Opinion: A Higher Purpose: Reforming Ethical Leadership

July 22, 2002

by Ivan Rosenberg, President and CEO, Frontier Associates, Inc.

The recent wave of Enron-esque scandals has caused a dangerous lack of faith from investors and a growing public distaste for corporate leadership. Predictably, the what-to-do buck found its way to Washington when President Bush made a recent high profile address to Wall Street, kick-starting corporate law reform debates. At one point during his speech, the President called for, "a new ethic of personal responsibility in the business community--an ethic that will increase investor confidence, make employees proud of their companies and regain the trust of the American people." Yet when the political gestures, ideologies, and law reforms are said and done, will this actually produce this new ethic of personal responsibility?

Such external changes, though potentially important on many levels, will not make people--CEOs and workers alike--more ethical. The disassociation between what individuals do at their jobs and the fundamental objectives of their lives leaves a crucial sense of purpose elusive. The necessary transformation must, as the adage goes, come from the inside out. Business leaders and employees need to transcend their objectives from mere productivity and profits, to one of higher purpose and broader vision for the company and thus, the people working for it.

From What to Why

In my work as a management consultant, when I ask company leaders why they want to solve certain problems, or why they have particular goals, most leaders respond with answers that relate to either their personal goals: "So I can make more money", "So I can get promoted," or "So I can sell the business for a lot of money."; or, sometimes the answers tend to fall on the side of the more generic: "So the business grows," "So the business survives," or "To provide work for others." An intelligent examination of these reasons reveals their hollowness. Few proposed reasons actually pertain to anything beyond survival. This may provide limited motivation, but is hardly inspiring.

As one example, one of my clients, a food processing company, had been scraping by on a long history of mediocre results. Some of the problems we were specifically asked to address included high overhead, high turnover and conflict and lack of trust within senior management. When asked about the organization's purpose, they gave the staid response, "We bring in roots and leaves, sterilize and grind them up, and put them in big barrels and ship them to other companies." An accurate statement, but hardly worth spending your life on.

The fundamental issue that confronted this company, as well as many others, was that none of the reasons offered point to the real purpose for why the organization exists. I have seen few leaders who know and are able to clearly articulate the fundamental purpose of their organization. The cracks in the wall of a company go from the top down, and consequently, an overriding organizational purpose does not guide the decisions and actions of the workers. Mirroring their superiors, most employees are unclear about the context, i.e., the ultimate purpose of what they are doing in the organization. It isn't that they don't know the tasks they are to perform or the results they are to produce. The main issue is that the focus of the organization's attention is on what they are doing rather than why they are doing it.

Rethinking The Purpose of Organizations

The concept of "organizations" was invented to accomplish some purpose. I suggest that organizations were invented for the sole purpose of enabling people to be part of making a bigger difference than they could operating as individuals. Consequently, a very powerful context for an organization is to have people believe that they are part of making a big difference.

When each individual in that organization believes making that difference is worthwhile, productivity, and thus company strength, ensues. If the purpose of an organization is clear, then the behavior of the individuals in that organization will be consistent with that purpose, and an organization will perform at its peak. If the purpose of the organization is to make a difference valued by society, then the behavior of the organization and its members is truly "ethical."

A perfect example of this is what happened with the food-processing client. During a 2-day strategic planning workshop, 23 representatives from all over the company were guided through the creation of a powerful vision, a statement of the difference or vision the company was created to make, and a statement of how it was going to make that difference. It resulted in these new declarations:

Vision: To create a world of good health and nutrition for all.

Mission: Provide high quality natural botanical products worldwide.

It was then that this company no longer perceived themselves as simply processors, but as an important part of the healthcare and nutritional system of the planet. Furthermore, they said that people appreciating the value of natural botanicals was a crucial step in creating this vision. They were going to bring this appreciation into reality by providing products that would make that difference in health and nutrition. The mission and vision were further reinforced by a strategic plan that linked their inspiring vision to the present reality, and thus to their tactical goals and their current actions.

In the six months following the strategic planning workshop, the company's revenues and profits more than doubled, with no significant increase in capital expenditures or operating costs. They saw that their real customers were the consumers of the botanicals, and that the companies to whom they delivered were really the distribution channels. Out of this new perception, they created new ways to deliver their products, e.g., as healthy additives to prepared food. Workers addressed and solved problems of cleanliness and efficiency that years of management memos had rendered ineffective. Turnover dropped to almost nonexistent levels (one first line manager turned down an offer of a 20% increase in pay from a competitor), and the senior management group began to operate as a real team.

A primary job of leaders is to make sure the difference their organization was created to make is clear, consistently spoken, drives the decisions and actions of the organization's members, and is something that consistently inspires. How can we distinguish between a worker or a company who is connected to a higher purpose and one which is simply functioning? Take the classic story of two stonecutters who are simply asked, "what are you doing?" One, who is doing uninspired and doing slovenly work responds, "I'm cutting stone." The other, who is doing high quality, inspired work, joyfully responds, "Building a cathedral."

Clearly a fundamental change in business is required for the trust and confidence of the body politic to be regained. The scandals of recent months are a symptom of a more fundamental problem in most of today's organizations that operate under the assumption of merely creating product. If, as the evidence suggests, the fundamental motivator of individuals is to make a difference with their lives, then the real purpose of an organization is to give people an opportunity to make a bigger difference than they could as individuals. When organizations have worthwhile purposes that are clear, well known and owned by their members, the "new ethic of personal responsibility in the business community," can transcend from being a politican's words and into a new business reality.

(The views of this article does not necessarily reflect the views of Larta or its employees, but represents the views of the author, who is responsible for any facts, statements or opinions.)

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Larta University Managing Your Team: July 24 & 25
When investors, recruiters and entrepreneurs intersect to match a startup with experienced business management, it's a delicate dance of communication, ego and power struggle that can make or break a company. Many startups usually have a standard set of weak spots in their initial management team--a lack of marketing experience, little to no background in launching or heading a corporation, or technologists that cannot juggle a business on their own. This workshop will address such topics as compensation and incentives, management skills, ensuring team follow-through and teamwork, and legal obligations. The workshop will also touch upon establishing and working with a board of directors. Speakers Include: Jim Jonassen (Riviera Partners), Greg Bonfiglio (Anthem Ventures), Michelle Jackman (MJ Enterprises and Adventures), David McKenzie (Ernst & Young), Ivan Rosenberg (Frontier Associates), and Bruce May (Stradling Yocca Carlson & Rauth)
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