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Are you a high-character leader? Showcasing strong character can do more than motivate a team or set an example — it can lead to higher returns. According to a seven-year study in the Harvard Business Review, high-character CEOs outperform low-character counterparts by a factor of five when measuring return on assets, plus higher employee engagement and higher returns on equity. That’s a powerful financial difference that stems from the leader’s example.

What is character? It’s a leader’s morals and ethics that guide their attitudes and behaviors. Strong character comes when a person’s attitudes and efforts are aligned and consistent.

Dan Cooper, founder and CEO of ROC Investments, explains that when looking at potential Return on Character investments, he and his team consider four factors, or the foundation of a high-character leader:

  1. Integrity. Integrity and honesty are the foundations of a strong leader. When a leader has integrity, they do what they say they will do. Integrity builds trust with employees, customers, and investors because people know they can trust the leader to be honest, speak the truth, and follow through on their commitments. How does this translate to financial gains? Leaders with integrity are honest about their company’s progress and create dependable partnerships, which establishes trust with investors and stakeholders and creates more opportunities for growth and sales.
  2. Responsibility. Leaders obviously shoulder many responsibilities in their daily tasks. What sets high-character leaders apart is their approach to responsibility. High-character leaders embrace their responsibility and own their wins and mistakes. They stand by their actions and don’t make excuses. Leaders with low character, on the other hand, tend to take credit for other people’s successes and now own up to their mistakes. When leaders embrace responsibility, they encourage their employees to do the same. It shows others that making mistakes is acceptable, which invites innovation and experimentation. Teams work better together when a leader sets the example of owning mistakes and successes.
  3. Forgiveness. Forgiveness may be an often overlooked characteristic of a strong leader, but it builds trust in an organization. Leaders with strong character forgive others when they make mistakes, and they forgive themselves. That means leaders are willing to leave things in the past and move toward the future. They don’t hold grudges or make rash, emotional decisions but instead want to see their employees succeed and grow.
  4. Compassion. A leader who embodies compassion and empathy creates a safe environment for their employees. They care about the people around them as humans, not just as workers. That comes as they spend time with people, get to know them, and listen to their struggles. Compassion builds relationships and makes people feel engaged and connected to work. When employees are valued and seen, they put in their best effort, which can increase productivity and lead to financial gains.

High-character leaders create a ripple effect. By showcasing these four foundational principles, they set the tone for their company and create an organization in which people want to work, customers want to purchase, and investors want to join because they trust the leader and know they have the company and its employees’ best interests in mind.

Written by

Michelle Kaiser
Michelle Kaiser

Senior Editor | CEO.com