The balance sheet is a fundamental report that is used to determine a company’s assets, liabilities, and shareholder equity at any point in time. It reports key information that shows the financial health of a company. By understanding how much it owns as well as how much it owes, a company is able to see where it stands and make better decisions. However, not all assets and liabilities are financial.
There is one asset that fuels a company, and it has nothing to do with numbers. It’s called Character. There’s also a liability by the same time that, if overlooked, can deplete a company. Accounting for this asset (and liability) is essential, just like the balance sheet, in determining just how healthy a company is.
The term “character” itself is not good or bad, it’s both. Too often we associate character with a person’s goodness. It can point to that, yes, but more accurately it describes a set of traits within a person. Those traits can be positive or negative, good or bad. Good character describes traits that impact in a positive manner while bad character describes traits that impact in a negative manner. So, good character is an asset while bad character is a liability.
Since character is hard to quantify it will most likely never be added to a company’s balance sheet, but does that mean character is any less valuable of an asset or less costly of a liability? If a company is going to be healthy and sustainable, shouldn’t it account for all assets and liabilities that impact it? A company’s greatest asset is its employees and an employee’s greatest asset is his or her character. It is for this very reason that all companies should look at employee character as one of their most important assets, and maybe more importantly, critical liabilities, even if it does not show up on a balance sheet.
Let’s look at an example of one character trait and see where it impacts a company’s bottom line:
Linda was a veteran salesperson who took a job with a venture start-up in the fin-tech industry selling software. She outperformed the majority of her peers after only being at the company for a short time. She exceeded her target for the last quarter by 25%. In the eyes of most of the team, including her manager, she was a rockstar.
However, something strange began to happen. Two of the sales team members quit within three months of each other. They both cited better opportunities as the reason even though they were exceeding quota and seemed very happy. Then a seasoned sales team member began to underperform even though he had always surpassed his sales goals in the past, even helping others succeed as well. This concerned the director of sales, so she brought it up in the next quarterly meeting, asking why two solid team members quit and why another began to slip in his performance. The sales manager did not have a good answer to these questions, so he decided to do some research.
First, he sought out the three sales team members to find out what was going on and discuss their respective situations. After conducting each meeting, he reviewed his notes and noticed all three cited one problem that affected them: Linda. Linda was a rockstar at sales. She was a well-trained, seasoned salesperson. However, Linda was also selfish and narcissistic. Linda had no interest in being a team player, in fact, she had no interest in the team at all unless it furthered her ability to sell. She talked about herself incessantly, she believed she was always right, and she drained energy from everyone around her. She had the disease that everyone, except Linda herself, knew she had: selfishness.
The sales manager wanted to dig a little deeper, so he began to review Linda’s sales. She was a very good presenter and was often complimented on her ability to demo the software to prospects. Due to her good sales numbers, she was awarded more leads to work. However, when researching Linda’s lost sales, it was evident that Linda would close leads if it looked like the sales cycle was going to take too long. It was later discovered that many of the leads Linda closed were, in fact, still very interested in the software, but Linda didn’t work that way. If she didn’t see the short-term value, she didn’t waste any more of her time with that prospect.
So, let’s run the numbers. At quota, Linda’s salary plus commission was $100k. She exceeded quota by 25%. Her annual earnings were $125k. On the other side of the ledger, Linda was the sole reason for the loss of two very good salespeople and the reason for the rapid decline in another. While the actual cost to the company could be in the tens of thousands of dollars to replace and train new employees, perhaps the largest cost of Linda as an employee was her unworked leads. It’s very realistic to think that Linda cost the company hundreds of thousands of dollars in overhead, lost sales, and intangible value.
Linda was a rockstar with her sales numbers, but her character trait of selfishness took more away from the company than her numbers brought in. Imagine the difference in company results if she chose to embody the character trait of selflessness instead of selfishness.
In my book, Character Driven Leadership, we discuss the 12 character traits that impact the health of any company or organization. Some of these traits are foundational- they are required by all employees to execute even the basic function of any operation. Some traits revolve around achievement- what it takes to get things done. Other traits impact inter-organizational engagement and these are crucial to healthy working relationships within a company. However, all of the 12 character traits impact a company’s bottom line, regardless of if they show up on the balance sheet.
If you would like to go into a deep dive regarding character in the workplace, including the value of character, the principles of character’s impact on an organization, working introspectively to self-identify strengths and opportunities, and building an action plan to improve as a person and thus, improve your company, join me for a 4-part series at Scaling New Heights, held in Fort Worth, Texas. These one- and two-hour sessions will be held on Tuesday and Wednesday, October 25th and 27th.