Corporate Leadership and Integrity
In our 21st Century business environment, integrity is arguably the top characteristic of successful leaders. The integrity of corporate senior leadership (i.e. CEO’s, Presidents, Vice Presidents, Corporate Board Members, Senior Managers, etc.) is closely monitored – and scrutinized – by employees, vendors, suppliers, stockholders, and other leaders. In addition, senior leadership integrity may be emulated by those who aspire to become senior leaders.
The definitions of corporate leadership integrity differ for one primary reason: there is no universal acceptance of what ethical, moral behavior is. For example, a corporate leader’s interpretation may be different from that of an employee, a vendor, an investor, or the citizens of the community in which the business operates. Most definitions of integrity I have researched include the following:
• Acting in an ethical, honest, and moral manner;
• Your actions and behaviors when everyone is watching compared to when no one is watching;
• Standing up and speaking out when you encounter unethical, immoral behavior of others.
This week’s blog, albeit rather short, will address some of the challenges of corporate leaders and integrity.
Current-Day Business Issues and Integrity
The temptation of financial gain and notoriety from corporate success is great. Sometimes the fine line between ethical, moral, and legal activity becomes shaded. Corporate stockholders and the investment community expect a constant and predictable return on investment. If a company delivers a 5% ROI in a quarter, the company must devise and produce additional efficiencies to deliver another 5% ROI the following quarter – or risk stockholders selling their stock. Sometimes finding innovative ways to consistently increase ROI results in unethical, immoral, or maybe even illegal behavior.
Senior leaders, specifically CEO’s wield significant clout. CEO’s of our Fortune 100 companies may influence our cultural, environmental, and social values and attitudes. I encourage you to research the activity and impact of the senior leaders of Enron and WorldCom during the past 10 years as a reference to the societal consequences of leadership integrity and behavior. Also examine the Sarbanes Oxley Act of 2002 for requirements of corporate leaders to help prevent future improprieties.
Considering the ramifications of unethical behavior, stakeholder reaction is mixed. On the one hand, stakeholders become disappointed, disgruntled, and frustrated when they hear reports of unethical behavior from their leaders. In addition, the level of trust in senior leadership is lost. Think about what your own personal feelings were when (if) you experienced such dysfunction. Think of how such news impacts your morale about the company you work for. On the other hand, some stakeholders find solace in the fact that their leaders are human and can make mistakes like the rest of us. Yet, some stakeholders are envious of leaders and aspire to become a leader. These stakeholders may even look to emulate the senior leadership behaviors they observe, regardless if the attitudes and behaviors are considered to be ethical or not.
Seeking Feedback on Your Leadership Integrity
If you currently serve in a management or leadership role, and you firmly believe that you consistently act in an ethical manner, I encourage you to seek input from others. Feedback is a gift. Just like you provide open and honest performance feedback to your employees and suppliers, they can also offer you open and honest feedback on your performance and behavior. If obtaining this valuable information is a challenge, then try a method by which subordinates, peers, and vendors can provide feedback confidentially. Whatever ethical means is used, you want to get this input and compare it to your own self assessment. You may find that your attitude, behavior, and values meet the expectations of those you work with. But you may also find out that you attitude, behavior, and values do not. In any case, please remember and adhere to the following acronym: DWYSYWD (do what you say you will do). Always keep your word. Leadership integrity and trust can be difficult to build, but it is very easy to tear down. More information on leadership integrity can be reviewed in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing).
Feedback to the bi-monthly blog entry is always welcome.
Sunday, September 27, 2009
Monday, September 14, 2009
Employee Layoffs - The Corporate Downsizing Initiative
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Employee Layoffs – The Corporate Downsizing Initiative
The primary goal of every business is to generate a profit. When a company’s expenses exceed its revenues (or when the financial projections may result in an operating loss), a common, acceptable leadership strategy is to reduce expenses. In today’s fragile business environment, employee layoffs – also known as “downsizing” – is one of the more prevalent practices used to reduce operating expenses. This week’s blog will address the challenges of downsizing, and highlight the dilemma leaders potentially encounter with this initiative.
Downsizing and Leadership Decision Making
Leaders face three tough challenges once the decision to downsize has been made. First, how much of the workforce must be released. If too many employees are released that daily operations cannot be maintained, leaders may seek to bring back released workers. Another option would be to contract temporary workers to fulfill a specific need. The advantage of using knowledgeable, skilled contractors is that the desired work gets completed and there is only a short-term expense to the operating budget (once the job is complete, the contract can be terminated. In addition, there are no healthcare and medical benefits to be paid for temporary contractors). The disadvantage of using temporary contractors is their lack of knowledge about the company and its culture. There may be a need for new employee orientation which could affect productivity. On the other hand, if too few employees are released, leadership will have the unenviable task of subsequently releasing more people. The impact of multiple downsizing activities is low employee morale of the remaining workforce, and their lack of confidence and trust in their company’s leaders. Employees become more concerned over who will be let go next (particularly themselves), than actually producing the results they were hired to deliver.
The second decision in employee downsizing is determining who to let go. Downsizing the more experienced “knowledge workers” within the organization results in lower productivity and facilitates team inefficiency. Downsizing the “younger” less-experienced workers has the long-term effect of not developing talent and not filling the pipeline with a capable workforce for the future. Yet, daily business operations must be sustained while handling this challenge. Further, the main objective – the primary goal of generating a profit – must drive the process when making the layoff decision(s).
Many companies have identified that downsizing the more experienced, long-term employees reduces payroll expense, healthcare and medical claims, and pension costs. However, this results in only a short-term expense reduction. The expense of training and developing inexperienced (and sometimes unqualified employees who ultimately are let go) offsets the anticipated gains of releasing higher priced workers.
