Dov Seidman argues that principled leadership is a determining factor in developing and sustaining a successful organization. In the new edition of his book, How: Why How We Do Anything Means Everything, he reports the findings from his company’s survey of 36,280 employees in 18 countries. In an interview with Art Kleiner, editor-in-chief of strategy+business, Seidman is quoted as saying:
We found that all the companies fit into one of three general categories. Companies in the first group, called “blind obedience,” rely on coercion, formal authority, policing, and top-down command-and-control leadership. The second group, “informed acquiescence” organizations, have clear-cut rules and policies, well-established procedures, and performance-based rewards and punishments — the standards of high-quality 20th-century management. The third group, organizations with “self-governance,” are the most farsighted organizations, best positioned to thrive in an interdependent world. People at all levels of the company are trusted to act on their own initiative and to collaboratively innovate; a shared purpose and common values guide employee and company behavior.
Seidman suggests that "self-governance" organizations are the most successful over the long term. While I think the most they can really say, given the method of the research, is that employees who report that their companies are ethical and trusting and supportive of individual initiative are more likely to report that their companies are successful, I think the findings are thought-provoking.
Seidman says that “shared purpose and common values” are the keys to business success. Relying on rules and regulations (i.e., “blind obedience” and “informed acquiescence”) to ensure that people do the right thing doesn’t work. I see this in companies like Enron, BP, Goldman Sachs, and JPMorgan Chase. They are in (past tense in Enron’s case) heavily regulated industries yet they ran into trouble when they, seemingly, were more intent on working around the rules than in doing the right thing. The rules and regulations, rather than encouraging the right behavior, had the opposite effect. Seidman says:
In a blind obedience system, there is a great deal of misconduct, compounded by the fact that it’s invisible; no one talks about it. In an informed acquiescence system, there is less misconduct, but people still tolerate it. In a self-governance system, when there is misconduct, people talk about it and consciously set up practices to address it.
In a live interview with Art Kleiner for the Carnegie Council, Seidman says managers tell their direct reports, “Just get it done, I don’t care how…Instead, we need an ethic of human endeavor that allows us to manifest our values and create value from values.” In other words, we need leaders who have a strong sense of right and wrong and are willing to let that ethic guide their words and their actions and organizations need to be willing to stand by these leaders.