given a good severance package. But soon most employ-

ees were rehired as independent contractors because KRW still had

work in the pipeline. Before long, their major client reinstituted the con-

tract, and KRW rehired all but a few of their former employees. One

employee never missed a paycheck, but she got a windfall—three

months off. KRW’s owners ended up losing more money by thinking of

themselves first than they would have if they had stepped back to take

everyone’s needs into account.

The mistakes KRW made during their 1994 downturn were the

result of destructive emotions and a moral virus. KRW’s owners had

started their business with the goals to “make money and have fun.” As

soon as something happened that threatened both goals, fear took over,

and they lost their ability to be reflective and self-aware. Further,

because their goals were not aligned with a deeper purpose, there was

no overriding sense of responsibility that could overcome their impulse

to take care of themselves first.

188 MORAL INTELLIGENCE

KRW weathered that crisis and soon regained considerable

momentum, so much so that during a 1998 company meeting, Kelly

Garramone and her administrative staff once again announced that they

were so overworked and stressed that if the company didn’t make major

changes, many would quit. KRW owners and consultants finally got the

message. It was a turning point. The strong feelings of the administra-

tive staff prompted the group as a whole to question why they were in

business. It became clear that financial rewards were only part of the

motivation for working at KRW. Some employees said that their ideal

purpose was “to make the world a better place.” Many employees res-

onated strongly with that purpose. Others worried that KRW would lose

business if hard-nosed senior executives got wind of such a pie-in-the

sky mission statement. Eventually, their collective desire to do some-

thing ambitious and wonderful won the day. In subsequent months,

Kelly led the effort to define the organizational values that sprung from

their newly articulated purpose. “If we are going to be an organization

of moral integrity,” insisted Kelly, “then we need to behave consistently

with our purpose.” Eight years after starting the company, “doing the

right thing” became an explicit part of the KRW culture. Little did

KRW’s owners realize that within a few short years, KRW’s collective

commitment to a shared purpose would mean the difference between

extinction and survival.

KRW took a steep trajectory as it gathered media recognition for its

approach to CEO coaching and senior executive development. In the

year 2000 alone, it increased its revenues by 27%, expanded its con-

sulting staff by a third, doubled its office space, and was actively

recruiting for additional staff to support anticipated further growth. By

June of the following year, business bookings were so strong that one

overwhelmed owner instructed the consultant group to stop marketing

until further notice. Only three months later, in the wake of September

11, KRW’s revenues crashed. This time, the moral lessons of the past

came to the fore. The owners, despite enormous pressure, vowed to

keep the company going. They cut their own salaries, mortgaged their

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 189

houses, and did everything they could to keep the staff together for as

long as possible. Each week, they updated their employees on the finan-

cial status of the company. For months, the news was grim. Everyone

could see the handwriting on the wall, but when two rounds of selective

layoffs finally came, laid-off employees were grateful for the lead time

they had been given to prepare for their job transition. Employees who

remained had almost as tough a time as those who left. Consultant

salaries were cut, and administrative employees were given reduced

hours. Owners suspended their salaries. With half of the staff gone, the

offices looked—and felt—like a ghost town. But no one left who had

the choice to stay. Maybe they stayed because the job market was dis-

mal. But if you ask KRW employees why they stayed, they will tell you,

“I believe in what KRW is trying to do.” If you ask former KRW

employees if they would go back if asked, the answer is almost always,

“Yes.” KRW returned to profitability within a year. Quite a few consult-

ing firms did not survive the economic downturn of 2000–2002. KRW

might have started by driving without a steering wheel, but it learned

the value of guiding principles along the way, and those values steered

it safely through its darkest hours.

Moral Values in Small Organizations The moral values highlighted throughout this book are crucial to organ-

izations of all sizes and stripes, big and small, for-profit and non-profit.

Integrity, responsibility, compassion, and forgiveness are undeniable

values, no matter what the venue. Although the four core principles are

the same, the moral challenges that dominate an organization are often

size-dependent.

Poll a cross-section of employees who work for small organiza-

tions, and you begin to see differences in the character of small versus

large organizations. Small company employees typically place a pre-

mium on decision-making freedom. Some value risk and adventure,

190 MORAL INTELLIGENCE

while others value the small-town intimacy or the potential to have a

larger impact. Another difference lies in the visibility of leadership in

small organizations. The entrepreneur or small company CEO lives in a

fishbowl—everyone can see everything they do. The beliefs and goals

that drive leader behavior are just as clear. So moral competence is par-

ticularly crucial to the small company leader because moral gaps can

not be hidden—and bad choices lead to more than a slap on the wrist.

They could spell the end of the business.

Challenges of Integrity. For small organizations, internal integrity

comes more easily than external integrity. Small companies by virtue of

their size promote more direct and honest communication. Your boss

might be sitting at the desk in the next cubicle, rather than sequestered

in a remote executive suite. Fortunately, good information flow is easier

to come by in a small company because without it, a small enterprise

could go belly up in a matter of weeks. Spenser Segal, CEO of technol-

ogy start-up ActiFi, says this about the business value of honesty:

“When we started, financial viability was not a given, and we felt every-

one had to feel responsible for our success. To do that, they had to be

able to manage the risk they were personally taking on. So we instituted

a policy of sharing detailed financial information on a weekly basis.

Now everyone knows how much cash is in our account, what is coming

in, and what our pipeline looks like. Instead of managers and employ-

ees speculating and worrying, everyone knows what’s going on and

works together to help us find solutions.”

Some hierarchical organizations, on the other hand, produce

cultures of intimidation that discourage effective communication.

Employees of large corporations often feel pressured to keep distant

superiors happy, even if it means concealing a painful truth about poor

performance. Ironically, when difficult truths are finally uncovered,

the consequences might not be so dire because large profitable compa-

nies usually have the cash reserves to weather fallout from internal

dishonesty.

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 191

While internal honesty might come more readily to small compa-

nies, integrity can be challenged when small companies must put on a

good face to the outside world. Capitalization is a perennial issue for

many small companies. They need to borrow, they need to sell equity

shares, or both. According to Paul Clayton, CEO of Jamba Juice, “It is

very tempting to hide the truth from potential investors about the health

of the company.” But resisting temptation is essential. “I’ve always

preached that we have to be open and as transparent as possible about

what the issues are,” says Clayton. “If you’re getting people to really

commit—whether they are employees or investors, then you have to be

honest about what is working and what isn’t.”

Challenges of Responsibility. Unlike large companies, which usually

are focused on increasing profits, many new or small companies are try-

ing to reach the point of making a profit. Small companies don’t have

the luxury of irresponsibility. Taking too long to admit a mistake can

make the difference between black ink and red ink. But admitting fail-

ure can be hard, in part because individuals who work for small compa-

nies often feel more intense ownership for the decisions they make and

want to keep plugging away to make it work. Unfortunately, that can

spell doom for an emerging business. New companies are successful,

not because they don’t make mistakes, but because they know how to

make a lot of mistakes quickly. The sooner the organization acknowl-

edges a mistake, the sooner it can change course.

