The story of Aaron Feuerstein is now old news but it was so spectacular in the late ‘90s that it quickly made it into dozens of business ethics textbooks and anthologies. Short version: Malden Mills, a textile company (best known for Polartec) in Lawrence, Massachusetts, was destroyed by a terrible fire in December 1995. Owner/CEO Aaron Feuerstein decided to continue paying the salaries of all of his workforce until he could finish rebuilding the factory. He rebuilt the factory as a more pleasant, sunny, healthy workplace at considerable extra cost to himself and the company.

Since I recently moved to the Boston area I decided to drive out to Lawrence and have a look for myself. The sign now just says “Polartec” but I had a chance to speak with Maria, a 19-year veteran hired by Malden Mills in 1993. Yes, she told me, she did get to know Aaron Feuerstein personally. Everyone at the plant knew him. He managed in a very caring, personal way, wandering around the factory and greeting his workers. She was not surprised when he decided not to cast his workers off onto their unemployment insurance and personal resources when the fire happened a couple years after she started.

Feuerstein could have cashed in his fire insurance payment and retired in luxury to Florida. He could have moved his business to a cheaper labor market outside the United States as most textile companies had done. No one would have blamed him for taking either of those options. But Feuerstein said it just wouldn’t be right not to care for the men and women who had been his loyal workers. He had no doubt that he was doing the right thing, even if it wasn’t the thing most financial advisors would urge.

In the immediate aftermath of the re-opening of Malden Mills product sales and employee productivity soared by some 40 percent. But the company carried substantial increased debt because of the high costs of re-building a state-of-the-art facility. The volatility of the textile industry hurt the company. Three warmer than usual winters in the late ‘90s depressed sales of cold weather fabric garments. The result was that Malden Mills declared bankruptcy in November 2001 and Feuerstein was replaced as CEO. The reorganized company declared bankruptcy again in 2007 and was sold to a group that now operates the company under the name Polartec.

Did Feuerstein’s Ethical Idealism Cause Malden Mills’s Business Failure?

It was very tempting to turn Feuerstein into an Olympian hero in the aftermath of the 1995 fire and factory rebuild. Here was a true “mensch” among business leaders, a CEO/owner who cared about his people, not just his net worth and personal interests. And it seemed that enhanced sales and productivity were the reward for his ethical virtue.

More recently it has been tempting to blame his ethical idealism for blinding him to business realities: His high ideals really have no place in the hard practical realism of business competition, some say.

But neither of these interpretations of the Malden Mills story is satisfying or convincing. First of all, remember that this was Aaron Feuerstein’s private company. He was not the agent of a set of shareholders. He had every right to do what he wanted, for his own reasons. I’m sure that if we asked him today he would still believe he did the right thing, the only thing. It satisfied him and his goals and values. It was a success.

Then, too, Maria and hundreds of other workers at the Lawrence factory still have their jobs and customers are still happily buying Polartec products. The business shrunk from its peak but it still exists. It is not based in China or completely closed down as it might have been. For over a hundred years, Malden Mills and other textile businesses have undergone wild swings of the market. Malden Mills had even been bankrupt once before, in1981. Looks like success today to me.

To the “Market Fundamentalists” who argue that no company should ever pay a penny above the going rate for labor off the street, I suggest that companies such as Southwest Airlines, Costco, and In-N-Out Burger tell a much different story with their high wages, progressive management policies, and industry-leading employee retention, satisfaction, and productivity rates. The increased effort and productivity by Feuerstein’s employees after the plant re-opened is evidence of a successful wage and employee-care strategy.

But markets are often volatile, rarely predictable. For a business to have enduring success it needs more than a happy, loyal workforce and good ethics: it needs a product desired by customers and available at affordable prices. Buggy whips made by happy employees for ethical bosses will not save a business when buggies disappear. Snow shovels made by happy employees for ethical bosses will not make for a sustainable business if global warming ends our winter snows. This is what drove Malden Mills bankrupt: not its ethics or employee care but shifts in market conditions, competitive pricing, and the like.

Good Ethics Is a Success Factor, not a Guarantee

Carrying big debt at Malden Mills was significantly related to Feuerstein’s choice to invest so heavily in his employees and his rebuilt facilities and this made the company more vulnerable. Part of Southwest Airlines’ and In-N-Out Burgers’ success is related to their preference to keep big cash reserves and avoid debt (though as mentioned, this does not stop them from industry-leading wages). But the radical reduction of textile prices because of international labor markets makes any survival of American textile manufacturing something of a miracle. This market situation, not his kind heart, is what ended Feuerstein’s run as a textile industry leader.

If we do have a quality product or service for which there is a decent market, then good ethics and good treatment of employees is without doubt a value added to the business that will contribute to the bottom line. Well-treated employees show up happier and more dedicated to company success. They steal less and work harder. Customers who receive what was promised to them and who are treated with respect will return more frequently for more business and recommend more friends to patronize the business. Anyone who needs a study to prove these common sense observations about the impact of good ethics on good business is beyond help.

David W. Gill was co-founder of IBTE and author of Benchmark Ethics, a regular article in the first 32 issues of Ethix. After eight years of writing, speaking, teaching, and consulting in the Bay Area of California, he joined the faculty of Gordon-Conwell Theological Center (South Hampton, Mass.) in 2010, where he is also director of the Mockler Center for Faith and Ethics in the Workplace.

