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The values that drive ethical leadership take stock of more than numbers

The idea that directions can be given for the gaining of wealth, irrespective of the considerations of its moral sources ... is perhaps the most insolently futile of all that ever beguiled men through their vices.  — John Ruskin (1819-1900)

By Aubrey Henretty

"American business leaders need to get over that initial wince when they hear the words, 'corporate social responsibility,'" says Ken Crites '97. "It seems like in our culture, business folks always assume that social responsibility will hurt the bottom line."

Crites thinks they're wrong, and he's come to appreciate the power of "values-based leadership." He is a marketing director at Green Mountain Coffee Roasters, a Vermont company ranked "Best Corporate Citizen" by The CRO (formerly Business Ethics) magazine in 2006 and 2007.

To Crites, "values" can be "just another way to measure success, or it can [mean] who delivers the greatest good to our global community. Shareholders fall into that good, but so do farmers."

More than a quarter of GMCR's coffee beans are certified fair trade, and Crites says the company is working to increase that number next year to 38 percent. Distributors pay a premium for fair trade items to help farm families earn stable incomes and build strong communities. But buying fair trade is more than a feel-good exercise. "In a lot of ways, [fair trade] stabilizes your supply chain," says Crites. "If your farmers can't feed their families, they're not terribly concerned with the quality of the coffee."

The company uses its resources to build strong communities in other ways, too. "Good corporate social responsibility work is one way to differentiate ourselves," Crites says, noting that GMCR employees can spend up to five days per year volunteering on company time. Some build affordable housing with Habitat for Humanity, while others choose to work with schools, religious organizations, food banks and other local groups.

"We donate at least 5 percent — usually more — of our profits to charitable organizations," adds Crites, who is quick to point out that this yearly commitment hasn't stopped GMCR's compounded annual growth rate from reaching 23 percent since the company went public in the 1990s. "We know that our numbers need to be in order for us to keep doing good works."

Tim Feddersen  
Tim Feddersen  Photo © Evanston Photographic  
Adam Galinsky  
Adam Galinsky  
David Austen-Smith  
David Austen-Smith  Photo © Evanston Photographic  
Liz Howard  
Liz Howard  Photo © Evanston Photographic  

Values: good and good for you

According to Tim Feddersen, the Kellogg School's Wendell Hobbs Professor of Managerial Politics, practicing social responsibility is also good business, and previously unmoved sectors of the business community are beginning to warm to the idea.

"What you're seeing is an understanding by firms that customers and employees and stakeholders are concerned with a broader set of issues," says Feddersen. "Companies realize that a failure to be responsive and responsible creates a risk for them." The risk, he explains, may be to a company's good name (if it declines calls to action from its customer base) or to its bottom line (if the company misses an opportunity to invest in, say, new technology that would significantly reduce energy costs).

Along with Associate Professor of Management and Organizations Adam Galinsky and Earl Dean Howard Distinguished Professor of Political Economy David Austen-Smith, Feddersen developed a new Kellogg course, Values-Based Leadership, to explore the psychology and sociology associated with leadership.

Galinsky says the course imparts the analytical tools that enable students to decide what to do should they find themselves part of a system that violates their values or ethical sensibilities: "Do you quit, or do you still work within that system?" If the flawed system helps bring about a greater good — be it social or financial — this can be a complicated question to answer.

But a company without clearly defined and consistently implemented values may have more than an academic conundrum on its hands. It may have a disaffected work force.

Dana Crandall '01 has seen it happen. Now a senior vice president at Colorado-based Qwest Communications, Crandall has been with the company since 1998. In early 2002, she says, the company lacked vision: It was on the outs with its customers and suffering under the alleged financial impropriety of its then-CEO. Its reputation was such a source of embarrassment for employees that many refused to be seen sporting Qwest apparel in public.

"I think it's safe to say that morale was fairly depressed," says Crandall.

But before long, Qwest had a new CEO, Dick Notebaert, who turned the company around, cleaning up its finances and adjusting its attitude. Crandall says one of the most important things Notebaert brought to the company was a cohesive value set that emphasized customer service, teamwork, ethics and profitability. "It was to be the rallying cry," she says, and it gave employees a brand they could be proud of again.

These days, the company is active in community outreach through The Qwest Foundation, which focuses on K-12 education and technology in the classroom.

"To me, being an authentic leader means that your own values are aligned in your personal life and your work," Crandall says. "I've got this framework that guides the way I'm going to lead my part of the organization."

Crandall says she wouldn't have it any other way: "I would not be in a company that doesn't give back."

For some companies, giving back is as central to the mission as quality control.

"Nonprofit organizations consistently lead with their values," says Liz Howard, the associate director of the Kellogg School's Center for Nonprofit Management and of the Social Enterprise at Kellogg Program. "As mission-driven organizations, all strategy, planning, operations and growth stem from the mission of the organization. This constant focus on mission translates to values-based leadership for their board and staff."

Howard adds that although the missions of for-profit entities have not traditionally focused on social change, many for-profit leaders have begun to adopt a "multi-stakeholder" approach to management, meaning they consider not only whether their practices will add value to the company, but also weigh the costs and benefits of their decisions to other stakeholders, which may include suppliers, employees, the community or the planet. "Like nonprofit leaders, these for-profit leaders must maintain a keen eye on the overall values of the organization."

If nonprofit organizations lead with their values, many of their managers lead with both eyes on the ever-powerful market.

"Markets are an incredible force for human development," says Andrew Youn '06, founder of One Acre Fund, an 18-month-old nonprofit launched with the ambitious goal of solving Africa's hunger problem. "The highest financial returns in the world are in the least-developed countries. Poor people in Africa are as smart as any free-market consumer in the United States and ought to be treated with the same dignity," Youn says.

Youn's organization — which provides small loans, on-site training and basic medicines to Kenya's poorest farmers — has come a long way from its humble beginnings as a business plan written for a Kellogg entrepreneurship course. It has been featured everywhere from Glamour magazine to Chicago Public Radio and received grants from the Echoing Green Foundation, the Draper Richards Foundation, the Yale University Entrepreneurial Society, the Business Association of Stanford Engineering Students, and board members of the Kellogg School's Larry and Carol Levy Institute for Entrepreneurial Practice.

More importantly, at the end of its first year, One Acre farmers had grown 4.3 times more food than they had the previous year. They had also repaid 98 percent of their loans.

Youn says the Kellogg experience was instrumental in his decision to pursue nonprofit work.

"Kellogg was like jet-fuel in helping to develop my interest in social change. I first became interested in Africa during the Kellogg Social Impact Conference, and came to Africa for the first time through my summer internship, through the nonprofit program."

Interest in social enterprise and outreach runs high at Kellogg. In 2003, students founded the Board Fellows Program, which provides one-year fellowships to Kellogg students it places on the boards of directors of Chicago-area nonprofits. The school's Social Impact Club is an award-winning chapter of Net Impact, a national network of leaders bettering the world through business. The Kellogg Neighborhood Business Initiative, also run by students, provides pro-bono consulting services for promising local businesses, and Business With a Heart routinely organizes large-scale community service projects.

"I am floored by the depth and breadth of work that my 2006 classmates are doing to make the world a better place, in both the nonprofit and for-profit sectors," adds Youn, whose organization's annual donor list includes 150 of his classmates. "Our generation is at a point in time where we all are making enough money, and we are increasingly searching for a way to infuse meaning in our lives. Kellogg does a fantastic job of encouraging that."

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