ActiFi’s Spenser Segal reflects on the cost of denying mistakes: “In

a small business that doesn’t have a long history of results, it is critical

that you stay firmly grounded in reality without giving up hope for the

long term. We initially developed some sales assumptions for our first

product. Our projections exceeded our results by a factor of five. It was

four months before we were ready to reexamine our assumptions. The

truth was staring us in the face, but no one said anything—maybe

because I was a big part of making the mistake. Fortunately, we were

192 MORAL INTELLIGENCE

able to recover, but we lost three months of valuable time by not admit-

ting that our assumptions were flawed and our targets were unrealistic.”

Spenser then adds a note about the benefits of admitting mistakes:

“Because we had a very experienced management team, we were over-

confident about our business model and our projections. After we

admitted our miscalculation, we got better at admitting that we don’t

know what we don’t know and therefore could look at things more like

experiments. That took a lot of pressure off of everyone thinking that

everything had to succeed.”

Contrast ActiFi’s rocky start with giant American Express, which

had the financial resources to stay with a troubled business venture that

its executives mistakenly thought would work—eventually. American

Express finally closed the business at a loss, but the company as a whole

was never at risk of going out of business because it delayed coming to

terms with a bad business decision. Executives of large companies

might produce higher profits if they heeded the lessons of responsibil-

ity that come from small organizations.

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 193

Small Companies Teach Some Big Lessons about Responsibility

In large organizations, we often encourage people to take lateral assignments that broaden their experience. Companies would be even smarter to encourage their high potential managers to spend a year or two working in the small business world. What they would learn would make them far more disciplined financial managers. They would know how to pay more attention, when to maintain support, and when to pull the plug on a struggling business. They would be more responsible with the company’’s resources. They would appreciate that five million dollars is a lot of money and should not be squandered.

Challenges of Compassion. Compassion comes more easily in a small

organization. Recall the compassion of BWBR Architects, the firm that

went out of its way to give a struggling Chinese and Malaysian firm

business when they most needed it—with nothing expected in return.

Within the walls of a small enterprise you know people better, and

you are likely to know all of your co-workers. In a small organization,

no one is anonymous. Small companies more closely resemble the

interdependent tribal groups that were so important to survival of our

human species. Membership in smaller working groups seems to acti-

vate our hard-wired tendency for altruism. We take interest in our work-

mates. We feel bonded to them. We see their success and ours as

interconnected. When they need help, we want to help them. That does

not mean that smaller organizations are immune from rivalry or decep-

tion or dislike. No human community is perfect. We may see the dark

side of connectedness when we work in a small organization, but we

rarely see indifference. If the small company headquarters is big enough

to have an elevator, it will not be a silent ride.

But compassion is a double-edged sword. Too little compassion—

as in the hard-edged and ultimately unnecessary lay-off in KRW’s early

days—and business may suffer. Too much compassion, as in KRW’s

post 9/11 protracted subsidy of employees, and business may also suf-

fer. Business judgment without compassion can be as equally damaging

as compassion without business judgment. Just as in the last chapter

when we emphasized the fabric of values, skillfully interweaving busi-

ness and moral values is even more critical for the small organization

that commonly lacks the financial cushion to absorb mistakes and

downturns.

Challenges of Forgiveness. Because small organizations rely on their

ability to cycle rapidly through mistakes, it is equally important for

small organizations to forgive mistakes. Spenser Segal believes that for-

giveness is critical to the success of a new business, adding, “Every

startup makes tons of mistakes. We have built our business model

assuming mistakes and bad assumptions. By being aligned around our

mission and core values, we are able to look at various strategies as tests

194 MORAL INTELLIGENCE

and hypotheses that we are seeking to prove or disprove. By ensuring

that an environment fosters trying new things and doesn’t cause bad

feelings when tests or hypotheses fail, we are able to learn much more

quickly—and that results in much better business models going for-

ward. We need to learn to avoid four-month mistakes. It’s better to make

lots of small mistakes than any big ones.” Amazon.com credits its

growth from small online bookseller to e-commerce giant to its encour-

agement of innovation. David Risher, former SVP of Marketing with

Amazon.com, describes what the company did to foster innovation:

Three times a year, we presented the “Just Do It” award.

We wanted to explicitly reward people who have pride in

doing something innovative. It had to have been well-

thought through—not just something silly—truly innova-

tive and focused on customer need. But it didn’t have to

work! And a third of the time they didn’t. The reward? A

used Nike sneaker—the bigger the better.

When it comes to letting go of mistakes and failures, small organiza-

tions have an edge. It can be hard to forgive a stranger. Forgiveness

works best when you and I know each other and therefore are willing to

give each other the benefit of the doubt when we make mistakes.

Therefore, letting go of mistakes and moving beyond them happens

more easily in a smaller organization—luckily so. In a small organiza-

tion, you work in close quarters with all the people who might do some-

thing to hurt you. When you are angry at someone who has done you

harm, or when you have done something to hurt another, there is

nowhere to hide. Without the capacity for forgiveness, you would be

surrounded by the tension of the unresolved hurt. Not only would a

tense work environment prevent you from giving your best efforts, it

would keep you from being able to take advantage of the resources your

colleague would normally offer. In a small organization, it is difficult to

work around a contentious relationship. For example, when you are in

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 195

conflict with your colleague who is the company accountant, there is

usually no department full of other accountants you can go to for help.

In small companies, we are stuck with one another. That is ultimately a

good thing. Knowing and accepting the foibles and failings of our fel-

low workers sets the stage for “getting over it” and moving forward.

The Moral Impact of Small Organizations. Small businesses (com-

panies of 500 employees or less) represent about 99% of U.S. employ-

ers, employ about half of the private sector workforce, and provide

nearly 75% of new jobs. Even during the economic recession of

2001–2003, job growth surpassed job losses among small companies.

During the first quarter of 2002, 36% of jobless managers and execu-

tives started their own businesses, with a majority of laid-off managers

moving to small companies.1

Some workers, disenchanted with the legacy of mega-company

scandals or simply weary of large corporate bureaucracies, are looking

to smaller organizations to provide a greater sense of meaning and pur-

pose. KRW’s Chief Financial Officer Don Waletzko, is a case in point.

Don left an executive finance position when he couldn’t approve his

former employer’s plan to go on an acquisition binge that would pro-

duce substantial layoffs. Don’s moral compass wouldn’t allow him to be

financial architect of a strategy that he feared would cause great per-

sonal disruption to his fellow employees. His former company’s loss

was KRW’s gain. Don arrived with a financial pedigree that a small

company like KRW could ordinarily never have afforded. Fortunately,

salary was not Don’s top priority. He wanted to work for a company

whose values reflected his own, and he found that in KRW’s commit-

ment to leadership development as a way to improve human lives.

196 MORAL INTELLIGENCE

1. Challenger, Gray & Christmas study, May 2002.

When the aftermath of 9/11 threatened KRW’s survival, Don’s stead-

fastness and financial savvy saved the day. He was a key player in the

reorganization and recapitalization that stabilized KRW on its way back

from the brink.

Don is one of many managers who believe they can have more pos-

itive impact on people and organizations by working in a small busi-

ness. The large organization, like a lumbering ocean liner, can be hard

to turn in the direction of increased moral competence. In contrast,

small organizations, like a 25-foot sailboat, can turn quickly and effi-

ciently when the compass and prevailing winds dictate. Small compa-

nies are fertile ground for shaping a morally intelligent culture—one

that provides value simultaneously to its customers, employees, owners,

and the community it inhabits. For those of us who are concerned about

the welfare of all the world’s peoples—small ventures offer great hope

for the future. The path of economic development isn’t from the sweat-

shop to the boardroom. It is from poverty to small locally based

sustainable businesses. Everyone who invests in a new venture or small

company has a golden opportunity to infuse the business world with

more principled, more humane, and ultimately, more financially stable

businesses.

