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The 4 Leadership Traits That Translate To Business Success

New evidence that the character of a company’s leaders has an effect on a business’s financial success.

The 4 Leadership Traits That Translate To Business Success
[Photo: David Allan Brandt/Getty Images]

When leaders of large corporations step down amid controversy, their character is often called into question. Recently, Volkswagon CEO Martin Winterkorn stepped down from his post when news broke that the German automaker installed technology intended to defeat emissions testing.

Though he claimed not to be aware of the wrongdoing, Winterkorn is known as being a hard-driving perfectionist bent on securing the top spot among global car manufacturers. Winterkorn’s resignation also came on the heels of a dispute with the chairman of the company, who claimed to have “lost confidence” in his leadership despite VW’s financial success.

Though it may take years to parse Winterkorn’s role in the company’s current crisis, there’s now evidence that the character of a person–especially those in leadership positions–can also translate to bottom-line success. According to KRW International, a leadership consultancy, CEOs whose characters were highly rated by employees had an average return on assets of 9.35% over a two-year period, almost five times as much as CEOs with low scores whose return on assets averaged just 1.93%.

Scoring emotional intelligence wades into squishy territory. One person might give a coworker’s ability to empathize high marks when a colleague from another team would not. To determine how to rate character, Fred Kiel, KRW’s founder, and his team of researchers combed through a list of 500 behaviors and traits from a classic study of anthropology to boil it down to four universal principles:

  • Integrity
  • Responsibility
  • Forgiveness
  • Compassion

Over the course of seven years, Kiel and his colleagues surveyed 8,500 employees at 84 companies in the U.S., asking them to rate their CEOs. They also analyzed the organization’s financial results. The leaders’ marks ranged from what Kiel calls “virtuoso” to “self-focused.”

At the top of the leaderboard were 10 executives who received high marks for the four traits and had the most business growth. For instance, Dale Larson took the helm of Larson Storm Doors after his father died of cancer. He grew the family business from 30 employees to more than 1,500 and gained a market share of 55%, according to a report in Harvard Business Review.

We’ve reported previously on the most well-liked CEOs in the U.S. They each received high marks for having a clear vision and communicating that effectively.

Kiel told the Washington Post that strategy and vision don’t mean anything if not executed effectively through a culture of accountability. “Execution is all about having an engaged workforce that is inspired by the vision,” he said. “The most effective leaders are those who combine a military toughness with regard to accountability along with a compassionate side, being very caring of the individual and their own success.”

Kiel believes that these skills began long before the CEO started the corporate climb. The study revealed that high character CEOs had advantages such as being born into homes with more functional parents, or had extended family who were more engaged with them than lower character leaders. He told Skip Prichard in an interview:

Nurturing parents, teachers, coaches, and mentors all find ways to encourage kids to reflect and learn from their behavior. You stole the bubblegum from the store? You march right back and return it and accept the consequences the shopkeeper metes out. You saw the new kid getting bullied on the playground? You stand up for her and help her out.

Through our research, we have come to understand that these supportive adults helped the high character CEOs learn how to reflect and create coherence around their experiences and stories—to be able to tell a coherent life story and find meaning from it that provided guidance for their decisions and behaviors. And the best news is that if that kind of examination, reflection, and learning can be done in childhood and adolescence, it can be done at any time in life. It’s the surest path to developing stronger character habits.

Those at the bottom of the list (all participants were guaranteed anonymity and only some agreed to let their names be shared publicly later) were commonly described as focused on their own personal and financial security and were not above bending the truth at any cost.

According to the results of the survey, Kiel believes that such leaders started out as well-intentioned who got careless in the way they treated others. The behavior is usually fear-based because they have developed a negative view of human nature. Unfortunately, this demeanor tends to shut down feedback because they believe they know better than anyone what their staff should be doing.

Kiel points out that before he and his colleagues conducted the study, they believed that integrity and honest business practices were all that mattered to bottom-line success. Instead, they found that all four characteristics were needed to get financial returns and boost employee engagement.

Says Kiel, “Someone with high integrity but low responsibility, forgiveness, and compassion scores would probably spend all their time micromanaging and would fail to engage the workforce. Integrity isn’t enough, and neither are any of the other three traits on their own. You need all four to achieve virtuosity.”

About the author

Lydia Dishman is a business journalist writing about the intersection of tech, leadership, commerce, and innovation. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Fortune, The Guardian, Popular Science, and the New York Times, among others.

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