Business was challenged in unprecedented and unfamiliar ways in the past few years. Among the challenges: a global pandemic with its accompanying suffering, death and economic destabilization; a reimagined workplace; technological advances, like generative AI, that challenge human dignity and autonomy; wars in Europe and the Middle East that have shaken international alliances; and the rise of autocratic leaders across the globe.

The social, environmental, biological, humanitarian, ethical and moral issues that were once considered tangential to an organization’s agenda are increasingly viewed as inescapably at the center of it. 

Those who embrace this fused reality, where moral neutrality is decreasingly an option, recognize the need for normative frameworks, principles, and models of leadership that can help leaders weigh which issues to engage with, how to engage in ways that are understood by all stakeholders, and how to do so in ways that scale and, thus, endure. 

We’ve been studying these models of leadership at The HOW Institute for Society

Our most recent study – The State of Moral Leadership in Business –  found that there is a deep desire for moral leaders. A vast majority of U.S. employees (88%) want greater moral leadership from their managers and CEOs. 

Yet the demand outpaces the supply. Only 16% of managers and 12% of CEOs consistently demonstrate behaviors associated with moral leadership. 

This gap has consequences. Moral leadership — or the lack of it — impacts everything, from the levels of trust within teams, to employee loyalty, to the bottom line.

How does moral leadership impact performance?

In business, we often hear and use the adage: What you measure is what you get, so manage what you measure. That remains true. That said, when we choose not to measure something, we signify that it does not matter. And, therefore, by choosing to measure something, we signify that it matters. However, metrics are thus a window into what we value and, more importantly, our values, and as such they reflect moral choices. 

The State of Moral Leadership in Business report is an ongoing study of the presence of moral leadership and how, when present, it inspires elevated behavior in people, shapes values-based organizational cultures, strengthens performance, and leads to deeper relationships with communities and society.

This year’s report confirms that while some leaders have risen to the occasion, especially since the pandemic, there still aren’t enough moral leaders. Eighty-eight percent of executives and 72% of entry-level employees say that their organizations’ leadership made them feel part of a community during the pandemic when their leaders ranked high on moral leadership as compared to 52% and 26%, respectively when their leaders didn’t exhibit many moral leadership behaviors.

It also found that when leaders embody the characteristics of moral leadership, they inspire exemplary workplace culture and exceptional performance. 

For instance, employees with senior leaders who rank high on the moral leadership scale are five times more likely to strongly agree that their organization has satisfied customers; six times more likely to strongly agree that their organization is poised to improve its business results in the next year; and eight times more likely to strongly agree that the organization adapts quickly to change. Further, 94% of employees with managers ranking high on the moral leadership scale strongly agree they are effective at achieving business goals, and 98% of employees would recommend their organizations as good places to work when their most senior leader is ranked as a top-tier moral leader. 

What is moral leadership, and why does it matter?

One private sector respondent described what moral leadership looks like in action: “I work the graveyard shift at a big tourist resort. When the pandemic hit, we knew we’d lose revenue. My boss started coming to work at 3 a.m. She couldn’t sleep because she was so worried about her employees. That is moral leadership to me.”

Moral leaders, in the report, are not simply well-behaved. They model and catalyze elevated behavior by enlisting those they lead into journeys of significance, guided by shared values. 

More than 80% of employees with a top-tier manager, for example, say their leader discusses current events in ways that help them have insight into new social issues that may impact their work. More than 80% also say their leaders remind teammates of the connection between their specific work and the impact they are looking to have in the world. They also help coworkers to resist the urge to make demands when conflicts arise. They work to build a shared understanding between all stakeholders, by doing many things, including sharing stories of inspiring impact with them and their team.

In other words, they don’t just follow the rules and concern themselves with what they can do. They are obsessed with the question: “What should I do?” 

“My manager admitted that he was biased on a personnel decision. He took proactive steps to fix it, and even went back to the employee to apologize. He was leading by example and inspiring trust among employees,” shared one respondent as an example of how acts of humility and authentic apologies can build deeper individual and team connections.

Having a senior leader exhibit the behaviors of moral leadership is necessary but not sufficient to foster a culture of moral leadership in an organization. Moral leadership at the organizational level requires a critical mass of individuals willing to put in the effort to continually build their moral leadership muscle. 

Most employees in the study noted they believed moral leadership is something that can be learned. Yet, companies’ investment in growing and supporting moral leadership remains underwhelming and insufficient. Organizations can close this gap by investing in formal and informal opportunities to help employees build the habits, practices and capabilities of moral leadership. 

A respondent offered this illustration of their leader pausing to develop new practices and shape new behaviors: “Rather than lashing out, my manager has helped me cope with problems. He is understanding and points out right from wrong. He listens to my opinions and ideas, taking them into consideration and deciding based on what’s best, which makes my job easier and more efficient.”

Development focused on principled decision-making has a direct correlation with exceptional organizational outcomes. Specifically, employees reporting that their organization invests in professional development in principled decision-making are more than two times as likely to strongly agree that they have satisfied customers, that their organization is positioned for improved business results, and that their organization adapts quickly to change. 

It is my sincere hope that these and other findings in our report will encourage leaders to take the deliberate and necessary steps to lead in new ways and scale this leadership model across their organizations.