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Books We Trust: The 3 Power Values by David Gebler

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This is the tenth in a series called Books We Trust.

The 3 Power Values is, simply, an excellent book. Author David Gebler’s unique talent is to combine a Big Idea, such as the need to remove roadblocks as the key to performance, with precisely defined linkages between values, culture and behavior. He brings needed commonsense to the often vague, un-actionable, and fog-sculpting enterprise known as organizational effectiveness.

David is a consultant and educator, with 20 years experience helping leaders understand how to use their organization’s culture to improve performance and to stay out of trouble.

The Interview

Charlie Green: David, we spoke a couple of years ago about why companies have so much trouble getting a handle on ethics issues and it seems like things are getting even worse.

David Gebler: I agree. Ethics scandals fill the papers every day. We don’t see change because we’re not dealing with the real issues that lead people to do bad things. We think that regulations will define outer boundaries to actions and that morals will guide us inside those boundaries. And that just isn’t the case.

Charlie: Why not? You would think that following the rules and knowing right from wrong would be enough.

David: What doesn’t get factored in is the environment we work in. Whether we follow the rules, even what we think is proper, is heavily influenced by the culture. Social norms tell us whether it’s OK to flout the rules. The norms also tell us whether to feel entitled or remorseful when we cheat or do something wrong.

Charlie: When is it OK to violate rules?

David: Charlie, even you have driven over the speed limit. But you wouldn’t call it morally reprehensible, I suspect. We have normalized that speeding, up to a certain point, is something we all do. So even if it’s illegal, we don’t see it as a moral issue.

Charlie: Did you say that moral issues are also subjective? What do you say to those who say morals are morals, right is right, and wrong is wrong?

David: The truth is, even our definition of what is right is subjective. Leaders in behavioral economics, such as Dan Ariely, point out that everybody has the propensity to be dishonest, and almost everybody cheats—just by a little. The behavior of almost everyone is driven by two opposing motivations.  On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people.

What determines whether we feel good about ourselves is the environment we’re in. If we’re in a culture where cheating is frowned upon, people will cheat less, because cheating impacts their sense of self. But if the culture is to take advantage and win at all costs, then cheating and cutting corners becomes just the way we do business.

Charlie: So if the key factor is culture, why do so few leaders tackle this issue head on?

David: Culture is so intangible that leaders hesitate to dive in – not even just to understand it, much less to tweak it. Many leaders haven’t focused on measuring and managing culture, not realizing that they can. Most don’t understand whether their culture hinders or supports performance, much less the implementation of strategies. And finally, many leaders don’t even know whether their culture encourages unethical or illegal conduct.

Charlie: In the book you explain that three “Power Values” are essential to get a handle. What do you mean by that and what are those values?

David: Twenty years of work with companies showed me that three values – integrity, commitment and transparency – stand out in fostering identification and community. I call these the power values because they can influence specific behaviors that in turn positively influence an organization’s culture. The chain is: values > behaviors > culture. It is the behaviors that nudge the organization’s cultural components (goals, principles, and standards) into alignment.

By focusing on the specific behaviors that make up integrity, commitment and transparency, you can transform negative behaviors impeding performance into positive behaviors supporting performance. This is how you measure and manage culture as a way to rev up performance and reduce risk.

Charlie: What if employees in the organization don’t understand these values?

David: Most employees already hold these three power values personally. When the power values are highly visible in an organization, they clarify the organization’s intentions and give employees a unifying sense of purpose and direction.

Employees who share their principles, goals, and outlook – the essence of the power values – can let their guard down a bit. They can trust that they will be understood, that there will be fewer booby traps, and that their leaders and coworkers will generally act in a predictable way, consistent with their shared values.

Charlie: What’s the connection between these power values and the kinds dysfunctional cultures we were just talking about?

David: In a positive corporate culture, employees feel good about themselves and their work (commitment).  They raise issues and freely ask questions (transparency).  They don’t feel challenged by unfair or inconsistent work processes, because people take personal responsibility for their actions and live up to their commitments (integrity).

When the elements of culture are out of alignment, frustrations arise. If principles are unaligned with goals, employees disengage and don’t feel a vested interest in their work (lack of commitment). When goals are out of sync with standards, unfairness arises as managers and employees “do what they have to do” rather than what they have said they would do (lack of integrity). And when standards are aligned with values, employees see that the organization’s actions are inconsistent with its principles, and it becomes hard to ask uncomfortable but important questions and ensure that the truth is heard (lack of transparency).

Charlie: How can you foster a positive corporate culture right from the start?

David: Organizational culture isn’t something that can be faked – or “implemented” – by leadership. The culture is simply the way the organization and its people conduct themselves. Organizations have cultures from their outset, though few start-ups spend time defining their culture when they’re small and everyone knows everyone.

When a culture goes bad, it’s not a sudden event; it’s a case of of slow erosion over time. Things begin to change. At the beginning it’s little things, e.g. a business decision made in the heat of the moment when the decision-maker didn’t feel the urgency to deal with the long-term impact at the time of the decision.

Leaders who understand the role organizational culture has in shaping behavior and performance, however, will be mindful of the early warning signs of trouble. Successful culture management means that leaders recognize the first steps down the proverbial slippery slope, and take actions to address them when they’re still small.

To do that, leadership must have a clear sense of a) what kind of culture is needed to achieve the organization’s goals, and b) what behaviors are needed to ensure that the desired culture is sustained. Successful leaders know that the small things matter greatly, and that veering off course is not to be done lightly or without serious plans to right the ship.

Charlie: Thanks, David, for sharing your insights. Until reading this, I also didn’t have a good idea of how one could actually manage culture.  You have managed to educate me greatly!

David: A pleasure, Charlie .

Real People Real Trust: Transforming a Business from the Inside Out

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Ron Prater has worked in government consulting firms for almost 20 years, including three years with Arthur Andersen LLP. In 2007, he set out with partner Alan Pentz to create a company that would apply real entrepreneurial curiosity to find new ways to solve the U.S. government’s biggest problems. The result is Corner Alliance. Find out how this organization, triggered by a crisis in its formative years, applied the principle of collaboration to devise a new and different kind of corporate culture.

Leadership Lessons

Ron and I have known each other through other people for years. A few months ago I was talking with Corner Alliance Director Sarah Agan, a mutual colleague and veteran consultant. I was intrigued by the unusual ways she described a recent all-hands meeting. “We practice ‘inner voice’ all the time,” she said. “And we have an explicit value to eat our own dog food.” Needless to say, I was intrigued by Sarah’s word choice and even more so by her animation. I wanted to find out more. So I set up some time to talk with Ron and Sarah together.

