Fred Kiel, author of Return on Character: The Real Reason Leaders and Their Companies Winconducted a seven-year study of more than 100 CEOs, their companies and 8,500 of their employees. What he found was that leaders of strong character achieved up to five times the return on assets as did leaders of weak character.

Kiel discussed his findings and views on leadership in an interview with Tom Fox, a guest writer for On Leadership and a vice president at the nonprofit Partnership for Public Service. Fox also is the head of the organization’s Center for Government Leadership. The conversation has been edited for length and clarity.

Q. What are the traits of leaders who have high character?

A. The leaders who attained the greatest financial bottom-line results had strong character habits that involve four basic principles: integrity, responsibility, forgiveness and compassion. They almost always tell the truth, keep their promises, are willing to own up to their mistakes and take responsibility for their choices. They are very forgiving of others. They are all about learning from mistakes rather than punishing. And finally, they care about people.

When employees say that leaders show these character habits, in contrast to those who show them about half the time, there was an amazing difference in bottom-line financial results—almost five times more.

Q. What else is needed besides high character to be successful?

A. High character is the foundation. A leader also has to have a certain set of business skills. Highly principled people aren’t necessarily going to be good business people. They have to be able to create an aspiring and compelling vision and establish the strategic focus for the organization. But it’s also incumbent on the leader to establish a culture of accountability. The most effective leaders are those who combine a military toughness with regard to accountability along with a compassionate side, being very caring of the individual and their own success.

Q. What about employee engagement?

A. You can have a business plan and strategy and vision, but if it isn’t executed effectively, it doesn’t mean anything. Execution is all about having an engaged workforce that is inspired by the vision. They must be eager to work together, collaborate and feel free to innovate and easily work in teams.

Q. What role does a senior leadership team play in this process?

A. The senior team really drives the organization. We find stronger correlations between characteristics of the senior team and organizational effectiveness than we did between the CEO and organizational effectiveness. So the skill of the CEO is to choose, develop and lead a high-performing team. If a CEO does that well, then the team will really engage the workforce.

Q. What does a low character manager look like, and how does that undermine success?

A. They are well intentioned people who have fallen into some carelessness regarding how they treat other people. Generally, a lot of their behavior is fear-based. They have a negative view of human nature and a frightening view of the world. Most would never think of treating their families the way they treat the workforce—they would be much more engaged and friendly. We’ve discovered that of all the character habits, compassion is perhaps the most powerful one in engaging a workforce.

Q. How does that behavior undermine an organization’s success?

A. It tends to shut down feedback. They begin to believe their own press releases, and they live in their own bubble. The virtuoso CEOs, by contrast, are always eager to seek out information. They assume that they don’t have all the answers and that the people in the organization are smarter than they are.

The ones at the bottom of the character curve assume that they know better than anybody else what people should be doing. That doesn’t work very well to engage a workforce.

Q.  How can leaders go about changing bad habits?

A. Everybody has had some experience in trying to change habits, and so they know it can be done. The first step is to become aware of your habits. Habits by definition operate below the level of self-awareness.

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