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A Question of Character

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					A Question of Character
by Suzy WetIaufer



  Joe Ryan turned a small-town
  cosmetics company into a
  national powerhouse, making
  employees happy and
  shareholders rich in the process.
  Does it really matter that he
  cheats on his wife?




                                      ARTWORK BY VICTOR JUHASZ
R
       OGER   GUSHING    WAS   ALWAYS      was the competition to keep tabs         school sports - which occasionally
         the first person to arrive at     on, of course, but as an executive       featured an article on the company.
         Glamor-a-Go-Go’s corporate        at a company catering to teenagers          The paper was usually a big booster
         headquarters. He needed the       and zo-somethings, he knew he also       of Glamor-a-Go-Go - the area’s
quiet of the early morning to get          had to stay on top of popular culture.   largest employer and a major adver-
ready for the craziness of the day-        So while he started with the Wall        tiser in the Help Wanted
and days at Glamor-a-Go-Go were            Street /ownal, he quickly turned to      section. The news-
always crazy. But good crazy, Roger        Women’s Wear Daily and about a           paper had,
reminded himself. The company had          half-dozen teen and fashion maga-        in fact,
just opened its 120th store, and 15        zines that he relied on for spotting
more were in the works. Not only           trends. He also did a quick check of
did customers love the Glamor-a-           several Web sites each day. And
Go-Go formula - department store           finally, Roger scanned the
cosmetics at drugstore prices - but        local paper. It was a typical
they also couldn’t get enough of the       suburban-city daily -
company’s “Girl Power” line of             heavy on restau-
private-label cosmetics. No wonder         rant openings
sales and profits were skyrocketing.       and high
And even more frenetic growth was
in sight -with a bold plan to take the
company global within 18 months.
As head of Glamor-a-Go-Go’s mar-
keting group, Roger himself was
deeply involved in preparing
for that giant leap.
   And so he arrived at
6:30 every day. He of-
ten used the quiet
of the morning
for reading.
There