Ron explained it to me, “‘Eating our own dog food’ means we operate the way we advise our clients to—we follow the same processes and approaches we recommend to them.” “Essentially, we practice what we preach. It can be harder than it sounds when you’re trying to balance helping clients succeed while also trying to grow a sustainable business. And it hasn’t always been that way, even in our company’s short life.”

Learning the Hard Way

Corner Alliance had some growing pains in its early years. “We had a really tough time a few years ago when we lost a project that led to a serious financial struggle,” Ron confided. “I, along with my partner, Alan, and our Director of Operations, Brandi Greygor, responded in typical ways. Privately, we talked daily about how much money we had left in the company’s line of credit and what to do if we maxed out what the bank would loan us. Publicly, we sent a general message to staff that we all needed to ‘increase billability’ but we were afraid to state the full reason.

“We thought we were doing the right thing by keeping the true stress from our staff. The MBA books say it’s important to protect the people from the stress of running the business. And the HR consultants told us we had to follow proper procedures to avoid lawsuits if we did have to lay people off. So we kept things hidden.”

Going contrary to conventional business wisdom, Ron and the other principals listened to their own inner wisdom. “It’s not how our guts said to handle it. We faced a real inner conflict every day for months. How do you form a company of trust and transparency when it seems like all the advice you get—from grad school, friends, lawyers, and more—says to withhold information?

“Looking back,” Ron said, “I grew more personally from that very tough time than from every great year I had. While it was hard, the learning from those six months led to one of the most positive and significant turning points for Corner Alliance.”

Eat Your Own Dog Food

Out of the crisis came a big transformation for the company. “With cost-cutting, along with full transparency with our staff, we managed to stabilize our operations,” Ron said, “And we realized that, on the heels of such a hard and painful time, we had a real opportunity to fundamentally re-think and re-vision.

“So Alan and I announced to our staff that he and I would map out a new company strategy,” Ron elaborated, “including our top three strategic priorities. We told people at an all-hands meeting that we’d start by focusing on which clients to talk to and what to offer them. That message landed with a thud. Within the first few minutes of the meeting it was clear we had made a huge mistake and needed to rethink the approach.

“Our people said, ‘That’s not how we advise our clients to develop strategy. So why are we doing it that way?’”

That uh-oh moment led to a dramatically different plan to create the company’s strategy. “We realized we’d be stronger if we engaged the whole company in the company,” Ron continued. “And instead of starting with what we do and where we want to go, we started with who we are and what we wanted to stand for as a company,” Ron explained.


Put Values First

The group put first things first. “We focused first on our values, and to do that we created a conversation rather than creating a task,” Ron said. “We also found a way to make it a truly collaborative process, not just a collaborative process led by one person. We’ve never been about one-person trust—not at our core—so we found a way to define our values that would reflect that we all have to trust everyone else in the company.

“Since we’re a virtual company with staff in five different states, we selected an on-line tool to help us create the conversation. Everyone could contribute real-time, see each other’s inputs, make comments, and vote.”

Take Your Time

The process of defining yourself takes time Ron learned. “We allowed three weeks to generate ideas, and it took us about four months to solidify our values. If we had tried to get results in a one-day strategy session, our output would have been more generic—even with everyone participating,” Ron added. “People needed time to digest and think through what they stood for and then internalize that in relation to the company. The elapsed time allowed people to contribute at their best, and allowed the most important things to materialize organically.”

They ended up with 10 explicitly stated corporate values that are the foundation on which Corner Alliance continues to be built. Not surprisingly, “Eat our own dog food” was on the short list.

It’s a value that Sarah especially endorses. “We live that value even beyond our approach to strategy development,” she added. “Everyone takes turns running our internal meetings—everyone. We share leadership that way, and expand our capacity as leaders and facilitators at the same time. People get to experiment, practice, and learn in a safe environment, and they get real-time feedback. Just like the leaders we serve, we have to be willing to take risks and make mistakes to learn.”

Sarah continued, “It’s okay for things not to go well. What’s not okay is not learning from it. One of the greatest gifts we give each other is feedback. We are deliberate about creating a culture where we all recognize we’re both perfect and imperfect, where we can bring our whole selves—who we are and who we aren’t.”

Tell It Like It Is

Financial transparency is another key value that emerged from Corner Alliance’s collaborative strategy process. “Alan was instrumental in moving us to open-books management,” Ron said. “We now share just about everything with all employees every quarter, the exception being salary information. We have bi-weekly company-wide calls where everyone sees each other’s billability, our revenue, where we are exceeding or falling short of revenue projections.  We don’t hide anything bad or anything good.”

Ron is clear that the effect is palpable. “It has made a massive difference in everyone understanding the business impact of their decisions,” he stated. “It also supports one of our other corporate values, which is sustainability. I believe the whole firm really understands the state of Corner Alliance and can see that we have a really strong foundation for growth right now.”

Be Bold with Clients

That kind of transparency also now extends to Corner Alliance clients—in a bold and differentiated way. The stated value “inner voice” is about people sharing their internal dialog as much as possible, recognizing that’s often where the truth lies. Corner Alliance staff is encouraged to not leave important things unsaid.

“This is definitely not easy,” Ron emphasized. “It takes a commitment to practice over time with our clients and with each other. We actually label it, as in, ‘Using my inner voice, I’d like to say I think there are serious organizational risks associated with what you are considering.’ This makes it easier to do and hear as the person listening now knows that the person speaking is taking a risk.

“Our people know they’ve got the organization behind them every time they venture into inner voice territory,” Ron affirmed. “As Alan points out about using inner voice, ‘It’s a personal risk to reveal what you’re thinking but not saying. It’s a risk to the organization if you don’t.’ But we all also recognize it’s important to apply this value wisely, appropriately, and thoughtfully.”

Perhaps the most unexpected result from this dedication to speaking the truth is that clients have begun to pick up both the practice and the lingo. Ron explained, “When our clients started saying to us, ‘My inner voice is saying xyz,’ we knew we were onto something bigger.”

Reap the Rewards

The list of indicators that Corner Alliance is onto something is long, and now includes growing staff, secure multi-year prime contracts in place, and work with key government executives who have budgets in the billions. “Corner Alliance is poised for an incredible year in 2012,” Ron said with pride. “Not only are we making a difference in the business of government, but we get emails from clients saying, ‘You’ve changed my life.’”

The focus for 2012? “Helping people thrive by doing creative, meaningful work, and living the life they want—not just the work life they want,” said Ron.

