The Triple Crown Quest—Excellent, Ethical, and Enduring

By Bob Vanourek and Gregg Vanourek
How are the three Es of Triple Crown Leadership (excellent, ethical, and enduring) related? There are both tensions and synergies among the three. There are tradeoffs in some cases, and how they relate depends on the nature of the leadership and quality of decisions. There is no magic win. Triple crown leadership requires building an organization that makes them work in concert. Ultimately, an organization cannot be excellent without being ethical. Unethical practices can boost performance temporarily, but over time they carry multiple costs that overwhelm perceived short-term benefits: litigation and other legal expenses, fines, heavier compliance costs, reporting hassles, delays, employee dissatisfaction, and damage to the organization’s reputation.

Similarly, unsustainable practices have costs (direct and indirect, short- and long-term), including loss of customers, supply chain disruption, employee turnover, hiring barriers, resource depletion, reputational damage, increased regulations, and more.

Ethical and enduring practices do not lead to excellent results in and of themselves. They are necessary but not sufficient. Leaders must devise a strategy and plan for all three, taking none for granted. Finally, leaders should recall the inherent value of ethical and enduring practices. They should not need return-on-investment calculations to insist upon ethical and enduring practices.

Tilts
Some people wonder whether triple crown leadership requires giving equal priority to excellent, ethical, and enduring considerations.

Our answer is no. There is no such magic formula. Sometimes tilts are required.

Sometimes short-term considerations must take precedence in order to save the organization. Heavy criticism may follow, but it will be moot if the organization goes out of business. Other times, the reverse is needed: Leaders must be willing to dampen short-term results in order to make long-term investments to set the enterprise up for future success given where the market is headed. There is, however, one hard and fast rule: Triple crown leaders do not compromise on the ethical imperative. Once they do so, they have stepped onto a slippery slope. Ethical compromises set a bad precedent, communicate a reverberating message, undermine credibility, and likely will come back to haunt them many times over.
Leaders have to draw the line. Better to fail with honor than succeed with disgrace.

Aside from the unwavering ethical imperative, leaders must decide which tilts are necessary and when.

A Culture of Character
The triple crown quest helps to create a unique culture in an organization: what we call a “culture of character.” We think of organizational culture simply as “how we do things here”—how people behave. Culture forms over time and drives what happens when the authorities are not present. It sets the tone for the organization and the norms for what is acceptable to the group. Culture is a powerful force in determining how an organization operates. Lou Gerstner, after his spectacular turnaround of IBM, wrote that “culture isn’t just one aspect of the game—it is the game.”

Organizations with a deficient culture pay a big price in lost revenue, reputation, lawsuits, and more. Think of all the corporate scandals in recent years and how many of those firms were rife with toxic cultures driven by greed, conflict, gamesmanship, mistrust, backstabbing, and exploitation.

By contrast, organizations with a healthy culture—think of Southwest Airlines, Zappos.com, Patagonia, and DreamWorks—set in motion a self-reinforcing, positive cycle with their stakeholders. Employees identify more with the enterprise and bring more of their talents and efforts to the table. This can positively affect productivity, staff retention, profitability, and relationships with customers and suppliers.

Researchers have found a “strong relationship between constructive organizational cultures and financial performance.” According to a 2011 McKinsey report, “Culture matters, enormously. Studies have shown again and again that there may be no more critical source of business success or failure than a company’s culture.” Author James Heskett estimates that an effective culture can account for 20 to 30 percent of the difference in performance versus “culturally unremarkable” competitors.

A healthy, constructive culture by no means guarantees success, but it provides the foundation for building an excellent, ethical, and enduring organization. In a culture of character, everybody expects excellent, ethical, and enduring performance and impact. Organizations seeking the triple crown build a culture of character through their leadership practices. Culture is the legacy of leadership.

A culture of character is the legacy of triple crown leadership.

Benefits of Triple Crown Leadership
Excellent, ethical, and enduring practices are worthy in and of themselves but also carry notable benefits:

• Insiders commit to the organization in ways they seldom otherwise would, challenging each other to find solutions, fueling innovation, refusing to roll over, and unleashing breakthrough ideas.
• The organization can avoid the devastating costs of ethical implosions.
• Employees experience more joy at work, with greater satisfaction and fulfillment.
• Stakeholders reward the enterprise with increased business and support.
• Infighting due to lack of trust, disrespectful behavior, and cutthroat competition decreases or disappears.

The case is building for a new brand of leadership. There is a growing cadre of thought leaders pointing the way forward. In “Higher Ambition,” Michael Beer and his colleagues write about a new breed of leaders who “deliver extraordinary economic and social value.” Jim Collins based his seminal works on “building enduring companies from the ground up.” In “Sustainable Excellence,” Aron Kramer and Zachary Karabell link sustainability with corporate excellence, arguing for lasting solutions to social and environmental challenges with lasting value for investors. In “SuperCorp,” Rosabeth Moss Kanter depicts “how vanguard companies create innovation, profits, growth, and social good.”

Still, the triple crown quest is demanding and not for the faint of heart. Ron Turcotte, Secretariat’s jockey, told us, “The Triple Crown was not meant to be easy.” People make mistakes. Values collide. Markets shift. Technologies advance. Ventures drift. The key to building a triple crown organization is not in the hands of a single “superleader” but rather in the hands, minds, and hearts of ordinary people who become extraordinary leaders and stewards of the culture of character.
It is time to put building an excellent, ethical, and enduring organization at the top of our priority list. The challenges we face demand nothing less.

Excerpt from Chapter 1 of the “TRIPLE CROWN LEADERSHIP: Building Excellent, Ethical, and Enduring Organizations” by Bob Vanourek and Gregg Vanourek (McGraw Hill, July 2012). For more information, visit www.TripleCrownLeadership.com.

Bob Vanourek has served as CEO of New York Stock Exchange companies during his 30-year business career. As CEO (now retired), he guided Sensormatic (a $1 billion security company) and Recognition Equipment (a $250 million optical character recognition company) through successful turnarounds. He has served as group vice president and division president of two major divisions of Pitney Bowes (a $5 billion mail stream company) and vice president, general manager of two divisions of Avery International (a $6 billion adhesives company). Vanourek has taught leadership at the University of Denver and Colorado Mountain College and is chairman emeritus of the Vail Leadership Institute.

Gregg Vanourek is coauthor of three books: “Triple Crown Leadership,” “Life Entrepreneurs,” and “Charter Schools in Action.” He teaches at the Stockholm School of Entrepreneurship and the Royal Institute of Technology. Previously, he taught at the Euromed School of Management, University of Denver, and Colorado Mountain College. He cofounded New Mountain Ventures (an entrepreneurial leadership development company) and served as senior vice president of School Development for K12 (an online education company) during its startup years. In addition, he helped to launch and served as vice president for Programs at the Thomas B. Fordham Foundation (an education reform foundation) and research fellow at the Hudson Institute (a think tank).