HARVARD   BUSINESS   REVIEW    September-October   1999                                                                31
recently given glowing front-page          called idiotic. For years, they had       Astros player. The door to Ryan’s
coverage to the company’s Girl             debated what to do about the Joe           office was almost always open, and
Power rally, where several Texas           Ryan “character question.” They            it wasn’t unusual to see employees
politicians had exhorted hundreds of      had always concluded, with some             stopping in just to share a joke with
local teenagers to make the most of        trepidation, that it didn’t matter-        the CEO, whose laugh was as large
their lives through education. But        until now.                                  as his personality.
there was no boosterism in the pho-           Roger had noticed that in-house             Lately, however, a group of senior
tograph that Roger spotted almost         rumors about Ryan’s philandering           managers - mainly women - had
instantly at the top of the gossip col-   had recently taken on a harsher edge.       started to grumble about Ryan’s ru-
umn in the Lifestyles section that        For years, most employees had              mored infidelities. When Ryan’s
morning. It showed his boss, CEO          laughed about his reputation for            secretary, Donna Ulin, quit, after
Joe Ryan, accompanied by a beauti-        flirting with young female staffers.       what was thought to be a two-year
ful, smiling young woman, “Who’s          After all, Ryan was immensely pop-         affair, some questioned her claim
That Girl?” was the headline. The         ular. Not only had he saved the com-       about a better job in California. A
caption read, “Glamor-a-Go-Go             pany from bankruptcy after he was          few members of the board had even
CEO Joe Ryan was part of the IOO-         hired in 1992, but he had made             wondered if she’d been sexually
plus crowd that attended the gala          Glamor-a-Go-Go a fun and exciting         harassed, fearing that such charges
opening of Houston’s newest steak         place to work, increasing workers’         would damage the company - espe-
house, Rarebits, Saturday night. He       wages and creating boundless oppor-         cially since its message was all about
is pictured leaving the party with a      tunities for anyone willing to work        Girl Power. Others complained -
friend [identity unknown]. Ryan and       hard and think out of the box. Be-         albeit never to Ryan’s face - that
his wife, Michelle, were recently         yond that, Ryan had delivered on his       Kimberly Crogan, a 24-year-old
named cochairs of Families First, the     promise to diversify the workforce,        who started in Glamor-a-Go-Go’s
Texas charity that supports educa-        bringing more women and people of          mailroom, seemed to move up very
tional programs to prevent child          color on board at every level. And         quickly after what appeared to be
abuse.”                                   finally, Ryan had made many em-            a month-long fling with the CEO.
    “Ouch,” Roger groaned, “that          ployees wealthy, with generous             With no manufacturing experience
hurts.” And Ryan’s “friend” in the        stock options and giveaways for the        to speak of, Crogan was now a fac-
picture was hardly unidentified- at       most senior employees right down           tory supervisor.
least to people within the company.       to the most junior. Glamor-a-Go-                “Kimmy Crogan is a smart
She was Laura Sanders, a 2 5 -year-old    Go’s stock price had grown tenfold         woman and she’ll go far” was Ryan’s
assistant manager in Glamor-a-Go-         during Ryan’s tenure- and that was         reply when Roger had asked him
Go’s human resources department.          hardly small change.                       about her meteoric rise. “Trust me,
Roger closed the newspaper and                Beyond his business acumen,            I know what I’m doing. Kimmy
shook his head. “How could Joe do         Ryan was popular because he was, in        Crogan will make great things
this,” he wondered out loud. “How         a word, charming. He was 50 but had        happen for us.” Such bravado was
could he do it again 2”                   the energy of a man half his age. He       typical of the CEO. Whenever in-
    Roger’s thoughts were interrupted     also had lost none of the good looks       dividual board members questioned
by the telephone. At this hour, he        that had made him a bona fide big          his flirtatious behavior in private
knew it could only be Carol Tom-          man on campus back in his days as          conversations-it had happened three
kins, a member of Glamor-a-Go-            a football star at Rice University. At     times, as far as Roger knew- Ryan
Go’s board and Roger’s close friend       Glamor-a-Go-Go, Ryan made it a             acted baffled, even offended. He be-
for years. Together, they had both        point to know employees by name,           moaned the fact that people were
watched Joe Ryan transform Glamor-        from R&D scientists to factory work-       misinterpreting     simple   friendliness.
a-Go-Go from a chain of 23 run-           ers. He spent hours each week bound-       “And 1’11 remind you,” he would
down stores selling discount make-        ing around the company’s sprawling         say, “no one has ever accused me of
up in southern suburbs into a retail      headquarters with the enthusiasm of        anything. No woman has ever come
powerhouse, with flashy outlets           a freshly minted entrepreneur, hand-       forward and claimed that I’ve acted
everywhere from New York to Los           ing out product samples and eagerly        inappropriately-because I haven’t.”
 Angeles. Together, they had watched      soliciting comments. And company           That was true. None of Ryan’s alleged
 him demonstrate great vision, stra-      lore was replete with stories of Ryan      girlfriends claimed to have had a
 tegic thinking, leadership - and per-    personally helping employees in            relationship with him, and some had
 sonal behavior that could only be        trouble. When a Glamor-a-Go-Go             even publicly denied it.
                                          truck driver found that his young              “I may flirt, but I’m a married
                                          daughter had cancer, Ryan paid for         man,” Ryan once told a board mem-
Suzy Wetlaufer is a senior editor at
                                          an experimental treatment not cov-         ber who queried him about the ru-
HBR.
                                          ered by insurance. When another            mors. “So let’s stop gossiping and get
To discuss this article, join HBR’s       employee was in a hospice, Ryan vis-       back to work.”
authors and readers in the HBR Fo-        ited him there and presented him               In the past, such appeals had done
rum at www.hhr.org/forum.                 with a baseball signed by his favorite     the trick. But, Roger wondered,

