What shall an organization profit if it should gain the world but lose its soul?[11] For Starbucks chairman Howard Schultz, the answer is "not a lot," which is why he raised exactly that question in a memo to everyone in his company in 2007, as described in Chapter Twelve. In the case of Enron, the answer was evidently "nothing at all"; the company eventually lost both its soul and the world it hoped to gain. Enron was America's largest gas pipeline company when Kenneth Lay took over as chief executive in 1985. At the time, it was a solid but pedestrian business. It was a strong competitor in its industry, but demand was flat, and profits cycled with fluctuations in the price of gas (Bodily and Bruner, 2002). Deregulation loomed, creating both threats and opportunities. Lay, as smart as he was genial, did what CEOs are expected to do: look for ways to grow the business and boost the share price. For more than fifteen years, he was remarkably successful. A once-sleepy company morphed into world's largest energy-trading business, and Enron's market value grew from $2 billion in 1985 to $70 billion in mid-2001.
Most of the excitement at Enron was generated by a new and unique business model. Instead of just pumping gas through pipes, the company redefined itself as a trader, a deal maker in a variety of commodities. Initially, the focus was energy, but Enron gradually expanded into areas as diverse as broadband and an esoteric form of weather insurance. By 2000, the old pipelines represented only about a fifth of Enron's revenues and profits. Much of the rest came from the new "merchant" businesses, which attracted a new breed of Enron employee: bright young fast-trackers with advanced degrees in business and finance.
The stable pipeline business was run by managers with years of industry experience. Reliability and operating efficiency were the keys to success. Pay was linked to seniority. The new trading operations carried much higher risks, which brought Enron into the business equivalent of the Wild West. Big rewards awaited aggressive gunslingers with the guts and smarts to grab whatever loot they could find. Enron's old pay system gave way to huge bonuses and generous stock options for high-performers. This was topped off with corporate jets and lavish parties adorned by $500 bottles of champagne and strippers who cost even more (Roberts and Thomas, 2002). As James O'Toole put it, "At Enron, you had a bunch of kids running loose without adult supervision" (Byrne, France, and Zellner, 2002, p. 1).
It's easy to catch gold fever in a mining town during a boom, and many of Enron's aggressive young pioneers were stricken. One was Timothy Belden, thirty-four-year-old head of Enron's energy trading office in Portland, Oregon. Belden earned bonuses totaling close to $5 million in 2001. A year later, he agreed to give some of it to the state of California, pleading guilty to illegal manipulation of California's energy crisis: "In the plea Belden admitted to working with others on trading tactics that effectively transformed California's complex system for buying and transmitting energy into a fictional world, complete with bogus transmission schedules, imaginary congestion on power lines and fraudulent sales of 'out of state' energy that in fact came from California itself" (Eichenwald and Richtel, 2002, p. C1).
When some of Enron's new mines produced only fool's gold, the company's financial wizards tried to keep the game going. Fancy financial maneuvers inflated revenue and hid debt, mostly by selling assets to supposedly independent partnerships that were controlled by Enron's chief financial officer, Andrew Fastow. Partnerships borrowed the money from banks or brokerages, and Enron guaranteed the loans (Eichenwald, 2002b). Moving money from one pocket to another bumped up Enron's financial statements in the short run, but eventually the off balance-sheet shenanigans came home to roost, and the company imploded.
At the heart of this tragedy, the company lost track of what it was or stood for. As Arie De Geus puts it, companies "need profits in the same way as any living being needs oxygen. It is a necessity to stay alive, but it is not the purpose of life" (De Geus, 1995, p. 29). Enron's story is far from unique. Over the years, corporate flame-outs have recurred around the world. What can managers and organizations do about this abysmal state of moral lapse? We argue in this chapter that ethics must reside in soul, a sense of bedrock character that harbors core beliefs and values. We discuss why soul is important and how it sustains spiritual conviction and ethical behavior. We then present a variegated picture of leadership ethics.