The Bottom Line

Ron feels very strongly that what Corner Alliance has created was not led by or done by one person. “Featuring me for this article is actually counter to our culture,” Ron stressed. “Corner Alliance has been led by a collaborative approach using values as our core, and that’s precisely what will lead us into the future.”

And a promising future it is.

Connect with Ron on LinkedIn.

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The Real People, Real Trust series offers an insider view into the challenges, successes, and make-it-or-break-it moments of people from all corners of the world who are leading with trust. Check out our prior posts: read about Chip Grizzard: A CEO You Should Know; Ralph Catillo: How One Account Executive Stands Apart; Anna Dutton: A Fresh Perspective on Sales Operations; Heber Sambucetti: A Learning Consultant’s Approach to Leadership; Janet Andrews: What Trust-based Strategy Consulting Looks, Feels, and Sounds Like, and John Dunn: An Entrepreneur Wins with Partnership.

 

25 Warning Signs You Have a Low-Trust Organization: Part 4 of 5

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Are you part of a low-trust organization? There are a surprising number of symptoms and tip-offs; perhaps the least obvious are in the organization’s products and services. This is fourth in a series of five. The other posts address warning signs from:

Product/Service Warning Signs of a Low-Trust Organization

Take a hard look at YourCo’s products and services. Not only do they provide tipoffs about high or low trust – they are themselves the beneficiaries (or victims) of high or low trust. YourCo’s market offering is very much tied up with trust.

Here are some product/service indicators of low trust at YourCo:

1. Innovation is low in YourCo.

  • Pick five big-picture indicators of innovation and rank your organization vs. your competitors. If you rank high, you probably have a high-trust organization. Low? Then probably not so much.
  • If you don’t rank well, you’ve got well-rehearsed excuses. “We’re like Apple, we’re not first in but we get it right.” “We focus more on service quality than on innovation per se.”  But you know what? Apple innovates. Ritz-Carlton innovates. Just in different areas. What’s your area?
  • The simple truth is, high-trust organizations foster high levels of innovation; low-trust organizations don’t. The lack of innovation is a canary in the coal mine; innovation itself is one of the great benefits of high trust.

2. Complaints are considered routine at YourCo.

  • Nobody’s perfect? OK. But if a complaint about your product or service no longer produces pain or angst within YourCo, then you’ve lost trust. Customers will sense that you’re unreliable, and – worse – that you don’t care.
  • Maybe this is just us, but we think those “please take a moment and rate your service” approaches hurt trust. They are automated; they leave no room for creativity; worse, they are all about YourCo and YourCo’s internal evaluation scheme. And worst of all, they pretend to be about the customer.

3. You don’t offer guarantees.

  • If you’re a retailer offering $1.99 items, “satisfaction or your money back” is no big deal. But if you’re a professional services provider, the value you provide may be way beyond the cost you charge.
  • What would it cost you to guarantee the cost of your service? If you’d lose money doing that – then maybe you have a service quality problem. The perception of not standing behind your service is that you yourself don’t trust it.
  • If you do offer a guarantee but it’s in small print, and you quibble over it, you just lost the value of the guarantee. That means you view guarantees as a cost of doing business, and not as a sign of confidence and customer respect. That will cost you trust.

4. Information is not forthcoming.

  • In this day and age, all customers – B2B, B2C – want easy access to every question they might have. The organization that gives you easy access to answers is the one that gets your trust.  The organization that manages your access to information so that you only see what they want you to see when they want you to see it – that’s the organization that loses your trust.
  • Put everything you can imagine on your website. That doesn’t mean it has to be all above the fold on page one; it just means you have to make it very available, and reasonably accessible. If I can’t find it, I infer you must be hiding it.  And I don’t trust you.
  • There are some questions I want help with; that’s when you make 800 numbers available, click here for live chat…  If instead of those options I get, “this is a recorded message; please call back during the hours of…” that’s when trust declines.

5. You think you’ve got the hamburgers.

  • In the early days of McDonald’s in Moscow, I’m told, customer service attitudes were hard to change. As one employee told a hapless American from corporate, “You people don’t seem to understand.  You see, we have the hamburgers; the customers don’t. They should be nice to us.”
  • Working from trust in business means you don’t trap people into doing what you want. Instead, you give them what they want; then let them live up to their humanity and give you what you want. The best way to create trustworthy customers is to trust them with your products and services.

The next blogpost in this series will be the last: client and customer tip-offs about whether you’re a low-trust organization.

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Many Trusted Advisor programs now offer CPE credits.  Please call Tracey DelCamp for more information at 856-981-5268–or drop us a note @ [email protected].

25 Warning Signs You Have a Low-Trust Organization: Part 3 of 5

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Low-trust organizations can be spotted in many ways.  This is third in a series of five. In this one, we explore warning signs from leadership. Previous and future posts address warning signs from:

  • Employees
  • Teams
  • Leadership (today’s post)
  • Products and Services
  • Clients and Customers

Leadership Warning Signs of a Low-Trust Organization

Look at the leadership in your organization. Does it have some of the following characteristics? If you’re a leader yourself, think hard, you might be contributing to a low-trust organization. These issues all arise from leadership choices, after all.

1. The Cult of the Corner Office thrives.

  • Do you have corner offices that are not conference rooms? Do they come with extra appointments, more square footage, better desks? Are there criteria for who gets them? You may have an issue.
  • If you have sanctified real estate, the odds are you have other visible symbols of class status and rank. With one exception, class systems detract from trusted relationships in an organization.
  • The exception: you’re intentionally running a business that connects meritocracy and materialism. Some trading operations fit that description. But you’re not likely to confuse them with high trust environments anyway.

2. The highest performer is a values-offender.

  • Name the 2-3 smartest, highest-bonus, most successful persons in your organization.  Does at least one of them get there by thumbing his or her nose at your avowed corporate values? Then you have a problem.
  • Values mean nothing if they are not enforced. Very few values statements have exceptions clauses (“…unless you can make a really profitable sale..”). What part of “team player,” “integrity,” or “client-focused” do you think rhymes with not showing up at team events, obfuscation, or self-aggrandizing?
  • Nothing shoots holes in values statements like blatant hypocrisy.

3. Blame is an art form.

  • Blame is the opposite of responsibility. If leadership means anything, it means taking responsibility. If the first words out of leaders’ mouths in the face of difficulty are to blame the situation or another person, what you have is the absence of leadership.
  • Don’t confuse an explanation with an excuse. Explanations are important; they help us know what to do differently next time. They do not, however, let anyone off the hook. Leaders can’t be let off the hook; that’s part of the definition of leadership.
  • Blame and its twin “inability to confront” corrode trust. They both try to disconnect responsibility from the truth. Leaders don’t do that.

