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You can win through trust, values and integrity -- if you work hard enough

Sometimes I wonder whether all the leadership advice we put out here at SmartBrief is for naught.

By that, I mean, is it true that empathy, and communication, and striving to serve others as a path to success for all, actually wins out over the selfish and brash? Especially if those selfish and brash people already have power, money, or both? Look around the world and you'll find plenty to discourage you.

recite-184e8v0Then again, sometimes you come across data -- yes, actual data -- that suggests hope. Most recently, this was in the form of LRN's "The HOW Report." Simply put, LRN's business is in helping large organizations build a culture of trust, of values and of doing the right thing based on the former -- and because doing the right thing is also the right business decision.

The gist of this argument: We've collected and examined the data. The best companies pursue excellence, yes, but not without boundaries. Those lacking principles, transparency and trust will be more prone to misconduct that will eventually be felt financially and otherwise.

Buoyed by this report, I recently spoke with Mike Eichenwald about what LRN does in its HOW Report research, why transforming an organization takes years of work, and why a "self-governing organization" is especially important for larger organizations (those with 10,000+ employees).

What kind of organization do we want?

LRN helps create "ethical, values-based companies that do the right thing," Eichenwald told me. That's easier said than done.

Reflection, discussion and hard work are imperative, with each organization needing to determine where it is, what it wants to be, and how it's going to get buy-in from, first, senior management and then down throughout the organization.

LRN looks at governance, culture and leadership when evaluating organizations, classifying them at one of three possible stages:

  • "blind obedience" organizations, with command-and-control power structures, fear-based incentives and a short-term vision.
  • "informed acquiescence," or organizations that are doing better, but are still bound by 20th-century constructs, performance-based expectations and rewards, and a culture where the long-term is acknowledged but not always prioritized.
  • "self-governance," where purpose and values underpin principles and morals, and where the organization actually behaves according to them. Employees are empowered, think long-term and act on those aforementioned values rather than rules.
self governance numbers Credit: LRN, "The HOW Report"

So, how many organizations are at "self-governance"? 8%, according to LRN's research, which included more than 16,000 people across 17 countries.

That sounds terrible, but here's the good news: It's up from 3% in 2012, and many organizations took the initial step from "blind obedience" to "informed acquiescence" over that time.

Why does this matter? From our conversation, I heard Eichenwald give at least six reasons.

One, "too many companies are finding themselves in pursuit of values like excellence, or winning, or innovation" yet committing embarrassing acts of misconduct because people are lying or cheating on the path to the top.

Second, more is asked of employees than ever before: "We not only want their labor, we not only want their minds, but we want all their creativity, we want access to their networks." While asking for so much more, he says, we've changed little in how we prepare people to do so in an ethical way, and we don't talk enough about inspiring employees rather than just engaging them.

Third, not everyone believes that values matter, Eichenwald says. So "The HOW Report" and LRN's work help show that "not only do values matter, but they help companies win."

Fourth, everyone loves talking about values, ethics, trust, transparency and the freedom to fail. But is this talk from CEOs and others, or is there behavioral change? Do employees feel the executive-level rhetoric exist in reality? And what does that behavioral change look like? These are important questions that need to be answered before a company can even think about becoming self-governing.

Fifth, companies are increasingly asked to take stands on issues of the day -- cultural, political or otherwise. Companies will need to discuss and determine who and what they are if they are to have coherent responses.

Sixth, and perhaps most important for readers looking to initiate change in their organizations: 97% of self-governing companies deliver high performance, according to LRN's analysis; only 80% of "informed acquiescence" and 36% of "blind obedience" firms can say the same.

What does an organization need to do?

The character of a self-governing organization cannot be demanded, Eichenwald says LRN has found. You cannot demand employees to "act with purpose" or "take risks" or "have character" or "have a 'we not me' mentality."

If you want certain behavior, he said, then you "need to focus on the things that enable that behavior to surface."

That starts with enabling trust at scale, which really means "the extension of trust to others," Eichenwald said. "Not what is usually talked about when people talk about trust in companies today -- which is 'prove that you're worthy and I'll give you more responsibility.'" Instead, trust here means that "just by the nature that you work at this company, I'm going to take risk with you."

LRN focuses on helping companies develop inspired employees rather than engaged employees. The latter, Eichenwald said, is a "transactional" relationship based on circumstances -- company success, who your boss is, etc. But to move beyond that:

"you need a different set of characteristics. You need people who not only take responsibility for themselves but others. You need people who feel deeply accountable for the quality of their work, not just the appearance of that work. And you need people who feel a lot of pride in what their organization is really about."

So, what is the starting point?

A high-level self-examination and open discussion. Leadership will often not agree "on the need for change or the reasons for it," but they'll ultimately need to align on a "common view of how the world works," Eichenwald said, and what the implications of that viewpoint are.

Beyond leadership buy-in, you'll need to engage employees, as well as customers, suppliers and other stakeholders. You'll need to have discussions with them, as you can't can't impose your values (successfully, at least). Ask questions like: What do all parties expect of your company? What are the implications from the behaviors we choose to model?

The goal is to scale trust, values and behavior, and to have "employees do it for you," he said. "Not because they have to, but because they think it's the right thing to do because they're inspired."

The C-suite has bought in. What about the rest of us?

Companies struggle with getting a top-level message or mentality to spread downward, as we may already know but LRN's data reinforces.

One reason, Eichenwald said, is that we're really not good at scaling "real freedom" among employees. This is particularly important at bigger organizations where a force of personality is not enough, and where it's often easier to implement rigid rules and processes than make systemic changes that encourage trust and reinforce desired behaviors.

Corporate communications matter -- is it a megaphone approach or a conversation? Beyond that, he said, efforts to spread these values and behaviors down throughout an organization should tie back to business goals. "Use your strategic agenda to teach values and behavior; in fact, make values and behavior a coordinator of your strategic agenda."

How long does it take?

Implementing new purpose and values in the hope of instilling character values and then behaviors is not a quick process. This "is not something you can learn in a week, or two weeks," Eichenwald said.

There will also be risk, and maybe mistakes. The HOW Report has a helpful graphic (below) that illustrates the hard work involved in this journey. A command-and-control company can be updated (relatively) easily. The journey to "self-governance" will require trial and error, enduring a period with uncertainties and discomfort, learning from those experiences and summoning the courage to continue.

Many companies will spend energy on change initiatives and then give up after a year or two, Eichenwald, said. But to be successful with the type of change LRN advocates can take three to five years of "conscious, deliberate effort," he said.

Credit: LRN, "The HOW Report" Credit: LRN, "The HOW Report"

You're self-governing! Congratulations. Now what?

There's a need to build this change into your hiring and onboarding, so that new employees are aligned and educated from the beginning.

And get ready for expectations to go up, Eichenwald said. Once you start talking purpose and values, everyone will expect more of you and scrutinize you more.

James daSilva manages SmartBlog on Leadership and edits SmartBrief’s daily newsletters on leadership and entrepreneurship. Sign up, and let him know what you think.