What Enron lacked becomes obvious if we compare it to the pharmaceutical giant Merck, one of America's most successful firms. Merck states its core purpose as preserving and improving human life, above making a profit. A noble sentiment, but is it reflected in key decisions and everyday behavior? Mostly, though Merck has sustained legitimate criticism in recent years for being slow to acknowledge health risks with some of its best-selling drugs like Vioxx (Fielder, 2005). But Merck can also point to a number of instances of selling a drug at a loss or giving it away to fulfill the company's core value of putting patients first. In one well-known instance, Merck had to decide whether to develop and distribute a drug for river blindness, an affliction of poor people in many Third World countries. From a cost-benefit viewpoint, the choice was clear: the drug had little chance of making money. For bottom-line-driven companies, such a decision would be a no-brainer. Merck, true to its emphasis on health, developed the drug and then gave it away. The company's commitment to its values made the decision easy, the CEO said afterward.
In contrast, "the woods were filled with smart people at Enron, but there were really no wise people, or people who could say 'this is enough '" (John Olson, cited in Eichenwald, 2002a, p. A26). Some of us have such strong ethical convictions that it matters little where we work, but many of us are more inclined to shilly-shally, attuned to cues and expectations from our colleagues at work about what to do and not to do. Enron lost track of its redeeming moral purpose and failed to provide ethical guardrails for its employees. Some went to jail, and many others suffered damage to careers and self-worth.
Many dispute the notion that organizations possess soul, but there is growing evidence that spirituality is a critical element in long-run success. A dictionary definition of soul uses terms such as "animating force," "immaterial essence," and "spiritual nature." For an organization, group, or family, soul can also be viewed as a resolute sense of character, a deep confidence about who we are, what we care about, and what we deeply believe in. Merck had it. Enron did not. Starbucks is concerned about losing it.
Why should an organization—a company, a school, or a public agency—be concerned about soul? Many organizations and most management writers either scoff at or ignore the matter. As an example, two best-sellers on strategy, Treacy and Wiersema's The Discipline of Market Leaders (1995) and Hamel and Prahalad's Competing for the Future (1994), link the enormous success of Southwest Airlines to its strategic prowess. But founder Herb Kelleher offered a very different explanation for what makes Southwest work, one that features people, humor, love, and soul. "Simply put, Kelleher 'cherishes and respects' his employees, and his 'love'is returned in what he calls 'a spontaneous, voluntary overflowing of emotion '" (Farkas and De Backer, 1996, p. 87). Kelleher's style was certainly unique: "On Easter, he walked a plane's aisle clad in an Easter bunny outfit, and for St. Patrick's Day he dressed as a leprechaun. When Southwest started a new route to Sacramento, Kelleher sang a rap song at a press conference with two people in Teenage Mutant Ninja costumes and two others dressed as tomatoes" (Levering and Moskowitz, 1993, p. 413).
But Kelleher's hijinks are only part of the Southwest success story. Soul, the heart of the "Southwest spirit," is shared throughout the company. Kelleher claimed that the most important group in the company was the "Culture Committee," a seventy-person cross-section of employees established to perpetuate the company's values and spirit. His charge to the committee was to "carry the spiritual message of Southwest Airlines" (Farkas and De Backer, 1996, p. 93). There were plenty of skeptics, and a competing airline executive grumbled, "Southwest runs on Herb's bullshit" (Petzinger, 1995, p. 284). But year after year, Southwest's growth and profitability topped its industry.
A growing number of successful leaders embrace a philosophy much like Kelleher's. Ben Cohen, cofounder of the ice cream company Ben and Jerry's Homemade, observes: "When you give love, you receive love. I maintain that there is a spiritual dimension to business just as there is to the lives of individuals" (Levering and Moskowitz, 1993, p. 47). Lou Gerstner of IBM and Howard Schultz of Starbuck's echo his sentiments in their emphasis on culture and heart.
Evidence suggests that tapping a deeper level of human energy pays off. Collins and Porras (1994) and De Geus (1995) both found that a central characteristic of corporations succeeding over the long haul was a core ideology emphasizing "more than profits" and offering "guidance and inspiration to people inside the company" (Collins and Porras, 1994, pp. 48, 88). When authentic and part of everyday life, such core ideologies—love at Southwest, preserving human life at Merck—give a company soul.
