Corporate Eye

Tone From The Top

Some of my previous posts discussed how effective and ethical companies managed their internal functions. I recently came upon a company that is noteworthy. It is BB&T Corporation, a fast-growing, highly profitable financial holding company headquartered in Winston Salem, NC. This is one of the financial services company that avoided the subprime meltdown. This chart is most telling, while the S&P 500 declined 20% in the last three months, BB&T went up 40%.

I suspect that one of the reasons for this performance is the “Tone at the Top”. CEO John Allison stands out among his peers —

Like its leader, the company utilizes philosophical principles and values as guiding forces.  Both are described in a 30-page brochure entitled “The BB&T Philosophy.”  Included is not only a quote from Allison, but from Aristotle. …“The BB&T Philosophy” helps guide employees to get the most out of themselves by earmarking ten values by which to live and work. Allison reasons that if his employees are getting the most of themselves, they’ll not only be better people, but better employees.

In 1987, mind you over 20 years ago, Committee of Sponsoring Organizations of the Treadway Commission (COSO), a private-sector initiative formed in 1985 to reduce fraud in financial reporting, indicated that —

[t]he tone set by top management – the corporate environment or culture within which financial reporting occurs – is the most important factor contributing to the integrity of the financial reporting process. Notwithstanding an impressive set of written rules and procedures, if the tone set by management is lax, fraudulent financial reporting is more likely to occur.

Too bad that many companies in the current financial crisis either never were aware of this insightful statement or chose to ignore it. Seems that BB&T got it. Read Why Principled Leadership Brings Profit and Pride to BB&T and find out more. A practice I find interesting is that new employees immediately find out the company’s values and get a Handbook that explains the “tone from the top”

One of the most effective practices for C-Suite leaders is to get out of their offices and meet with people at all levels in the organization and talk about their views on ethics and hear what employees have to say. This is one of the best ways to promote the tone at the top. Here are some tips from my book —

  • Corporate Aristocracy type Leadership is very Old Economy. Tom Peters coined the phrase ” Management By Walking Around” in the 1980s. To his credit the concept is still current. Get out of your office go to where your people are located and talk with them. In one of the best articles on leadership published in The Harvard Business Review, Naval Officer Mike Abrashoff mentioned, “. . . I had come to realize over the course of my career that no commanding officer has a monopoly on a ship’s skills and brainpower. There’s an astonishing amount of creativity and know-how below decks, just waiting to be unleashed. To set it loose and make it flourish, a leader should provide vision and values, and then guide, coach, and even follow his people.”
  • Get rid of the special parking places, the executive dinning room, anything that gets between you and the people who you support-yes support. In his book Servant Leadership Robert Greenleaf talks about, “. . . the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. The difference manifests itself in the care taken by the servant-first to make sure that other people’s highest priority needs are being served.”
  • Meet the people you support often. Don’t wait for the special events. Invite small groups to neutral area, the cafeteria during off peak hours is good. If this doesn’t work, your office is OK, but be sure that your desk is not a barrier. Move your chair to the front of your desk. Have people speak first and listen. Ask what their suggestions are to do things differently.

Another good reference is The Risk Of Being Ethically Tone Deaf At The Top.(PDF)

I’d like to be optimistic that the current financial crisis inflicted so much pain that Boards and C-Suites will finally get it that ethics matters. We shall see.

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Ed Konczal has an MBA from New York University's Stern School of Business (with distinction). He has spent the last 10 years as an executive consultant focusing on human resources, leadership, market research, and business planning. Ed has over 10 years of top-level experience from AT&T in the areas of new ventures and business planning. He is co-author of the book "Simple Stories for Leadership Insight," published by University Press of America.