I was dragged to Portola the first time by a friend who is a coffee purest of the highest order.  When we scheduled the meeing, I suggested a spot closer to both of us, given that Diet Pepsi is the same the world over and that’s all I drink.  He insisted on Portola and proceeded to buy me – against protestations – a mocha.  And for the first time in my life, I wanted another one.  It was spectacular.  And I have to say that I get the craving more often than I’d like to admit.

What I love about Portola is that it is a business centered on a vision for something the owners and employees are deeply passionate about – not only coffee, but creating a wonderful environment where people can hang out, enjoy time together, build relationships and memories.  This commitment is written on everything they do.  Ask a question about coffee at Portola and you will have coffee artisans in lab coats – yup, lab coats – explaining in the finest detail their in-house roasting process, the inner workings of the espresso machine, how to create the perfect foam…  It’s insane.  Except that it’s deeply inspiring.  Mention that you don’t like coffee and they take it as a personal challenge.  They are offended by roasters who have led people like me to think they don’t like coffee, and they want to expand your world to love what they love.  I never get the sense that they are after my credit card, though indeed Portola is expensive.

Listening to Christa during the show, and getting to chat a bit after our taping reminded me of the passion of starting-up, of getting into business not because you want to be good at “business,” but because you want to make your contribution, to get your product out there, to make this world a better place.

Phil Libin, co-founder of Evernote (another company I love), recently spoke at the Stanford business school about the importance of having a sufficiently epic vision – of having a goal worthy of all your time, energy and talent.  This what keeps one energized and engaged in their work, what brings long-term success and defines a life well-lived.

The struggle, of course, is to not become slowly seduced by the financial rewards and the recognition of being a “success.”  Many ventures begin with passion, but as they are rewarded in the marketplace, profits begin to become the driving force in leadership (multiply this pressure by 1,000 when a firm goes public).  When this transition from valuing product to valuing profits occurs, unethical behavior becomes tremendously more likely (which puts both the profits and the initial passion at risk).

This is not to say that profits aren’t a central concern; no business can survive without them.  But they must always be a secondary good.  They fuel the engine of creativity, but they are not the destination.  And when means and ends get confused, problems are inevitable.

The point is this:  To truly win in business and in life, we have to remember our real reason for being.  What is that thing that you were put on this earth to do?  What is your contribution, your passion?  Stay true to that, and you will be richly rewarded – and you’ll probably make some money too.  What’s sure is that you are much less likely to compromise the values that matter to you.

Thanks to Hugh for the interview and thanks to Portola for the reminder.

How these brands are created and promoted is a subject best left to the political scientists.  But the campaign process also offers insight into surviving an attack on your brand’s reputation. In an age when accusations of wrongdoing are easily made and rapidly spread, how should you respond to an allegation of wrongdoing?  Handle it well and your reputation can actually benefit (think Tylenol, 1982). Handle it poorly and that may be all she wrote (think Arthur Andersen, 2002)…

I hope you never find yourself in such a situation (and my main work is to help ensure you don’t!).  But should an accusation of wrongdoing occur, here are a are a few suggestions for your response:

1.  Act quickly, respectfully and in proportion to the accusation.  If word is on the street that your brand has done harm, silence is rarely wise.  Speak to the issue as quickly as you can, and be sure to do so respectfully and fairly.  And whatever you do, don’t mock the accuser.  The charges may seem ridiculous or malicious to you, but the rest of the world is not inside your organization.   Let people know that your brand’s integrity is essential to you, that you will see that the matter is investigated, and if there is a problem, it will be rectified.  A quick, honest word is the fastest way to get the 24-hour news cycle on your side.
2.  Seek wise counsel.  Every great leader has a team of advisors and so should you.  Get trusted friends, mentors and colleagues to weigh in – especially those outside your organization.  Things can get myopic under stress, so be sure to get some perspective from those who’s moral compass you respect. (Surely you’ll need to consult your legal counsel, as  accusations often come with the threat of financial liability.  But be thoughtful about the advice you take.  Sometimes it’s worth a little legal risk for the opportunity to speak plainly.  More than a few medical malpractice cases have been resolved with a sincere apology…)  
3.  Have a command of the facts.  Watching Herman Cain the last few days has been especially painful on this front.  He may be entirely innocent of the sexual harassment allegations against him (though that is looking less likely), but his equivocation definitely communicates duplicity or incompetence or both.  If you are in the C-suites and there is an accusation against your brand, you are going to be asked about it (regardless of how many PR people you have). And “I don’t know the details,” will sound like a dodge.  So know the facts and be prepared to speak to them directly.
4.  Be thorough.  Good campaign managers know to do “opposition research” on the own candidates – they need to know what’s wrong before everyone else does.  So within the organization, don’t settle for answering the singular allegation.  Be sure there isn’t another shoe about to drop.  No matter how brilliantly you manage one allegation, if another comes along in its wake, you will be assumed to be guilty of both.
5.  Be as transparent as possible.  As we’ve discussed before, transparency is essential to trust.  Show what you’ve done to investigate, make people available for interviews, disclose documents if you can.  If an honest investigation reveals no wrongdoing, transparency will make the results believable.  And no matter how innocent you prove to be, a lack of transparency will lead many to believe you are covering up.  
6.  If your organization is in the wrong, own up.  Nobody is perfect and good customers understand.  What good people won’t tolerate is a refusal to take responsibility (think Bill Clinton). So if there is a problem, acknowledge it and immediately begin the work of making it right.  Nothing says “trustworthy” like the willingness to confess a wrong followed by the honest effort to make a repair.

