Integrity: a precondition for value creation

In everyday speech and dictionary definitions, there is an overlap – and therefore confusion – between integrity, morality, ethics and legality.

At Value@Stake, we use the term ‘integrity’ as defined by Prof. Michael Jensen (emeritus professor of economics at Harvard Business School and Nobel laureate). Jensen’s economic model establishes a causal relationship between integrity and increased performance, quality of life and value creation.

In the definition of Jensen et al. integrity is nothing more (or less) than keeping or otherwise respecting (‘honoring’) your ‘Word’. Doing what you promised (or what may reasonably be expected of you). And saying what you do (how you solve it) if ‘keeping your word’ is not possible for any reason. Only this will lead to workable relationships and thus to trust.

In Jensen’s view, this makes integrity a production factor that is just as important as ‘knowledge’ and ‘technology’. Yet the role of integrity in productivity and performance has largely gone unnoticed, even ignored by economists and others. Jensen has shown that integrity provides access to potentially superior performance and competitive advantage. He also proved that applying a cost-benefit analysis upfront to keeping your word guarantees that you will be untrustworthy.

In line with Jensen’s theory, we argue that (groups of) individuals and organisations perform better when they communicate with integrity. By doing what they promise (or may be expected to do). Always, in all circumstances. Regardless of the – sometimes adverse – short-term consequences. OR, if that is not possible, by offering an acceptable and workable alternative. We argue that organisations should always strive for integrity, not only in their core business but also in their communications with stakeholders. Note: striving does not mean always succeeding. And you are never ‘done’ with it. It is like climbing a mountain without a top.

But those who want to be successful have no choice because, as Jensen says: “Integrity: without it nothing works” (see video).

The 'Law of Integrity' and mission-inspired communications

Just like the importance of clean air, the importance of integrity is most obvious when there is a lack of it.

The ‘Law of Integrity’ states: ‘When integrity decreases, so does workability. And when workability declines, so does the opportunity for performance’. An increase in integrity in your business operations leads directly to an improvement in workability and the (possibility of) performance.

Promises and expectations are described by organisations in their missions. When promises and expectations are fulfilled (or adjusted in time), less time, money, energy and material are spilled. This contributes to better workability and performance, in the form of greater, better output, with more pleasure and satisfaction among all stakeholders (employees, customers, suppliers, etc.). And that in turn attracts new employees, customers and suppliers with integrity, who deal with each other, trust each other and are committed to each other. And you communicate clearly and honestly with all your stakeholders about how you fulfil promises and expectations. We call this mission-inspired communications. This is how integrity is applied in deed and word.

Going against the Law of Integrity is like going against the Law of Gravity. You can do it, but you must be prepared to accept the consequences.

Michael Jensen of Harvard Business School on leadership principles and the value of integrity for the workability of organisations.

Mission, integrity and stakeholder management

Value@Stake is often called upon by organisations that want to change. Whether it is a necessary reorganisation, an acquisition or merger, a crisis, or a desired repositioning; change always requires communication with internal and external stakeholders and all others you want to involve in your transition.

Anyone who wants to involve their stakeholders in a change must sketch a relevant perspective, place a ‘dot on the horizon’. The trust of stakeholders is decisive for cooperation. Every change has advantages and disadvantages for them. So it is best to communicate about this with integrity.

Enhancing your organisation's integrity

We would like to talk to you about specific programmes tailored to your organisation that will make your organisation better. Programmes that are based on the following two promises:

  1. Workability and performance increase through communicating with integrity within the organisation (between employees, between departments and between manager and employees. Fulfilling agreements’ and ‘living up to expectations’ are the norm, as is ‘addressing and rewarding each other’.
  2. Trust, loyalty and commitment in the relationship with external stakeholders increases by (re)formulating the promises of the organisation (translated into corporate narratives, core values and stakeholder-oriented communication).

Integrity (honouring your word) in the relationship between colleagues and with customers, suppliers and business partners leads to more mutual trust and greater job satisfaction. Increased workability leads to better performance. As a result, from top to bottom the awareness will grow that mission-inspired communications (communicating and acting with integrity) is a crucial added value for your organisation and all its stakeholders.