Soul and ethics are inextricably intertwined. Recent decades have regularly produced highly public scandals of major corporations engaging in unethical, if not illegal, conduct. It happened in the 1980s, a decade of remarkable greed and corruption in business. It happened again with the spate of scandals in 2001 and 2002, as well as in the sub-prime mortgage mess of 2007–2008. Efforts to do something about the ethical void in management have ebbed and flowed as dishonor comes and goes. One proposed remedy is more emphasis on ethics in professional training programs. A second has sparked a flurry of corporate ethics statements. A third has pushed for stronger legal and regulatory muscle, such as the Foreign Corrupt Practices Act, forbidding U.S. corporations from bribing foreign officials to get or retain business, and "SOX"—the Sarbanes-Oxley Act of 2002[12]—which mandated a variety of measures to combat fraud and increase corporate transparency.
These are important initiatives, but they only skim the surface. Solomon calls for a deeper "Aristotelian ethic":
There is too little sense of business as itself enjoyable (the main virtue of the "game" metaphor), that business is not a matter of vulgar self-interest but of vital community interest, that the virtues on which one prides oneself in personal life are essentially the same as those essential to good business—honesty, dependability, courage, loyalty, integrity. Aristotle's central ethical concept, accordingly, is a unified, all-embracing notion of "happiness" (or, more accurately, eudaimonia, perhaps better translated as "flourishing" or "doing well"). The point is to view one's life as a whole and not separate the personal and the public or professional, or duty and pleasure [1993, p. 105].
Solomon settled on the term Aristotelian because it makes no pretensions of imparting the latest cutting-edge theory or technique of management. Rather, he reminds us of a perspective and debate reaching back to ancient times. The central motive is not to commission a new wave of experts and seminars or to kick off one more downsizing bloodbath. "It is to emphasize the importance of continuity and stability, clearness of vision and constancy of purpose, corporate loyalty and individual integrity" (1993, p. 104). Solomon reminds us that ethics and soul are essential for living a good life as well as managing a fulfilling organization. Since the beginning, the world's philosophical and spiritual traditions have proffered wisdom to guide our search for better ways to accomplish both.
We have emphasized the four frames as cognitive lenses for understanding and tools for influencing collective endeavors. Our focus has been the heads and hands of leaders. Both are vitally important. But so are hearts and souls. The frames also carry implications for creating ethical communities and for reviving the moral responsibilities of leadership. Exhibit 19.1 summarizes our view.
The Factory: Excellence and Authorship
One of our oldest images of organizations is that of factories engaged in a production process. Raw materials (steel, peanuts, or five-year-olds) come in the door and leave as finished products (refrigerators, peanut butter, or educated graduates). The ethical imperative of the factory is excellence: ensuring that work is done as effectively and efficiently as possible to produce high-quality yields. Since the 1982 publication of Peters and Waterman's famous book, almost everyone has been searching for excellence, though flawed products and mediocre services keep reminding us that the hunt does not always bring home the quarry.
One source of disappointment is that excellence requires more than pious sermons from top management; it demands commitment and autonomy at all levels of an enterprise. How do leaders foster such dedication? As we've said before, "Leading is giving. Leadership is an ethic, a gift of oneself" (Bolman and Deal, 2001, p. 106). Critical for creating and maintaining excellence is the gift of authorship:
Giving authorship provides space within boundaries. In an orchestra, musicians develop individual parts within the parameters of a musical score and the interpretative challenges posed by the conductor. Authorship turns the pyramid on its side. Leaders increase their influence and build more productive organizations. Workers experience the satisfactions of creativity, craftsmanship and a job well done. Gone is the traditional adversarial relationship in which superiors try to increase control while subordinates resist them at every turn. Trusting people to solve problems generates higher levels of motivation and better solutions. The leader's responsibility is to create conditions that promote authorship. Individuals need to see their work as meaningful and worthwhile, to feel personally accountable for the consequences of their efforts, and to get feedback that lets them know the results [Bolman and Deal, 2001, pp. 111-112].