Johnson & Johnson’s recent troubles are such a downer for those of us who have held the company up as a paragon of virtue for decades. J & J competitor Merck lost its halo earlier this decade with its shameless promotion of Vioxx when it knew of clear risks but buried this fact while frolicking in boatloads of cash extracted from its gullible customers. In the auto industry, Toyota’s problems over the past couple years are similarly a difficult pill to swallow for long-time admirers. What troubles? In a nutshell, it is a loss of quality and safety for customers who had come to trust implicitly in the drugs (or automobiles) produced by these companies.

Can it be that Toyota continued to sell its cars while knowing about braking or acceleration defects? How could they do this? The story is not completely written yet, and it seems that at least some of the “sudden acceleration” problems were actually caused by driver error. Other flaws requiring huge Toyota recalls suggest, however, that there has indeed been slippage on the commitment to quality. This becomes an ethical issue, not just an engineering or financial one, when harm is threatened to customers or when quality or performance promises are broken. The best explanations so far are that, in its obsessive quest to overtake GM as the largest auto manufacturer in the world, Toyota began putting quantity over quality and lost its way, at least temporarily.

The Johnson & Johnson story is one of massive product recalls over the past year, following customer complaints, and leading to a serious shattering of public confidence in their products from Tylenol to Rolaids to Sudafed to Motrin to contact lenses and hip implants. This has not been a story of one or two isolated problems but a systematic, companywide breakdown. How can this be? Since 1943, J & J has operated by a famous “credo” mission and values statement that puts the safety and well-being of patients and customers above everything else. Long before other companies in pharmaceuticals or other industries adopted such statements, Johnson & Johnson was out in front.

Johnson & Johnson has recognized its problem and taken steps to improve factory cleanliness, inspections, and overall quality and safety. They could hardly do otherwise. Back in 1982, when seven Chicago-area people died from poisoning traced to Tylenol, J & J made history by pulling its drug off every shelf in America instantly, no matter what the cost to the company. It turned out to be a case of criminal tampering that had nothing to do with J & J. But it led to improvements in tamper-resistant packaging for drugs, among other things. And J & J’s aggressive response to protect its customers won a huge amount of trust and admiration everywhere. So the recent “fall” is extremely disappointing.

The initial commentaries from those close to J & J have pointed the finger at cost-cutting measures that reduced or decentralized staffing and oversight, and delayed equipment repair and replacement. Others have suggested that J & J lost sight of its credo in its pursuit of profits. In any case, there is a lot of work ahead for J & J to restore its culture and values, improve operations — and then hope for reputational recovery.

One of the lessons here is that there are just no guarantees that “once ethical, always ethical” or “once reliable, always reliable.” Corporate reputations, like corporate cultures, have momentum but no assured permanence. Arthur Andersen was probably the most highly thought of, ethical, excellent accounting firm in the world. But in the 1990s, they all-too-quickly lost their way and gave in to corrupt schemes at Waste Management, Enron, and elsewhere, and were forced out of business altogether. No guarantees.

Jim Collins, in his little book How the Mighty Fall and Why Some Companies Never Give In (2009), identifies five stages of decline in the fall of the great companies: (1) hubris born of success (arrogance, entitlement), (2) undisciplined pursuit of more (overreaching, obsessed with growth), (3) denial of risk and peril (blaming, refusal to face facts), (4) grasping for salvation (panic, desperation, silver bullets, and star CEO recruits), and finally (5) capitulation to irrelevance or death. Marianne M. Jennings, in her book The Seven Signs of Ethical Collapse (2006), points to (1) pressure to maintain the numbers, (2) fear and silence in the culture (3) a “star CEO surrounded by young sycophants” incapable of dissent, (4) a weak board,” (5) a failure to recognize and root out conflicts of interest (family, financial, etc.), (6) a claim of “innovation like no other” (i.e., we are doing things our way because no one else has figured it out as well as us yet), and (7) a justification that goodness in one area (e.g., corporate philanthropy) atones for evil in another (corporate “crookery”).

We can’t see all of these factors at work in either J & J or Toyota, but some of it is certainly relevant. For all leaders of organizations it is probably worth reviewing the analyses of corporate decline and fall by Collins, Jennings, and others at least once a year. Nobody, and no company, is invincible — especially when we think otherwise.

David W. Gill was co-founder of IBTE and author of Benchmark Ethics, a regular article in the first 32 issues of Ethix. After eight years of writing, speaking, teaching, and consulting in the Bay Area of California, he joined the faculty of Gordon-Conwell Theological Center (South Hampton, Mass.) in 2010, where he is also director of the Mockler Center for Faith and Ethics in the Workplace.

By David Gill

Is there anybody out there who wouldn’t like to enjoy the business success of Southwest Airlines? This year Southwest celebrates its 40th birthday and, can you believe it, in their wild and crazy airline industry, with bankruptcies and mega-losses everywhere, Southwest has been profitable 38 years in a row. They have suffered losses in a few quarters in recent years but no annual losses. Have you checked out the financials for United, American, Delta and the other big boys over the same period? No competition. Not even close. Last year Southwest flew 86 million passengers in the USA, more than any other airline (New York Times, Nov. 12, 2010). This is a huge success story.

It Takes a Brilliant Business Model

So what can we learn from Southwest? The first thing to get our attention has to be their airline business model. Southwest pioneered a point-to-point travel model in place of the traditional hub-and-spoke model. They have also often chosen to fly in and out of “secondary” airports such as LaGuardia (instead of JFK), Midway (instead of O’Hare), Oakland (instead of SFO) (often with better pricing, more convenience, less congestion as a result).

