, , , ,

What is Return on Integrity
(and Why is it Important?)

By Chris Hitch, Ph.D.
Originally published by UNC Kenan-Flagler Business School

During an executive development program of high potential mid-career professionals, we talked about a significant problem. “We’re told over and over that we need to achieve very high financial performance. We’re all very driven people. So, we do what we need to do to achieve those goals. Yet, there are times when l see where we cut some corners. Most of the time, it’s not a problem. But each time I see it, I worry about our partners’ reaction if they find out.”

I’d be willing to bet that we all have this same issue. We want to do the right thing all the time. That’s a key to integrity. But there are times when I ask, “Is there a return on doing the right thing? Is there a return on having integrity?”

This is a challenge as old as time itself, going back to David and Bathsheba (Ludwig and Longnecker, 1993, Journal of Business Ethics, 12:265-273) and Machiavelli. I’ve worked in leadership development with over 6,000 managers and executives in multiple industries since 1995. A key element focuses on “What is the right thing to do here? How do we ‘walk the talk’ between what we say and what we do?  How do we act with integrity?” One thing I’ve learned is that integrity is NOT a single decision by a monolithic organization. Integrity comes down to individual public and private decision making. Here at UNC, we’re working through the far-reaching effects of the decisions of a few people who have created an historic academic and athletic cheating scandal.

I’m not naïve. I’ll bet that there is no one in your company that wakes up one morning and says “How can I lie, cheat, or steal at work today?“ Acting with integrity is based on your values. Your values foundation occurred a long time ago. Behaving unethically doesn’t start with one big decision to be unethical. Rather, we are all vulnerable to the same slippery slope, where we begin with small, seemingly inconsequential indiscretions, which lead to a slippery slope where unethical behavior erodes over time.

Just like high performers in all fields return to the basics on a consistent basis, these insights on acting with integrity can help you and your team focus on the fundamentals in your team on a daily basis. I’ll submit that acting with integrity has a positive ROI (Return on Integrity).

In this short series, I’ll make the case that acting with integrity has a significant financial return for you and for your organization. I’ll outline some key elements of integrity. I’ll also share some key insights (from research and the workplace) of specific actions you can continue to take to grow your integrity.

Acting with integrity isn’t just doing the right thing. It makes great financial sense as well.

The ROI on Integrity

There is some compelling evidence that there is a positive return on acting ethically. In fact, acting with integrity may be the “X factor” in leadership. We are fascinated by learning from leaders. We apply a basic formula:

  • Look at a successful leader of a particular industry or profession,
  • Interview that person,
  • Look for lessons from that particular leader in that particular situation, then
  • Try to generalize those themes to a broader audience.

Fewer of us, however, look at universal or generalizable characteristics that can transcend a particular industry, profession, career, or where one is in the journey of life (K-12, college, early career professional, or executive). My former boss, GEN H. Hugh Shelton noted to me several times that “…any leader should strive to be known as a values based leader. Values make up our character. They’re things that we believe in. They are things that we strive to make sure that we always include in our thought process when we think about making decisions.”

One of my early thought leaders on this is David Maister who noted that a firm that has great technical expertise and has demonstrated integrity will have a sustained competitive advantage in the marketplace.

More recently, several studies have outlined where acting with integrity has provided a clear positive financial return for the organization:

  • A 2000 study outlined a study of hotel employees where the higher the average employee integrity rating translated into a $250K profit increase per hotel per year. (Simon, The Integrity Dividend: Leading by the Power of Your Word).
  • A 2013 U.S. study found that a corporation’s proclaimed values appear irrelevant. What mattered to the firm’s stronger performance was employee perception of their top managers as trustworthy and ethical.  (source: Guiso, Luigi and Sapienza, Paola and Zingales, Luigi, The Value of Corporate Culture (September 1, 2013). Chicago Booth Research Paper No. 13-80; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2353486 or http://dx.doi.org/10.2139/ssrn.2353486).
  • A 2014 study suggests that a critical, yet frequently concealed, benefit of integrity is that it forces people to confront reality rather than manage the illusion or appearance of progress.
  • In 2015, researchers noted  that trust and integrity make good business sense. They found that CEOs whose company employees gave them high marks for character had a corporate average return on assets of 9.35% over a two year period, compared with companies whose CEOs had a low character rating and averaged only 1.93%.

In the next segment, I’ll dig deeper into the various elements of integrity that I’ve read about and observed over the past 25 years that have proven to be most important. Click here for part two.

From your own experience, has faith in the integrity of your leaders made an impact on your performance? Let us know!