Southwest Airlines offers a compelling example of authorship. Its associates are encouraged to be themselves, have fun, and above all use their sense of humor. Only on Southwest are you likely to hear required FAA safety briefings sung to the music of a popular song or delivered as a stand-up comedy routine. ("Those of you who wish to smoke will please file out to our lounge on the wing, where you can enjoy our feature film, Gone with the Wind.") Too frivolous for something as serious as a safety announcement? Just the opposite: it's a way to get passengers to pay attention to a message they usually ignore. Surely, it's also a way for flight attendants to have fun and feel creative rather than being mechanically scripted by routine.
Caring—one person's compassion and concern for another—is both the primary purpose and the ethical glue that holds a family together. Parents care for children and, eventually, children care for their parents. A compassionate family or community requires servant-leaders concerned with the needs and wishes of members and stakeholders. This creates a challenging obligation for leaders to understand and to provide stewardship of the collective well-being. The gift of the servant-leader is love.
Love is largely absent from most modern corporations. Most managers would never use the word in any context more profound than their feelings about food, family, films, or games. They shy away from love's deeper meanings, fearing both its power and its risks. Caring begins with knowing; it requires listening, understanding, and accepting. It progresses through a deepening sense of appreciation, respect, and ultimately love. Love is a willingness to reach out and open one's heart. An open heart is vulnerable. Confronting vulnerability allows us to drop our mask, meet heart to heart, and be present for one another. We experience a sense of unity and delight in those voluntary, human exchanges that mold "the soul of community" (Whitmyer, 1993, p. 81).
They talk openly about love at Southwest Airlines. As president Colleen Barrett reminisced, "Love is a word that isn't used often in Corporate America, but we used it at Southwest from the beginning." The word love is woven into the culture. They fly out of Love Field in Dallas; their symbol on the New York Stock Exchange is LUV; the employee newsletter is called Luv Lines; and their twentieth anniversary slogan was "Twenty Years of Loving You" (Levering and Moskowitz, 1993). They hold an annual "Heroes of the Heart" ceremony to honor members of the Southwest family who have gone above and beyond even Southwest's high call of duty. There are, of course, ups and downs in any family, and the airline industry certainly experiences both. Through life's peaks and valleys, love holds people—both employees and passengers—together in a caring community.
For Levi Strauss, the issue of caring came to a head in trying to apply the company's ethical principles (honesty, fairness, respect for others, compassion, promise keeping, and integrity) to the thorny dilemmas of working with foreign subcontractors. How should the company balance concern for domestic employees with concern for overseas workers? Even if pay and working conditions at foreign subcontractors are below those in the United States, are inferior jobs better than no jobs? A task force set to work to collect data and formulate guidelines for ethical practice. Ultimately, the company wound up making some tough decisions. It became the first American clothing company to develop a set of standards for working conditions in overseas plants. It pulled out of China for five years beginning in 1993 because of human rights abuses, despite the huge market potential there. In a factory in Bangladesh employing underage children, Levi's arranged for the children to go back to school while the contractor continued to pay their salaries (Waterman, 1994).
We turn now to a third image: the organization as jungle. Woody Allen captured the competitive, predator-prey imagery succinctly: "The lion and the calf shall lie down together, but the calf won't get much sleep" (1986, p. 28). As the metaphor suggests, the jungle is a politically charged environment of conflict and pursuit of self-interest. Politics and politicians are routinely viewed as objects of scorn—often for good reason. Their behavior tends to prompt the question: Is there any ethical consideration associated with political action? We believe there is: the commitment to justice. In a world of competing interests and scarce resources, people are continually compelled to make trade-offs. No one can give everyone everything they want, but it is possible to honor a value of fairness in making decisions about who gets what. Solomon (1993, p. 231) sees justice as the ultimate virtue in corporations, because fairness—the perception that employees, customers, and investors are all getting their due—is the glue that holds things together.