They have a fleet of 550 or so aircraft, all of them the same Boeing 737 model (simplified maintenance, purchasing economies of scale). They have done a better job than any other airline of hedging fuel costs; buying contracts in advance and locking in lower prices. They also lower costs by maintaining a strong cash position instead of living off credit and paying big-time interest. They have a simplified passenger seating system (no assigned seats, no first class section) enabling faster booking, boarding, and exit.

It Takes High Performance

On the performance side, Southwest Airlines has the best on-time arrival record, the best airline travel safety record, the least luggage lost, and the fewest customer complaints. They are almost always the poll winners for best customer service — and for best employee place to work. They have the fastest turnaround time (10 minutes or so) to get docked arrivals back on their way to the next destination (SWA leaders often say, “We’re not making any money if the planes are just sitting there; let’s get them back in the air”).

Problems have been rare but when they occur, Southwest has been exemplary in response. For example in 2008, it came to light that airplane fuselage inspections had been overlooked. SWA executives issued an immediate public apology and increased the scope and frequency of all their plane audits and maintenance work.

It Is Not a Function of Exploiting People

Many people assume that Southwest must succeed because it is younger and not burdened with legacy union contracts and the like. Wrong! Southwest has the highest percentage of union employees (85 percent) of any airline. Or some may think they pay low wages in an economy with lots of unemployment. Wrong again: Southwest agents, flight attendants, mechanics, and crew have industry-leading wages and benefits. Southwest’s 5,600 pilots earned $171,000 on average in 2009, 20–40 percent more than the average pilot salary at the big legacy airlines (New York Times, Nov. 21, 2010).

Employees can participate in a profit-sharing program. Southwest hired the first black chief pilot in the industry and has been a leader in promoting women in leadership positions (Colleen Barrett being the prime exemplar as long time COO before her recent retirement). No wonder that in 2008, some 90,043 applicants sought the 831 jobs filled at Southwest (a tighter admissions percentage than getting into an Ivy League school, the New York Times writer noted).

One thing I am in the habit of doing on airlines (and in restaurants, banks, and other businesses) is asking the personnel ,“How do you like working here?” Do I need to summarize for you the difference between how Southwest (and Jet Blue) people respond — compared to United and American airlines people? I didn’t think so. Southwest is a great place to work by all accounts.

One place where wages are actually significantly lower at Southwest is in executive compensation: Herb Kelleher, Gary Kelly, Colleen Barrett and their executive suite colleagues at Southwest take salaries in the hundreds of thousands of dollars; they are share holders and are doubtless very wealthy. But they do not award themselves 10 of millions of dollars while sticking it to employees, defaulting on pension commitments, cutting benefits, increasing workloads, and presiding over bankruptcy proceedings — all pretty common stories at the legacy airlines in recent decades. Executive compensation practices, I find, are a pretty reliable index of the cultural and ethical health of a company.

Ethics, Values, and Culture Are a Huge Factor

As you might expect, other airlines have tried to replicate the business model and the financial success of Southwest. United Airlines tried it with “Ted” airlines for a brief while. These efforts have failed. Jet Blue is pretty much the only successful “son of Southwest” — launched by former SW execs. Why is this?

Jet Blue succeeds because they not only have the business smarts but also a leadership that understands the importance of Southwest’s values and culture. High values and great cultures will not save a lousy business model and they cannot overcome a radical shift in the market (i.e., a great culture would not make a buggy whip or typewriter business a success today). But a great culture will empower and enable a good business and product to thrive and achieve excellence. This is what happens at Southwest (and Costco, and In-n-Out Burger).

Probably the best study of Southwest is Jody Hoffer Gittell’s The Southwest Airlines Way. This major analysis originated as Gittel’s doctoral research. What she discovered was that from day one in 1971, Southwest built a harmony model of relationships instead of a conflict model. Unions and management agreed that it was in their interest to work together instead of against each other in a “zero-sum” game mentality. Flight attendants might help ramp agents; pilots might give a quick hand to flight attendants. It’s not in their job descriptions or union contracts — but these acts of teamwork create the SWA difference. This is how the fast turnaround times are achieved. This is why people love working together at SWA.

In fact, Southwest has often said that taking care of their employees is their top priority. Happy, well-cared-for, respected employees will turn around and give comparable care to customers, Herb Kelleher and his colleagues contend. The SWA values statement says: “Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest Customer.”

Southwest Airlines is careful about who it hires. Their mantra is “Hire for attitude and train for skill. ” SWA has long had a formal “Culture Committee” charged with maintaining the distinctives of the company. There is constant, relentless communication and celebration. The SWA “University of People” (U4P) offers frequent orientation and training sessions. A biannual employee survey asks for ways to improve SWA.

Nobody’s perfect, of course, but Southwest is way ahead of second place. Personally, I will change planes halfway along my route if that’s what I need to do to fly Southwest instead of the other guys. I will pay a few dollars more to fly Southwest – although usually I pay a few dollars less because their prices are better. I own no SWA stock and don’t get paid for my positive opinion, but these guys are a marvelous business success story I can’t keep quiet about. People who are so jaded that they think all business is evil, or all executives greedy and corrupt, need to have a look at Southwest Airlines. And all businesses in all industries could learn a thing or two from these pros.

Happy birthday, dear Southwest! Happy birthday to you! (And many more).

