Restoring Values-Based Leadership: An Interview with Daniel H. Kim
by Kali Saposnick

The failure of some of today’s large corporations has left many of us bewildered and angry. Particularly disturbing has been the unfettered greed displayed by senior executives of these organizations. Daniel H. Kim, cofounder of Pegasus Communications, Inc. and a leader in the field of systems thinking and organizational learning, believes that “rather than focusing on building their organizations to last for the long haul, many of these leaders seem to have been seduced by the incredible opportunities for quick wealth.” He continues, “While growing our companies may be a common impulse, we must do it in a way that leads to sustainable success and in a manner that doesn’t violate the integrity of our organizations or the public interest.”

Why have so many organizations lost their moral compass? A large part of the problem, explains Kim, may be our misunderstanding of the nature of a market economy. “Over the past two decades, the U.S. Federal Reserve Board and the government have been very successful in dampening the business cycle—that is, eliminating downturns—through various fiscal and monetary policies.” He points out, however, that throughout history economies have always experienced ups and downs. Because these fluctuations are an intrinsic part of a sustainable market economy, trying to avoid them forever is neither natural nor healthy. Furthermore, the longer we artificially delay short-term recessions, the more severe the correction will ultimately be—as we’re currently finding out.

An Economic Wildfire
Daniel compares the dynamics of the current economic crisis to the uncontrollable forest fires that have swept through the southwestern United States this past summer. For centuries, fires occurred in natural cycles that cleared dead wood and allowed forests to rejuvenate themselves. By suppressing these natural blazes in order to develop the surrounding areas for residential and commercial use, we have allowed the undergrowth to become so dense that now, when a fire does strike, it quickly becomes an inferno. “The ‘only you can prevent forest fires’ campaign featuring Smokey the Bear was too successful!” Daniel laments. “The great redwoods that have survived over a thousand years of natural fires may be destroyed because of humans tampering with a natural process that we did not fully understand.”

He believes that not allowing the economy to have its smaller “fires” can lead to great financial distortions, such as the overvaluing and then crash of Internet stocks in the late 1990s. It also allows “deadwood” (companies that deserve to “die”) and bad ideas (profits don’t matter) to accumulate and proliferate. “Similar to the severe forest fires that are ravaging our countryside, we are experiencing the economic after-effects of years of over expansion and irrational exuberance,” says Daniel. “The stock market has already lost over five trillion dollars of value, and we may lose trillions more before this economic ‘fire’ is tamed and new growth can resume. And, like with the forest fire disasters, it is likely to take much longer to recover from this big ‘fire’ than from the smaller recessionary ‘fires’ we have experienced in the past.”

A Leader’s Role
Against this specter of prolonged economic crisis, Daniel believes that a leader’s primary role is to create a viable future for the organization. By definition, any short-term action he or she takes that jeopardizes this future is unethical because leaders have a responsibility to take the long-term view, even as they must deliver short-term results. He explains, “In football, the goal is to win the game in four quarters. If you focus on results on a quarter-by-quarter basis, you’ll exhaust your players in the first quarter so you can be ahead of your opponent at the end of the first 15 minutes. But as the game continues, they’ll be so ragged that the other team will score more than you, and eventually you’ll lose the game.” Kim compares this situation to business executives who take actions to prop up stock prices so they can cash out while the going is good. Instead of seeing their role as continually developing the company’s long-term health beyond the current quarter and even the current year, they focus on short-term results that will allow them to reap quick personal gains. He comments, “When leaders become selfish and greedy, they have lost sight of the central ethic of what it means to be a leader—to care for the future of the enterprise.”

To prevent greed from escalating, Kim asserts that leaders must continuously build and maintain their organizations’ integrity. If they don’t, the organizations will ultimately fail. “Take Arthur Andersen & Co., whose founder believed that accountants should be the guardians of the public trust,” says Kim. “While he was alive, Arthur Andersen instilled this ethos in his staff, and people came to believe that if a financial statement had the stamp of Arthur Andersen, you could trust it. But in the last few years, rather than guarding what was once one of the largest, most successful, and most respected professional service organizations in the world, the firm’s senior executives seems to have been so revenue-focused that they lost sight of protecting the company’s most important asset—the public’s trust in its integrity. As a result, in the space of a few short years, they destroyed what took decades to build.”

Above all else, a leader must provide others with guidance to ensure that their actions in the moment do not undermine the company’s viability. By virtue of the role they play in the organization, people who work closer to the ground level may not see the impact of their actions on the future. Kim says, “As a leader, your job is to use the special vantage point you have in the organization to look out for others. Period. Leadership means to be of service. If you’re only looking out for yourself, you have no business being a leader.”

A Values-Based Approach
So how do we begin to develop leadership capacity in ourselves and others? Kim says that this is a critical question all executives should be asking. We should consciously focus on what qualities and characteristics we want to develop in our people and not leave leadership development to chance. “To begin the process of creating a values-based approach to their organizations,” Kim advises, “leaders need to first articulate the enterprise’s purpose at its highest level—What is its reason for being? What value does it contribute?—and then help their staff understand their role in achieving this purpose. In the recruitment process, executives should be looking beyond just skill matching to seeking resonance with the organization’s purpose and values.” He points to the Red Cross, an organization that must recruit people who not only can do the job but who also value being of service to others. When an organization’s culture is deeply imbued with a strong purpose, people’s behavior naturally becomes more aligned with the organization’s mission.

“What I’ve learned about human beings,” says Daniel, “is that we want to be part of something larger than ourselves, part of more than just the day-to-day activities we do. People may not be clamoring for it on their own, but when given the opportunity, their relationship to the work itself, their attitude, their whole experience changes. I believe that this change is closely related to people’s continual search for meaning in their work and in their life.” He continues, “A distinguishing characteristic of great leaders is their ability to tap into the highest aspirations of their people and provide the necessary support to realize them. When we engage people’s hearts, minds, and spirit in the work that they do, we automatically build integrity into the fabric of the organization so that long-term health will never be sacrificed on the altar of short-term profits.”

Kali Saposnick is publications editor at Pegasus Communications, Inc.