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Integrity: The key to turning a profit

    Profiting from Integrity: How CEOs Can Deliver Superior Profitability and Be Relevant to Society. Alan Barlow.
    Routledge, 2017. 178 pages.

    If you believed the Left, you might think that people in business are all cutthroat crooks. This book aims to demonstrate - through hard evidence - that when a corporation is run with integrity, it delivers better financial performance, too. As the most successful and robust capitalists, like Charles Koch, already know. "Conducting all affairs with integrity,” he says,  "is the first principle because it is the basis for trust and the foundation for mutually beneficial relations with our constituencies - employees, customers, suppliers, partners, communities and governments."

    The book’s author, Alan Barlow, illustrates the integrity-based management approach from his own experience in running a multi-national corporation. To him, integrity in business means: transparency in what management and staff say and in what they do and how they behave; management and staff taking a proactive stance as to what is acceptable and unacceptable behaviour; integrity as a prerequisite of how CEOs go about leading and managing their corporation, not an afterthought; and making integrity a core business process.

    His recommended approach has several elements. Feedback, for example: making sure management and staff share things honestly. Stakeholders: identifying the people who matter. Vision: setting out a vision that motivates staff and meets the wider community’s needs. Integrity: embodying integrity and honesty into the business. Leadership: ensuring the moral direction is set from the staff. Staff: delivering real engagement and communication. Barlow devotes a chapter to each of these headings, showing how - and why - they lead to greater business success, as well as moral satisfaction. And using the Culture Audit survey developed by the Great Place to Work Institute, he shows how each of these approaches also makes integrity-led businesses great places to work.

    Barlow highlights some of the superior financial performance that his own company experienced through the integrity approach. Record growth in excess of targets; a doubling of size; profits growing 18 per cent compound for seven years; revenue growth at double the market sector average; a 20 per cent premium when the company was sold. 

    But was that all due to integrity? Could it have been more about the quality of the management and staff, or grasping opportunities, or taking market share from others, or more and better R&D, or good networks? Maybe, says Barlow: but if so, that was precisely because the commitment to integrity encourages all all of these things - such as making the business a place that attracts first-class employees.

    And again, is integrity perhaps something that works in some businesses - those like service industries that have very direct relationships with customers, for example - but not others? Barlow insists it benefits all, as the survey evidence suggests: America’s top companies to work for come from all sectors, and their financial performance is better than others, too. Barlow concludes that companies can achieve greater profitability, be great places to work, and benefit the community through acting with integrity in everything they do. That’s possible if CEOs have the right character, mindset, and intrinsic belief in themselves and the quality of what they create. And it is a million miles away from the dog-eat-dog, fast-buck parody of capitalism imagined by the Left.

    It’s not just Paul Drucker’s idea that "culture eats strategy for breakfast." Rather, "integrity eats strategy for breakfast." People, it seems, want to work for and do business with people they trust, and avoid those they don't. Who apart from Charles Koch would have guessed?

    You can buy Alan Barlow's book, Profiting from Integrityhere.

    This article was originally written for the Adam Smith Institute and is reprinted with permission

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    Dr . Eamonn Butler is director and co-founder of the British neoliberal policy think tank, the Adam Smith Institute, and a leading author and broadcaster on economics and social issues. Eamonn is the winner, with his colleague Dr Madsen Pirie, of the 2010 National Free Enterprise Award, for the greatest contribution to furthering the market economy. In 2012 he was awarded an honorary D. Litt. from Heriot-Watt University in Edinburgh in recognition of his outstanding contribution over several decades to the advancement of public policy and economics. Eamonn is Vice-President of the Mont Pelerin Society, an international association of distinguished economists and entrepreneurs, founded in 1947 by the Nobel Prize winner F A Hayek. Butler is author of books on a wide range of subjects, from economics through psychology to politics.