Five Maxims of Moral Entrepreneurship. Start-ups are excellent lab-

oratories for moral leadership. Because resources are tight, mistakes

have more immediate consequences. If you falter, there is no elaborate

infrastructure to cushion you from disaster. American Express can write

off millions in bad junk bond debt without going out of business. The

owner of a new company does not have that luxury.

Entrepreneurs by definition choose paths to success that are both

risky and rewarding, both exhausting and exhilarating. Your success as

an entrepreneur, like that of any leader, depends on following the same

four principles of integrity, responsibility, compassion, and forgiveness

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 197

that underlie any sustainable enterprise. Here are five additional pieces

of advice:

1. Build a business that helps others. If your product or serv-

ice doesn’t make the world a better place, why bother?

Frankly, the world just doesn’t need any more pet rocks, reality

TV programs, or 2,500-calorie cinnamon buns. Starting a busi-

ness is hard work. Doesn’t it make sense to unleash your pas-

sion on something that will improve the safety, security, or

comfort of fellow humanity? Knowing that you are building a

socially worthwhile business can sustain you and your work-

force through the rockiest times. Consider this model of a

profitable business that exists to help others. Mark Oja runs

ACTIVEAID, Inc., the medical devices manufacturing com-

pany founded by his father 40 years ago. ACTIVEAID is a

small company by most standards. But to the 37 employees in

the small town of Redwood Falls, Minnesota (population

5459), it is a big business. Employees know what their work

means to customers—disabled people who rely on their prod-

ucts for mobility, comfort, and dignity. Quality is paramount.

Everyone takes pride in the fact that what they do helps people

in their daily lives.

There is no scarcity of business ideas with service at their core.

Heartland Juice, the regional partner of Jamba Juice for Illinois,

Wisconsin, and Minnesota had a vision—to offer a quick,

healthy alternative to the usual fast-food establishments. It is

now selling thousands of smoothies and fruit drinks a week to

happy customers, employing hundreds of young people, and

developing leadership talent for the company and community

at large.

Modern Survey is another small enterprise with service at its

core. Early on, its founders discovered that their real product

198 MORAL INTELLIGENCE

was not the business information software solutions they pro-

vided, but the service they offered their customers. According

to co-founder, Don MacPherson, “Service to others is very

important. That’s what we do as a company. It’s helped our

business effectiveness because if we put our clients’ goals first,

we achieve our goals. We have loyal clients, and we do virtually

no advertising.

Even if your business fails—most entrepreneurs do fail several

times before finally developing a successful venture—you will

have the satisfaction of knowing your intentions were good.

When you ultimately succeed—by staying true to universal

principles and following the maxims of moral entrepreneur-

ship—you will reap the combined rewards of service and profit.

2. Choose Your Partners Wisely

If you work in a large organization, your professional relation-

ships tend to form through networks of work associates, indus-

try colleagues, mentors, bosses, and acquaintances. If you work

in a small organization, your professional relationships often

overlap with personal networks of family and friends. Small

business entrepreneurs are more likely to enter into partnership

arrangements with family members, friends, and friends of

friends. Choosing friends as business partners carries a host of

dangers. No matter how objective you think you are, it is hard

to evaluate a friend or relative’s moral strengths and weak-

nesses. The success of your partnerships depends on shared

principles and values. Looking at close personal associates

through the rose-colored glasses of your affection, you may not

notice moral gaps that could spell doom for your mutual ven-

ture. Rowland Moriarty, noted chairman of Charles Rives

Associates, said this about a previous business partner. “I made

a 25 year commitment to a friendship then watched him take

actions that led to the collapse of our company.”

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 199

Choosing a friend as a business partner can make it difficult to

address the business problems created by one or the other. What

do you do when a partner-friend betrays your trust by putting

the business at risk? Though it’s hard to contemplate, your best

response would be to remind yourself of your friend’s ideal

self. By considering how your friend wants to behave ideally,

you are able to give your friend the benefit of the doubt and

avoid being overcome by destructive anger. When you believe

that your partner and friend shares your values, you are able to

discuss and jointly recommit to your vision and goals for your

business. You forgive, and then you move on. You try again.

You trust again. Keep in mind, however, that shared values lose

meaning when ongoing behavior is inconsistent with those val-

ues. Forgiveness is not synonymous with stupidity. You can’t

look the other way when a partner continues to violate your

mutual commitment. It’s bad for your bottom line, and it sends

the wrong message to employees who see that you are afraid to

confront deceptive behavior. Remember that your emotional

blinders are even stronger when your partner is a family mem-

ber. Consider the experience of Janet Smith. Twenty years ago,

her husband started a home renovation company. Business was

booming, but cash flow was tight. Janet, a bright special needs

teacher and mother of two, did not know that her husband was

keeping his employees’ social security and tax withholdings,

until the IRS summons arrived. Janet and her husband declared

bankruptcy, but that did not protect her from the legal liability

to the IRS. They avoided imprisonment but ended up with mas-

sive penalties that took many years to repay. Meanwhile, her

husband started a second small construction company, after

assuring his wife that he had learned his lesson and would faith-

fully make employee tax payments. A year and a half later,

Janet discovered that her husband had once again failed to

make the proper employer payments to the IRS. Angry but still

200 MORAL INTELLIGENCE

desperate to believe in her husband, Janet agreed to become his

partner in a new business that designed, produced, and sold

diagnostic equipment for chiropractic offices. The company

had some success, was on the way to profitability, and had

attracted the interest of a potential buyer. But the succession of

business pressures had taken its toll on their marriage, and Janet

and her husband finally divorced. Only after he signed over the

business to her, did she discover that the potential investor was

a phantom, and her husband had saddled her a third time with a

set of enormous tax liabilities. Janet was an intelligent woman,

with good analytic skills. But her overwhelming desire to trust

her husband blinded her to his persistent ethical lapses. Ten

years after her divorce, she is a successful financial advisor to

small businesses, having built a second career out of the painful

lessons of her business partnership with her former husband.

Because start-ups are so fragile, it’s especially important to

choose partners who share your values. “I can’t say enough

about this,” says Spenser Segal. “Understanding that the first

few years would be filled with adversity, it was critical that we

hired a leadership team that shared common values and

believed that working on something they believed in was the

best possible use of their time. By coming together with a team

who shared that commitment, they were assured of personally

being successful even if the business failed.”

3. Hold on tight to your core values.

Small business entrepreneurs need to be vigilant about main-

taining their alignment with core values. Most entrepreneurs we

know are highly morally intelligent. They are notably articulate

about the principles and beliefs that guide them. ACTIVEAID’s

Mark Oja, for instance, endorses the importance of remaining

true to one’s principles. His moral compass is deceptively

simple. “Honesty and family are the values that mean the most

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 201

to me,” says Mark, adding “If you don’t mean it, don’t say it. If

you know or think or feel that something is improper, immoral

or illegal, don’t do it.” But even though Mark is strongly com-

mitted to those values, business pressures can begin to lure a

company away from its moral foundation. “It can be tough

competing with companies who go offshore for their products.