4. “Need to know” is your catchphrase – and you’re not in the military.

  • The military, and military contractors, legitimately operate on a “need to know” basis. Not too many others do. It’s an easy rationalization that leads to low trust.
  • If I say you don’t need to know something (outside the military), it means you can’t be trusted with the information. Maybe you’re incompetent, maybe you’re a blabbermouth, maybe you’ll misinterpret it; there can be many reasons for low trust. But they’re all low trust.
  • If I don’t understand or accept why I have no need to know, then I will resent you telling me. Resentment leads to all kinds of avenues, none of them good, and all of them low-trust at heart. Need-to-know erodes trust.
  • None of them above is any different because it’s a policy: a policy to withhold the truth systemically just means you have a systemic approach to withholding the truth. Now you have a whole organization that is untrusting.

5. The need to “have a positive outlook” trumps the need to tell the truth.

  • Many a leader has said, “We need to keep people’s morale up, make sure they hear this the right way, don’t let them get depressed.” That way lies trouble. Because the truth has a way of getting out.
    • Most people in most situations would prefer to hear the truth, to make up their own minds. They don’t trust people who assume they know better.  Remember Colonel Jessup in A Few Good Men, yelling, “The truth! You can’t handle the truth!” Don’t be that guy.

In the next post, we’ll explore 5 ways in which products and services can indicate a low-trust organization.

The Evolution of Trust-based Leadership

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In 2000, I co-wrote The Trusted Advisor, with David Maister and Rob Galford. At the time, it was aimed largely at external professional services advisors. The word “leadership” appeared exactly once in the book (I checked).

This month, Andrea Howe and I published The Trusted Advisor Fieldbook. The subtitle is, “A Comprehensive Toolkit for Leading with Trust.” “Leadership” occurs 19 times, and the l-word itself appears many more times in its various forms.

What changed?

Trust Didn’t Change

The dynamics of trust are the same. I’ve developed the Trust Quotient and the Trust Principles since 2000, but the fundamentals are the same. The Trust Equation, the ELFEC process for creating trust, the dynamics between trustor and trustee are unchanged.

That’s hardly surprising. Trust is a fundamental human relationship that’s been around since well before the written word.

The World Changed

My Trusted Advisor co-author Rob Galford was more prescient than I; he wrote The Trusted Leader way back in 2003. Or, maybe he was ahead of his time. In any case, by 2011, the world looked radically different than it did in 2000.

In particular, the business world is:

  • Flatter – more horizontally linked, less vertically integrated
  • More inter-connected: think Linked-In, outsourcing, offshoring
  • More wired – Windows XP was then; the cloud and iPad are now
  • More independent – Boomers ruled then; millennials rule now
  • More collaborative ­– YourCo against the world is DeadCo
  • More transparent – Facebook, data scraping, digitized everything
  • More networked – a competitor in one line is a partner in another.

Leadership Changed

In 2000, “leadership” conjured up images of #1 leader Jack Welch pacing the floor in front of high-potential candidates at Crotonville, violating the chain of command with exhortations for “boundarylessness” – as long as it stayed within the boundaries of the corporation known as GE, that is.

Today, “high-potential” sounds not just elitist but out of whack with reality. Just as everyone today is a salesperson, everyone is in customer service – so too everyone is a leader.

That’s not corporate double-speak; it has meaning. The leadership skills of today are persuasion, influence, collaboration, the ability to create alliances, to join forces, to create environments that encourage collaboration, the ability to play nicely together in the sandbox, to forge agreements, and to play long-term win-win rather than screw-your-customer to jack up the quarterly numbers.

Leadership Skills are Trust Skills

Those skills are trust skills. We don’t need fierce competitors, we need fierce collaborators. We don’t need to ‘win one for the gipper,’ we need to win one for all of us. We don’t need vertical skills, we need horizontal skills.

Certain leadership skills are constant: the ability to inspire, to create and articulate visions and stories, for example. But others have been replaced. Being good at vicious infighting to gain the top job is – on balance, in most companies – a lot more dysfunctional these days than valuable. Making “tough decisions” isn’t the virtue it used to be; sometimes it just reflects a failure of imagination.

Today organizations are less about being led and more about cultures that foster leadership throughout.  Such cultures are driven by what we call Virtues and Values.

But that’s another story for another blogpost.

Creating a Culture of Trust: Virtues and Values

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This post comes from our upcoming book, The Trusted Advisor Fieldbook: A Comprehensive Toolkit for Leading With Trust, from the chapter on Implementing a Culture of Trust. Tools for trust initiatives include principles, or values, at the organizational level, and personal attributes, or virtues, at the individual level. The chapter explores five tools for implementing trust change initiatives: leading by example, stories, vocabulary, and managing with wisdom. This post explores two diagnostic tools: the Trust Temperament™ and the Trust Roadmap™.

We will be sharing selected portions of the book with our readers leading up to the publication date. The Trusted Advisor Fieldbook will be available from Wiley Books on October 31, 2011, or you can pre-order The Trusted Advisor Fieldbook today.

What Is a High-trust Organization?

Our definition: an organization of people who are trustworthy, and appropriately trusting, working together in an environment that actively encourages those behaviors in employees as well as stakeholders.

Creating a culture of trust requires a different emphasis than do most change initiatives. What works to reduce accident rates, increase customer-centricity, or become ISO-9000 compliant isn’t the same as what’s needed to create a high-trust organization.

Trust is about interpersonal relations. For people to trust and be trusted by others, they must take personal risks and face personal fears in ways that cannot, by their nature, be fully planned and structured in ways that typical change initiatives can rely on.

That suggests a different emphasis: an initiative built around personal change.

Two Keys to Trust Culture Change: Virtues and Values

Creating a high-trust culture boils down to two main thrusts: virtues and values. “Virtues” are the personal qualities that high-trust people embody, and “values” are what guide the organizations they work in. In trust-based organizations, virtues and values are consistent and mutually reinforcing.

We use these words very intentionally, because they’re commonly understood–and common language matters. Each deserves its own word and understanding, and both are required for trust culture change. In our experience, some companies rightly focus on organizational values, but few focus enough on personal virtues.

 

The virtues of trust are personal, and involve your level of trustworthiness and your ability to trust. The virtues of trust are contained in the trust equation: credibility, reliability, intimacy, and self-orientation.

It is virtuous for someone to tell the truth, to behave dependably, to keep confidences, and to be mindful of the needs of others. Unless people take personal responsibility for their own behavior around trust, the organization will never be a trust-based organization.