Whether the candidates will take such advice, I don’t know.  But I do know that good customers reward integrity. And the best businesses are built by serving the best customers.

What I had not picked up on in our initial phone conversations was the sense of desperation in the organization.  When they invited me to come, they seemed concerned.  When I arrived in the conference room, there was something closer to panic, with one question dominating the discussion:  “How do we get our market share back?!?”   By which they meant, “How do we convince these people to return to our brand and keep us alive?”  The leadership’s perception was that their decline was essentially a marketing failure.  All they needed was an adjustment to their message.  And what they wanted from me was the answer:  What’s the new thing to say to this bunch so that they choose us?

At first I bought into their thinking.  They were so persuaded their marketing was the problem they persuaded me.  But a few hours into the conversation it was clear we were walking in well-worn circles.  And each time I suggested a new angle on the problem, that perhaps there was a deeper issue than marketing, the team rebelled.  Marketing, message, communication!    It was paralyzing.  For most of the day we made no progress. Finally, in some exasperation, I asked, “So who exactly exists for whom?  Do you exist – truly – to benefit your customers?  Or do they exist to provide for your need for success?  This is quite unclear to me.”

It quickly became clear to all of us.  The answer was the latter – customers existed to serve the organization; and this was at the heart of their decline.  What had begun with with the goal of providing services to clients had slowly transformed into an organization centered on the need for prestige. And customers could tell (we did several focus groups and this was a dominant theme).  Legacy customers often remained (lots of brand loyalty).  But new customers were looking elsewhere, recognizing that their best interests were no longer at this firm’s heart.  The brand had lost trust.

And what was so striking about this realization is that the organization was working feverishly in their marketing to communicate the exact opposite.  The “we are here for you” language was everywhere.  And yet customers could tell it was lip service.  The organization was only fooling itself.  It wanted to be customer focused, but what actually motivated them was being perceived as “successful” by their peers.  Customers were simply a means to that end.  It was a nearly fatal mistake.

The lesson I learned that day:  Building trust in our brand requires a constant examination of motives.  Who really exists for whom?  Are we in the business of making a genuine contribution to others?  Or do others exist merely to satisfy our need for success?  The distinction is critical, and it’s easy to deceive ourselves.  And mantras and mission statements about serving customer needs are no inoculation against becoming very self-interested.

Always remember that trust is granted only to those who consistently demonstrate that they value the needs of others.  If you want to build trust in your brand, ensure that an honest and regular examination of your motives is a core dimension of your corporate culture.

I was once a passionate cheerleader for Amazon. Sure, I was a bit distressed at first by the pressure they placed on the mom and pop book sellers. But there was little doubt that the internet was the marketplace of the future, and I appreciated Amazon’s courage to innovate. I also quickly found that I continued to shop at my local independent. Where Amazon was a tremendous help was in obtaining the hard-to-find or the discount it offered on the book I could not otherwise have afforded. And as they expanded beyond books, I had friends who benefitted greatly from the ability have goods delivered. Win-win.

And in those early days I didn’t begrudge Amazon for not collecting sales tax. The economy was good, tax revenues up, bricks and mortar stores had the market share, and establishing the world of e-commerce was a benefit I was willing to support with modest tax incentives (in the sense that Amazon was drawing business by not collecting sales tax). And besides, I was sure it wasn’t forever. Let e-tailers get established and then we’ll ask them to make their full contribution to the social good.

But Amazon is no longer David in this story, and yesterday, gave more evidence of liking the role of Goliath. Amazon’s decision over recent months to disown thousands of affiliates is both ironic and tragic: turning their back on those now trying to build their own e-businesses and doing so at a time when their market share is secure and state and local governments are desperate for income.

In their notice to affiliates, Amazon laments the difficulty of collecting taxes in so many jurisdictions and declares that the pressure on them to do so is the work of “big box retailers.” The technological challenge is too big. The costs are too great. And after all, they’re the little-guy. Really? Amazon can launch a Netflix-rivaling movies on-demand service, but can’t find a way to collect taxes? They have the creativity to change the face of retail, but don’t have it to help our larger society in desperate economic times? Can they really say with a straight face that they gain no competitive advantage by not collecting taxes? Really?