Justice is never easy to define, and disagreement about its application is inevitable. The key gift that leaders can offer in pursuit of justice is sharing power. People with a voice in key decisions are far more likely to feel a sense of fairness than those with none. Leaders who hoard power produce powerless organizations. People stripped of power look for ways to fight back: sabotage, passive resistance, withdrawal, or angry militancy. Giving power liberates energy for more productive use. If people have a sense of efficacy and an ability to influence their world, they are more likely to direct their energy and intelligence toward making a contribution rather than making trouble. The gift of power enrolls people in working toward a common cause. It also creates difficult choice points. If leaders clutch power too tightly, they activate old patterns of antagonism. But if they cave in and say yes to anything, they put an organization's mission at risk.
During the Reagan administration, House Speaker "Tip" O'Neil was a constant thorn in the side of the president, but they carved out a mutually just agreement: they would fight ferociously for their independent interests but stay civil and find fairness wherever possible. Their rule: "After six o'clock, we're friends, whatever divisiveness the political battle has produced during working hours." Both men gave each other the gift of power. During one acrimonious public debate between the two, Regan reportedly whispered, "Tip, can we pretend it's six o'clock?" (Neuman, 2004, p. 1).
Power and authorship are related; autonomy, space, and freedom are important in both. Still, there is an important distinction between the two. Artists, authors, and craftspeople can experience authorship even working alone. Power, in contrast, is meaningful only in relation to others. It is the capacity to wield influence and get things to happen on a broader scale. Authorship without power is isolating and splintering; power without authorship can be dysfunctional and oppressive.
The gift of power is important at multiple levels. As individuals, people want power to control their immediate work environment and the factors that impinge on them directly. Many traditional workplaces still suffocate their employees with time clocks, rigid rules, and authoritarian bosses. A global challenge at the group level is responding to ethnic, racial, and gender diversity. Gallos, Ramsey, and their colleagues get to the heart of the complexity of this issue:
Institutional, structural and systemic issues are very difficult for members of dominant groups to understand. Systems are most often designed by dominant group members to meet their own needs. It is then difficult to see the ways in which our institutions and structures systematically exclude others who are not "like us." It is hard to see and question what we have always taken for granted and painful to confront personal complicity in maintaining the status quo. Privilege enables us to remain unaware of institutional and social forces and their impact [1997, p. 215].
Justice requires that leaders systematically enhance the power of subdominant groups—ensuring access to decision making, creating internal advocacy groups, building diversity into information and incentive systems, and strengthening career opportunities (Cox, 1994; Gallos, Ramsey, and Associates, 1997; Morrison, 1992). All this happens only with a rock-solid commitment from top management, the one condition that Morrison (1992) found to be universal in organizations that led in responding to diversity.
Justice also has important implications for the increasingly urgent question of "sustainability": How long can a production or business process last before it collapses as a result of the resource depletion or environmental damage it produces? Decisions about sustainability inevitably involve trade-offs among the interests of constituencies that differ in role, place, and time. How do we balance our company's profitability against damage to the environment, or current interests against those of future generations? Organizations with a commitment to justice will take these questions seriously and look for ways to engage and empower diverse stakeholders in making choices.
The Temple: Faith and Significance
An organization, like a temple, can be seen as a hallowed place, an expression of human aspirations, a monument to faith in human possibility. A temple is a gathering place for a community of people with shared traditions, values, and beliefs. Members of a community may be diverse in many ways (age, background, economic status, personal interests), but they are tied together by shared faith and bonded by a sanctified spiritual covenant. In work organizations, faith is strengthened if individuals feel the organization is characterized by excellence, caring, and justice. Above all, people must believe that the organization is doing something worth doing—a calling that adds something of value to the world. Significance is partly about the work itself, but even more about how the work is embraced. This point is made by an old story about three stonemasons giving an account of their work. The first said he was "cutting stone." The second said that he was "building a cathedral." The third said simply that he was "serving God."