 

The values of trust are institutional, and drive the organization’s external relationships, leadership, structure, rewards, and key processes. The values of a trust-based organization are reflected in the four trust principles: other-focus, collaboration, medium- to long-term perspective, and transparency. An organization that espouses these values treats others with respect, has an inclination to partner, has a bias toward a longer timeframe, and shares information.

Trust-based organizations take values very seriously. If your organization has never fired someone for a values violation, then either you’ve been astoundingly successful in your hiring and development efforts, or you’re not a strongly values-driven organization.

Diagnosing Trust

To improve virtues and values, it’s helpful to know where you’re starting from—to have some kind of diagnostic. For virtues, there is the trust quotient: for values, there is the Trust Roadmap™.

Virtues.

The trust quotient is a self-diagnostic taken at the individual level, based on the four values of the trust equation.   With individual data aggregated anonymously at the group level, you can profile the organization in terms of Trust Temperaments (the pair of highest-scoring values in the trust equation for an individual), as follows:

Trust Temperament™ Highest Ranked Attributes Motto
The Expert C, R “Lead, follow, or get out of the way.”– Anonymous
The Doer R, I “As for accomplishments, I just did what I had to do as things came along.”– Eleanor Roosevelt
The Catalyst C, I “A genuine leader is not a searcher for consensus but a molder of consensus.”– Martin Luther King, Jr.
The Professor C, S “The important thing is not to stop questioning. Curiosity has its own reason for existing.”– Albert Einstein
The Steward R, S “My goal wasn’t to make a ton of money. It was to build good computers.” – Steve Wozniak
The Connector I, S “It’s not what you know, it’s who you know.”– Anonymous

 

Values.

The Trust Roadmap is a diagnostic tool that surveys the Trust Values across components of organizations, as below:

Collaboration Medium- to Long-Term Perspective Transparency Other Focus
External Relationships
Leadership
Structure
Rewards
Processes

 

Generic and organization-specific questions are developed for each of the 20 cells, and the survey administered to groups of stakeholders: customers, employees, managers, for example.   For example, the question for Leadership and Medium-to-Long Term Perspective might be “Your leaders are willing to sacrifice short-term gains for the long-term benefit of the organization.”

The survey results allow a management team to assess, in a structured manner, where the organizational values that drive trust are being implemented, and where they’re not; how those patterns vary across constituencies; and what they feel the priority should be in addressing the issues.  In short, a Trust Roadmap.

The Trusted Advisor Fieldbook: A Comprehensive Toolkit for Leading With Trust will be published by Wiley Books on October 31, 2011.  Pre-order your copy of The Trusted Advisor Fieldbook today.

How the Mortgage Crisis Made Us Immoral

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If you own a house and I’m your neighbor, I’ll respect your property rights. It’s just the right thing to do. (Though if there’s a fire at my place, I might break in to borrow your fire extinguisher).

If you live in a nice neighborhood, you have little to fear from the more modest parts of town. (Though if your neighborhood doubles its average income, and the modest part of town doubles its unemployment rate, and you start putting gates around your community—well, you might be a little more fearful).

Which leads us to this US headline from Fannie Mae’s Quarter 1 National Housing Survey:

“Nearly twice as many Underwater Borrowers (27%) think it is okay to walk away from a mortgage if they face financial distress than in January 2010.”

Is this a moral issue? What does it mean that the frequency of the opinion has changed? That it has doubled in a year?

Economics and Morality

Most people still think it’s immoral to walk away from a debt. But those who think otherwise—that defaulting on a payment to a nameless morass of long-since-tranched, securitized asset-owners is as amoral as it gets—have grown by 100% in just over a year.

That’s pretty high growth for the amoral team.

It’s one thing to say that morality should have nothing to do with economics. And indeed, the sense of honor and justice and trust that underpins most moral behavior is socially useful. If we all acted solely in our immediate self-interest in every situation, the world would be a greedy, dangerous, Hobbesian mess.

At the same time, economic disparity writ large spells social unrest. In Greece, they riot in the streets. In Rio de Janeiro, they have a street crime problem.

In the US, we are witnessing a small version of things. People who used to feel a moral obligation to repay a debt are saying to themselves, “Heck, the big guys and companies do this all the time—if things aren’t working out, they just default, take the insurance payment, write it off, whatever. There’s nothing moral or immoral about it—it’s just dumb to do otherwise.”

Economics Can Wear Down Morality

You may think that honoring your debt is a moral issue. You may think it’s not. What’s clear, though, is that the ratio of those two views is being driven by economic changes.

The credit ratings services will take note of this, calling it a likely increase in the default rate, and a cause for downgrading securities.

But the people on the street—in both the nice and the modest neighborhoods—will experience it as a moral casualty of the economy.

It’s just one more area of human relations that will no longer be governed by the rules of “rightness,” but rather by the least common denominator, Darwinian terms of the marketplace.

And that’s not a change to be happy about.

NY Life ex-Chairman Sy Sternberg on Trust in the Life Insurance Business: Trust Quotes #16

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Seymour “Sy” Sternberg served as Chairman and CEO of New York Life from the late 1990s until 2008. New York Life is a Fortune 100-sized company in existence since 1845. It is the largest mutual life-insurance company in the US, and one of the largest life-insurers in the world.

I spoke with Sy in his offices atop the New York Life building on lower Madison Avenue in Manhattan.

CHG: Thank you very much for taking time with us to talk about trust, an issue that I understand has some resonance for you.  Let’s start with the company. New York Life goes back over 150 years. Are there some principles or values that have stayed with the company since its beginning?

SS: When I took over, we decided on a very simple set of values for the company; not that the values were new, in fact they represented values we had always had—I just wanted a shorthand for it. Those values were financial strength, integrity, and humanity. Implicit in the integrity component, the way I see it, is trust.

Rich Sternhell recently showed me an interview from about 40 years ago with our then-CEO: let me quote a bit of it:

“These days we’re being constantly reminded of how important are honesty, integrity and dependability. We were founded in 1845 on a remarkably similar premise: Trust us, we said then as we say now, and we will keep our promises…The guarantees we make last a lifetime.”

One of our more recent ads shows an old desk with an old quill pen on it; the text says, “Our promises have no expiration date.” My point is simply, these are themes that have been around for a long time. [Note: the three values are engraved on a plaque inset into the wall on the ground floor of the NY Life headquarters building—across the hall from the company museum].

We’re trying to emphasize this in other ways too. The industry has for a long time sold immediate annuities. We’ve renamed that product to emphasize our values: Guaranteed Lifetime Income. Same product, but it emphasizes we are insuring not mortality risk, but longevity risk.

