Work and Life is a radio program hosted by Stew Friedman, director of the Wharton Work/Life Integration Project, on Sirius XM’s Channel 111, Business Radio Powered by Wharton. Every Tuesday at 7 pm EST, Stew speaks with everyday people and the world’s leading experts about creating harmony among work, home, community, and the private self (mind, body, and spirit).
On Work and Life Stew Friedman spoke with Fred Kiel, a psychologist, author of Return on Character: The Real Reason Leaders and their Companies Win and coauthor of Moral Intelligence. For more than thirty years, he has helped Fortune 500 CEOs and senior executives. And he’s known for his popular TED talk, Psychopaths in the C-Suite. They discussed how leadership character produces results at work and in other parts of life.
Stew Friedman: Let’s start with the definition of character; how do you define character?
Fred Kiel: 
We look at character in two different ways. Everyone has their own self view of their character, and only you know what that is, what is in your heart, your intentions. Most people view themselves as being highly principled and having strong character. However your character is revealed in how you treat other people and that is all that other people see; your behavior. So people judge your character based on your behavior, they view it as a reflection of what is in your heart.
SF: So these are two very different things, aren’t they? How you view yourself and how the world sees you. And is character something that you see as immutable or is it possible to develop our own moral intelligence as you mature in life?
FK: I think it is very much possible to grow and develop; people do all the time. How you treat other people, a reflection of your character, is a matter of habit. We have identified a long list of habits, or ways that people reveal their character, and based on how they treat other people. Because they are habits, they can be changed. You can strengthen habits and you can replace bad habits with good habits; we all know that from other experiences in life. If you change your habits in the way you treat other people, it begins to change the inner you as well, and you become a stronger, more principled person.
SF: Can you give us an example, perhaps from your book, Return on Character, of one of the most prominent habits you see going awry and how to change that habit?
FK: One very good habit that leaders would be very wise to emulate is showing an interest in the development of other people, showing an interest in their personal goals as people. Leaders are thought to be very goal-focused and a big mistake many leaders make is that they don’t stop to think about the fact that they have relationships with people. They fail to show that interest in people and that has a major impact on the commitment and the level of engagement of the people around them.
SF: My late friend and mentor, Joel DeLuca, used to say, “relationships before strategy” as way to capture that.
FK: That’s a great way of saying it.
SF: If you have been trained and rewarded for getting results, without really caring about those around you as human beings beyond what they provide in terms of value in the work place, then how can you change that habit?
FK: The first step in habit change is to become acutely aware of the nuances of how you treat other people as objects. The only way that you can get really objective data from others is through anonymous surveys. We have a 360 tool that we help people use to get that clarity. Maybe it is a series of different behaviors such as walking down the hallway and not giving people eye contact because you are on phone, or looking at your smart phone when you are in a meeting, or when you are talking to someone. All of that telegraphs that I am not very interested in you as a person. So awareness is the first step. The second step is deciding how important this is to you that you want to change. One of the things that we have done through our research is to show the impact these bad behaviors, bad habits, have on the bottom line. They really do diminish the bottom line in financial terms.
SF: Tell us how you found that. What did you find in your observations about the connections between character and economic outcomes for businesses?
FK: We collected the return on assets for the two years prior to the time that we conducted our research with each CEO in our study. Then we compared return on asset figures for the ten strongest character CEO’s and teams in our study compared to those at the other end of the character spectrum, the low character CEO’s. We found, amazingly, nearly 5 times the amount of return on assets for the strong character CEO’s vs. those CEOs low on character.
SF: How did you distinguish between these types of CEO’s in terms of their strong or weak characters?
FK: Cultural anthropologists have identified certain practices and beliefs that people all over the world practice. We chose four of these universal moral principles that all cultures teach their children; integrity, responsibility, forgiveness and compassion. For those four moral principles we the identified a whole list of behavioral indicators of those four principles. We began with 65 and, through our research, we cut it down it a shorter list of 25. Then we selected random samples of employees to rate how often the CEO’s and their senior teams display those behaviors. So, for example, behaviors for integrity is how often they tell the truth and keep their promises. For responsibility, for example, we ask how often do they own up to their own mistakes and accept the consequences of their decisions. For forgiveness, it was how often do they respond in a curious, forgiving way rather than a shaming and blaming way. And finally on compassion, it’s how often do they show an interest in people and their personal goals and how often do they treat people as people versus treating them as objects. Once we had the independent ratings from random samples of employees we created an algorithm that put them together in to one overall score, which we call the ‘character score.’ Then we were able to rank these 84 CEO’s based on the strength of their ‘character score.’ And we got a nice spread; it was a matrix that could go from 0 to 100; the highest scoring CEO and team was at 92 and the lowest was at 54. Then we looked at the two extremes. We selected the bottom ten CEO’s and their teams and we compared those to the top. There were really no significant differences in tenure, age or education. But when we put in the character measures it just jumped out. Nearly five times greater for the strong character CEO’s. Also for the level of workforce engagement, it was 26% higher. The high character CEO’s had a much lower risk profile in legal incidents and lower audit fees compared to their revenue base and fewer morality issues, fewer union problems for those workforces.