When we had an opportunity to sell a low-priced cane that

came from outside the U.S., we took it. Then our distributors

complained about how bad the canes were. Our distributors and

customers count on us for high quality products, and we had

violated their trust. When we realized what we had done, we

cancelled the deal. It took some time to repair the relationships

that had been completely trusting before.”

4. Surround yourself with employees who share your values.

When it comes to human talent, do not confuse the “best” with

the “brightest.” Values fit is a stronger contributor to perform-

ance than technical skill. We all have known “values misfits”

who were expert in their fields but couldn’t advance because

they did not operate effectively within a particular organiza-

tional culture.

Mark Oja recounts this experience: “One time, we knowingly

hired someone we didn’t trust. We needed a certain skill that

was in short supply in our area. Our only skilled candidate in

this small town was a man with a minor rap sheet and a reputa-

tion for bad relationships. But we felt desperate, so we thought

we could handle him. We were wrong. He was impossible to

work with, and we had to let him go.”

KRW International is obsessed with hiring employees who res-

onate with its purpose and values. Before job candidates are

invited for an interview, their technical credentials are carefully

scrutinized. Then the real vetting begins. Candidates run

202 MORAL INTELLIGENCE

through a gauntlet of individual and group interviews in which

the spotlight is almost exclusively on “fit” and values. The

KRW community as a whole must agree that the candidate

shares key values and will effectively represent them to cus-

tomers and stakeholders. An owner once violated the recruit-

ment protocol by hiring a consultant who had not run the full

interview gauntlet. His colleagues were angry, and the unwit-

ting new consultant wondered why some of his new associates

were less than friendly.

Although resonance with organizational values is key for suc-

cessful hiring, be sure to preserve diversity. Organization cul-

tures have strengths as well as weaknesses, and if you hire only

clones of your current workforce, you will lose the opportunity

to energize your company with new employees who bring

novel approaches to your products and services.

5. Put your people—and your organization—first.

The United States Army has a saying, “The leader eats last.”

The New York Times offered an illustration of this maxim a

few years ago when it published a photograph of an Army gen-

eral serving Thanksgiving dinner to his combat troops in

Afghanistan. Army leaders know what every entrepreneur

needs to know. Followers must be able to absolutely trust their

leaders to do what is best for the unit.

Putting people first also means investing in the development of

employees. Small businesses are notorious for neglecting to

invest in employee development. Their financial struggles usu-

ally leave little cash reserve, and it’s easy to drop the ball when

it comes to “overhead” expenses such as training. Studies indi-

cate that large company employees are more than twice as

likely as small company employees to be offered employer-

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 203

subsidized educational programs.2 Given the lower average

wages offered by small companies,3 it is even less likely that

employees of small companies will have the financial resources

to maintain and update their job skills. Bucking this trend is

ACTIVEAID’s Mark Oja, who used the productivity increases

generated by a new production system, not as an excuse to

downsize, but as an opportunity for employee development.

Several years ago, ACTIVEAID transformed its manufacturing

process from batch production to packet production—

essentially it changed to a “just in time” production method.

Mark knew that packet production would be more responsive to

their customer, but it also meant there would be times when

employees were not occupied making inventory during the

transition. When employees were first told not to make prod-

ucts, they were worried, fearing that down time would mean

layoffs. But Mark had no intention of laying people off or

reducing work hours. Today, when orders come in, production

gets busy. When no inventory is needed, employees use the

time for training. Mark is firmly convinced that the investment

in training creates not only more skilled employees but a more

motivated workforce that will enhance their business perform-

ance in the months and years to come.

Last Words About Business Start-Ups Despite many differences in the culture and operations of small and

large enterprises, the basic requirements of moral leadership are the

same. Moral skills are intrinsic both to successful entrepreneurship

and successful management of established companies. If you are an

entrepreneur, it may seem more difficult to stay true to principles when

204 MORAL INTELLIGENCE

2. International Foundation of Employee Benefit Plans, June 2000.

3. Bureau of Labor Statistics, March 2000.

the stakes are high and the cash flow is low. But your new venture sim-

ply will not survive unless it is anchored in core principles. Moral com-

petence is essential for the small business leader. The small organization

rarely has the excess resources to weather a major moral lapse, nor does

it typically offer the golden handcuffs that could keep employees tied to

a morally bankrupt enterprise.

So in the end, the small organization and the large have this in com-

mon—doing what is right morally and doing what is right for the busi-

ness are inseparable. No matter the size of the territory, the morally

competent leader weaves business and moral values together—and that

makes all the difference.

CHAPTER 11 • MORAL INTELLIGENCE FOR THE ENTREPRENEUR 205

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Undoubtedly, you want your business to succeed, and you want to do

the right thing. The good news of this book is that you are not alone.

A large number of business leaders want to do the right thing, and

they believe doing the right thing leads to organizational and personal

success.

Like many leaders, you feel deep responsibility for your businesses

and your workforces. Your challenge now is to accept an even larger

responsibility. Whether you realize it or not, the future of our planet is

in your hands. Why? Because you are part of the most powerful social

force on the planet today. In the last half-century, the corporation has

assumed a central role as the iconic institution of many cultures across

the globe.

Business is rapidly assuming a role as the most influential force in

the lives of the world’s 6.4 billion people. Religions, families, ethnic

groups, and governments still matter and thankfully will continue to

Epilogue BECOMING A

GLOBAL MORAL LEADER

207

matter, but unless business leaders and their workforces bring moral

values to work, none of those other institutions will matter enough. If

you are not sure just how influential you really are, consider the impor-

tance of the consumer economy to the well-being of your friends, fam-

ily, employees, and the world itself.

As a business leader, you are de facto a moral educator. The moral

lessons you and your company teach are lessons more powerful and

more pervasive than that of churches, schools, and families. If you do

the right thing, you will teach moral behavior to your employees. If you

cook the books, fire someone unfairly, or use deceptive business prac-

tices, you will be teaching others to do the same thing, or you will be

misleading others into believing that’s just how business is done.

Your workforce is learning right and wrong at your workplace and

is learning that “right” is sustainable and “wrong” is not. If we want

current and future generations to care about the welfare of others as

well as the prosperity of the business and the survival of the planet, we

who lead today’s businesses will have to show them the way. When it

comes to moral values in the workplace, a lot needs to be said, and more

needs to be done!

You may not have signed up to be a global moral leader, but you

are. And with the inescapable power of your role comes a daunting

responsibility. It is a responsibility that includes and yet goes beyond

profitability. It is a responsibility that encompasses and goes beyond

more obvious notions of corporate social responsibility.

Raising the Stakes This book argues that moral intelligence and moral skills are critical to

sustainable business performance. It has proposed a set of essential

moral skills and highlighted the moral mechanics of interacting with the

usual organizational stakeholders, especially customers, employees, and

208 MORAL INTELLIGENCE

owners. Like most leaders, you recognize that you are accountable to

those three groups, but there is another constituency that is equally

important—the communities beyond your organization.