32                                                                   HARVARD   BUSINESS   REVIEW   September-October     1999
would Joe Ryan be able to talk his        point. “Didn’t the Monica Lewinsky            Girl Power. We could become a
way out of this latest scandal?           scandal just prove that Americans            laughingstock.”
                                          don’t care about the private lives of           “Not to mention the fact that this
   Roger picked up the phone with a       their leaders ?” Roger asked. “After         is sure to damage morale within the
heavy sigh; the voice at the other        all, everyone knew Bill Clinton              company, ” added Tim Wheeler, a
end was bright and acerbic. “Roger,       cheated on his wife, but his approval        board member with 40 years of expe-
did you see the fabulous picture in       ratings stayed sky high. Everyone has        rience in the industry. “No one likes
the paper this morning?” Carol            known for years about Joe’s philan-          to work for someone they can’t re-
Tomkins asked.                            dering, and most people still think          spect. I mean-”
   “You know what he’s going to do,       he’s a great CEO. 1’11 remind you, Joe          Martell held up his hand to stop
don’t you 2” Roger replied. “He’s go-     claims that he’s never cheated on            Wheeler. “Now, wait a minute,” he
ing to claim that he and Laura are        Michelle. And there is no proof that         said firmly, “I respect Joe Ryan. I
just friends. Same old story.:: As he     he has.”                                     think everyone at this table respects
spoke, Roger opened the newspaper            It was Carol’s turn to sigh. “That’s      him as a businessman. He has made
again and glanced at the photo.           right,” she said, “and I’m afraid I’ll       this company into what it is today-
Ryan’s arm rested on Laura’s shoul-       have to hear that lame story all over        a great place to work with terrific
der, and they were smiling at each        again this afternoon. Our quarterly          products, first-class manufacturing
other in a manner that definitely did     board meeting just happens to be at          processes, and a smart strategy for
not look platonic. “Poor Michelle,”       two o’clock. Joe’s private life wasn’t       both the short and long terms. In
Roger groaned, thinking of Ryan’s         on the agenda-but it will be now.”           fact, I just got our latest numbers
wife, a soft-spoken mother of three                                                    this morning, and they’re even bet-
girls, ages eight to r 5.                    The meeting was chaired by Sam            ter than expected. I have to say- I
   “Frankly, I’m not worried about        Martell, who had been on the Glam-           respect Joe Ryan as a CEO.
Michelle at this point,” Carol said.      or-a-Go-Go board for nearly a                   “And let’s remember, shall we,
“She’s known about Joe for years-         decade. A sardonic New Yorker,               that our first job as members of the
she’s had to. She’s obviously decided     Martell was a partner at the venture         board is to represent Glamor-a-Go-
to stay married to him anyway. I’m        capital firm that had hired Ryan and         Go’s shareholders,” Martell went
worried about Glamor-a-Go-Go. I           funded the company’s turnaround.             on. “Do you really think they care
think Joe’s behavior is putting the       Its IPO had made him very rich, and          that Joe Ryan had his picture in a
company at risk.”                         he was, not surprisingly, usually            little Texas newspaper with some
   “Why? Because you’re afraid one        very supportive of the CEO. But              young woman who happens not to
of his old girlfriends is going to turn   Martell also remained a large share-         be his wife?”
up and charge him with sexual ha-         holder. He liked Joe Ryan, but he               “Absolutely not.” It was Mary
rassment?” Roger grimaced, pictur-        cared more about Glamor-a-Go-Go.             Lamott speaking, the longest-serv-
ing the headlines, which were sure           Martell called the meeting to or-         ing member of the board. Her father
to poke fun at Glamor-a-Go-Go’s           der by crumpling its agenda into a           had founded the company and
advertising slogan: “Go All the Way       ball. The other nine members of the          served as its CEO for 30 years. La-
with Glamor-a-Go-Go!”                     board laughed, but not happily. “I           mott herself had worked behind the
   “A sexual harassment charge            trust all of you have seen this morn-        counter in Glamor-a-Go-Go’s origi-
is possible,” Carol said. “And so is      ing’s local paper,” Martell began. “If       nal store. “Think what you want of
widespread ridicule. I mean, our          not, here it is.” He held up the pic-        me,” Lamott went on, “but I don’t
brand identity could be completely        ture and read the caption. “I asked          give a hoot who Joe Ryan sleeps
ruined. Think about it, Roger. Think      Joe to give us some time in an execu-        with. The nature of his marriage is
about our Web site- it has all that       tive session before he joins us.”            utterly irrelevant to the sharehold-
advice about Girl Power. You know,           “I’ll vent first,” Carol broke in.        ers of this company. In fact, I think
‘Don’t let anyone pressure you into       “Sam, we have a real problem on our          most of them would have our heads
a physical relationship,’ and ‘Older      hands. People in this room have              if we fired a top-notch CEO just as
guys who go after younger girls are       talked to Joe at least three times           the company goes global. And hon-
creeps,’ and on and on.. .                about how flagrant his behavior is.          estly, I don’t think Joe’s extracurric-
   “But even more important,” she         And each time, he completely de-             ular behavior matters one whit to
continued, “I’m worried about the         nies any impropriety; he sweet-talks         the employees either. This is 1999,
whole question of leadership- of in-      us into focusing on his performance          for God’s sake. The president and
tegrity. Can we really expect Glamor-     as a CEO. Every time, we do just             a zr-year-old intern had sex in the
a-Go-Go’s employees to pour their         what he asks. But we’d be irrespon-          White House-”
hearts and souls into a company           sible if we didn’t face the fact that           “This isn’t about sex!” Carol Tom-
that’s run by a guy who lies and          his affairs open Glamor-a-Go-Go up           kins cut in. “It’s about character.”
cheats on his wife? Come on.”             to lawsuits and public embarrass-               Carol’s statement hung in the air
   Sexual harassment and threats to       ment. Just think about that refer-           as Sam Martell walked to the door
brand identity concerned him, but         ence to Families First in the news-          of the boardroom and ushered in
Roger wasn’t sure about Carol’s last      paper today and our major focus on           Joe Ryan.

