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Michael Useem
Scholar

Michael Useem

Michael Useem is Professor of Management and Director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania.

Try the Warren Buffett Way

Like digital information, personal integrity is binary. Either you have it or you don't; either you are a 1 or a 0. But unlike digital information, where a 1 can be converted to a 0 and back again with the flick of a switch, personal integrity can only change, if it does change, from one to zero. No switch will restore what has been lost. Even a hint of an ethical lapse can irretrievably destroy a reputation of integrity.

When malfeasance or illegal behavior washes on a leader's front door, three immediate actions are required:

1. Secure the facts: What contacts if any did President-Elect Obama's staff have with Governor Blagojevich, what was said by both sides, and if improper suggestions were made by the governor, were they promptly reported to the U.S. District Attorney?

2. Disclose the facts: The passage of time imposes an exponential penalty if knowledge of malfeasance or illegal behavior is known but not reported. A swift report to both legal authorities and the public of any malfeasance is essential.

3. Reaffirm a culture of integrity: Leaders of organizations of any size have no choice but to lead through others. And the most potent way for doing is to ensure that everybody understands the leader's principles of integrity. When put to the test, everyone is watching to see if the leader's principles are fully applied.

By way of illustration, consider the actions of Warren Buffett in 1991 when he agreed to serve as a temporary chief executive of Salomon Brothers after the actions of a rogue trader had forced out Salomon's entire top management team. Buffett immediately flew from Omaha to New York, brought in his personal lawyer to get to the bottom of the scandal, and told federal authorities that he would tell them everything.

Three days after taking over, Buffett dispatched a memo to all Salomon officers, saying "You are each expected to report, instantaneously and directly to me, any legal violation or moral failure on behalf of any employee of Salomon." He listed his personal telephone number and added that among the only reporting exceptions were parking tickets.

In other words, Buffett secured the facts, reported the facts, and restored a culture of integrity, making for a gold standard in corporate recovery and one worth noting in the midst of the current story.

By Michael Useem

 |  December 15, 2008; 2:26 PM ET
Category:  Politics Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: It's All About Character | Next: Democrats Need to Police Themselves

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Well said! Warren Buffet's handling of the Salomon Brothers matter is a great example of principled crisis management.

Posted by: Wharton Grad | December 15, 2008 10:01 PM
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