Every organization lives within at least one community: whether it

is the neighborhood surrounding the corner grocery store or the world

community in which a major multinational corporation operates. How

well do you serve the community that hosts your business? Consider

these three different levels of responsibility you have for your external

communities:

• The responsibility to do no harm

• The responsibility to add current value

• The responsibility to add future value

Watch Your Wake Boaters entering harbors are often greeted by signs saying, “Watch Your

Wake.” Traveling too fast creates lines of turbulence—the wake of the

boat—that can capsize smaller vessels. You also need to watch your

wake. You need to understand the potential negative consequences of

your presence in the communities where you operate. Some of the most

admired corporations in the United States and in the world have been

slow to acknowledge the catastrophic side effects of their business

processes.

Businesses have knowingly and unknowingly polluted oceans and

rivers and lakes. As Erik Peterson and Jay Farrar from the Center for

Strategic and International Studies1 have pointed out in their presenta-

tion on the “Seven Revolutions” that will shape the world in the next 25

to 50 years, strategic resource management of food, water, and energy

EPILOGUE BECOMING A GLOBAL MORAL LEADER 209

1. As presented at http://www. csis.org.

will become an even greater challenge as the overall population of the

world balloons to 8.8 billion by mid-century, while simultaneously the

population of developed countries contracts.

Too few of the world’s biggest companies take seriously their

responsibility to do no harm. Alison Maitland reported in the June 23,

2004, issue of Financial Times that, “the world’s 100 largest companies

have a poor record of accounting for their impact on society and the

environment.” Maitland drew her conclusions from a recent research

report published by AccountAbility, a UK-based social responsibility

institute. Had traditional philanthropy and community involvement

been included in the report, big companies would have been rated more

highly. Nevertheless, their relatively poor showing illustrates large com-

panies still need to be convinced to do no harm to the environment.

Although environmental protection is an obvious responsibility for

business organizations, other more subtle forms of pollution need to be

remedied, and other challenges need to be addressed. If you work in the

media industry, you may need to watch your wake in the behavioral

messages you send to children and adults alike. Just about every busi-

ness has to concern itself with the potential negative consequences on

family life of a 24/7 work culture.

Give Back In addition to doing no harm, you also have a responsibility to “give

back” to your communities in exchange for the varied resources that

they provide—desirable locations, good employees, attractive living

conditions, raw materials for manufacturing, customers, and so on.

Business-sponsored social responsibility programs are one good way to

add value to your communities at large. Your personal efforts and con-

tributions of time and money are another.

210 MORAL INTELLIGENCE

There are likely a number of ways that you and your business have

contributed positively to your local communities—perhaps by support-

ing programs in education, the arts, and health/well being or by men-

toring programs for at-risk youth or fundraising for medical research. If

you and your organization are adding value in these and other ways,

good for you and good for your company.

Giving back is more than a public-relations tool. It is vital for main-

taining thriving local, regional, and world communities and the more

you can do, the better. As the world’s economy continues to globalize

and as communication and travel technologies continue to “shrink” the

world, each of us and the businesses we lead and/or work in will have

the opportunity to become even better at giving back.

Create the Future Your third level of responsibility, to add future value, is the most chal-

lenging. Accepting responsibility for the future can be difficult in a

business environment that is so attuned to the short term. It is relatively

easy to contribute to the cause of the month because the need and the

benefits are usually obvious. Figuring out how to add future value is

less intuitive. Caring about the future impact of your business on the

community and the world requires a different mindset. Consider this

illustration of the kind of mindset that we would have to cultivate: At

the 1998 State of the World Forum (founded in the mid-1990s by Jim

Garrison and Mikhail Gorbachev), participants had the fascinating

experience of participating in a ceremony led by a Polynesian tribal

chief from Hawaii. After the ritual, the chief was asked, “What is your

advice for those of us in businesses who are concerned about both the

short term and the long term? There is a lot of pressure on quarterly and

annual results.” The chief answered, “You need to understand how we

think about responsibility and accountability. In our culture, we help

people realize they are accountable to the three generations that

EPILOGUE BECOMING A GLOBAL MORAL LEADER 211

preceded them and responsible for the seven generations that follow

them. When we make decisions, we take into consideration the impact

of that decision on someone seven generations from now.”

Imagine what your company’s strategic plan would look like if

Polynesian decision-making criteria were incorporated into your analy-

sis. We have seen the harm done by managers who optimize for the

short term. What kind of good could your company do if its perform-

ance objectives were designed to contribute to results a hundred years

down the road?

A Global Business Opportunity Like all the moral competencies discussed in this book, serving your

external communities is not only morally right, but essential for sus-

tainable business success. The business case for global moral leadership

is strong. There are profits to be made. Here lies the opportunity: As you

provide the people of the world with good jobs and fair pay for their

work or fair prices for their products and services, you simultaneously

expand the opportunity for yourself and your business.

Global business is less about expansive holdings and more about

expansive thinking. Consider this: Businesses that work to increase the

welfare of the global community simultaneously increase the market for

economic goods and services.

A recent Business Week article chronicled how new technologies

could help alleviate chronic poverty in India. It pointed out that “many

of the educated elite responsible for the success of India’s tech and soft-

ware houses—or who have helped U.S. multinationals prosper—

decided to turn their energies to helping India’s poor.”2 They see both

the opportunity for compassion and the business opportunity for profit

that comes from helping the poor move up the economic ladder.

212 MORAL INTELLIGENCE

2. “The Digital Village,” Business Week, June 28, 2004.

The article quotes management strategist C.K. Prahalad, who

says,“If you can conceptualize the world’s four billion poor as a market,

rather than as a burden, they must be considered the biggest source of

growth left in the world.”3 Every person on the planet is a potential cus-

tomer or partner or supplier or employee. Large companies today may

compete aggressively for dominant share of a ten million customer mar-

ket or for a relatively small number of highly educated and technically

competent prospective employees, when the actual potential market and

the potential workforce is the entire world’s population.

Today, markets are constrained by the economic status of regional

populations, and education and development is typically available only

for those who can afford it. But people lacking education are not dumb,

and people without economic means still have material needs and the

intelligence to create economic value (through jobs) in exchange for the

ability to buy products that will satisfy those needs. Many people in

underdeveloped regions can’t afford the consumer products they are

hired to produce (think designer athletic shoes.) Wouldn’t it be good for

business if they could? Henry Ford asked that question about an infant

American car industry more than half a century ago. Henry Ford may

not have been a saint in many respects, but he knew how to do well by

doing good. He figured out how to create customers for his new-fangled

automobile by paying his workers well above the going rate. He wanted

people making the Model T to be able to afford one. He created a mar-

ket for his products through enlightened self-interest. Henry Ford’s

workers won, and Ford won.

Prosperity need not be a zero sum game. Why couldn’t we increase

our markets by financing business start-ups in third world regions? The

micro-lending movement is a good example of the economic effective-

ness of business creation in undeveloped regions. But those economic

experiments are largely the province of academics and non-profits. Why

EPILOGUE BECOMING A GLOBAL MORAL LEADER 213

3. Ibid.

aren’t those of us in the for-profit sector doing more to develop com-

munities that will, in turn, sustain us and our businesses through the

balance of this new century and beyond?

We need to stop thinking that we can only win if others lose.

Ultimately, none of us will do well unless all of us do well. We may be

feeling pretty comfortable in our plush executive suite or on the porch

of our summer home. But our grandchildren and great grandchildren

will not have the benefit of our well-appointed lives if we don’t help all

the world’s people do better.