David W. Gill was co-founder of IBTE and author of Benchmark Ethics, a regular article in the first 32 issues of Ethix. After eight years of writing, speaking, teaching, and consulting in the Bay Area of California, he joined the faculty of Gordon-Conwell Theological Center (South Hampton, Mass.) in 2010, where he is also director of the Mockler Center for Faith and Ethics in the Workplace.
Comments to dgill@ethixbiz.com

I’ve been thinking about hall of famers, contractors, presidents, and the future of health care.

I like Celtics’ Hall of Famer Bill Russell’s explanation of the difference between major and minor surgery. “When you have knee surgery,” he said, “it’s minor.”

I’d guess you’re not much different from me. When I go under the knife, it’s major. And when it’s my child, I feel it more than when it’s someone else’s.

I heard about a highly respected contractor who took his son under his wing to teach him the trade. The father’s philosophy was simple: Build each home as if you were building it for yourself.

After several years, he assigned a project to the young man, stating that for this one, he was on his own. “I will see you when the house is finished,” he said. “Just remember, build it as if you were building it for yourself.”

The son figured that without his father watching, he could cut a few corners. Who would ever know? So he bought substandard framing materials, lower-rated insulation, and thinner dry wall than his father would have used. Paying less for the materials, he pocketed the savings.

When the house was completed, the father came to see the finished product. On the surface, everything seemed to match the quality of his own projects. “Looks great,” he said. “Congratulations! Now, I have some good news. You have built this house for you and your family. It’s my gift to you for the work you’ve done with me over the years.”

In the winter of 1995, I toured the Centennial Medical Center in Nashville with the director of pharmacy. While walking through the main lobby, we bumped into The Honorable Bill Frist, M.D., and newly elected U.S. senator from Tennessee. After introductions, the senator explained that he had come to visit his father, Thomas Frist, who was in critical care following major surgery. It turns out the senator’s father, also a physician, was the founder of this top-100 hospital and the co-founder of its parent Hospital Corporation of America.

I could not help but think about how this dedicated physician, while building a topnotch hospital for the community he loved, was at the same time (whether the thought ever crossed his mind or not) building the hospital in which he and his children would one day be treated as patients.

Several months ago, my wife was in our community hospital being treated for a staph infection. I watched as a student nurse hung and started an IV, then left the room. Ten minutes later, she returned to scan the bar codes on Cinda’s wristband and IV bag to confirm a match. Up to that point, I didn’t know our hospital had bar-code point-of-care verification technology in place. So I asked the nurse, “I’m interested in this bar-coding thing. Can you explain how it works?” While she didn’t have a clue that I have had a nearly two-decade obsession with bar coding, she apparently sensed she had been caught administering a drug before instead of after scanning to verify a match with her patient.

The next day, the charge nurse of a new shift came into the room to hang another IV. This time she scanned both patient and bag before starting the infusion. Again, I said, “I’m fascinated with this bar-code technology. Tell me how it works.”

To my surprise, she hesitated, then asked, “Are you Mark Neuenschwander?” How did she know? After all, my wife’s last name is Peters. “I read your monthly articles,” she said, “and we leaned on your technology reports while getting ready for bar coding.” Turns out, this nurse is the hospital’s bar-coding champion, and her director of pharmacy had attended The unSUMMIT for Bedside Barcoding, of which I am a co-founder. Not only had I helped motivate my community hospital to adopt bar coding, but I had also contributed to its developing best practices for identifying patients and matching them with the right medications and treatments at the point of care.

It honestly had not occurred to me before this encounter that by helping others achieve safer points of care, I was contributing toward protecting my wife and eventually myself when it’s my turn to be stuck with needles and taking the meds.

Abraham Lincoln said, “Whatever you are, be a good one.” If asked to expand on what it means to “be a good one,” there’s a good chance our current president’s favorite president would have pulled out, as I understand he often did, the good old Golden Rule: “In everything, do unto others as you would have them do unto you,” e.g., contribute to building a health system that you would want others to build, if they were building it for you.

We who are involved in shaping health care are not only shaping it for others, as if that were not reason enough. We will eventually sleep in the beds we have made — and so will our loved ones.

Nothing minor about any of it.

What do you think?

In December 2010, Mark Neuenschwander received the Institute for Safe Medication Practices’ (ISMP) Lifetime Achievement Award. The ISMP’s highest award honors individuals who, throughout their careers, have made ongoing contributions to patient safety and have had a major impact on safe medication practices. Neuenschwander is the 10th recipient of ISMP’s Lifetime Achievement Award — previous winners include Lucian Leape, M.D., Harvard Medical School; Kenneth N. Barker, Ph.D., R.Ph, Auburn University; and Don Berwick, M.D., head of Centers for Medicare and Medicaid Services (CMS).

Mark heads The Neuenschwander Company, which provides reports and consulting services for technology companies and health care providers across America and around the world. The company is committed to promoting and facilitating wise development and sound deployment of medication-use automation, including drug distribution and dispensing technologies, and specializing in bar-code verification and documentation technologies for the prevention of errors at all points of care.

Trained as a pastor, Mark was senior pastor for a large church in Bellevue, Wash for 10 years.

Jim Moats works with management teams of privately owned companies to stimulate organic collaboration; he also chairs a CEO-and-key-executive group through

◊ ◊ ◊ ◊ ◊

Want your company to be better than average? If you don’t, read no further.