It also uses the word “guarantee,” which again reinforces the promises we’re keeping. We’re not emphasizing your risk of dying; we’re insuring your “risk” of living, making sure you’ve got enough money. That’s the current market need; but it’s also a simple rephrasing of our basic values that have always driven us.

The word ‘guarantee’ is important in that rephrasing too; just like our guarantees have always been there for life insurance.  We paid every claim in the ’29 crash.  We paid claims under a flag of truce in the Civil War. During the San Francisco earthquake, we were the first to provide loans to survivors. During 9/11, when I chaired the American Council of Life Insurance, we waived all of our war provisions in our policies, and did not enforce clauses on proof of death. We led that drive. That is all values-driven. Do what is right. And that’s where trust comes in.

CHG: How did you, Sy Sternberg, happen to join New York Life?  What brought you into the fold?

SS: I got an electrical engineering degree from City College of New York, then went to work for Raytheon in Massachusetts, and got a masters in Electrical Engineering at Northeastern. At that time, electrical engineering was the one place where you could pursue computer science. I switched from hardware to software, and helped design Raytheon’s first automated drafting systems. We did a purchasing system, and then I was hired away by a consulting firm that had a contract with MassMutual, in Springfield, to automate the entire agency network. It was a great job, so I joined up, and in 1975, MassMutual hired me directly.

I rose up the ranks in information systems, and the president then asked me to take over the health insurance business. (I didn’t realize at the time that they figured that business was dying and there was nothing to lose in handing it to me; fortunately, I was able to turn it around). I left MassMutual for New York Life in 1989, then rose up the ranks and became Vice Chairman in 1995, and president in 1996, and—on April Fools’ Day 1997—CEO.

CHG: What role does the concept of trust play in the life insurance industry? Is that role distinct from the role trust plays in business in general?

SS: I think people expect trust in all businesses.  The need is always there. But I think it’s distinct in life insurance, for several specific reasons.

One reason is complexity. Few people really understand insurance, they cloud over when you get into it. It means you end up having to trust the person who sells it to you.

Another reason is that it’s a high stakes product: there are big consequences. If we don’t get it right, and it doesn’t pan out, that not only hurts you the customer, but the family involved as well. Consequences extend beyond the customer to his or her most important relations.

The third area of trust is that this is a business where it’s fairly hard to switch providers or vendors. You can’t just redo your insurance policy like you can switch restaurants or bank accounts—because the rates have gone up as you’ve gotten older. You may not even be insurable any more. So the consequence of changing vendors is much more severe in this business.

So there are three big reasons why trust is even more important in insurance than in others. And one more: we say in our ads, what we sell is promises; that’s it. If people can’t trust your promises, you’ve got a serious business problem.

CHG. Let’s go back up to big picture for a minute: what does the notion of ‘trust’ mean to you in the world of business?

SS: To me, trust means operating honestly. There is no agreement that can substitute for honesty in this world. There are bad people–those are people without a conscience.

Most of us, we do what’s right because it’s right, because you wouldn’t be able to sleep otherwise. So how could Madoff do what he did? Because he has no conscience, that’s how. I’m not saying you shouldn’t have formal agreements, but the relevant question is: if you didn’t have a formal agreement with someone, would the same thing happen? And if the answer is yes, than that’s someone you can trust.

Most people live by those principles, or at least try to; they may have less of a fine ear about it, but they’re not without a conscience.

CHG: So what’s happened to that ‘fine ear’ out there, how have we gotten less attuned to doing what’s right?

SS: The world lives cyclically, not linearly. We move from overly done self-interest to the opposite. Under certain environmental conditions, one’s behavior becomes more self-interested.

The insurance industry in the 50s and 60s was a Father Knows Best business—the Robert Young character was a life insurance agent. It was not dog eat dog, it was civil. At that time, no life insurance company had a CMO or a CFO—because, honestly, you couldn’t easily lose money. You invested at 5%, and provided an IRR of 2%, so who needs a CFO?  And you only changed your products every 5-10 years, so who needed a Chief Marketing Officer?

Until about 1980, that is, when Jane Bryant Quinn wrote, “Do you know what the internal rate of return on your life insurance is?” Suddenly you had to get a CFO, because suddenly the products and markets all became a lot more complex. Product series started changing twice a year. It became a more competitive market, and some agents took shortcuts.

In mid to late 80s, the whole industry got caught up in promising dividends.  Now, we all had small print saying dividends weren’t guaranteed, but agents would say you know, they’ve always grown. Well, interest rates had gone up for 30 years, that was the truth—it was a huge secular rise in interest rates. But then the 80s came, and suddenly—and for the last 20 years—they’ve gone down.

But because of what the agents said vs. what really happened, we now have compliance departments. At New York Life, we have over 100 people now in our compliance department, making sure that nothing gets said that’s wrong. At first, the agents hated that stuff. The morale of the agent was very low in the 90s. We had to learn to operate as a much more rigid business required by regulations.

So—was that a time of low integrity? I don’t really see it that way: I see it as more circumstantial. 30 years of rising rates, that’s long enough you begin to forget things could be otherwise.

CHG: However: people who get wrapped up in compliance, they end up doing things not because they’re right—because of their conscience—but because of compliance. Aren’t compliance rules in some sense the cause of a decline in conscience?

SS: There’s definitely some truth to that. It goes to the role of principles. Let me give you an analogy. How do you determine what’s a liability on your balance sheet? There’s a whole set of accounting literature to answer that. Well I’ve got a simple definition: you put it on the balance sheet when it is, or could be, a liability of the enterprise. That’s a principle.

PricewaterhouseCoopers came out some years ago in favor of principles-based accounting, rather than rules-based accounting. This relates to compliance—when you work from principles-based accounting, not rules-based accounting, you don’t focus on ways to get around the rules—you focus on the principles.

So—you focus on principles, because of exactly what you said: focusing on rules compliance doesn’t exercise the conscience.

CHG: Well that leads us nicely into talking about what happened in the recent financial crisis.

SS: There are four things that happened. Let me start with the non-unique aspect, which is that this was a natural cyclical situation. This is the credit market. After a bad cycle in the credit markets, you put in strong covenants and you raise the spread, all in reaction to the bad cycle. But then high spreads attract competition, then people start squeezing margins, and covenants get weaker and weaker, and finally it blows up again. So part of what happened is—just another business cycle.

But here are the other three drivers, special ones. Number one was the repeal of Glass Steagall, and that was a serious mistake. Glass Steagall was put into place for a really good reason. It was created because the mindset and objectives of a customer doing business with a bank are different from the mindset and expectations of a customer doing business with an investment firm. Once a bank starts thinking like an investment firm, the risk profile of the bank goes up.