Conclusion Mark Twain once said, “It is curious that physical courage should be so

common in the world and moral courage so rare.” It is time for moral

courage to take center stage in business and for business to accept the

responsibility that comes with its prominent position in the world. The

ball is in our court.

214 MORAL INTELLIGENCE

Think of moral skill building as a learning process like any other.

Richard Boyatzis, noted leadership development expert, offers a partic-

ularly useful way of understanding how we build leadership capabili-

ties.1 Boyatzis argues that we don’t learn to be better people or better

leaders by attending training programs. We build our human and lead-

ership capabilities through actual life experiences. Though experience

is the best teacher, we don’t have to leave what we learn to chance.

Boyatzis proposes that we can put ourselves in charge of our learning

using a structured five-step process:

1. Understand your ideal self—The person you want to be.

2. Recognize your real self—Your actual strengths and weak-

nesses in the context of who you want to be.

STRENGTHENING YOUR MORAL SKILLS

A

215

1. Dan Goleman, Richard Boyatzis, Annie McKee. Primal Leadership: Realizing the Power of Emotional Intelligence, Boston: Harvard Business School Press, 2002.

3. Decide how to build on your strengths and reduce the gaps

between your real and ideal selves.

4. Experiment with new behaviors and feelings.

5. Develop trusting relationships with people who will support

your learning process.

Developing moral skills follows the same cycle of self-directed learn-

ing. In Chapter 3, you’ve already had an opportunity to complete the

first step of the process—you examined the contents of your principles,

values, beliefs, and your goals, all of which make up the raw material of

your ideal self. So you’re now ready for the next step of understanding

your real self—by assessing your moral strengths and weaknesses.

With a full picture of your ideal self and real self, you will then

be in position to craft a moral learning plan. Your moral learning plan

will be your road map for gaining the moral skills that are most

important to you and that promote the highest levels of business

performance.

A Look in the Mirror Most of us have some idea of our moral strengths and weaknesses. Our

conscience might give us a pang if we exaggerate a business accom-

plishment. A friend could take us to task for being thoughtless. Or we

may feel very secure in our unswerving fairness to our employees. But

our data about our own moral performance is usually anecdotal and

incomplete. To help you identify your moral strengths and weaknesses,

we have developed the Moral Competency Inventory (MCI). See

Appendix B.

216 MORAL INTELLIGENCE

Using the MCI The MCI is a 40-item survey that you will find here and in Appendix B.

It is a “self-report” survey; that is, you are the person who rates yourself

on each item, and you are the person who decides the meaning of the

results. Take the MCI when you have an hour to spend. It will take

about 20 minutes to complete the survey, about 10 minutes to score, and

another 30 minutes to reflect on your results.

The MCI is a self-development tool, not a test, so it does not have

the scientific precision of, say the SATs or an IQ test. But leaders who

have used the MCI tell us that it helps them capitalize on their moral

strengths and strengthen moral skills that are difficult for them.

The Right Frame of Mind for Completing the MCI The MCI items are all worded in a positive way, so there is no attempt

to hide what the survey would consider to be positive behavior. Because

you are rating yourself, the value of the MCI will be enhanced if you are

as honest with yourself as possible. That means trying to avoid two

kinds of self-rating errors:

• The tendency to give yourself a high rating on most items because they sound like positive things to do

• The tendency to give yourself low ratings on many items because you are typically hard on yourself (self-critical)

Scoring and Interpreting Your MCI You will find scoring instructions in Appendix C and interpretation

guidelines in Appendix D.

APPENDIX A • STRENGTHENING YOUR MORAL SKILLS 217

There are several different ways to look at your MCI scores. You

will have an opportunity to consider your overall moral competency

profile, and you also will be able to examine specific areas where you

have strength or need development. No single interpretation is correct,

and no “test” is the last word on your capabilities. If any part of your

MCI scores don’t ring true to you, keep in mind that you know yourself

best. But if you are dissatisfied with your scores, we ask only that

before dismissing them, you use your results as a springboard for hon-

est reflection about your strengths and weaknesses.

Prioritizing Your Moral Development Efforts There are two paths to improving your performance in any arena of life.

You can concentrate on removing weaknesses, or you can focus on

using your strengths. When you focus on your weaknesses, you try to

improve your performance by undoing old behavior and practicing new

skills or competencies. When you focus on your strengths, you try to

improve performance by finding new ways to use the skills and compe-

tencies you already have.

Which path do you think is more effective? We believe you will

reach higher levels of performance by capitalizing on your strengths

than by trying to remove your weaknesses.

Which path do you think most organizations follow? Most organi-

zations try to improve the performance of their workforce by concen-

trating on deficiencies. Our experience has been that most of the

performance feedback many employees receive is negative, that is,

information about perceived gaps. Organizations assume that negative

feedback will create awareness of gaps that employees will then seek to

improve. Ironically, negative feedback often produces the opposite

effect. Studies have shown that performance often gets worse following

218 MORAL INTELLIGENCE

negative feedback. It can take weeks for performance to recover to

previous levels, and months, if ever, to see positive gains in perform-

ance. Even though managers regularly observe that negative feedback

can be counter productive, most organizations continue to provide an

excess of feedback about performance gaps. Focusing on gaps is a

well-worn path, but one that rarely leads to the highest organizational

performance.

The Road Less Traveled Most organizations treat positive feedback, that is, recognition of

strengths, like a scarce resource. Employees are expected to perform

well, and when they use their strengths to accomplish positive results, it

often passes without comment. Organizations who fail to acknowledge

strengths miss out on a tremendous performance multiplier. That is

unfortunate because most employees perform best by spending most of

their time leveraging their strengths. It is in our strengths that we most

resemble our ideal selves, and the more time we spend using our

strengths, the more closely we approach our ideal self. Focusing on

strengths may be “the road less traveled,” but it is the path that makes

the most difference to creating high performance.

The 80/20 Rule Management consultant Roy Geer, offers this advice: Spend 80 percent

or more of your time developing and leveraging your strengths and 20

percent or less of your time “pumping air into your priority flat spots

(weaknesses).”

Look for ways to leverage the moral strengths you already have.

Actively use those aspects of yourself which are closest to your ideal

self. For example, Marietta Johns is a senior executive who knew she

APPENDIX A • STRENGTHENING YOUR MORAL SKILLS 219

was weak in the financial management aspects of her job. But she did-

n’t spend a lot of time trying to learn what she didn’t know. She got help

from a corporate financial guru and concentrated on doing what she did

best—connecting with her people and inspiring them to produce envi-

able financial results.

Moral development is largely a process of developing and leverag-

ing your strongest moral competencies. You will get the most perform-

ance equity from using your strengths, but you can also benefit from

spending up to 20% of your development time dealing with your gaps.

By concentrating primarily on your strengths, you can also avoid the

discouragement of trying to remove gaps that are part of your basic per-

sonality and difficult to change. So don’t ignore your gaps. Allocate

your time wisely on the path to your ideal self.

Your Moral Development Plan A moral development plan helps you boost your performance by

increasing the odds that you will actually do the things that increase

your moral competence. A moral development plan records your moral

development goals and outlines specific actions you will take to become

increasingly morally competent. This need not be a separate plan from

a professional development plan. If you work in an organization or for

a boss open to discussing principles, values, and beliefs, you may find

it useful to include moral development as part of your overall develop-

ment plan. The important thing is to write down the moral and emo-

tional competencies on which you want to focus and detail the steps you

will take to use those competencies. Goals for moral development, like

any goals, are more likely to be achieved when you commit to them in

writing.