In recent posts, I’ve been raising the relationship between company growth, employee engagement, and customer value creation. Today I am raising the relationship between company performance and CEO limitations — they always exist, but we rarely discuss them. I’ll let you in on a little known secret — there are no perfect CEOs.

During a meeting with the board chair of a local enterprise, the CEO’s performance came up. It seems the chair and other board members have been trying to get through to the CEO regarding her limitations, but she continually resists them.

They described the CEO as bright, articulate, and charismatic, with a depth of industry knowledge that is exceptional. The board recruited her, and she continues to have their full support. However, she resists seeing and acknowledging her limitations, which the board believes significantly limit growth.

Why is this so vital? Each CEO and leader is like an organism in the company’s “ecosystem”; there are certain roles and relationships in which they thrive and others in which they don’t. When the “ecosystem” is lead by people who thrive in the roles they play, the company thrives too.

Gallup has popularized the term “strengths” through the book, Now Discover Your Strengths and by coining the term, “Strengthfinder.” While I’m completely in support of this, we still need to deal with limitations, because unless a company’s “ecosystem” can embrace a CEO’s personal limitations, it remains in that awful and constraining place of denial. Ignoring a CEO’s limitations decreases collaboration and causes the “ecosystem” to become half-hearted in its work.

Whole-hearted collaboration is the key to accelerated value creation.

Accepting limits

Why is accepting our limitations such a big deal? Most of us learn at an early age that we need to try to be something more than we are, so we extend ourselves by trying to go beyond our inherent range. While this process is a necessary part of life, I believe that failure is the least efficient method for discovering limitations. I have learned that when I stay within my inherent limits, life and business are more meaningful — I flourish as well as those around me. Accepting my limits has been a wonderful gift, especially when those around me can also accept them.

Limitations are as much of a gift as strengths.

Here is a positive example of how this can work: In my peer groups, members have fun helping each other explore strengths and limitations. In a recent meeting, one particular CEO announced that the group had helped him with this process, and he went on to say that he had come to grips with a limitation. He shared that he needed to feel more knowledgeable than others in order to feel good about himself, and this had limited his ability to thrive in business and personal relationships. He thanked the group for giving him this gift, and returned it by helping them learn from his new understanding.

Remaining blind to personal limitations imputes an immense cost, while facing them sets you and others in your “ecosystem” free to flourish. Freedom and employee engagement go hand in hand, and without this “value creation” will remain weak.

From another point of view, if my “ecosystem” allows me to remain blind to my limitations, it robs those people with strengths that complement my limitations, of the opportunity to bring all of their capacity into their work. When I am partially blind and am near the top of the organizational chart, dysfunction cascades from me through the entire organization. Removing this block is very powerful —leading to employee engagement and accelerated value creation.

Would you like to be clear on your particular strengths and limitations? How would this affect your life? You might be pleasantly surprised.
I’d love to know your thoughts.

Jim
jim@peer-place.com

Do you consider your organization to be ethical? Many organizations have a moral foundation that enables them to make ethically sound decisions even when faced with adverse short-term consequences. However, as has recently been seen on Wall Street and in other places (e.g., Toyota) too many organizations are quick to put immediate economic gain before ethics. While the unethical actions may be expedient, they ultimately contaminate both the employees and the organization. Maintaining high ethical standards is the only way to produce sustainable success.

Do you want your organization to be consistently ethical? Using recent scientific breakthroughs, it is now possible to efficiently enhance the ethics of almost any organization. A simple process of setting a goal and then motivating, sustaining, and scaling ethical behaviors has produced numerous success stories like these:

• Pharmacy managers in a large retail chain think of themselves as “a critical part of the family emergency response system,” going out of their way to ensure that their patients get the correct medicines and care (instead of just selling prescriptions).

• Sales people in an advertising firm that serves small and medium businesses see themselves as “helping customers achieve their personal life goals” (instead of just selling advertising).

So how can an organization create the ethical foundation that inspires this type of response?

1. Set the Bar
First, use your organization’s “positive deviants” to establish a clear, specific standard of ethical values, attitudes and behaviors. Positive deviants are highly respected individuals who are consistent top performers and can typically be identified simply by asking management who stands out. They model the ideal ethical attitudes and best practices all others should achieve and are therefore the primary creators and preservers of an organization’s ethics. Positive deviants are motivated by a commitment to ethically creating a “social good” for their customers and for their organization.

2. Motivate Ethics
Second, guide all personnel to firmly embrace the goal of ethically achieving the positive deviant’s social good. When a positive deviant’s social good, or the inspiration behind their work, is presented to others in an empowering manner, it can be contagious for an organization. It naturally and organically spreads the commitment to the social good, and its ethical foundation, quickly and efficiently.

More specifically, once a strong understanding of the positive deviants’ social good has been established, it can be packaged into a short, emotionally powerful statement that excites and empowers other employees. To be successful, the social good must be presented in a way that creates a sense of honor and dignity (i.e., fair process). It must also cause people to naturally visualize themselves as having the same personal standards and commitment as the positive deviants (i.e., positive visualization). When these occur, people quickly embrace the positive deviants’ perspectives, improving the ethics of the entire organization.

3. Sustain Ethics
Next, ensure that the commitment to ethics is sustainable, even in the face of contrary pressures. True ethical behavior is profound and long term. It is a way of doing business that is so engrained in the organization that people cannot imagine functioning any other way.