CHG: Help me out here. How is it that the investment banks don’t appear to agree with that? Aren’t they running partly a banking-client business, and partly a casino? How is that?

SS: Well, people see things the way they come to see them. If you’re an investment bank these days, they don’t see a contradiction like you might. Sandy Weill started it with CitiCorp, combining insurance and brokerage and banking, and he founded it partly on the model of European banks. Not crazy, just different.

Of course, then it all ran up to 30:1 leverage ratios, and it all would’ve gone down in flames had it not received TARP funding. Back in the Glass Steagall time, it would have been one thing for Goldman to have taken risks, and quite another for Citibank to have done so. But post Glass Steagall, those distinctions were lost to us.

CHG: OK, back to reasons for the meltdown. Besides cyclical credit and the repeal of Glass Steagall, what else?

SS: Well, here’s what I said to Barney Frank.  You’ve got a broker, with no skin in the game; his whole motivation is to sell. Then you have the originating bank, that used to take that loan and keep it on its books, and that bank was always concerned it was underwritten correctly. Since then we moved to a place where those banks were laying off all the loans. The people making loans these days have no skin in the game. The originating banks shouldn’t be allowed to lay off 100% of the mortgage loans they make.

In our business, you can’t do that—you’re not allowed to. In New York State, you can’t legally re-insure any more than 90%, which means the one who sells the product still has skin in the game. The underwriter needs to sustain a piece of the responsibility; that’ll keep him honest. In the packaged mortgage loan business, we lost that. The lenders did not have skin in the game. ‘Put that in the legislation,’ I said. (And it did, in fact, end up in the legislation).

CHG: And the last reason?

SS: The b-schools and the investment banks pride themselves on the creation of what they called innovation; exotic securities, securities of securities. A mortgage-backed security maintains in it the discrete mortgages that went into the basket. So you could do a credit rating on it.

But once you turn it into a collateralized debt obligation, a CDO, you lose that direct connection with constituent parts. So here’s Moody’s and S&P. Now, people claim they were rating CDOs in bad faith, from self-interest. I don’t think so; I think they rated them wrongly because they didn’t know what they were doing. Ignorance, not venality, was the explanation. Nobody knew how to test these models, including the ratings agencies.

And on top of it all, it was all interconnected—the world of investment banks and credit instruments and global markets had all become inextricably tied together.

CHG: Now, let me push you on that. Sam Hayes, investment banking professor at HBS, is quoted in the movie Inside Job saying (about Wall Street in general,) “Oh, I think they understood what was going on, all right.” So—how do I square his idea with yours that it was just an honest issue of complexity and low understanding?

After all: you guys at NY Life managed to cut your risks a full year ahead of the crash. You saw it coming—why didn’t they?

SS: Let me explain that. Our Chief Investment Officer came to me a year and a half before the blowup and said, “I don’t like what I’m seeing here.” The covenants were coming off, the spreads were compressing, the indicators were clear. He said, “I want to start taking X% of our cash flow every month and putting it in treasuries.” Which meant taking a hit. We didn’t know when it would all fall down, we just knew that eventually it would. Reversion to the mean is among the most dependable principles. So when it did, we were very well positioned.

But that doesn’t mean we knew that a particular CDO would blow up, or that it was a single-A versus AAA. Our business was the general environment, the credit cycle issue I mentioned—we did not have to deal with the complexity issue I mentioned. We could afford to focus on the secular credit cycle.

CHG: Let’s touch on the mutual form of insurance in the insurance business.

SS: Good, because it’s related to this discussion. A mutual insurance company is not owned by its shareholders, it’s owned by its customers, like a co-op. And I believe the natural state of an insurance company is a mutual, not a stock company, and here’s why. And why it brings this discussion full circle.

Back in 1997, a lot of companies were de-mutualizing. One of the arguments was if you become public, you could raise capital and acquire companies. People felt the finance businesses were consolidating (again, think CitiCorp), and the argument went you had to raise capital to acquire, or be acquired.

But we felt is there’s a fundamental conflict between stockholders and customers in an insurance business. In a widget company, a creditor wants to see the maximum amount of equity in the firm, so that there’s a cushion to the debt-holders. The equity holder, on the other hand, wants to have the minimum equity, to maximize their return on equity.

If you’re a widget customer, you don’t have a horse in that race. You really don’t care about the debt/equity balance.

But in the insurance business, if you are a customer with an insurance policy, you are a creditor in that company. Our customers loan us money—called premiums—and in the end, we pay it back—in death benefits. It’s a creditor relationship, pure and simple. Our customers, in other words, are exactly aligned with our creditors. The more capital we have, the more safety there is to pay claims. That’s how we get rated AAA—our ability to pay policies.

Other companies that went stock started buying back stock, because their shareholders wanted higher returns. So in 2008, to take one example, a headline came out from Lincoln National; their earnings were down. And in the same press release, they approved a stock buyback program. When every warning signal is pointing to the fact that they should be husbanding their capital, they were about to use that scarce capital to buy back stock to placate their shareholders. That’s a conflict of interest in our minds.

And a year later—a billion and a half in TARP money went to Lincoln National. To pay back a bunch of the money that frankly had gone to their stockholders a short while earlier.  Obviously that didn’t have to happen with us.

So what’s trust got to do with that? Everything. We are in the business of making promises and keeping them. We have to live by long-term principles of financial strength and integrity—and the mutual form is at the heart of that.

A mutual company has a singular focus—what’s best for our creditors/customers. We have no conflict. That’s why I argue that the natural form for a life insurance company is not a stock company, but a mutual company. That’s all about principles, and all about trust.

CHG: Sy, this has been fascinating. Thank you so much for taking the time to speak with us.

——————————

Seymour “Sy” Sternberg on Trust in the Life Insurance Business is number 16 in the Trust Quotes: Interviews with Experts in Trust series.

Recent interviews include:

Ava J. Abramowitz on Essentials of Negotiation (Trust Quotes #15)

Robert J. Kueppers on Trust and Regulation (Trust Quotes #14)

Rich Sternhell on the Evolution of Trust in Business (Trust Quotes #13)

Read the complete Trust Quotes series.

Are your company values important enough to fire people over?

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Warning: Rant ahead.

Odds are the company you work for will fire employees for serious criminal conduct. And maybe for sexual harassment, or BSIP (Behaving Stupidly In Public).

But does your company fire people for VVs (values violations)? You know, values like respect and integrity (from Enron’s values list), or performance, innovation, progressive, and green values (from BP’s Lubricant Business).