34                                                                    HARVARD       BUSINESS   REVIEW   September-October   1999
What, if anything, should
Glamor-a-Go-Go’s board
do about Joe Ryan?
                                                                                      Freada Kapor Klein
Six correspondents                                                                    and Mitchell Kapor
                                                                                      Freada Kapor Klein is a principal
offer their advice. ‘e,                                                               ofKlein Associates, a firm based
                                                                                      in Cambridge, Massachusetts,
                                                                                      that surveys, trains, and
                                                                                      consults on issues ofworkplace
                                                                                      environment. Mitchell Kapor
                                                                                      is ageneralpartneratAcce1
                                                                                      Partners, a venture capital firm
                                                                                      based in Palo Alto, California.
                                                                                      He is the founder and former
                                                                                      CEO    ofLotus     Development
                                                                                      Corporation andserves on
                                                                                      several boards o f directors. They
                                                                                      occasionally consult together
                                                                                      to CEOs and boards ofdirectors.
                                                                                      They were recently married.


                                  GLAMOR-A-G•     -GO'SBOARD     should   the least risk of lawsuits. Given the
                                  reframe their discussion. This isn’t    legal climate in this country, some-
                                  only about Joe Ryan’s sex life or       body is going to threaten a lawsuit
                                  character; just as important is the     no matter what the board does. Try-
                                  question of whether the board has       ing to avoid that at all costs would be
                                  been doing its job appropriately. Its   myopic; instead, the board should
                                  members are now operating at a sub-     figure out what the right thing to do
                                  stantial disadvantage: they need to     is -and then do it.
                                  react quickly, but they’re not ade-        If the whole story about Ryan
                                  quately prepared, nor do they have      emerges, the board needs to be able
                                  reliable data.                          to justify its actions to all the com-
                                     The board is currently polarized-    pany’s constituencies: the teenage
                                  some members see the sexual es-         girls who spend their allowances on
                                  capades of the CEO as a business        Glamor-a-Go-Go’s products, the em-
                                  issue, and some think they are irrel-   ployees who want to be proud of
  HBR’s cases present common      evant. Both sides are making argu-      their workplace, and the sharehold-
  managerial dilemmas and         ments about the impact of the CEO’s     ers who want steady returns and no
  offer concrete solutions from   behavior on customer confidence,        surprises. How will the board re-
  experts. As written, they       employee morale, legal liability, and   spond when the following informa-
                                  shareholder interests. The trouble is   tion surfaces?
  are hypothetical, and the
                                  that the board members haven’t de-         Ryan’s “flirtatious behavior” had
  names used are fictitious.
                                                                          n


                                  veloped a shared framework that           come up at least three times in pri-
  We invite you to write
                                  would help them think about these         vate conversations with members
  to Case Suggestions,            issues. As a result, their course of      of the board.
  Harvard Business Review,        action will be dictated by the mem-     n  A group of senior managers
  60 Harvard Way, Boston,         ber who is the most articulate or the     had expressed concerns about
  MA 02163, and describe the      most powerful.                            Ryan’s behavior.
  issues you would like to see       Undoubtedly, someone will ask        9 Specific employees were widely
  addressed.                      the general counsel for an opinion on     rumored to have had affairs with
                                  what course of action would pose          Ryan.