The most effective means of generating this depth of commitment comes from the neuroscience principle “neurons that fire together wire together.” All profound learning is a change to the underlying neural structure of the brain that occurs when neurons fire together around consistent concepts. If the concepts are focused around the positive deviant ethics, new learning occurs that can be so complete that people do not even recognize they were ever any other way.

What makes neurons fire together? The key to achieve this organizational depth is simple — practice, practice, practice. Everything the organization does needs to exercise and reinforce the mental commitment to ethics.

4. Scale Ethics
Finally, engage a critical mass of the organization quickly to ensure that ethics pervades all aspects of the organization and becomes a true reflection of the organization as a whole. At the same time, individuals must display ethical behaviors in ways that are unique to their function and personality.

Persuasive technology — technology designed to “change what people believe and do” — that incorporates the principle of mass customization can facilitate widespread commitment to an organization’s ethics. Because this type of technology can touch many people simultaneously, individuals function more ethically and the organization as a whole builds a lasting foundation for ethical behavior.

Contributing to Success
The notion of an ethical organization may seem abstract, yet people who work in an organization with healthy ethics absolutely know it. They love their work, and they ultimately create better, more successful institutions.

Like all well intentioned wannabe entrepreneurs, I set about my due diligence. I shared the idea with some trusted friends, did the normal market research, wrote a business overview — outlining my business priorities, purpose, and vision — and contemplated core values. In truth, I was dreading going through this part of the process because it’s so often proved to be an arduous task when I’ve done it with former clients.

But surprisingly, it was pretty straightforward — for one reason. Some years earlier my wife and I had articulated a set of core family values. Instead of picking values that were aspirational or based on a sense of moral obligation to do the right thing — which is so often the case with corporations — we drew on the basis of experience, emotion, and the things that really mattered to us; the things that were part of our core family identity; the things we knew deep down we could own and passionately advocate across every facet of the business.

As we pondered the highs and lows, aces, and rabbit-holes of circumstances that had crossed our paths over the years — we recognized that certain motivations had become centers in our gravity time and time again. We acknowledged that the convictions that had so profoundly affected our “yesterdays” quite simply had to feature in measuring our “todays” as well as guiding our “tomorrows.”

Obviously, there are a plethora of values we could have readily selected from such as teamwork, commitment, or integrity. These are great words — indeed one could argue they are a prerequisite for doing business. There’s no doubt our business model lives or dies on transparent collaboration with strategic value partners across the globe, so it goes without saying that all three of these — but especially teamwork — is critical to the business.

But for us, these terms and others — including love, giving, and innovation — felt more implicit. They very much needed to be part of the business, but as an extension rather than the core of our values system. What we were looking for were a set of terms that reflected our life experiences. We wanted terms that together were a belief system that would play a more explicit role in characterizing our brand as well as building sources of inspiration. We like to refer to these type of values as “valuable assets” — assets that are a definitive source of market positioning and competitive advantage.

These are the values we picked:

• Joy
• Thankfulness
• Perseverance
• Courage
• Thoughtfulness
• Communication
• Honor

Each one fuels a personal-level emotion, but mostly importantly, we felt could they be authentically operationalized at every level throughout the business. So, again, while teamwork is a fundamentally important part of the business, it is more specifically and externally manifested through perseverance. Here’s an example.

Recently we were engaged in a very time-sensitive assignment that seemed impossible to achieve for many reasons. We were working with a number of external partners who, for completely valid reasons, couldn’t see how the project would be delivered by the deadline.

Through a series of fairly intense weeks of project reprioritization and negotiation both on the client and strategic-partner and supply-chain side, we were able to redesign the entire project framework and deliver a more effective outcome within the timeframe. On reflection, everyone agreed that working together — but more importantly going the extra mile — made all the difference between complete project failure and success. What’s more, the process provided insights that in turn are being used as key performance indicators for future projects.

When values are deeply imbedded in an organization’s culture, they can profoundly impact a variety of areas: attitudes toward decision-making, the way people build processes, innovation, hiring, conflict resolution, dealing with a competitive takeover of clients. Every touch point of a customer experience is affected. Basically, values affect the heartbeat of a company, its day-to-day modus operandi, as well as the outcomes that allow it to grow and change.

At the same time, a company’s values have the potential to play a powerful role in building differentiation and distinctive capability that is difficult for competitors to authentically replicate — which again is why we believe each value can play a bigger role than just making us feel good about what we’re doing. They can translate into tangible metrics such as increased number of new contracts, more profitable projects, and more effective operating procedures. Values have the potential to be quantified on a balance sheet, again as a valuable asset.

There’s no doubt that values — as with its cousin, brand — find it difficult to establish line-item credibility on a balance sheet. This article isn’t about to argue that cause. But maybe, just maybe the day will come where values are a nonnegotiable on any financial statement — where company mission, purpose ,and best practices are really tied to what they believe.

Next time around, we will look at each value more specifically, discussing how they can be made real in the day to day life of a business.

Paul Graves is a brand and business strategist. He has worked in and around the advertising, brand, and marketing communication industry for more than 20 years, advising for some of the world’s most recognized brands. His company, See Seven, currently helps organizations better understand how to more effectively leverage their internal brand, culture, and business models to deliver more valuable customer experiences.

Don Flow is president and owner of Flow Automotive, 31 automobile dealerships across North Carolina and Virginia, which are known for exemplary ethical practices. Flow Companies employs over 900 associates and operates 31 award-winning, highly respected dealerships. In recent months, the company was recognized as the top Honda dealership and runner-up among BMW dealerships in the country for customer satisfaction.

