I have personally asked over a hundred companies how important character is by force-ranking skills, knowledge, and character in their companies. As you might expect, many companies respond (and quickly, I might add!) that character is the most important. Exactly how many companies would you guess see it this way? Half? Two thirds? In my informal research, I have yet to have a single company respond with anything but character.
Excuses, Excuses
You might have a “well, duh” response to this revelation. Of course, character is important to companies! It’s important to me too! Nearly every part of our society depends on character. Because character is so important, you would think that each of these companies was intentionally developing the character and values of its stakeholders, but they’re not. Why aren’t they? I think that’s an important question to think about, but I’ll only touch on a few possible reasons, because I’d like to talk about the value of character in this mini-series.
Here are some arguments preventing some companies, maybe yours, from intentionally developing character and values in their people:
Developing character is someone else’s job. Aren’t parents, K-12 schools, and churches supposed to develop character?
Developing character in an adult is not possible. Whatever character a person has is developed in childhood, and they can’t and won’t change as an adult.
I don’t know how to develop character in an adult.
Developing character is messy or too costly.
I will have to compromise business outcomes like profitability or market share if I focus on values and broad stakeholder care.
I am too focused on the business (e.g., surviving, launching a new product, short-staffed) right now, but will work on values and purpose integration when it’s a better time.
This is not an exhaustive list, but I want to point out that arguments like this, whether conscious or unconscious, keep companies from investing in what they state is more important than anything else. Sales and economic theory tell us that a decision to buy anything isn’t made until the benefit of saying "yes" outweighs the cost; or perhaps more importantly, the cost of saying "no" and doing nothing outweighs the cost of saying "yes."
This first of a two-part post will focus on the costs of doing nothing, the downside when character breaks down or purpose is lacking. The second part in this series focuses on the returns demonstrated when companies intentionally focus on developing character and integrating purpose. Together, I hope these articles illuminate the benefits of investing in values and purpose integration enough to tip the cost-benefit equation for you, inspiring you to invest!
The Cost of Lack of Character
Pull those weeds!
When I go to work in the garden, before I focus on nurturing the desirable plants, I spend time pulling the weeds that choke out the good ones. So, before we look at the fruits of character, let’s look at the weeds when character fails. What is the cost to our company when someone on our team has a lapse of character? If you pause for a moment, you may have no shortage of your own stories where an employee or leader acted without character, damaging your company’s performance, reputation, and maybe people’s lives. It could be something small like a few percentage points of shrink or it could be something big like Enron. These lapses of character inside your company are damaging, costing real dollars in lost inventory, lost business, lost productivity, lawsuits, and even bankruptcy.
Often our approach to mitigating these lapses in character is to add external controls, like more frequent audits, additional security, or access restrictions. Whatever the solution, it is often costly, inefficient, intrusive, or distrusting. This is an external response to an internal issue. We must acknowledge we are already dealing with internal character shortfalls in a costly external way rather than investing in developing internal character.
More character means less external control
I'm not advocating for zero controls, of course, but in general, the amount of external control is inversely proportional to the amount of character in our stakeholders. A corporate culture that lacks character will require more external controls. This is the same issue America’s founders faced – if we are to move from oppressive external government to free self-government, our people must have virtue. Benjamin Franklin famously said that “only a virtuous people are capable of freedom. As nations [or companies] become corrupt and vicious, they have more need of masters [or controls].” Lack of controls does not mean lack of accountability. In fact, there is more responsibility and accountability in a trusting organization with fewer controls, because responsibility is transferred from a policy or regulation to a person’s character.
Shrinkage Hurts
At Hallmark University where I used to serve as President, we built a character formation program designed to develop traits like integrity, stewardship, and service. This university uses a self-serve honor system vending service where students and staff select items from open shelves and unlocked coolers, then use a self-checkout system. The vending company reports that this university has about half the shrinkage of vending locations at other universities.
Greater attention on character, fewer controls, less shrinkage.
Special Favors
A friend who is an entrepreneur shared his own story with me earlier this month. One of his product leads requested a special COVID rate and deferred payments for a new prospect company. As the team reviewed the situation, they determined the prospect company did not qualify and declined to extend any special pricing. A few weeks later, an invoice review revealed that work had been performed and even third-party services purchased for this customer, disregarding her supervisor’s decision. Further investigation revealed the prospect company was owned by her son. Real dollars and company resources were lost, and now there’s the added expense of replacing the misbehaving team member.
We're Already Paying for Character
Consider your own company or organization. What is your ratio of control to character? How often do you have to separate from an employee for skills deficiencies vs. character deficiencies? We are already spending significant money on controls, turnover, and other costs due to character gaps. Could there be a payoff for investing in character development and purpose integration?
Character lapses hurt!
Now that we’ve briefly looked at the cost side of character, in the next part of this two-part series, we’ll examine the value side. In the meantime, jot down a few instances where character lapses cost you. Try to put a dollar value to each instance. Maybe there was a lawsuit. Or significant rework. Or lost inventory. Or a costly partnership dissolution. Or damaged customer relationships. Look at just the costs of character lapses may have already tipped the cost/benefit equation for you. But if not, stay tuned – we’re going to talk about the benefit and value side of character next.