Culture
Save

Integrity Is Free

by Elizabeth Doty

In 1979, Philip Crosby wrote Quality Is Free: The Art of Making Quality Certain, a bestseller that outlined the counterintuitive economics fueling the quality revolution in the U.S. and Japan. His logic was straightforward: It is always cheaper to do things right the first time than to go back and do them again. Crosby showed that investments in prevention more than paid for themselves by reducing the costs of poor quality—inspection, measurement, rework, repairs, or lost customers—that could run as much as 30 percent of total expenses. Those downstream benefits weren’t always easy to track, but they were invaluable. In that sense, he wrote, “Quality is free. It’s not a gift, but it is free.”

Quality methods are usually applied in manufacturing or repeatable services, but if we relegate these lessons to the factory floor we may miss their broader implications for leadership. For Crosby and his contemporaries, W. Edwards Deming and Joseph Juran, quality was a question of integrity. When there were problems with quality, they usually arose because senior leadership had not been clear about what they were committing to deliver (by setting requirements) or acted in ways that did not align with those commitments in practice (through consistent budgets, rewards, recognition, and so on). And when companies transformed, it was because senior leaders became convinced that defects were not inevitable and that accepting the status quo was costing too much.

Integrity—or lack thereof—remains a critical challenge for companies today. Whether it involves promising a client that our software will work in their setting, adhering to investment guidelines with people’s retirement savings, or performing the correct medical procedure, we owe it to our customers, employees, shareholders, and the world at large to be responsible about what we commit to and what we deliver. But integrity isn’t easy: It stretches the imagination to envision a world in which businesses deliver on 99.99966 percent of their commitments, as factories do with Six Sigma quality methods. Every day, every leader faces opportunities or even pressure to side step the truth, fudge the numbers, play politics, or pass the buck on hard decisions. In the moment, doing the right thing, or doing things right, always seems to cost more.

As a result, it is easy to view compromise as inevitable, and become accustomed to “commitment drift.” But although there are very real personal and professional costs involved in telling the truth, keeping a promise, and living our values—consider, for example, what it means to be a whistleblower—there are also great benefits. Acting with integrity prevents the unintended “costs of compromise,” such as damaged reputation, stress, and added complexity, which are detrimental to companies but often hidden from view. Honesty and transparency make things simpler. When you have the courage to own your values and make clear commitments and keep them, employees, partners, suppliers, and customers are more likely to commit and engage, as well. And when yes means yes, and no means no, people can make decisions because the facts are out in the open and they know you are serious. In relationships, courage of conviction prompts you to have the crucial conversations needed for alignment and engagement, rather than letting issues fester.

Researchers are now able to show that companies with high integrity cultures reap financial benefits. In The Integrity Dividend: Leading by the Power of Your Word, Cornell University professor Tony Simons outlines a 2000 study of 76 franchise hotels that revealed a 3 percent difference between two hotels’ average employee “behavioral integrity ratings” translated into a difference of US$250K in profit per hotel per year. More recently, when University of Chicago professor Luigi Zingales and his colleagues analyzed employee survey data from 1,000 U.S. companies, they found that those with a culture of keeping their word were significantly more profitable.

Perhaps the most important, but also most concealed, benefit is that integrity forces individuals and companies to invent. When we commit to confronting reality head-on, we close the door to managing impressions. Rather than looking like we are achieving results, we are left with no choice but to really achieve them. I spoke with one leader who had been on a team tasked with developing a “zero-to-landfill” printer—just the sort of green initiative that often falls short of the goal. Week after week, the project team met and checked off their status reports on various tasks, but never tackled the difficult challenges: the toxic chemicals and outdated production processes that made zero-to-landfill a moonshot goal. One day, a team member stood up and said, “I think zero-to-landfill is a good goal. How about we make it real?” That was when they began the work in earnest—and ultimately delivered.

Waffling on integrity almost always involves some element of avoidance. The problem is that too much of our attention goes to managing appearances and putting out fires, and too little to the actual work. Conversely, when you make a clear commitment to integrity, you face your mistakes and your limits, and you step up to the sorts of honest challenges that galvanize employees and senior leaders alike. Yes, this will mean making sacrifices. Initially, the results are likely to look worse, simply because you are telling more of the truth. Yet, as in the quality movement, the single biggest barrier to improvement may be overcoming assumptions about what is possible. Over time, you will propel your results to a level where others ask how you can afford to do it. And your answer? “Actually, contrary to popular belief, we have found that integrity is free.”

 

Reprinted with permission from strategy+business, published by PwC Strategy& LLC. ©PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see pwc.com/structure for further details. strategy-business.com 

MORE ARTICLES

Board composition +
Refreshing Your Board of Directors
Patrick R. Dailey, Ph.D. and Joel M. Koblentz
Battle For the Boardroom
Ludo Van der Heyden and Chris Howells
Night of the Living Board
Matt Palmquist
Strategy & innovation +
The "Third Team" Approach to Board Effectiveness
Denis Mowbray and Coral Ingley (both from Auckland University of Technology)
Tapping The Strategic Potential of Boards
Chinta Bhagat, Martin Hirt, and Conor Kehoe
Board supervision +
Best Practices: Non Profit Governance
McDermott Will & Emery
Value-Focused Corporate Governance
Christian Orglmeister, Marcos Aguiar, and Daniel Azevedo
The Trouble With Too Much Board Oversight
Olubunmi Faleye, Rani Hoitash and Udi Hoitash
Culture +
Team building +
Collaborate Better
Leigh Thompson
Five Things Every CEO Must Do in the Next Era of Globalization
Hans-Paul Bürkner, Arindam Bhattacharya, and Jorge Becerra
Outgoing CEOs Shouldn't Pick Their Replacements
David F. Larcker, Stephen A. Miles, and Brian Tayan
Compliance +
Leadership +
Risk management +
Exec. evaluation & comp +
Surviving the Sophomore Slump: Moves That Matter The Most
Roselinde Torres, Judy Johnson, James M. Citrin, and Susan S. Hart
Leapfrog Succession: Trend in Appointing CEOs
Roselinde Torres, Gerry Hansell, Kaye Foster, and David Baron
Cyber security +
Why Senior Leaders Are On The Front Line Against Cyberattacks
Tucker Bailey, James Kaplan, and Chris Rezek
Are You In the Dark about Shadow IT?
Ryan Shadle and Brian Turley
Corporate Governance in the Age of Cyber Risks
In collaboration with RANE (Risk Assistance Network and Exchange)
The Board’s Role in Managing Cybersecurity Risks
Ray A. Rothrock, James Kaplan, and Friso Van Der Oord
Featured +
Planning Ahead – The Board’s Role in Crisis Management
M. Hill Jeffries, Kyle G. Healy, Marshall M. Chalmers
Agitators and Reformers: How to Respond to Activist Investors
Josh Hinkel, Henrik Poppe, Martin Toner and Chuck Whitten

Your library is currently empty. Browse the Boardspan Library to get started.