Ethix featured an in-depth conversation with Don Flow in the March/April 2004 issue. When the economic crisis came in September 2008, the automotive industry was one of the hardest hit. We did an update with Flow in the March/April 2009 issue.

John Terrill, director of the Center for Integrity in Business at Seattle Pacific University, had the opportunity to visit with Don and Robbin Flow on September 12, 2009, to gain their perspective on the economic recovery process, as well as some personal reflections on what they’ve been learning about leading in crisis.

Ethix: In the March/April 2009 issue, you provided some important insights on how to lead during crisis. And as we know, the economic fallout of the last year has had dramatic impact on the automotive industry, including Flow Automotive, which has a number of General Motors dealerships. What have you been learning that might be helpful to other leaders?

Don Flow: I discovered how critical it was for us to get everyone on the team involved in helping us improve our business operations through the crisis. One of the ways you avoid paralysis in a time of crisis is to engage in meaningful activity, and for us that was reexamining everything we do to find ways to improve our business so that we can better serve our customers. A key question we’ve asked continually over the past year is what can we do to create more value for our customers? We’ve always asked this question, but during the last year when both the sales and service sides of the business have been down dramatically, we decided to drive more deeply into the organization to address this challenge.

To do so we formed teams at each of our dealerships to deal with this important question. We also developed web-based tools to solicit feedback and involvement. By engaging everyone in this process, we found that many new ideas emerged. The process has changed our culture. I can hardly walk into a dealership without someone approaching me with an idea for process improvement. The process of forming teams and having these kinds of discussions was a stabilizing activity for us, and we need to find ways to maintain this level of involvement after the crisis subsides.

The conversations also allowed us to refocus on core values, such as respect for the intrinsic value and dignity of all employees, customers, and community members; and responsibility and accountability to all company stakeholders in running our business.

During these last months, we’ve really tried at each turn to share important information with our employees. This has helped them feel valued, and has provided some sense of control for them during the crisis. Even though business was down dramatically, we also increased our investment in our employee assistance fund this past year, which was important given the challenges all of us have faced.

One of the things going forward, as conditions improve, is to find ways to create opportunities for professional growth and promotion. A period of contraction, like we’re going through, creates opportunities for our team members to step into positions of increased leadership and responsibility. We want to take advantage of this situation and be a place where employees can develop as leaders.

Robbin Flow: I think the other thing you learn during a period like this is how important periods of rest and networks of deep, personal friendships can be. We have a little farmhouse outside of Winston-Salem, which has been a refuge for us during this past year. Building in a rhythm of rest is one of the best ways to maintain perspective. Don will chop wood and clear brush while there, and we’ll both spend time together bicycling country roads. There is tremendous emotional drain that comes during seasons of intense ambiguity. As I reflect back on our weekend retreats at the farm, it is interesting to note that Don’s Blackberry never seemed to work properly while we were there. We’re both glad this was the case.

The other thing that has helped us survive is deep friendships that provide perspective. We have a group of friends we meet with weekly. Without this community, I am not sure we could have survived this past year, which has been one of the most challenging we’ve faced.

There was a lot of talk in the press about the Cash for Clunkers program. How did it affect your business?

Don Flow: The program produced a lot of sales for us. One of things that didn’t get covered by the press, and was not originally intended for the program, was how helpful it was to a percentage of American workers who are dependent on personal transportation for commuting purposes. Probably 20-25 percent of the cash-for-clunker sales we made were with customers who had been deeply buried in the subprime loan mess but who are also dependent on personal transportation to get to their places of employment. The $4,500 incentive allowed many of these customers to buy a $15,000 new car at a prime rate, which lowered their financing costs considerably. Rather than owning a clunker that required considerable ongoing maintenance costs and was not dependable, they were now able purchase a new car at comparable or lower costs. And when paying off the loan, they own an asset with significant residual value. From our perspective, it felt great to work with this segment of our customers. Helping customers take advantage of program benefits, break a cycle of subprime loans, and get into a dependable automobile at lower costs was really gratifying for us.

What other insights have you gained during this last year that you’d like to share?

Don Flow: I really hope some of the processes we’ve put into place will guide us for the next five years. I think the whole experience has really changed the way we think about risk. We’ve always been careful, but going forward we’ll keep more cash on hand. We’ll also try and find ways to better assess and plan for risk in our business. I don’t think this is unique to the automotive industry. I think businesses across the board will approach risk a bit differently. We’re faced with some of these decisions right now, in fact. It is time to start planning for the second quarter of 2010, when most economists predict that the economy will pick up steam. I’m wrestling with how to expand our outlets and inventories given where we’ve been.

I also think it is going to be important to find ways to maintain the same sense of urgency and discipline we’ve pursued this past year. Our business is better today because of what we’ve been through. In the years to come, we need to find ways to accelerate our learning curve so that we can continue to create value for our customers and stakeholders.

Interviewed by John Terrill

It made me wonder what would happen if every employee in a company had to make a similar pledge and what that might mean for a company’s brand.

Think of ethics as the values you live out, and your brand as representing the promise that you make. If you don’t adhere to those internal values — your ethics — you may negate the promise to your customers. And here’s the real challenge: It’s not just the leadership of the organization that must live out a standard code of ethics. It’s up to each person in the organization.

Your brand is more than just a logo or tagline. It involves everything you do. Every touch point with customers affects their perspective of you, and thus your brand. Hence, all the advertising in the world won’t help your brand if a customer has a bad experience with an employee who does not live out the values you espouse.