———–

I got a call recently from a BWKC (Big Well Known Company); it employs many VSPs (Very Smart People). Here is what they said:

We have a group of VHPS (Very Highly Paid Salespeople). They’re mainly commission-paid and very successful. Problem is, they don’t pitch-in on corporate initiatives—recruiting, people development, internal sessions.  They prefer to focus just on making more money. 

We want to incent and motivate them to be more participative. We’re looking for ideas from other commission structure industries that have figured out how to keep the high-pay but incent and motivate team behavior.

OK. This is like meat to Pavlov’s dogs. There is such a feast of things wrong with that statement: where, oh where, to begin! 

 

1. “Incenting Values” is an Oxymoron

The call came from a staff person. Which means somewhere, there’s an RDB (Really Dumb Boss) who is thinking, “How do I motivate my employees to live the company values?” Here’s what that boss should be saying:

“It has come to my attention that y’all are not showing up to do some real basic stuff. Further, I understand this is because you’re not ‘motivated’ or ‘incented’ to do these things.

“Instead, y’all are getting rich at the corporate buffet by cutting in line. You’re eating scrambled golden eggs while you’re starving the goose that lays them. You’re suckling at the teats of the money-pig and refusing to clean up the pen. So I got some motivatin’ for you.

“First, TCSRN (This Crap Stops Right Now). Starting today, if I see any more of this, it’s LDHYWGLSY (Let the Doorknob Hit You Where the Good Lord Split You). Adios. 

“And if that’s not incentive enough for you, I can OUCOWA (Open Up a Can of Whup Ass) and show you the door.

You don’t “incent” values. Values are Jacks for openers, table stakes. If you’re not motivated to live by your company’s values, your company should tell you that you’ve got the wrong company. If you insist on incentive for living your company’s values, your company should politely suggest that your employment contract should be incentive enough.

This company basically has three choices:

1.    Exempt the salespeople from the values, and say so publicly; at least that’d be honest;

2.    Tell the salespeople this is non-negotiable, and a firing offense (fat chance); or,

3.    Just keep the values on the website where they belong, away from the money, now walk away, nothing to see here…

2. When Did We Start Calling Boneheadedness “Smart?”

This company is hardly unique—and you all know it. We have an epidemic in Corporate America of what I’ll call behavioralism, the beliefs that:

a.    nothing’s real if you can’t measure it;

b.    management consists largely of placing the correct amount of cheese in front of just the right rats at just the right points of the maze;

c.     really ‘smart’ people are the ones who can model, quantify and produce metrics with respect to cheese, rats and mazes.

Push this line of thinking far enough and you get entire BWKCs, with lots of VSPs, who don’t have the commonsense to spot a values issue when it personally insults them to their face. And yet we call them ‘smart.’

The word ‘smart’ has come to be, in the anthropological dictionary that is daily corporate usage, synonymous with high SAT scores, good colleges, spreadsheet-dexterity, quantitative skills and a belief that human-life-is-messy-but-fortunately-we’re-figuring-out-the-neuro-secrets-behind-it-all-and-we’re-nearly-there. 

How else to describe VSPs (and the companies who hire them) who have no other mental construct for management besides money-cheese-rat-metrics? Concepts like wise, commonsense, intuition, curiosity, empathy, relationships—these have no place in the world of VSPs.

Let’s all just give up on ‘smart;’ that word’s been co-opted. Let’s find something else. May I suggest we take ‘wise’ for a spin. And start by not using it lightly.

3. Tactics Are Not Management

Three years ago I wrote about The CEO vs. the Bankers. The CEO was an MBA from the late 1970s and was, as he put it, amazed at how little the newer MBAs seemed to know. He was talking about VSPs, too—from, as he put it, “Goldman Stanley, Morgan Sachs.” 

It’s a great read, I don’t want to spoil it for you, but the gist of it was: the new MBAs had been taught analytical techniques—tactics. The CEO had learned strategy: the wisdom kind, not the numbers kind. And when you read his story, you realize that in the real world, all those ‘smart’ models were dead wrong, and he was dead right.

Not only do we over-celebrate ‘smart,’ the concepts our ‘smart’ people are focusing on are not—systemically—wise. Our best and brightest are learning to do things that aren’t good.

What things? Looking at transactions, not systems. Believing that everyone only pursues their own interest. Believing that letting those who do pursue only their own interest somehow magically produces wealth and happiness for all. Believing that human emotions are most effectively dealt with through physical abstractions like chemistry and behaviors. 

Most of all: believing that values are something for which you can incent or motivate people.

What’s to be done? A good start would be to find out if anyone ever got fired for a values violation in your company. And if not, to seriously question how seriously your company takes its values. 

OK, end of rant-warning. All clear. Thanks for listening.

Accenture CEO Bill Green: What Leading from Principle Sounds Like

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A few years ago, I watched Bill Green, Chairman and CEO of Accenture, as he addressed a very senior leadership group at the end of a 2-day offsite meeting. Relaxed, he sat on a stage chair on a small platform and took questions from the 75-80 people in the room.

About halfway in, someone asked about a recently announced organizational shift. 

“Bill,” the person asked, “how do we know that the incentives are rightly aligned with the new global roles; that if I ask my colleague in Eastern Europe or Australia for help, they’ll be incented to do the right thing?”

Green quickly stood up, visibly tensing at the question. 

“Let me—well–,” he sputtered, “OK, I guess I’m glad you asked that question. Because I want to tell you—I don’t want to hear that question again!

“Here’s what I mean. And I expect every one in this room to get this; moreover, I expect everyone in this room to make sure you teach everyone back in your offices too.

“Here’s the thing. When there’s a conflict between the incentives and the right thing: you do the right thing, and then fix the incentives later. Understand? This is critical.

“We must be a values-driven organization before we are an incentives-driven organization. You design incentives to reinforce and reward behavior—you don’t design them to drive behavior. Values are what we need to drive behavior. If there’s a mismatch: you fix the incentives. After you do the right thing.

“And just to be clear: the right thing is almost always defined in terms of the client—not in terms of our internal P&L distribution.

“Now—am I being clear enough? Thanks for the question. And I don’t want to hear it again.”

Bill Green was plenty clear that day about what was important.  When he said "the right thing," he meant principles like client focus, taking a longer term perspective, and collaboration.  And he was clear that principles, not incentives, were the way to establish a values-driven organization.

For my part, when people ask me to name a big company that does trust well, Accenture is one of the few names I mention. Every company is far from perfect, but some are less so than others. Accenture is a lot better than most, and I think it’s because of the kind of leadership Bill Green demonstrated so clearly in this situation.

That’s what leading from principle sounds like.