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Dov Seidman: From formal authority to moral authority

In our interconnected world, a management style that emphasizes honesty and trust should replace traditional carrot-and-stick-style rewards and punishments.

October 9, 2012

Being a successful leader requires competencies such as intelligence, skills and knowledge.

But a moral culture may push achievements to even higher levels, said Dov Seidman, founder and CEO of LRN, a company that works with businesses to develop ethical corporate cultures.

Dov Seidman photoSeidman explains how principled behavior -- an idea missing from much organizational lingo -- can lead to profitability in his book “How: Why HOW We Do Anything Means Everything.”

Published in 2007 and updated in 2011, “How” urges readers to look beyond typical measures of success, such as page views or units sold, to focus on the degree of trust and transparency within their organizations.

Seidman believes that such concepts should be integral to any organization that desires to move forward.

“Life is really about progress,” Seidman said. “[And] we know that progress is created and enabled by innovation. … Trust enables … risk taking, which in turn enables the innovation.”

Seidman spoke with Faith & Leadership recently about his theories on behavior and leadership. The following is an edited transcript.

Q: Why is a leader’s behavior as important as what he or she gets done?

In business and politics leadership today, we’ve created these spheres and invented language around these spheres with the idea that it’s an amoral space, such as: “It’s business, so just do it. I don’t care how.”

But we are now in such a hyperconnected, interconnected world, there’s no place to park morality while you create this amoral sphere. We are rising and falling together.

One banker at his desk can lose $2 billion and affect global markets. One vegetable vendor can catalyze a revolution toward freedom throughout the Middle East.

We are in a relationship of dependency, and that’s why I think that we are in what I call the era of behavior.

In this new dynamic, leadership itself is going on a journey from formal authority to moral authority. We are going to follow people because they inspire us with visions worthy of our dedication. They themselves walk the talk and are animated by values.

“How” is a noun. It’s a thing. It’s an ethic. It’s a platform. We can do it, we can scale it, we can invest in it, we can model it, and others can emulate it -- and that’s really the argument. In an interdependent world, the amoral sphere is no longer tenable.

Q: You use the acronym TRIP, which stands for trust, risk, innovation and progress. The core, really, is the idea of trust; why is that so important?

So, I mean, what is life really about? It’s about progress -- however it is we envision progress. It could be in a quest for truth. It could be curing certain diseases. It could be progress in our ability to entertain ourselves.

We know that progress is created and enabled by innovation -- some creation, some interruption, some disruption -- that all progress is created through innovation.

We also know that innovation is enabled by risk taking. Speaking up in a meeting is risk taking, because when you speak, you take the risk that a colleague will think less of you for your ideas. Investing capital to pursue innovation is a risk that you’re not going to get the return. So it’s all about risk taking.

Now, when do people take risks? They only take risks when the room is full of trust. In low-trust environments -- and we’ve measured this -- it’s actually more rational to not take risks.

So trust enables the risk taking, which in turn enables the innovation, which creates whatever progress it is you’re pursuing. That’s what TRIP is about.

Many of us grew up in the tradition of “trust and verify.” We go looking for trust, and we set up elaborate checks and balances and approvals. But according to Aristotle, the virtue of trust lies in giving it away. Through trust, you are giving somebody else the power to do right by you or let you down.

Neuroscientists have actually established that oxytocin is released in the brain of someone who feels like they are being trusted, and they reciprocate the trust in a virtual cycle of trusting dynamics.

We’ve got to give away trust in meaningful, palpable ways. In my company’s performance management system, colleagues rate themselves and we pay bonuses. We trust people with their own rating. We pay bonuses based on what you think of yourself, and not based on what somebody else thinks of you. Giving trust away is the ultimate act of transparency.

Q: How do you engender trust and transparency as values in an organization?

What character is to the individual, culture is to the organization -- that which animates how things happen, how decisions get made, how we treat each other and our customers, suppliers and vendors.

Let’s say that there’s a leader who’s really inspirational, and she says, “I trust you to innovate.” So this person runs off inspired to innovate but needs to get two signatures to spend $8 to innovate. Did you see how the left hand just took away the trust that the right hand gave away?

Organizations are systematic about everything they want to scale: just-in-time inventory, TQM, supply chain management, shareholder relations. The one thing we’ve yet to be systematic about with the same rigor is the human operating system.

How do we really get our hands on all of those levers that shape behavior? Now here’s where morality comes in. When you bring together leadership and culture in a deliberate, strategic way, the company is not just letting culture evolve ad hoc. It is doing culture. It’s shaping culture.