Let me illustrate with a recent personal example. I was about to board a flight home and arrived at the airline’s gate after they had started boarding. Since I had “elite” status on one of this airline’s partners, I got in line immediately but was told I had couldn’t board yet. The gate attendant said I’d missed the elite boarding and had to wait until my row was called. I thought this odd, but accepted it as a quirk of this airline. But when she told the same message to a few other elite flyers including a 100K mile member, things got ugly. The 100K member questioned the attendant’s judgment and knowledge of company policy and asked to see a supervisor but to no avail. By the time the shouting match ended, it didn’t matter: Everyone else was already on the plane.

What happened here? Here are some possible ways to look at it:

• The attendant missed the spirit of the rules and followed the letter of the law (if that, in fact, was the airline’s actual policy). Unlike some companies where values override policy details (such as the legendary example of the Nordstrom salesperson who accepted a return of a set of tires), the attendant followed the rules at all costs.
• She applied ethics of her own (perhaps she held more egalitarian and democratic values that uphold a first-come, first-served approach).
• She practiced her own form of situational ethics, whereby she had to get the plane out on time — her highest value — and she figured that the people with the most mileage were least likely to switch brands.
• She was just having a bad day. She let her emotions override her values.

The real answer may be a combination of these but no matter: The result was bad customer service. Underlying that service though was a set of values, but most likely not the corporation’s. Whether the attendant knew the company’s values and ignored them or operated in ignorance, I don’t know. I do know her actions damaged the brand.

Would a company oath that committed each employee to a shared code of ethics have helped? It might. Everyone would need to take it seriously and implement it consistently. But there’s another potential benefit of such an oath.

We live in an age where the slightest blunder is just a Tweet away or the next hit on YouTube. Having a common standard of values helps everyone know what’s expected of them and why it matters. But it also helps build your brand so that should something bad happen, you’ve built up enough positive value with your employees and customers that they know that one bad experience is not the norm. When they know what you stand for, they’ll more likely give you the benefit of the doubt when they hear or experience something bad like my incident boarding the plane.

Ethics matter because they are at the heart of your values. Values matter because they are at the heart of your brand. Connect these, perhaps with something like an oath or other means of ensuring everyone knows and owns your values, and you not only increase the likelihood of a successful brand, but you can become a force for good in society.

Steve Brock is the CEO of Brand:Wallop and former president/CEO of HighPoint Solutions. Brand:Wallop is a strategy and integrated marketing consultancy specializing in social marketing (fundraising for nonprofits and corporate social responsibility for corporations), branding, and the Internet. Steve graduated with distinction from The Thunderbird School of Global Management with an MBA in the areas of Pacific Rim studies, marketing, and Mandarin Chinese.

Why? Because if you don’t understand the fundamentals of good job searching, these tools will only provide the illusion that you’re doing something productive, rather than help you land that “better fit” job.

Remember: These are tools! Much like knowing how to write a good résumé is a tool. That’s all they are. Just like my new 3-wood that was sold to me with the promise that 200+ yard fairway lies will now go straight and long, it didn’t quite live up to the hype. So, too, will your job search stagnate if you rely solely on all the Internet’s latest social-networking tools to land you that exciting new job.

Don’t get me wrong, these tools can work. My daughter just landed an outstanding internship by actively pursuing a Twitter post. But these new Internet tools may continue to repeat the same problems with regard to hiring and networking that have always existed: They give you the illusion that you’re doing something productive toward your job search, when you simply may be Twittcrastinating. Even though we have thousands of job postings at our finger tips, and can search the ones that closely resemble what our expertise might be, most ads are so horribly written, focusing on sterile information about the job description, that only the most desperate job seeker would answer them.

As a side note — Are employee referral programs a reliable hiring tool if the recruiter ends up hiring the most popular person rather than the skilled, yet reserved person, who might be best for the job?

The majority on both sides of the equation (companies and job seekers) continue to miss the mark. There are a few who “get it.” What do they get? They get that people want more than a job. They want to be challenged with the responsibility of contributing to achieving something great. They get that it may be the person with the nose ring and blue hair who rarely says a word who might just love to get things done right.

When companies don’t “get” this, they hire the “best interviewee.” This person is typically the most socially connected, or worse … the most desperate, because that is who they are pitching to!

When job searchers don’t get it, they come across as individuals who are needy and desperate, and will do anything to look good. Looking good doesn’t last too long once they’ve been through the first 90 days. Not to mention the fact that the best companies won’t hire you when you come across as simply desperate to get a job.

Great companies and talented people want to know how each will compliment the achievement of something really interesting. Both parties search and interview with this in mind.

So, for job seekers, the old fashioned way remains the best way. TAKE CHARGE! Know that the easiest way a recruiter can hire is to have someone call them and ask what the given company is trying to accomplish, and how this position is expected to contribute to this mission. Only after you understand all of this, tell them why your skills and experience are a good fit for making that contribution.

While you’re doing that, I’ll be returning to the driving range, working on improving my game, while my gimmick 3-wood sits safely in my bag … and I certainly won’t use it to putt.

By David Mashburn
David earned his doctorate in clinical psychology in 1986. He is in private practice in Bellevue, Washington. He is also a partner in a Seattle-based company, Tidemark, a provider of workforce staffing solutions. He writes and speaks on the science of human flourishing. See his blog at workpuzzle.com.