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Which CEO Character Traits Yield the Highest Returns?

05/15/2015 04:14 pm ET | Updated May 15, 2016

Machiavelli said, "It is better to be feared than loved, if you cannot be both." And for that statement, as well as other views, he is famous, or rather... infamous.

But that begs the question: Which leadership style yields better financial results? Does an organization fare well with a self-focused, unethical leader ruling with fear, driven to obtain personal gain? Or would it do better having a leader with integrity who shows responsibility, forgiveness and (dare we say it) compassion?

Based on his statement, Machiavelli would argue that a leader who rules with an iron fist gains the best results, i.e., strong-arm tactics will continue until morale improves. However, a new study by KRW International, a Minneapolis-based leadership consultancy, argues differently. (Source)

Kinder and Gentler Wins

For this study, KRW looked at organization performance compared to the prevalence of four moral principles of the CEO and management team. The four principles questioned were:

  • integrity
  • responsibility
  • forgiveness
  • compassion

Next, KRW sent anonymous surveys to employees at 84 U.S. companies and nonprofit organizations asking each respondent whether their CEO embodied any/all of these four principles. The results showed that CEOs receiving high marks for these character traits had an average return on assets (ROA) of 9.4 percent. By contrast, CEOs with low character ratings averaged an ROA of only 1.9 percent. That's almost a 5x difference!

Those who received high marks often showed strong character by choosing to do what is right, indicating their concern for common goals, or for showing empathy. Those who received low marks were described as willing to stretch the truth in order to get personal gain and taking self-interested actions.

Why not get onboard?

After looking at these survey results, we might ask ourselves: "If strong character means greater economic benefit, why don't all leaders exhibit strong character?" The challenge lies in the fact that arrogant leaders in need of character enhancements tend not to think they have an issue--potentially because they are deluded and busy being transfixed on themselves.

In the KRW study, when leaders of the organizations were asked to rate themselves on the four moral principles mentioned previously, the self-focused CEOs rated themselves with loftier scores than their employees. Ironically, but not surprisingly, CEOs who were highly rated by their employees ended up giving themselves slightly lower scores.

What to do?

Fortunately, leaders can do a few simple things to increase self-awareness about their own character traits. One potential improvement method is to gather unbiased and objective feedback from those they lead. This method can be productive if the leader is receptive to getting some potentially negative feedback.

Most self-serving CEOs will deny they have character flaws; it may take guidance from a trusted mentor or advisor to help them see those flaws and work on improvement.

Our "character" is a collection of attributes developed over time through acting, leading, choosing, and deciding. While improving character is not an easy process, it is certainly possible. The leader who puts time and honest effort into character improvement should reap the rewards personally and professionally. And that's good for the business!

Note: This article and the opinions expressed here are from Russ Warner, VP of Marketing at Converus, makers of EyeDetect, an innovative, new deception detection technology.