“Be careful the environment you choose for it will shape you; be careful the friends you choose for you will become like them.” – W Clement Stone
Over my almost 30 years in management consulting working with CEOs, senior executives and their teams across a number of sectors and geographies as they articulate strategic direction, launch transformation initiatives and align their teams and organizations, I have seen some of the best and worst exhibitions of the Leadership Effect™. While working with senior executives of a large North American combination financial services and philanthropic (i.e. good works) enterprise, I had occasion to meet and have exchanges with the CEO as he and his team were launching a significant transformation. They were attempting to harness the synergies between the philanthropic side (charitable initiatives that raised millions of dollars to support countless community projects) with their financial services side (insurance and investment products). What they were attempting to do made sense in terms of the business and organization model. As external management consultants we become privy to core issues and insights through our confidential interviews, anecdotal off the record exchanges and other forms of diagnosis. Sometimes those issues are exceptionally disturbing and this was the case for this organization, making me and the colleagues on my team uneasy. While the CEO would articulately and charmingly deliver compelling visionary statements in our workshop meetings, there was a different story behind his executive leadership veneer. He was sleeping with the attractive CHRO (both with marriages and families), there were regional “boondoggle” sales meetings with hired hookers, drugs and booze, (watch The Wolf on Wall Street for some idea on what this looks like) and money was being squandered on various hedonistic pleasures. His executive team members colluded in this either by their silence in not calling him out, or by their active participation. An example of his hubris was when new smoking laws were passed to make all business offices smoke-free; he had a special air conditioner installed in his office so he could continue to smoke there. And he was supposed to be the “role model” CEO of an organization that prided itself in using its for-profit side to give back through its philanthropic side. Needless to say the transformation was a travesty. When word was finally out, as is always inevitable, about the immoral leadership at the top, the CEO and some executives including the CHRO were fired by the Board. While he was replaced by a new top notch CEO from the outside, along with a new executive team, the damage to their value creation was significant in terms of business and membership trust and it has taken years to rebuild.
Contrast that situation with a CEO and team that I have had the privilege to work with over the last several years. They head up a mid-size North American professional services enterprise seeking double digit growth in a tough competitive environment. When the CEO took over six years ago, it was just after the company had acquired another entity of equal size with many complementary capabilities. The resultant growth strategy was primarily focused on harnessing the collective capabilities to take advantage of emerging opportunities in their marketplace. From day one the CEO engaged his larger leadership team to collaborate with him in charting a new direction, developing a unified culture knitting the two entities. He also implemented a set of organization values which he role models and continues to hold others accountable for exhibiting as well. His leadership behaviour and that of his executive team is principled, transparent and was and still is characterized by fairness, integrity, compassion and accountability. Since taking the helm, he and his team (not one member has changed in six years and counting) have achieved solid double digit mostly organic growth, an ever strengthening balance sheet and reliable and handsome dividend payments to shareholders, not to mention an highly motivated workforce. They are stronger than ever and well positioned for continued growth and prosperity, probably doubling in size before 2020.
What is the Leadership Effect™? It is the quality of character of the senior leader and their team. While we might instinctively agree with this, don’t take my word on it. The KRW Research Institute, headed up by Dr. Fred Kiel and his team, are soon publishing the results of several years of ground breaking research confirming that high character virtuoso leaders and their teams produce on average 4 1/2 greater return on assets compared to low character leaders and teams. What does that look like in financial terms? High character leaders and their teams return an average of $78.2K more in net operating income for each million dollars of assets on their balance sheet which equates to about $61K per million more on average than low character leaders and their teams. And what’s more, such high leadership character can be measured and also developed. Achieving this much added value creation through your executive leadership talent is both something entirely within your control and is something you can take to the bank!