For all of the attention that leader character gets when we witness its negative extremes — such as when an authoritarian CEO presides over a corrupt or an abusive culture — most organizations give surprisingly little thought to what is actually one of the most significant available levers to effect positive organizational development.

Organizations that fail to hire for and develop positive character among its leaders are missing an opportunity. In fact, one study found that organizations with leaders of high character — those whose employees rated them highly on integrity, responsibility, forgiveness, and compassion — had nearly five times the return on assets of those with low character.1

Why is this aspect of leadership and organizational culture so overlooked? Over more than a decade of investigating leader character in organizations, we’ve found that leaders largely underestimate and misunderstand the concept of character. They marginalize it as just being about ethics rather than recognizing it as the foundation of all judgment and decision-making. They generally assess their own character as “good enough.” They believe it is a fixed trait rather than a quality that can be developed, and so they don’t see how individual strength of character can be embedded and scaled in their own organizations and cultures. Simply put, they don’t see that competence and character go hand in hand.

Our research into leader character began as an investigation into the failures of leadership associated with the 2008 global economic crisis.2 We conducted focus groups with over 300 business leaders in Canada, the U.S., England, and Hong Kong. The groups reached consensus that the character of leaders contributed substantially to creating the crisis. Unfortunately, there was no consensus about how to define character, and there was extensive debate about whether it could even be developed. We set out to address the underlying science of leader character: what it is (and is not), why it matters, how it can be developed, and how it is manifested in people’s actions.

As we unpack what character is and how it operates, the critical underpinning is its impact on judgment and the choices we make minute by minute, day in and day out — what we call the micro-moments between stimulus and response. It is this character-based judgment that supports superior performance, and its lack explains both misconduct and poor decision-making. In numerous high-profile cases — whether the global financial crisis, the Volkswagen emissions scandal, or the Boeing 737 Max tragedies — technical competence was largely evident, but character was not. Essentially, the slippery slope of compromised judgment and decision-making can be identified in the seeds of compromised character.

It’s important to note that while strength of character certainly supports ethical decision-making, its reach is much broader; as noted above, too many leaders equate it simply with being “good,” which is much too narrow. It is also a powerful influence on individual well-being and sustained excellence, and so it matters at all levels of the organization, not just in leadership.3 To illustrate, consider the perspective of Ron Francis, general manager of professional hockey team the Seattle Kraken. At the 2022 NHL combine, where teams have an opportunity to interview prospective draft picks, one athlete asked him what the team looks for in a player. His immediate response? Character. Competence is table stakes, but what sets players, teams, and organizations apart is the character that enables them to bring their best every day, even in challenging situations. Will the exhausted player maintain the drive needed to win the one-on-one puck battle? Will a player withstand an opponent trying to pull them off their game? And will a team persevere through a difficult stretch of losses? None of these choices are about competence or skill but about character, and they make the difference between winning and losing. At the highest level, character is the competitive edge.

In this article, we will provide a deeper understanding of character and its applications, beginning with an overview of our research-based Leader Character Framework, and we will offer guidance for how business leaders can begin to apply considerations of character to build stronger organizations.

[NOTE: Here is an especially relevant observation by Warren Buffett: “We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity. And if they don’t have the latter, the first two will kill you, because if you’re going to get someone without integrity, you want them lazy and dumb.”]