_“I look for three things in hiring people.

__The first is personal integrity,

__he second is intelligence,

__and the third is high energy level.

__But if you don’t have the first,

_the other two will kill you.”

-Warren Buffet, CEO of Berkshire Hathaway

When most people think about the critical ingredients of high-performing teams, they list things like execution, clarity, alignment, and communication. Integrity doesn’t even make the list. Big mistake.

In our research for Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations, we interviewed leaders in 61 organizations in 11 countries and unpacked some important insights about integrity. Ethical behavior matters. Not just a little. A lot. Building a high-performance team demands what we call the “ethics imperative.”

Ethical means acting according to accepted principles of right and wrong—acting with integrity. It means paying attention to how the results are achieved.

We know you confront ethical challenges and dilemmas in your work. All leaders do. Yet research has shown that people overrate their own ethical fortitude and are surprisingly good at rationalizing unethical behavior.

Some people oversimplify ethics as merely upholding the law. Though they overlap, there is an important difference between ethics and law. Some laws are fuzzy and leave room for interpretation about what is right. Other laws—as we’ve seen in rare but important cases in our history—are unethical and warrant civil disobedience.

Most ethical failures occur because there is pain or discomfort involved with ethical behavior. People feel fear or pressure, and they rationalize unethical decisions to avoid hurting others. Ethical behavior is tested most under duress.

Often, the ethical path is the harder one, relying on courage to face adversity and pressure. However, even courage is not enough. Sometimes, ethical dilemmas arise that require not only character but judgment, and our judgment can be flawed or impaired.

Recognizing that we all have blind spots and make mistakes, smart leaders solicit input from team members and trusted confidants when confronting ethical dilemmas.

It helps to apply some simple standards such as:

• “Would this violate any of my core beliefs?”

•  “How would I feel if this were on the front page of the newspaper?”

• “What would my family think about this?”

Leaders should also analyze the situation from the perspective of all the relevant stakeholders and brainstorm alternative responses—holding out for a good solution.

In addition, leaders should create systems and processes for instilling ethics into the enterprise, from screening for character in the recruitment process to recognizing and rewarding people for upholding the organization’s shared values to reporting abuses and maintaining transparency.

In his book, The Speed of Trust, Stephen M. R. Covey made a convincing case that teams with a high degree of trust not only perform better but also faster in the end. He said that trust is built upon integrity, intent, capabilities, and results—what he calls the “cores of credibility.”

Echoing Covey, a growing body of evidence—from Ethisphere Institute, Corpedia, CEB, and Trust Across America—suggests a possible link between ethics and excellent results. According to the Ethisphere Institute, for example, firms on its “World’s Most Ethical Companies” list have outperformed the S&P 500 since 2007 in terms of shareholder returns.

This correlation makes sense because many stakeholders reward organizations for ethical behavior, fair treatment, and responsible practices. Consider the impact of ethical behavior on brand equity, customer loyalty, employee engagement and retention, contracting terms with key partners, and even lower regulatory costs or avoidance of legal fines.

In the end, though, leaders should not need return-on-investment calculations to insist upon ethical practices. Ethical practices have inherent value and should be non-negotiable. 

Core concept: Integrity is imperative for high-performance teams.

Practical Applications

1. Does your organization do only the bare minimum of legal compliance?

2. Is ethical behavior a top priority—and non-negotiable commitment—on your team?

3. Do your team members trust one another?

4. Do you have processes and systems for instilling ethical behavior such as recruiting screens, reward and punishment systems, and confidential reporting channels?

5. Do you discuss ethical dilemmas with your colleagues?