  PORTRAITS BY ALLAN BURCH                                                                                         37
. It’s very possible that Ryan has lied   what they believe in? Are their strat-
  to -or intentionally misled-board       egy decisions driven by principles or
  members.                                by opportunistic thinking? Do they
   Glamor-a-Go-Go’s board should do       really believe in the company’s “Girl
two things: give Ryan a strict warn-      Power” slogan, or is that just a mar-
ing and begin to develop a shared         keting ploy?
framework that will allow it to act          Glamor-a-Go-Go should have a
responsibly.                              set of business principles in place
   First, the warning. Ryan’s behav-      that are more than platitudes. For
ior has a substantial impact on the       example, it needs a policy not only
business’s performance- that’s a re-      on sexual harassment but also on
                                          consensual behavior. At a minimum,
While admonishment is me&x,               it should require the disclosure of
                                          any consensual relationship that
termination at this point would be        might lead to a conflict of interest.
unfair. The members of the board          The relationship itself wouldn’t be
                                          grounds for termination, but non-
had plenty of warning signs; all they     disclosure of the potential conflict
did in response was engage in             would be.
halfhearted conversations.
                                             Glamor-a-Go-Go employees who             Burke Stintson
                                          want to raise questions about sexual
                                                                                      is public relations director atAT&T   in
                                          harassment, discrimination, office
ality. Once pictures start appearing      romance, or conflicts of interest           BaskingRidge, New Jersey.
in newspapers, privacy is no longer       should have a direct channel to the
an issue. The board members should        board when they feel they can’t talk        LET’S FACE IT: getting away with
tell Ryan three things: they’re going     to human resources or to their man-         breaking the rules is fun for many
to invite employees to go directly to     agers. In addition, all employees,          inventive, adventurous, and accom-
them with complaints or concerns;         including the CEO, should receive           plished people. It makes them feel
he will be terminated if his actions      training on how to handle these is-         important and larger than life. Leg-
cause a real or perceived conflict of     sues, and the board should hold fo-         ends are made of this behavior- es-
interest; and he will be terminated       cused discussions on them.                  pecially in business, sports, and the
immediately if they discover that he         The board should also collect data       military, where victory is the pri-
has lied to them.                         through employee and customer sur-          mary goal.
   Ryan should also be offered help in    veys. Such data would help resolve             But not all legends are good ones,
the form of executive coaching. He        speculation over how much Ryan’s            as any public figure suddenly caught
must come to understand how em-           behavior has damaged employees’             up in a scandal can attest. First off,
ployees and customers view his ac-        confidence in management. It would          rule-breaking leadership often cre-
tions and why he continues to en-         also indicate what customers expect         ates tension and jealousy. People who
gage in self-destructive behaviors.       from the leaders of a company trying        are less talented and more timid fre-
The terms of the coaching relation-       to distinguish itself through a values-     quently resent it when their high-
ship should be carefully constructed      based campaign.                             flying leaders flaunt the rules- all
so that everyone is very clear about         The board is between a rock and a        the while feeling envious of the
who the client is: Ryan or the board      hard place, but it is partly responsi-      chief’s success.
of directors.                             ble for putting itself there. As long as       In this particular case, a charis-
   While admonishment is messy,           sexual behavior in the workplace is         matic CEO is clashing with people
termination at this point would be        approached from only a narrow per-          who want the rules to be followed.
unfair. The members of the board          spective -fear of lawsuits or concern       And they do have a point: the public
had plenty of warning signs; all they     about individuals’ privacy - compa-         embarrassment of Ryan could affect
did in response was engage in half-       nies will make mistakes. The con-           consumers’ perception of the com-
hearted conversations. They never         tinuum from welcome to unwelcome            pany’s products - as well as employ-
gave Ryan a clear message. To fire        sexual attention in the workplace           ees’ perceptions of what’s considered
him under those circumstances             should be viewed like any other             acceptable behavior at Glamor-a-
would be irresponsible.                   business issue - one that requires          Go-Go.
   Next they need to tackle the issue     thinking in advance and reliance on            Ryan seems like the type of per-
of how to go forward. Their current       data and analysis to make the best          son who would take any discussion
discussion would be dramatically          decisions. There are more than              about the photo in the morning pa-
different if in the past they had re-     enough unavoidable crises in con-           per lightly. He’s probably faced sim-
solved some important questions.          temporary business- the sexual be-          ilar predicaments throughout his
Do the board members subscribe to a       havior of the CEO need not be one           career and would have little trouble
set of values about who they are and      of them.                                    making a case that no immediate