SF: So it pays to be good! Phyllis is calling from Pennsylvania. Phyllis welcome to work and life.
Phyllis: As we are moving forward to a society that is more social media driven, one that has virtual office workers where everyone is communicating via email and managing tasks via email, how do you suggest employees or leaders start driving more towards knowing their employees better, understanding what their interests are and their goals are? I think we are getting a bit disconnected. I have been in Information Technology for about 17 years and I have seen us moving to a virtual environment in communicating and we are not doing a good job of it. I think we are getting disconnected with people.
SF: That’s a great point that you raise Phyllis, about being less connected. Fred, what do you think about how the digital age has changed the nature of how character is revealed and expressed?
FK: This is the new normal. Most organizations are global. They not only have distances to deal with, they have different time zones to deal with, so it is definitely a challenge. But technology is also filling in with face-time services like Google Hangout and others. I work in a virtual organization and only three or four times a year do I see all of our company together in one spot. We have a lot of opportunities to talk remotely through technology. It takes more effort but there is a real art and skill to showing who you are to another person even when you are on the telephone. With email you have to pay special attention to make it very conversational and to focus on not being so very curt and short, as most of emails are. It really pays dividends to build relationships that way.
SF: So what do you do to make it work in your organization? What have you seen in strong character leaders in terms of how they operate virtually? What kinds of things specifically, what sorts of habits do they bring to bear on their relationships?
FK: When anyone started off every meeting just by getting right to the tactics, it could be a problem. There’s usually some conversations in the beginning, and, just like in face-to-face meetings, they are run by people who have relationships. They just don’t jump in to the business context, they talk about events surrounding them and what you might call small talk, but that is just increasing the lubrication for the relationship. That can be done by telephones, Face-Time and Skype, for example, just as well as in person.
SF: But the tendency, that Phyllis is raising here, is for us to ignore the pleasantries and small talk, as you call it, that are the grease that make the wheels of relationships run. So how do we reverse that? If you are caught up in the hamster wheel of virtual relationships that get right in to business what can you do to break in to that?
FK: I think it is a matter of awareness and personal discipline to not let that happen. Relationships require maintenance and a lot of people overlook that. That’s why we have such a disconnected workforce in many companies; because leaders treat employees like objects and don’t pay attention to the relationship. Mangers need to see and understand the connection; if you behave this way it has an impact on the bottom line. The best place to start is to increase awareness because that provides the fuel for wanting to take care of this as an issue.
SF: The awareness provides the motivation. I would like to pick up on what you speak about and in your book, Return on Character, as the real reason leaders and their companies win. You have got a blue print there for building your own leadership character and creating character driven organizations that drive better business results. How can people build their own leadership character to make it stronger than it is right now; where should one begin?
FK: You need to begin by popping the bubble we live in. All of us have our own cherished view of ourselves. Everyone views themselves as being of strong character. Through our research we discovered that of these 84 CEO’s there were about 30% of them that had a fairly accurate view. But the other 70 percent grossly overestimated themselves. They were at the bottom of the curve, based on the surveys of their employees, but rated themselves higher than how the so-called virtuoso CEOs rated themselves!
SF: So there is a humility factor with the high character, virtuoso, CEOs.
FK: But CEO’s at the bottom of the curve rated themselves 30 times higher than their employees rated them. So first step in change is to pop that bubble and it is difficult.
SF: Scary.
FK: Most people don’t want to tell you the truth; they learn ways to work around your annoying habits rather than telling what they are. So it is only with real persistence that you are able to get people to tell you the truth. You need to make it very safe for them by being very open and reacting with curiosity rather than by being defensive.
SF: Most people are fearful of speaking truth to power so, as a boss, how do you make it easy for somebody to tell you that you are causing problems for them? And how can you stay open and keep those channels for feedback open so that you are continually learning how you come across, in terms of your character, to people around you? How do you keep those channels open?
FK: If you are a boss, one way to demonstrate to others that is safe to give feedback is to openly talk about what you understand are some of your weaknesses and mistakes. Openly ask, ‘I’m open to hear more about this and that’s why I would love to get feedback’. Now if you have a history of not being so open, then you often won’t have people who are willing to say anything. So it will be a challenge. You may turn to using a 360 tool to provide people with the cover of anonymity in order to get feedback. If you do use the 360 tool, then you are not able to get a very accurate picture from your direct reports. We discovered that direct reports live in the same bubble along with their manager. Or they are too fearful that they are going to be identified so they don’t tell the truth. We found that we got much different pictures when we went lower in the organization. When you cast your net wide then you get real anonymity and the wisdom of the crowd, so you get the best judgment.
SF: So the best data for senior executives is at least a level or two removed from where they sit?
