Return on Character - The Real Reason Leaders and Their Companies Win

Return on Character by Fred Kiel Book Review by Bob Schoultz All American Leadership

Why this book: I was intrigued after reading an excellent and very positive review of this book in Strategy and Business . Since serving as the Naval Academy’s Director of Character Development, I have struggled with the three fundamental questions about character that my mentor Dr George Lucas posed: What is (good) character? Can it be developed? If so, how? This book addresses all of those questions, and adds one more: Why bother? Well, – Kiel’s research concludes that virtue is not simply its own reward – there can be good money in it too! While we all want to believe that, most of us don’t. So I wanted to read the book to see how he makes his case.

My impressions: In Return on Character ( “ROC” for shorthand) Fred Kiel seeks to discredit the old saw that “nice guys finish last” by showing the data that “proves” that in business, and over the long run, good guys and gals (who are also competent at business skills), finish first – or at least way ahead of the game. In trying to tackle in a fairly comprehensive way, the huge topic of the role of character in business, this book is more ambitious than most business leadership books. It does a good job of discussing this complex topic in terms that most can readily understand. Kiel doesn’t refer the giants of western intellectual history who have wrestled with the nuances of character over the millennia, steering clear of academic philosophy in order to better connect with a larger target audience.

The author’s consulting company KRW International did a survey of 84 CEO’s and their companies over several years. Based on the responses of the CEO’s AND their employees, he identified 10 of who he called “Virtuoso CEOs” – those who best met the standards for good character that he establishes in his book. These he compared to those he referred to as “Self-Focused CEOs” – the 10 whose character scores were lowest in his study. The rest of the CEOs studied fell in somewhere along the spectrum between those two groups. He says that his book offers “a close and inextricable link between CEO character and value creation.” He makes the case that his study showed that a company’s profitability corresponded pretty closely to where its CEO broke out on his character spectrum, and those companies led by his Virtuoso CEOs were far more profitable than those led by the Self-Focused CEOs.

The book identifies four “Keystone Habits” which form the basis of his concept of good character: Integrity, Responsibility, Forgiveness, and Compassion, and he explains what each entails how they are manifest in behaviors in the work place. He spends less time on the four key activities of what a leader does: Decision Making, Vision and Strategy, Senior Team Development, and Creating a Culture of Accountability. One could easily quibble with these two lists of four, but for the purposes of his book and his message, they work. He does make clear that, for a CEO of good character to succeed s/he must also be proficient in the fundamental “skills” of business leadership. He says: “Character (who the leader is) + Skills (what the leader does) = Results (Return on Character)”

One finding that surprised him and his team, is the key role of the CEO’s executive team. This insight forced Kiel and his team to change the criteria for a Virtuoso CEO. He said a couple of CEOs who scored very highly on all measures of character, he did not include in the ten Virtuoso CEOs. Though employees scored these CEOs high in character, they scored these CEO’s executive teams relatively low in character qualities, and this was reflected in levels of engagement and other measures in their companies. Kiel and his team concluded that a fundamental responsibility and “behavior” of a Virtuoso CEO is to select, support and inspire an executive team that reflects the CEO’s strong character and values. He made this a key criterion for “Virtuoso” status.

In the final section of the book, entitled The ROC Habits Workshop, Kiel tackles the ticklish question of whether and how one can improve one’s character, assuming one is convinced that it is worth the trouble. In other words, how might I become a better person, so that I can garner all the success at work and in life that he describes? For those truly motivated, he offers a step by step process, which requires discipline, coaching and support from friends, family, and colleagues. I can imagine psychologists having a field day with his process, but in fact it makes sense to me – for those individuals who truly have the desire and will to improve, and whose character is not too far off the spectrum.

He summarizes his study on page 208: “We’ve learned… that character matters, that our character is a product of our genetic heritage and our life experiences, that we express character through our habitual behaviors, and that like all habits, we can change our character habits. We’ve seen that by changing our leadership character, we can begin the process of improving the character and culture of the organization we work for. When we effect that kind of deep and meaningful change, we can change the lives of everyone our organization touches – our workforce, our clients, our communities, our world.”

A pretty idealistic outlook, I’d say. There is certainly room for some skepticism, regarding whether self-focused leaders would be willing, much less able, to change their characters – even if motivated by the promise of more profits, or even spiritual rewards. I do believe that true transformation is possible, but it is not all that common. But I’d rather believe in Kiel’s idealism than the negativity of the cynic, who would dismiss such idealism as woefully naïve. Recall Oscar Wilde’s description of the cynic as one who, “…knows the price of everything, and the value of nothing.”

A good friend of mine is very interested in the subject of this book, but doesn’t think he can read it in its entirety, and asked that I recommend to him key chapters. Accordingly, I’ve recommended that in addition to reading the one page summaries at the conclusion of each chapter, he read the Introduction, Chapter 1 (Character Defined), Chapter 6 (The ROC Ripple Effect); and Chapter 8 (Developing an ROC organization).

I recommend that anyone who finds this review of interest, read the excellent review that inspired me to read this book. It is at Strategy and Business.

A drawback to this book: Kiel does not address examples that would not support his thesis. I suspect that his response to this objection would be that such examples didn’t show up in his study. But to give credibility to the sweeping generalization he makes, he should have addressed the possibility that his theory MAY have some holes in it. There clearly are and have been business leaders whose people don’t them, who don’t embody his keystone character habits, whose characters are not “virtuoso,” but who have been enormously successful and people have stayed with them because they just continue to make solid and successful business decisions that lead to “success,” as measured traditionally – by the single (vice the triple) bottom line. Kiel’s argument that great business success comes with great character combined with great business skills, can be countered with examples of those who have succeeded in business with great business skills and (arguably) poor character. We seldom however, see the reverse. Who are the outliers, those self-focused leaders who have succeeded anyway, and from their success, others, perhaps many of us, have benefited? We know they are out there (Steve Jobs?). The book would have been stronger had he addressed and made room for exceptions to the case he makes.

You can find Return on Character on Amazon.com.