38                                                                    HARVARD    BUSINESS   REVIEW    September-October          1999
harm to the company or employee                                                           in other sexual behaviors, such as
morale would result from the inci-                                                        compulsive visits to prostitutes and
dent. Yet in these days of on-line                                                        frequent cybersex. His parents or
gossip, it is difficult to shrug off                                                      other relatives probably have prob-
nasty news.                                                                               lems with addiction. And, as is usu-
   Glamor-a-Go-Go’s board has to                                                          ally the case with sex addicts, he
bear in mind Ryan’s psychological
makeup, the company’s personnel
                                                                                           When an employee is in trouble
guidelines, and the impact of his
leadership on both the company and                                                        with sex, the easiest response is
the marketplace. I would suggest                                                          either to ignore the problem or to
that Tim Wheeler and Carol Tom-
kins prepare a report -perhaps,in   the                                                   fire theperson....Corporations must
form of a damaging newspaper ex-                                                          get beyond prejudices.   If   they do,
pose about Ryan, one that hasn’t
broken yet but could if an enterpris-                                                     they may find at the bottom of the
ing reporter started digging. The story                                                   situation a treatable illness. And
would include excerpts from the
company’s sexual harassment pol-                                                          when the person is treated, they
icy, an example about an employee                                                         may gain an even more valuable
the company had reprimanded in the
                                                                                          employee as a result.
past, and a fabricated quotation or       Patrick Carnes
two from people who buy Glamor-a-
                                          is clinical director for sexual disorder
Go-Go products.                                                                           would likely have been a victim of
   Wheeler and Tomkins should             services at the Meadows, a facility in          childhood sexual, physical, and
give the report to Sam Martell,           Wickenburg, Arizona, that treats people         emotional abuse. Addicts often
Ryan’s supporter. They must con-          who have addictive and psychiatric              compulsively repeat the scenarios
vince him that Ryan’s behavior has        disorders.                                      of their abuse.
to change, using the news story to                                                           Apart from his apparent sexual
                                          RYAN'S   STORY is commonly heard                compulsion, Ryan appears to be
                                          in clinics that treat sexual disorders          conscientious and ethical. That
Mar-tell needs to see that rumors         and addictions. And corporate offi-             means we can probably rule out so-
(and facts) about alleged                 cers frequently react the way they              ciopathy or extreme narcissism as
                                          did in this case. Let’s look at the two         a diagnosis. There’s no evidence of
philandering and abuse of power
                                          main claims, first from Ryan’s foes             alcohol or drug abuse, which would
can have a powerful impact on             and then from his defenders.                    be typical, but he does engage in
                                             “It’s about character.” Sexual be-           some high-risk behaviors, which is
the bottom line.
                                          havior usually is about character.              also typical. The picture in the pa-
                                          The choices one makes reflect one’s             per makes that clear. Again, assum-
show what would happen if fiction         sense of responsibility and judg-               ing that he is a sex addict, he needs
became fact. They need to keep            ment. But for some people, sexual               help. Treatment can restore a valued
their feelings in check; hand-wring-      behavior is an addictive illness. Just          employee and reduce the risk and
ing and scolding won’t have any           as some people gamble, eat, or use              performance problems that gener-
effect on Martell- or anyone else.        drugs and alcohol compulsively, so              ally stem from sex addiction. That
Martell needs to see that rumors          too do some use sex repetitively and            brings us to the second perceptual
(and facts) about alleged philander-      self-destructively. They don’t un-              problem.
ing and abuse of power can impact         derstand some of the things they do,               “It won’t affect the company.”
the bottom line.                          nor do they even want to do them.               Roger Cushing argues that the Clin-
   Finally, Martell must have a one-      On the inside, they feel nothing but            ton outcome shows leadership is
on-one, no-nonsense talk with Ryan -      shame and despair. On the outside,              not affected by sex scandals. But the
particularly while the CEO’s behav-       they usually deny that they have a              President and the country did suffer
 ior can still be corrected from the      problem and expend a great deal of              consequences. And it’s well estab-
 company’s viewpoint and the news         effort convincing others of the truth           lished that there is always a nega-
 coverage is confined to a local daily.   of that claim.                                  tive impact on productivity and cor-
 Martell’s advice? “Like Caesar’s wife,      There is not enough information              porate culture in these cases. In the
you must be above reproach. We            in the case to determine if Ryan is             past, Ryan has assured the board
need you to behave yourself and keep      a sex addict. But let’s assume he is. If        that no complaints will be lodged.
up appearances - whether at grand         that were true, his affairs would be            As a sex addict, he would have con-
openings or around the office. Too        the tip of the iceberg. More than               fidence that a combination of ma-
much is riding on you.”                   likely, he would also be engaging               nipulation, charm, or depth of rela-

