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.