Not too long ago, when we were in a really industrial age, we wanted employees to behave quasi-robotically -- show up at work, don’t be late, work hard, be repetitive, put this widget in this wheel over and over again.

If you give me enough carrots and sticks, I can get someone to behave quasi-robotically. But today we are asking employees to go on to Facebook and have a meaningful conversation on behalf of your company, and defend your company if you’re attacked.

We’re asking people to collaborate with people of different cultures, to be creative, to innovate and to be principled in their decision making.

We’ve never asked for so much humanity from people, as opposed to just productivity.

That type of humanity can’t be commanded. You can’t say to someone, “Go in a room, and don’t come out until you have an idea.” Or, “You two figure out how to collaborate, or else.”

A manager can shift your behavior with carrots and sticks, but a leader who wants to elevate your behavior can only do so by inspiring you. That’s why I talk a lot about inspirational leadership, the ability to connect with people around values, beliefs, missions and purposes worthy of their collective efforts.

Q: Are there any particular practices that you would recommend to leaders and organizations that want to foster the TRIP culture?

It’s ultimately about freedom in the workplace to contribute character and creativity.

There are two types of freedom: freedom from micromanaging bosses, unnecessary approvals and too much hierarchy -- that’s freedom “from.”

Freedom “to” requires values-based frameworks and principles. The freedom that counts is the freedom to contribute, to collaborate, to innovate, to pursue progress.

I think we need to do both in synchronicity. We need to get rid of those things that inhibit freedom “from,” but we can’t stop there. That’s when the real work begins of the freedom “to.”

The hard work is to take the values and translate them into corporate practices, leadership, and individual behaviors that you can observe and reward and measure. When you’re hiring for character and not just skill and talent, you’re rewarding not just how much gets done but how the job got done.

When you start to do these practices and build that organizational muscle, that’s when you start to create this culture in a very deliberate way.

Q: So it’s going to be different for each organization -- not a checklist of things that you think all organizations should do?

You can’t reduce this to a checklist. It’s a journey.

Organizations and leaders need to inspire people to be resilient and propulsive. And they need to go forward because they understand that they’re on a journey and it’s going to be up and down. When you’re on a downslope, don’t despair; that’s part of the journey.

I think it takes a certain type of leader -- an inspirational leader -- to have people pursue progress, which is what journeys are about, even when you’re going up and down.

And that’s where trust comes in. When we’re born, we have perfect certainty. All we know is, every time we cry, we get fed or held. Then we get out in the world and we start to realize that a gap develops between that ideal state of certainty and reality. When the gap is massive, we hunker down.

You can’t close that “certainty gap,” but when there’s trust, we can move forward. When there’s low trust, we don’t move forward.

In business, managers say, “Hope is not a strategy; give me a plan.” I say that without hope, there is no strategy. When people don’t have hope, they disconnect.

When FDR said, “We have nothing to fear but fear itself,” that was a way of saying, “Don’t lose hope.”

When people are inspired by hope, they move forward, irrespective of circumstances. And they don’t surrender their dreams and aspirations.

Q: The book first came out in 2007, before the recession. How have recent events influenced your ideas?

The book resonated initially when it came out, but nothing like it is doing now. I think when I wrote the book we had just entered the era of behavior. Now we have plunged way deep into it, where everything is about behavior.

The other thing that has become clear is that all behavior has to be guided by values. There are two types of values: situational and sustainable. Selling someone a mortgage and thinking, “I’m never going to see you again, so I can be dishonest in this mortgage-lending transaction” is a type of situational behavior.

Sustainable values are those that literally sustain human relationships and organizational relationships.

You can’t have an enduring relationship if it doesn’t have truth and trust at its center, and if it’s not animated by hope and transparency and integrity and respect and dignity.

What we measure is our choice. It’s a window into what we value, and even into our values themselves. We keep measuring “how much” market share, friends, followers, click-thrus, page views, GDP -- yet that’s misguided in a “how” world. We need to start to measure the “hows.”

Q: How do you measure things like hope and trust?

We’ve come up with questions [in the recently released Global HOW report] that get at that. We have figured out ways that we can measure those behaviors that can only happen if there is trust, and that [are] statistically valid.

Q: And your research found that companies with a culture of self-governance outperform their peers, correct?

The good news is that we’ve demonstrated [the value of self-governance] statistically. The bad news is that only 3 percent of organizations are these types of organizations. So we have lots of work to do -- but also lots of opportunity.