Temples need spiritual leaders. This does not mean promoting religion or a particular theology; rather, it means bringing a genuine concern for the human spirit. The dictionary defines spirit as "the intelligent or immaterial part of man," "the animating or vital principal in living things," and "the moral nature of humanity." Spiritual leaders help people find meaning and faith in work and help them answer fundamental questions that have confronted humans of every time and place: Who am I as an individual? Who are we as a people? What is the purpose of my life, of our collective existence? What ethical principles should we follow? What legacy will we leave?
Spiritual leaders offer the gift of significance, rooted in confidence that the work is precious, that devotion and loyalty to a beloved institution can offer hard-to-emulate intangible rewards. Work is exhilarating and joyful at its best; arduous, frustrating, and exhausting in less happy moments. Many adults embark on their careers with enthusiasm, confidence, and a desire to make a contribution. Some never lose that spark, but many do. They become frustrated with sterile or toxic working conditions and discouraged by how hard it is to make a difference, or even to know if they have made one. Tracy Kidder puts it well in writing about teachers: "Good teachers put snags in the river of children passing by, and over time, they redirect hundreds of lives. There is an innocence that conspires to hold humanity together, and it is made up of people who can never fully know the good they have done" (Kidder, 1989, p. 313). The gift of significance helps people sustain their faith rather than burn out and retire from a meaningless job.
Significance is built through the use of many expressive and symbolic forms: rituals, ceremonies, stories, and music. An organization without a rich symbolic life grows empty and barren. The magic of special occasions is vital in building significance into collective life. Moments of ecstasy are parentheses that mark life's major passages. Without ritual and ceremony, transition remains incomplete, a clutter of comings and goings; "life becomes an endless set of Wednesdays" (Campbell, 1983, p. 5).
When ritual and ceremony are authentic and attuned, they fire the imagination, evoke insight, and touch the heart. Ceremony weaves past, present, and future into life's ongoing tapestry. Ritual helps us face and comprehend life's everyday shocks, triumphs, and mysteries. Both help us experience the unseen web of significance that ties a community together. When inauthentic, such occasions become meaningless, repetitious, and alienating—wasting our time, disconnecting us from work, and splintering us from one another. "Community must become more than just gathering the troops, telling the stories, and remembering things past. Community must also be rooted in values that do not fail, values that go beyond the self-aggrandizement of human leaders" (Griffin, 1993, p. 178).
Stories give flesh to shared values and sacred beliefs. Everyday life in organizations brings many heartwarming moments and dramatic encounters. Transformed into stories, these events fill an organization's treasure chest with lore and legend. Told and retold, they draw people together and connect them with the significance of their work.
Music captures and expresses life's deeper meaning. When people sing or dance together, they bond to one another and experience emotional connections otherwise hard to express. The late Harry Quadracci, chief executive officer of the printing company Quadgraphics, convened employees once a year for an annual gathering. A management chorus sang the year's themes. Quadracci himself voiced the company philosophy in a solo serenade.
Max DePree, famed both as both a business leader and an author of elegant books on leadership, is clear about the role of faith in business: "Being faithful is more important than being successful. Corporations can and should have a redemptive purpose. We need to weigh the pragmatic in the clarifying light of the moral. We must understand that reaching our potential is more important than reaching our goals" (1989, p. 69). Spiritual leaders have the responsibility of sustaining and encouraging faith in themselves and in recalling others to the faith when they have wandered from it or lost it.
Ethics ultimately must be rooted in soul: an organization's commitment to its deeply rooted identity, beliefs, and values. Each frame offers a perspective on the ethical responsibilities of organizations and the moral authority of leaders. Every organization needs to evolve for itself a profound sense of its own ethical and spiritual core. The frames offer spiritual guidelines for the quest.
Signs are everywhere that institutions in many developed nations suffer from a crisis of meaning and moral authority. Rapid change, high mobility, globalization, and racial and ethnic conflict tear at the fabric of community. The most important responsibility of managers is not to answer every question or get every decision right. Though they cannot escape their responsibility to track budgets, motivate people, respond to political pressures, and attend to culture, they serve a deeper, more powerful, and more enduring role if they are models and catalysts for such values as excellence, caring, justice, and faith.