Where feasible, a significant effort has been made to either offshore jobs to other countries, or to hire workers from other countries into domestic operations at a lower labor wage rate. This desired lower labor wage expense also takes into consideration the cost (and employee utilization) of healthcare and medical benefits. One of the most heated debates on American quality of life and U.S. citizens’ rights is access to healthcare and medical help. This societal issue is a tremendous opportunity for leadership in the business community to step up and be a part of the solution (corporate social responsibility and corporate citizenship will be discussed in a future blog).
Open and Honest Leadership Communication
The third leadership decision in the downsizing process is when and how to communicate to employees they are being let go; in addition, how and when to communicate to the remaining employees newly defined roles, responsibilities, and expectations as a result of the layoffs. Whereas many companies are agree with the need to downsize, there are vast differences in their techniques in carrying out this delicate and sometimes difficult task. Fear of negative responses and repercussions such as: verbal abuse; physical abuse; lawsuits; damage to company property; and slander of company reputation have facilitated the use of technology to carry out the communication activity. What should be a personal face-to-face discussion, albeit a tough conversation is now being done by telephone, or by email, or other electronic non-personal means. In my book on Corporate Leadership Selection, I briefly discuss a software package that when implemented, will draft employee an termination letter; calculate employee severance pay; and discontinue employee access to the company’s resources (i.e. computer, building access, and other security related material).
Although downsizing is a “necessary evil”, there are more personal and professional means of conducting this difficult leadership activity. From a personal perspective, I have not experienced or participated in these leadership behaviors. However, more information on others’ experiences with downsizing can be reviewed in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing).
Feedback to the bi-monthly blog entry is always welcome.
Employee Layoffs – The Corporate Downsizing Initiative
The primary goal of every business is to generate a profit. When a company’s expenses exceed its revenues (or when the financial projections may result in an operating loss), a common, acceptable leadership strategy is to reduce expenses. In today’s fragile business environment, employee layoffs – also known as “downsizing” – is one of the more prevalent practices used to reduce operating expenses. This week’s blog will address the challenges of downsizing, and highlight the dilemma leaders potentially encounter with this initiative.
Downsizing and Leadership Decision Making
Leaders face three tough challenges once the decision to downsize has been made. First, how much of the workforce must be released. If too many employees are released that daily operations cannot be maintained, leaders may seek to bring back released workers. Another option would be to contract temporary workers to fulfill a specific need. The advantage of using knowledgeable, skilled contractors is that the desired work gets completed and there is only a short-term expense to the operating budget (once the job is complete, the contract can be terminated. In addition, there are no healthcare and medical benefits to be paid for temporary contractors). The disadvantage of using temporary contractors is their lack of knowledge about the company and its culture. There may be a need for new employee orientation which could affect productivity. On the other hand, if too few employees are released, leadership will have the unenviable task of subsequently releasing more people. The impact of multiple downsizing activities is low employee morale of the remaining workforce, and their lack of confidence and trust in their company’s leaders. Employees become more concerned over who will be let go next (particularly themselves), than actually producing the results they were hired to deliver.
The second decision in employee downsizing is determining who to let go. Downsizing the more experienced “knowledge workers” within the organization results in lower productivity and facilitates team inefficiency. Downsizing the “younger” less-experienced workers has the long-term effect of not developing talent and not filling the pipeline with a capable workforce for the future. Yet, daily business operations must be sustained while handling this challenge. Further, the main objective – the primary goal of generating a profit – must drive the process when making the layoff decision(s).
Many companies have identified that downsizing the more experienced, long-term employees reduces payroll expense, healthcare and medical claims, and pension costs. However, this results in only a short-term expense reduction. The expense of training and developing inexperienced (and sometimes unqualified employees who ultimately are let go) offsets the anticipated gains of releasing higher priced workers.
Where feasible, a significant effort has been made to either offshore jobs to other countries, or to hire workers from other countries into domestic operations at a lower labor wage rate. This desired lower labor wage expense also takes into consideration the cost (and employee utilization) of healthcare and medical benefits. One of the most heated debates on American quality of life and U.S. citizens’ rights is access to healthcare and medical help. This societal issue is a tremendous opportunity for leadership in the business community to step up and be a part of the solution (corporate social responsibility and corporate citizenship will be discussed in a future blog).
Open and Honest Leadership Communication
The third leadership decision in the downsizing process is when and how to communicate to employees they are being let go; in addition, how and when to communicate to the remaining employees newly defined roles, responsibilities, and expectations as a result of the layoffs. Whereas many companies are agree with the need to downsize, there are vast differences in their techniques in carrying out this delicate and sometimes difficult task. Fear of negative responses and repercussions such as: verbal abuse; physical abuse; lawsuits; damage to company property; and slander of company reputation have facilitated the use of technology to carry out the communication activity. What should be a personal face-to-face discussion, albeit a tough conversation is now being done by telephone, or by email, or other electronic non-personal means. In my book on Corporate Leadership Selection, I briefly discuss a software package that when implemented, will draft employee an termination letter; calculate employee severance pay; and discontinue employee access to the company’s resources (i.e. computer, building access, and other security related material).
Although downsizing is a “necessary evil”, there are more personal and professional means of conducting this difficult leadership activity. From a personal perspective, I have not experienced or participated in these leadership behaviors. However, more information on others’ experiences with downsizing can be reviewed in Corporate Leadership Selection: Impact on American Business, Employees, and Society (Authorhouse Publishing).
Feedback to the bi-monthly blog entry is always welcome.
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