Amazon’s real argument, of course, is that there is a Supreme Court decision that absolves them of the responsibility. And to them this is the end of the story. Law doesn’t demand it; we won’t do it! (And we won’t put any of our innovative genius into finding a way to solve this problem long before state governments start passing laws. We’ll wait ‘til the ink is on the page and then appear stunned and oppressed.)

But by taking such an oppositional stance, Amazon is clearly telling us all that they are content to build entirely mercenary relationships. Amazon will trade us a product for a price. Good will, collaboration, the common good are not in the mix. Buyer beware…

It’s an all-too-common practice in business, and when thinking in purely utilitarian terms, appears reasonable. But by taking the stance of victim and completely disregarding the opportunity to build a fortune in goodwill, Amazon is placing all their eggs in the basket of price and convenience. A fine strategy until someone develops cheaper or easier way to shop.

The thing about mercenaries is that no one likes them. They may be necessary from time to time, but no one wants to hang out. We want our mercenaries to do their dirty work and then pretend not to know us. The minute we find an alternative, we choose them. And we feel good about ourselves for doing so. (Did Amazon learn nothing from Blockbuster’s rise and fall? All you need is one Netflix and it’s over…)

So will I keep my Amazon widget? For now… But I won’t feel good about it. I leave it there because I think the books I’ve suggested are important reads and Amazon’s plug-in is the easiest way to add them to my website. But the minute there is a better one, I’m out. The one who lives by the sword…

In future posts, we’ll explore the anatomy of trust: what it is, how it works; how to gain it and, most critically, how it is lost. But today I want to begin by asking the “why” question: Why is trust so valuable? Why does it provoke such an immediate and consistent response in us? Why is being trusted worth so much more to your company than being “sexy” or “exclusive” or “innovative” (which we know to be very powerful motivators)?

Recent research into both brain science and evolutionary biology offers a compelling answer: trust is biologically connected to our survival mechanism. Though in western culture we often try to deny it, one of the first lessons we learn in this world is that we need others. Whether it’s fending off the wooly mammoth or facing a hostile boardroom, you aren’t going to last very long on your own. Trusted allies are an incredibly valuable resource. And our brains put a premium on finding them.

Consequently, when a person or an organization is recognized as trustworthy, a deep psychological bond is formed. We are drawn by primal instinct to those whose partnership creates peace, security and predictability in our lives. And we tend to root ourselves into those relationships. We count on them to provide the stability that allows us to take creative risks, which, in turn is what moves us all forward. In other words, trust both soothes primal human fears and gives us the ability to take on the future. No wonder trust is so powerful. And no wonder we are biologically wired to reciprocate.

But posers beware! The same survival instincts that cause us to value trust so deeply also cause us to reject those who appear unreliable or deceptive. We may be fooled for a while (humans are only mediocre lie detectors in any specific situation). But evolution has hard wired within us the ability discern defectors. And when they are discovered, to protect the tribe, we feel compelled to spread the word (e.g., Amazon reviews, Yelp, Consumer Reports…). Furthermore, our loyalty to those we trust compels us to punish the cheaters, even when that punishment comes at a cost to us (e.g., not purchasing a product that benefits you, personally, when you know the producer is harming others).

So, if creating value is what you seek, your chief priority is creating trust. We humans hard wired to seek it and to reward it with cooperation and loyalty. But if “trust” is only a veneer or later betrayed, know that you face an equally primal response. Mother Nature will compel people to spread the word, and if the harm is big enough, they will sacrifice to see you punished. All the more reason to build a culture of virtue within your organization, starting now!

Next time we’ll take a look at component pieces of trust. Can we break trust down into its elements so that we know where to focus our energies in building it?

If you have questions or comments, I’m always delighted to receive them. This blog is for you, so if you have a topic you’d like me to discuss, just say the word.

Want to do some further reading? Here are two original sources used in this post:

• Nowak, Martin and Roger Highfield. SuperCooperators: Altruism, Evolution, and Why We Need Each Other to Succeed. Free Press, 2011. (This and other suggested titles can be found in my Recommended Reading for the Ethical Executive.)

   

• Wasieleski, David and Sefa Hayibor. “Evolutionary Psychology and Business Ethics Research.” Business Ethics Quarterly 4 (2009): 587-616. (See the abstract.)

I ask this because I find the conventional wisdom generally true: the greater one’s ability to delay gratification, the higher their ethical standards. Those who understand the value of the long-term, and possess the discipline to invest in it, are vastly less likely to put it at risk for a short-term gain. Likewise, those who require immediate payoffs are highly motivated towards corruption – they must take the shortcut to their vision of “success.”

