We tend to believe behind every great company, there's a great, role model-worthy leader. But that's not always the case. A company can still be successful and have leaders with little to no character. Leadership will ultimately be reflected in its bottom line, especially when measured against businesses that put people with high character in charge.
Take, for example, Fred Kiel's seven-year study of more than 100 CEOs, their companies, and 8,500 of their employees, as reported by the Harvard Business Review. Kiel found that leaders with strong character made up to five times the return on investment that leaders with weak character did.
What does Kiel mean by "strong character"? According to his interview with The Washington Post's guest writer Tom Fox, strong character is measured by what we usually deem to be "good" traits:
This is all heartening new for small-business owners that take the time to build relationships with their employees and keep the human element of their business at the forefront. This study shows a compassionate leader tends to see more economic gains, which can help the business stay in the black.
On Compassionate Leaders, Employee Loyalty, and Productivity
Of course, you can't build a company on good principles alone. It also takes business skills and vision. But you can hardly execute your goals without the support of your team behind you.
The best way to get that support is to build relationships with your employees. When you care about the lives and well being of your workforce, your team feels more invested in your business. That means you have an easier time retaining top talent and getting your employees to produce better work.
Consider what Gallup's "State of the American Workplace" survey found:
- Leaders are the biggest influence on whether or not your employees are engaged in their work. A leader who cares about their team tends to have more engaged employees.
- Engaged employees are more productive. By contrast, the survey finds that employees who aren't tuned into their work cost businesses $450 billion to $550 billion in lost productivity each year.
You can read more about employee engagement in our post "Why Small Businesses Shouldn't Hire 70% of Employees."
How to Consistently Display Strong Character in the Workplace
Displaying strong character isn't a one-off deal – it's something you must exhibit day in and day out. How can you make sure you're putting your principles into practice? Here are some ideas:
- Listen to your team. A good leader has the ability to listen and adapt accordingly. Many of the great leaders we look up to in business today didn't get to the top by relying on themselves alone (more on the greats here: "For Better Business Outcomes, Try Getting It Wrong"). They surrounded themselves with smart people and good advisers. Moreover, if you want your team to engage with their work, you should make a habit of engaging with them and asking for feedback.
- Show that you care. Acknowledging birthdays, special occasions, and important work or personal accomplishments shows employees that you don't just view them as work drones. On a similar note, encouraging a work-life balance demonstrates compassion, which Kiel notes is one of the most powerful ways to engage a workforce.
- Stick to your principles – especially when things go wrong. It's hard to be our best selves when frustrations, roadblocks, and accidents pop up. Unfortunately, these are the times when the caliber of your leadership will be most remembered. Say an employee is injured at work. You can put your best foot forward by keeping in touch with them throughout their recovery. That extra effort can help build the employee's morale and assuage harsh feelings toward your business. Read more about that in "Workers' Comp Investigation Offers Small Businesses a Reminder to Communicate."
On a related note, find out how employee wellness programs can help you reap two times the ROI in "Study: Wellness Comes Back to Small Businesses Twofold."