40                                                                           HARVARD   BUSINESS    REVIEW     September-October1999
tionship would protect him from lit-                                                     idea is that what we do in one area of
igation. The CEOs, physicians, and                                                       our lives tends to affect actions in
clergy we treat always believe that                                                      others because we become habituated
no legal action will result from their                                                   to telling ourselves that certain be-
behavior - but they are nearly al-                                                       haviors are justified. Those who hold
ways wrong.                                                                              this view believe that it’s a serious
   So what should the board do! The                                                      ethical mistake to draw a hard-and-
problem it has now is a lack of data.                                                    fast line between our private and our
One thing it can do is conduct a “ha-                                                    professional lives.
rassment audit.” It is a common                                                             I know of one case in which some
risk management practice to have                                                         bank employees saw a bank manager
an outside investigator talk with                                                        snorting cocaine at a party. The em-
current and form,er employees.                                                           ployees did not report this drug use
Sometimes the results are astound-                                                       to the manager’s boss. They reasoned
ing. I recently worked with a com-                                                       that what the manager did on his
pany in which two complaints had                                                         own time was entirely his own busi-
been filed against the CEO, who de-                                                      ness. But they should have been
scribed them as “baseless.” An out-                                                      more concerned: the bank manager
side investigator conducted an au-                                                       was subsequently found guilty of
dit. Close to IOO women employees         Daryl Koehn                                    embezzling large sums of money
spoke of affairs, propositions, or                                                       from the company to support his
                                          holds the Cullen Chair in Business Ethics at
fondling. An expanded investiga-                                                         drug addiction.
tion revealed that the man had ap-        the University of St. Thomas in Houston.          If we continually rationalize ques-
proached vendors, neighbors, family                                                      tionable behavior outside the office-
friends, and even his daughter-in-        T HE   M E M B E R S OF THE B O A R D need     “It’s okay to take drugs because it’s
law. These women did not come for-        to confront Ryan about his alleged             not hurting anyone else” - there is
ward for many of the same reasons         behavior. They should talk with him            nothing to stop us from explaining
that women may have protected             about how his own ethics are inex-             away corrupt behavior at work - “It’s
Ryan. He was known to be likable,         tricably tied to his ability to lead the       okay to steal from my employer be-
kind, and talented. And everyone          company and perhaps even threaten              cause the company is not paying me
he worked with benefited from his         him with termination if he attempts            what I’m worth.” If Ryan is having
competence.                               to stonewall them or evade their               affairs with his female subordinates
   If data show that there’s a serious    queries.                                       and then lying about it, he may well
problem, trusted supervisors or col-         The board members are divided               lie in other circumstances. He may,
leagues can have a frank talk with        right now because, like most Ameri-            for example, feel free to misrepresent
Ryan. Sometimes that’s all that’s         cans, they’re unsure about the rela-           the company’s performance to boost
needed. If addiction is the problem,      tionship between character and ethi-
addicts usually know they are in          cally acceptable behavior in the
trouble; sometimes they welcome           workplace. One side maintains that             Ifwe    continually rationalize
help. Sometimes an intervention by        character can’t be compartmental-              questionable behavior outside the
a therapist familiar with the corpo-      ized: someone who exercises poor
rate world is in order. For an inter-     judgment in one sphere is likely to            office, there is nothing to stop us
vention to work, all the participants     make bad choices in another. The               ffom explaining away corrupt
need to be familiar with basic con-       other side holds that personal ethics
                                                                                         behavior at work.
cepts about sex addiction- just as        are separate from professional eth-
they would with alcoholism or com-        ics. A person can function in a fully
pulsive gambling.                         professionally manner while engag-             the value of his stock options. Before
   When an employee is in trouble         ing in off-hours behavior that others          meeting with Ryan, the board should
with sex, the easiest response is         might find offensive. Tomkins and              ask the audit subcommittee to scru-
either to ignore the problem or to        Wheeler lean toward the first view.            tinize the company’s “better than ex-
fire the person. But corporations         Others- like Martell and Mary La-              pected” numbers.
frequently confront the issue when        mott - are committed to the second                At the same time, the people de-
the person is vital to the organiza-      view. Both views have some merit,              fending Ryan are partly right: profes-
tion’s future. They must get beyond       and they are not mutually exclusive.           sional and personal ethics are not
prejudices. If they do, they may find        Let’s start with the idea that the          always one and the same. Profession-
at the bottom of the situation a          issue of character can’t be divided            als have skills that are task specific.
treatable illness. And when the per-      into personal and professional behav-          If a doctor can heal us, we aren’t likely
son is treated, they may gain an          ior. The Greek word for character-             to pay much attention to rumors
even more valuable employee as a          ethos- means acquiring a habit of              about her marriage. As long as peo-
result.                                   making choices in a certain way. The           ple’s private lives do not impair their

HARVARD   BUSINESS   REVIEW   September-October   1999                                                                         41
                                         HARACTER


