What do Toyota, Goldman Sachs and BP have in common?

Since The Economics of Integrity came out at the end of February, three huge corporate stories have unfolded, illustrating the phenomenal importance of integrity to a company’s bottom line. Toyota, Goldman Sachs and BP are great examples of what happens when a company’s integrity is called into question. For public companies the market reaction to an integrity breach is swift and the stock is punished. Longer term, though, the costs will also pile up. Think of what faces BP in the future: a bill for damages, the likelihood of more restrictive regulations around the world, less trust from business partners and so on. But it doesn’t have to be like that. If corporations understand the importance of integrity to their bottom line they can learn to protect and promote their most valuable asset. Here are five critical steps to investing in corporate integrity:

1. Keep your promise. Start with your brand since this is your promise to customers. If you promise quality as part of your brand, then make sure you do everything you can to deliver quality. If it’s safety, deliver safety.

2. Make it a win/win for everyone. Make sure what you do benefits everyone involved: shareholders, customers, employees, suppliers and society. If you’re doing anything destructive, stop immediately.

3. Reliability. Go the extra mile to be reliable. Do not cut corners however tempting it may be.

4. Continuous improvement. Focus on how to make the experience and product better for everyone.

5. Feedback. Seek out constant feedback from your employees, customers, suppliers and so on. It’s valuable information to help improve and address problems as they arise.

The Woman behind Integrity in the Workplace

While doing research I came across the biography of Alice Hamilton. It made me realize that I knew so little about the people behind some of our most important advances in integrity. Hamilton was born in 1869 into a highly educated family. She received her medical degree from the University of Michigan and took a teaching position in Chicago at Northwestern University. It was in Chicago while living at Hull House with Jane Addams that she started her work which transformed the American workplace.

Hamilton began to wonder why so many workers had curious illnesses and often sickened and died. She began to read research on workplace illness which was being done in Europe but at the time not in the United States. She decided to travel the nation, visiting mines and factories to report on the state of health and workplace practices. Her research was considered so remarkable because it was meticulous, impartial and eye opening. She became the pioneer of occupational health and our laws promoting workplace safety today are the direct result of her work. Incidentally, Hamilton was recognized as a trailblazer and hired in 1918 by Harvard Medical School. She was Harvard’s first female faculty member. In 1935 she retired from Harvard and served as a consultant to the US division of labor standards. She died in 1970.

Hamilton is an important reminder that integrity doesn’t just happen by itself. It takes the effort of individuals and governments over many years. The best part though is that the payoff can last for generations.

Does small business sacrifice integrity more than big business?

At a talk I gave recently, a member of the audience commented that in his experience, a big business was more likely to protect its integrity asset than a small business. As a lawyer for subprime lenders, he found that small lenders were willing to cut corners and operate in grey zones to win business but big lenders simply couldn’t afford to take those same risks. His argument was that a big business understood it had more to lose by exploiting integrity than a small business. It was a provocative idea and quite frankly a distinction that I had never made.

My initial reaction was that size shouldn’t matter. But the more I thought about it the more I determined there was something to it. For one, it’s hard to get big without integrity. So big businesses tend to have a lot of built up integrity. Plus big business can afford to have a long run perspective while small businesses, fighting for daily survival may not.

On the other hand, small business has something that big business doesn’t. Small businesses tend to be run by owners and they have a huge stake in the future of the firm. Big business, on the other hand, is often run by professional managers who don’t have as much invested in the firm’s long run performance.

The temptation to exploit integrity seems to arise when a company is under pressure. If a business can’t figure out how to make money or can’t make enough money to satisfy expectations, there will be enormous pressure to sacrifice integrity for short term money making opportunities, regardless of the future. That could mean that small business often faces greater temptations to cut corners or skirt the law than big business. But the key is whether they cave in to that pressure or not. If anyone knows of studies on this topic I’d love to hear about it. Or just chime in with observations!

How to capture integrity opportunities

Here's an interview Dan Schwabel did with me on his personal branding blog.