220 MORAL INTELLIGENCE

Step 1: Describe Your Ideal Self

Moral development planning only makes sense in the context of

who you want to be. Recall the principles, values, and beliefs

that form your moral compass. Given that set of beliefs, what

kind of person would you be if you were at your absolute best?

Step 2: Document Your Goals

Again, moral development is only important if it helps you

accomplish your most important goals. Recall your goals

frame. What are the most significant things you want to accom-

plish in all of the important areas of your life?

Step 3: Identify the Moral Competencies You Need

the Most

Reflect on the moral and emotional competencies that you need

the most to reach your goals. If you used the alignment work-

sheet presented earlier, you have already completed this step.

Step 4: Leveraging Your Strongest Moral Competencies

Now recall your strongest moral and emotional competencies:

• In the course of the next six months, how can you use those competencies to get closer to your goals?

• Can you use your strengths in a new situation?

• How might you become even stronger in your use of some of those strengths?

• If it were possible to use your strengths and use them well enough, how many gaps would you actually have?

APPENDIX A • STRENGTHENING YOUR MORAL SKILLS 221

Step 5: Reducing Moral Gaps

• In the next six months, what could you do to strengthen those moral competencies in situations that are important

to you?

• If you strengthened one competency, what impact would that have on your ability to accomplish your goals?

Finally, consider any other moral or emotional competencies

that are highly important to accomplishing your goals:

• In the next six months, what could you do to strengthen those moral competencies in situations that are important

to you?

Step 6: Your Moral Development Short List

Putting this all together, what are the three to five most impor-

tant actions you can take to boost performance by developing

your moral competence? Put this on a note card, enter it into

your planner, or record it anywhere that you can keep it handy

as a reminder of what you plan to accomplish.

Putting Your Moral Development Plan into Practice Now that you have your short list, moving forward should be easy. But

actually doing what you think is important requires that you clear the

road ahead. We need to keep our behavior on course with our beliefs

and goals. If you recall the alignment model, unproductive behavior is

usually the result of disconnectors—those moral viruses or destructive

emotions that get in the way of positive and aligned actions. So chang-

ing behavior begins with recognizing your personal disconnectors and

222 MORAL INTELLIGENCE

then reprogramming yourself to stay in alignment even when moral

viruses or destructive emotions threaten you.

Breaking Bad Habits Although moral viruses and destructive emotions are major causes of

misalignment, another common cause of misalignment between goals

and behaviors is simply a matter of bad habits. Changing our behavior

so that we do what we need to do to accomplish our goals usually

means overcoming the inertia of doing things the usual way. Anyone

who has tried to quit smoking or lose ten pounds knows that repro-

gramming behavior is not easy. Developing moral competence usually

means that you will have to change habits that get in the way of being

moral.

Realize that doing something different will not feel natural. Don’t

wait until something feels right. Do the right thing until it feels right.

Expect a new behavior to feel strange or uncomfortable. Be willing to

do it no matter what for x days. Build in reinforcement to tide you over

until the behavior becomes second nature.

Reward Yourself for Positive Change The best way to reinforce a new behavior is to reward yourself for doing

something new. This doesn’t mean that you need to sign up for a golf or

spa vacation to reward yourself for doing the right thing. It’s more along

the lines of waiting for dessert until you have eaten your peas. Take the

pleasures that are already part of your life and make them contingent on

succeeding in the behavior changes that are part of your moral develop-

ment planning. Celebrate your new behavior by going to that Friday

night movie. If you have ignored your development plan for the week,

stay home and pay your bills. When setting up your reward system, be

APPENDIX A • STRENGTHENING YOUR MORAL SKILLS 223

sure that you use an optional activity, not a necessary activity such as

exercise. You don’t want to compromise your health or well-being if

you suffer a setback in your change efforts.

Surround Yourself with Positive People Because we are wired for interdependence, we need help from others to

do our best. Within Boyatzis’ theory of self-directed learning is the

discovery that “you need others to identify your ideal self or find your

real self, to discover your strengths and gaps, to develop an agenda for

the future, and to experiment and practice.” Everyone needs the support

of trustworthy friends and colleagues to help them stay true to their

goals. Make sure you establish at least a few relationships with people

who will tell you the truth about yourself, even when you might not

want to hear it. Find trusted people who know your values and goals

and will let you know when you are not living up to them. When you

are attempting new behavior, let them know what changes you are try-

ing to make and ask them to tell you if they see you falter.

Do I Really Need to Change? Like any worthwhile activity, living in alignment takes some effort. You

might wonder if you really need to change. You are, after all, a decent

human being with a good track record of career accomplishment. If you

are an experienced manager, you may even believe that you already

know all you need to know and don’t need to learn anything new. If you

are a senior manager, it has probably been a long time since you have

gotten any critical feedback about your leadership skills. So why go to

the trouble of trying to enhance your moral competence? Developing

moral competence is every person’s job because when it comes to

human behavior, there is no standing still. If you don’t continuously

224 MORAL INTELLIGENCE

work on your moral development, you will lose moral competence.

Think about any activity you used to enjoy that you have dropped over

the years. It is not quite true that there are some things you never forget

how to do, such as riding a bicycle. Get on a bike after 20 years, and

you will probably gain your balance, but you certainly won’t be able to

go as fast, or as far, or turn as smoothly as you did when you were

young. You might still be able to pedal, but your performance won’t be

what it could if you had kept on biking all those years. Maintaining and

developing moral competence only happens when we keep pedaling.

We need to use our strengths consistently, day after day, in pursuit of

our ideal self. As our real self comes to look more and more like our

ideal self, we will see the results in our personal lives and in our leader-

ship of others.

Resist the urge to think of yourself as a finished product. Don’t let

anything stand in the way of becoming your ideal self. Invest time in

activities that build on your strengths and enhance your moral compe-

tence. You are in charge of your moral development, but don’t think you

have to go it alone. Take advantage of personal development resources

that you might not have considered in the past.

Books, Audio, and Video Media There are many worthwhile books on the topic of principled leadership

and personal growth. Reading such books is one good way to reflect on

what is most important to you. For the busy manager with a long

commute, books on tape are a useful way to de-stress and maintain

alignment.

APPENDIX A • STRENGTHENING YOUR MORAL SKILLS 225

Workshops Look for seminars on leadership, emotional intelligence, and values.

Many senior managers think they don’t need “training.” Recognize your

human fallibility and invest the time in active learning where you

can benefit from the expertise of the presenters and the support of your

fellow participants.

Personal Counseling Some of us find that our moral viruses are so severe that they are seri-

ously limiting our personal and professional effectiveness. The worst

moral viruses usually arose out of traumatic childhood events. If some

aspect of your life is not working for you, despite your best efforts,

find a counselor or psychotherapist who can help you understand the

source of your difficulties and work with you to develop more effective

behavior.