specific competencies, we tend to       His cavalier refusal to heed his col-      pect that he has been sexually harass-
view their quirks, habits, and tastes   leagues’ advice is a public and profes-    ing his subordinates. It is only a mat-
as largely irrelevant to our judgment   sional matter that raises serious          ter of time before other employees
of their performance.                   doubts about his leadership abilities.     begin to believe that the company
   However, the separation of the       Ryan is a golden boy for now, but          has a double standard.
public and private spheres is never     leaders do not live by charm alone. If         Like many American companies,
absolute. When task competencies        Glamor-a-Go-Go falls on hard times         Glamor-a-Go-Go may have required
are directly threatened by weak-        or gets slapped with a sexual harass-      all employees to sign an ethics code
nesses of character - or by a major     ment lawsuit, the company will             as a condition of employment. These
gap between personal and profes-        need a CEO who is willing and able         codes typically require employees to
sional practice -we become alarmed.     to respond meaningfully to the con-        avoid even the appearance of a con-
As information about character          cerns of fellow managers, board            flict of interest or of improper behav-
comes to light, we reassess RFople’s    members, employees, shareholders,          ior. If such a code is in place, the CEO
abilities to carry out their work.      and community members. Ryan’s              shouldn’t be allowed to violate ethi-
What parent, for example, would         habitual strategy of denying that a        cal rules that all other employees
trust a pediatrician if it became       problem exists will be unacceptable        must adhere to. Although some em-
known that he liked to look at child    under those conditions.                    ployees may be willing to overlook
pornography after hours? Who would         All leaders need the respect of their   Ryan’s sexual peccadilloes, the ma-
trust an American Lung Association      followers. After all, Ryan did not in-     jority will not tolerate hypocrisy and
executive who had major stock hold-     crease the company’s stock price by        favoritism.
ings in tobacco companies?              himself. The increase in Glamor-a-             The board needs to put these argu-
   The key question, therefore, is      Go-Go’s value is largely due to the        ments to Ryan. If he denies that a
whether Ryan’s behavior is under-       hard work of employees who believe         problem exists, the board should be
mining his task-specific compe-         in the company and in the values           prepared to threaten him with termi-
tence: business leadership. The         Ryan communicates. Because Ryan            nation. Ryan cannot continue to ig-
board has warned him at least three     refuses to change his behavior, his        nore the impact of his behavior on
times about his behavior, yet Ryan      colleagues are questioning whether         colleagues, subordinates, and the
continues to dismiss its concerns.      he deserves their respect. Some sus-       larger community.
                                                  when employees from different de-
                                                  partments have affairs. A relation-
                                                  ship between a company accountant
                                                  and a sales rep who regularly turns
                                                  in a monthly expense report could
                                                  be cause for concern.
                                                     But in truth, most managers look
                                                  the other way when they see that an
                                                  affair is taking place. If job perfor-
                                                  mance suffers, then termination be-
                                                  comes likely; if job performance is
                                                  fine, the two people may simply get
                                                  a slap on the wrist and an admonition
                                                  not to kiss in the hallways. That was
                                                  the result in Bill Clinton’s case, and it
Lisa A. Mainairo                                  is the most likely scenario with Ryan.
                                                     Let’s look at the facts in this case.
is a professor of management at the               First, despite people’s suspicions, no                              JAM ES OTOOLE
Fairfield University School of Business           one has ever caught Ryan “in the
in Connecticut and the author of Office           act,” so to speak. Second, none of                     “...I have never been as thor-
Romance (Rawson, 1989).                           Ryan’s alleged paramours have made                     oughly absorbed by a style of
                                                  a claim of sexual harassment. Third,                   storytelling that brings human
MOVE    OVER, BILL CLINTON . These                and this is critically important, al-                  behavior so much to life.”
days, cupid is blowing kisses on                  though one woman has enjoyed                           -David Law-Smith, chairman
company time. The workplace now                   rapid promotion, there is no pat-                      and CEO, Caltex Corporation
serves as a dating service for many               tern of sex being traded for power.                    Hardcover 393 pages
couples, spawning numerous office                 Fourth, the women who have sup-                        ISBN O-7879-4858-3 $22.00
affairs. Most companies don’t have                posedly been involved with Ryan
a big problem with relationships be-              have denied any wrongdoing. Fifth,
tween unmarried peers. But what                   the guy is still-amazingly perhaps -
should a company do when relation-                married. Sixth, there’s no indication
ships appear improper for one reason              that the job performance of any of
or another?                                       the characters has suffered.
   No corporate policy on God’s                      Given the evidence - or rather, the
green earth can prevent people from               lack of evidence- it would be diffi-
                                                  cult to fire the CEO at this point. The
Companies should be concerned                     board should have a discussion with
when employees’love lives create                  Ryan to let him know about the ru-
                                                  mors that are circulating and their
conflicts of interest and raise                   potential impact on Glamor-a-Go-
questions about job performance.                  Go’s bottom line. He should be rep-
                                                  rimanded and warned to keep his
falling in love at the office. But com-           private life strictly private. He also
panies should be concerned when                   needs to be reminded that as a leader
employees’ love lives create conflicts            his actions are closely scrutinized.
of interest and raise questions about             And the way people perceive his ac-                    “This book covers some of the
job performance. Some have policies               tions is extremely important; when                     most critical and important
designed to discipline people whose               perceptions linger long enough, they                   issues that will define future
behavior may hurt the company.                    eventually become as good as facts.                    winners in many industries.”
   When affairs cross hierarchical                My advice to Ryan is this: You should                  -Karl-Erling Trogen,
lines, the lower-level lover may ben-             scrawl in permanent marker the say-                       president and CEO,
efit from undeserved raises, promo-               ing “Don’t fish off the company pier”                     Volvo Truck Corp.
tions, or even costly business trips.             on your office wall. ..and on your
In such cases, the boss is not doing              computer screen.. and on your brief-                   Hardcover 304 pages
his job, the subordinate may find                 case...and on your tie. Your future                    ISBN O-7879-5034-3 $35.00
herself in a position she’s not quali-            with Glamor-a-Go-Go may depend
fied for, and other people’s produc-              on taking that message to heart. g                      Available in Bookstores
tivity may fall as they see how re-
wards are doled out. And consider                  Reprint 99 5     I I

the potential conflicts of interest                To order reprints, see the last page of this issue.   IOSSEY-BASS        PUBLISHERS
                                                                                                         SAN FRANCISCO~WWW.JOSSEYBASS.COM


HARVARD       BUSINESS        REVIEW   September-October    1999

				
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