FK: Yes, two or three levels down.
SF: But then you have people observing from afar so they are making attributions about very limited data in terms of what they can observe, right?
FK: This is the beauty of the wisdom of the crowd. When you combine the judgments of people who are independent of each other then you may only have a certain piece of the puzzle. But with all aggregated and averaged you will come in with a very accurate picture as has been demonstrated over and over.
SF: So the place to start really is to have the courage to look at what people see when they see you. How does this affect your capacity to bring together work with other parts of your life? If your character central to who you are, then by being a strong character leader, someone who demonstrates these habits of integrity, compassion, responsibility and forgiveness, how does that help in terms of being able to create a sense of harmony between work and family and community?
FK: As you change your outward behavior, that is the outer journey. But there is usually an inner journey that people take when they are focusing on strengthening their character habits. Most people go through an inner journey of trying to understand their whole life and create their own personal narrative. A coherent narrative helps to make sense of some of the painful and unhappy experiences earlier in their lives and they can see the impact these have had on the person they are today. This is just a process of becoming a more integrated person. Often when you become more other-centered, that is what character is all about; it is becoming more other-centered. The more you become other-centered the more that you find you are curious about others rather than judgmental. And all of that is an inner journey that helps to become a more integrated person. As people achieve that sense of integration they generally report a much more sense of balance and peacefulness in their lives. They have had time for inner reflections so that they pay attention to other things that are important to them other than just career.
SF: I suspect that you have worked with people who have had transformative experiences that kind of shock them into realizing there’s a problem with their character. What is it that typically up ends a person’s view of themselves that opens them to creating some change?
FK: Well the common concept is that of a wakeup call and that can happen in any number of ways. For example, having your spouse say, “Honey we need to talk.” And then to discover that things are fraying at the edges with regard to your home life. That can be a wakeup call. But just getting the data in 360 [feedback from those around you] about how the organization views you, what your reputation is in the organization, can be a real dramatic wake-up call. We have the experience of that being a jarring experience for people to have their bubble popped, to see how they are truly viewed by others.
SF: Especially the people at the lower end of the spectrum of character. You must get a lot of resistance from people who see a view of themselves that is shocking and discordant with their own view.
FK: Actually we don’t. If you position this as something that is really smart for them to do, they understand that there is a connection between how they treat people and the bottom line. And they are motivated to improve the bottom line. And then, of course, the art of being a helper in this kind of journey with somebody is not to be judgmental but to shepherd them through this process. Usually when you give that data to people they take it in what appears to be pretty reasonable fashion. You find out in the next few days that they have gone through a more dramatic, more painful time. We always say this is not the kind of information that will harm you; it will cause you pain but it won’t be any kind of pain that harms you. In fact it is the kind of pain that is necessary for growth.
SF: When asking students and clients to do a form of 360 that involves not just their work environment but the other parts of their lives as well, when they engage in dialogue to discover directly how other people see them and they are fearful of doing this because they are afraid of what they are going to find out, my offer to them is wouldn’t you rather know than not know? Leaders have to deal with reality, don’t they?
I am going to be at graduation this weekend here at the University of Pennsylvania and at the Wharton school’s MBA program graduation. What would you say to the graduates here about what they can be doing and thinking about with respect to taking their characters to the next level of strength and development?
FK: I would ask all of them to reserve time in their lives for reflection and for getting feedback. They should approach life with curiosity and openness. That is the best formula for moving down the road of character development; is to be open and vulnerable and curious.
SF: You have been studying this for a long time; what changes have you seen at the top of organizations in the time that you have been in this field and exploring questions of character in the business world?
FK: I have seen some remarkable changes where people come to me privately and say, “How did you manage to pull off a personality transplant?” And it is not that we do that at all. It is just that we bring the tools to people to really get in touch with who they want to be as people so that their outer behavior matches more closely with their intentions and with the good person that they believe they are and want to be.
SF: It is not magic, there’s a method.
What about the changes in society? What have you seen over the last couple of decades in terms of values, aspirations and character of leaders at the top of organizations? What trends have you observed?
FK: Over the last 3 or 4 decades we have evolved into much more of a me-focused society especially as it relates to business leaders and other leaders. But I see encouraging green shoots coming up to change that. Harvard business review just published an article yesterday on compassion and leadership that would never have been something that would have been in that kind of publication even two years ago. So I think society is changing. We also have a whole new group of young people coming up called the millennials that I am pretty high on. I see them as people that are much more willing to take a look at these kinds of issues and place a higher priority on character development and relationships.
SF: I am seeing that too, not only with my students, but also in our 20-year longitudinal survey. I agree that there is hope for the future as more young people are thinking of what it means to have a positive social presence and impact in the world.
For more information about Fred Kiel visit his web site www.returnoncharacter.com and follow him on Twitter @FKiel.
Join Work and Life next Tuesday at 7 pm on Sirius XM Channel 111. Visit Work and Life for a full schedule of future guests.
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