As we survey the recent financial crisis, we seem to have one very large case in point: once-great companies letting go of core ethical principles to get while the getting was good. We are dismayed at their behavior and feel desperate to prevent such mistakes from happening again.

In this state of mind, it is tempting to believe that the solution is to insist that the focus be entirely upon the long-term – to align compensation and other incentives to reward only long-term gains.

But for all the wisdom of such impulses, we must also be aware that there is a dark side to long-term thinking. Specifically that delayed gratification can lead to very unrealistic expectations of reward.

Consider the following game often used to examine delayed gratification: a subject is offered an enticement in the present (food, money, laudatory blog comments…) with the assurance that the reward will be increased if the subject can wait a specified period. Researches then vary the wait times or the rewards or both, to see where the limits of our discipline lie. But generally both the reward and the time frame are made known to the subject. And thus, what is really being studied is a contractual arrangement: specified effort for specified reward.

But rarely does real life offer us such a contract. In practice, our decision to delay gratification is based not on certainty, but on expectation. We believe that if we successfully complete a long-term endeavor, we are assured of a promotion, a bonus, a raise… And, frequently, in our mind we convert “reasonable expectation” to the level of contractual obligation (of our boss, the company, the client, the universe…)

But what if the situation doesn’t unfold as we expect? What if targets required for the bonus aren’t quite met? What if it looks like the deal we’ve been working on is going to fall apart in the 11th hour? What if someone else becomes the heir apparent? What if we did everything “right” and still the expected reward doesn’t materialize?

These are moments we must examine ourselves very carefully, because studies also show that people will engage in far riskier ethical behavior to preserve a perceived possession than to gain what they do not already have. In other words, the average person is unlikely to tell a lie to acquire $100. But to keep from losing $100 they already have, research says that they will lie quickly and repeatedly.

So herein lies the risk of focusing on the long-term. If we come to believe that we are entitled to a particular reward, we consider ourselves as already possessing it. And should we then come to believe that this reward is at risk, we are tremendously more likely to engage in unethical behavior to preserve it. When corruption is considered “defensive” by the one committing it, it becomes far more palatable, even to those of otherwise high ethical standards.

To keep ourselves true to our core principles, then, it is essential to recognize that when we take the long view (and we almost always should), we are making investments not signing contracts. In any given interaction, acting with wisdom and discipline offers no certainty of reward. It is only over the, dare I say “long-term,” that such efforts prove their value.

These, and the many others that Taylor raises, are, in my opinion, essential issues upon which every ethical executive must reflect; and I very much commend him for his work (in this talk and his larger direction of the RSA).

Note that this discussion is high on content and perhaps a little low on passionate inspiration.  If you’re looking for memorable stories, this is  not the conversation for you.  But Taylor’s research is excellent, his sources first-rate.  You may not agree with every conclusion, but he knows his stuff, and he’ll push you to think about your role as an executive and what you can do for our greater good.

I know that this is not an easy time to be out in front. The economy is uncertain. Competition is global. The pace of change is bewildering. You feel the stress of having people who depend upon you. And you know the stakes at risk whenever you make a decision.

This pressure is only compounded when one considers the rewards available to those who can achieve even the shortest-term “success.” An athlete needs only one great season to be a celebrity. A political figure can gain tremendous power not by wisdom, but by command of the sound bite. A corporate executive can walk away with millions if a quarterly report exceeds expectations. Shortcuts are so available, so well worn. And, after all, everybody’s doing it – “industry standard!”

Then come the Anthony Weiners and Elliot Spitzers, the Ken Lays, Bernie Madoffs, and Raj Rajaratnams… Their failures provoke such bitterness in the broader public that leadership itself brings one under suspicion. Serve in office, manage a company, be seen in the spotlight and someone will assume that you must be up to no good. If there is a benefit of the doubt, those in leadership may well not get it.

And yet, you persevere. You never forget the importance of character. You have put in the work to find your moral compass and you let it guide your decisions. You take feedback, but you don’t let it drive you. When you commit a wrong – as we all do – you work to make it right. And you never capitulate to the pressures to compromise your principles. Most of all, you remember that business exists to make the world a better place, and that you are the bearer of a public trust.

For all of this, I thank you – the many of you I know and the many more I do not (at least not yet). I thank you for your dedication and I want you to know that this blog is for you!

I learned long ago that ethicists have little to teach those who are not already ethical. No one can install principles in those who care nothing for them. What ethicists can do is make life far easier for those who are already working to do the right thing. For them, specialists can share research, explain the nuances of theory, curate information, and provoke creative dialogue… And that is what I want to do for you.

I consider it my mission to make this blog a place where you can quickly and easily find the tools you need to carry out your work as an ethical executive. I will do my best to ensure that a small investment of your time pays a rich return in creating the culture of integrity in your organization that I know means so much to you.