Executive Coaching Executive coaches are a particularly helpful resource for high-potential

managers who want to accelerate their leadership development and for

seasoned managers with moral or emotional blind spots. An executive

coach understands the demands of your leadership role and the politics

and culture of your organization. A coach can help you get the kind of

honest feedback you need to build a development plan, keep you

focused on your goals, and advise you on how to increase your leader-

ship effectiveness. Many of the best-known Fortune 500 CEOs have

benefited from their use of executive coaching services.

226 MORAL INTELLIGENCE

• Please choose one rating in response to each statement by circling the number that corresponds to your rating.

• You will get the most value from this assessment if you respond honestly. It may be tempting to give yourself a high rating

because the statement sounds positive, but please do your best to

rate yourself accurately in terms of how you really behave.

1. I can clearly state the principles, 1=Never

values, and beliefs that guide 2=Infrequently

my actions. 3=Sometimes

4=In most situations

5=In all situations

MORAL COMPETENCY INVENTORY (MCI)

B

227

2. I tell the truth unless there is an 1=Never

overriding moral reason to withhold it. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

3. I will generally confront someone 1=Never

if I see them doing something that 2=Infrequently

isn’t right. 3=Sometimes

4=In most situations

5=In all situations

4. When I agree to do something, 1=Never

I always follow through. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

5. When I make a decision that turns out 1=Never

to be a mistake, I admit it. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

6. I own up to my own mistakes 1=Never

and failures. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

7. My colleagues would say that I go 1=Never

out of my way to help them. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

228 MORAL INTELLIGENCE

8. My first response when I meet new 1=Never

people is to be genuinely interested 2=Infrequently

in them. 3=Sometimes

4=In most situations

5=In all situations

9. I appreciate the positive aspects of 1=Never

my past mistakes, realizing that they 2=Infrequently

were valuable lessons on my way to 3=Sometimes

success. 4=In most situations

5=In all situations

10. I am able to “forgive and forget,” even 1=Never

when someone has made a serious 2=Infrequently

mistake. 3=Sometimes

4=In most situations

5=In all situations

11. When faced with an important decision, 1=Never

I consciously assess whether the decision 2=Infrequently

I wish to make is aligned with my most 3=Sometimes

deeply held principles, values, and 4=In most situations

beliefs. 5=In all situations

12. My friends know they can depend on 1=Never

me to be truthful to them. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

13. If I believe that my boss is doing 1=Never

something that isn’t right, I will 2=Infrequently

challenge him or her. 3=Sometimes

4=In most situations

5=In all situations

APPENDIX B • MORAL COMPETENCY INVENTORY (MCI) 229

14. My friends and co-workers know they 1=Never

can depend on me to keep my word. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

15. When I make a mistake, I take respons- 1=Never

ibility for correcting the situation. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

16. I am willing to accept the 1=Never

consequences of my mistakes. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

17. My leadership approach is to lead 1=Never

by serving others. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

18. I truly care about the people I work with 1=Never

as people—not just as the “human 2=Infrequently

capital” needed to produce results. 3=Sometimes

4=In most situations

5=In all situations

19. I resist the urge to dwell on my mistakes. 1=Never

2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

230 MORAL INTELLIGENCE

20. When I forgive someone, I find that it 1=Never

benefits me as much as it does them. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

21. My friends would say that my behavior 1=Never

is very consistent with my beliefs 2=Infrequently

and values. 3=Sometimes

4=In most situations

5=In all situations

22. My co-workers think of me as an 1=Never

honest person. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

23. If I knew my company was engaging 1=Never

in unethical or illegal behavior, I would 2=Infrequently

report it, even if it could have an adverse 3=Sometimes

effect on my career. 4=In most situations

5=In all situations

24. When a situation may prevent me from 1=Never

keeping a promise, I consult with those 2=Infrequently

involved to renegotiate the agreement. 3=Sometimes

4=In most situations

5=In all situations

25. My co-workers would say that I take 1=Never

ownership of my decisions. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

APPENDIX B • MORAL COMPETENCY INVENTORY (MCI) 231

26. I use my mistakes as an opportunity to 1=Never

improve my performance. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

27. I pay attention to the development 1=Never

needs of my co-workers. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

28. My co-workers would say that I am a 1=Never

compassionate person. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

29. My co-workers would say that I have a 1=Never

realistic attitude about my mistakes 2=Infrequently

and failures. 3=Sometimes

4=In most situations

5=In all situations

30. I accept that other people will 1=Never

make mistakes. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

31. My co-workers would say that my 1=Never

behavior is very consistent with my 2=Infrequently

beliefs and values. 3=Sometimes

4=In most situations

5=In all situations

232 MORAL INTELLIGENCE

32. I am able to deliver negative feedback 1=Never

in a respectful way. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

33. My co-workers would say that I am the 1=Never

kind of person who stands up for my 2=Infrequently

convictions. 3=Sometimes

4=In most situations

5=In all situations

34. When someone asks me to keep a 1=Never

confidence, I do so. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

35. When things go wrong, I do not blame 1=Never

others or circumstances. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

36. I discuss my mistakes with co-workers 1=Never

to encourage tolerance for risk. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

37. I spend a significant amount of my time 1=Never

providing resources and removing 2=Infrequently

obstacles for my co-workers. 3=Sometimes

4=In most situations

5=In all situations

APPENDIX B • MORAL COMPETENCY INVENTORY (MCI) 233

38. Because I care about my co-workers, 1=Never

I actively support their efforts to 2=Infrequently

accomplish important personal goals. 3=Sometimes

4=In most situations

5=In all situations

39. Even when I have made a serious 1=Never

mistake in my life, I am able to 2=Infrequently

forgive myself and move ahead. 3=Sometimes

4=In most situations

5=In all situations

40. Even when people make mistakes, 1=Never

I continue to trust them. 2=Infrequently

3=Sometimes

4=In most situations

5=In all situations

234 MORAL INTELLIGENCE

If you are using the paper version of the MCI that appears in this book,

you now need to use the following scoring sheet to produce your survey

results:

1. Transfer your ratings for each item to the scoring sheet. Your

item 1 rating should be placed next to the number “1” in col-

umn A. Your rating for item 2 should be placed next to “2” in

column B, and so on. Continue until you have transferred your

ratings for all 40 items.

2. Add each column and place the total in the box indicated.

3. Add columns A through J and place the total in the box indi-

cated. Columns A through J are subscores for each of the 10

moral competencies discussed in Chapters 5–7.

SCORING THE MCI

C

235

4. Divide the total from columns A–J (step 3a) by 2 and place in

the box indicated. This is your total MC (Moral Competency)

score. The maximum MCI score is 100

5. Using the Moral Competencies Worksheet below the scoring

sheet, transfer your scores for each column—A through J —to

the corresponding list of competencies that are listed after each

corresponding letter.

236 MORAL INTELLIGENCE

A PPE

N D

IX C

• S

C O

R IN

G T

H E

M C

I 237

MCI Scoring Sheet

Item A Item B Item C Item D Item E Item F Item G Item H Item I Item J 3a. Add

1 2 3 4 5 6 7 8 9 10

11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28 29 30

31 32 33 34 35 36 37 38 39 40

Add Add Add Add Add Add Add Add Add Add

Col Col Col Col Col Col Col Col Col Col

A B C D E F G H I J

4a. Divide by 2

MCI Score

columns (A–J)

Moral Competencies Worksheet A. Acting consistently with principles, values and, beliefs

B. Telling the truth

C. Standing up for what is right

D. Keeping promises