The connection between ethics and innovation and their effect on bottom-line performance.

Ever found yourself in a smoky bar or trendy coffee shop where architects and engineers congregate? Ever heard someone ask this question in one form or another about the icons of their industries? “Just what is it that makes them so different and special — and successful?” 

And as they ponder the question, you may detect the hint of a wry smile as someone with a swirling glass will simply shrug off the question as impossible to answer — and who could seriously blame them?

We believe the answer lies in finding the key that can unlock better performance and improved bottom-line performance. Finding that key is what separates the industry icons from the other mere mortals. But what is that key, and where is it?

We believe the key can be found in ethical environments that allow and encourage leaders to plant seeds that will grow a finely-tuned collaborative culture; the very culture that creates innovation that in turn improves performance and bottom-line.

It is the power of superior innovation that created our icons and distinguishes them from the rest of us.

But, if the key is hidden in ethical environments, we have to start by defining what exactly is an “ethical environment”

A starting point: Defining ‘an ethical environment’

The late Supreme Court Justice Potter Stewart once wrote that ethics is knowing the difference between what you have the right to do and what is the right thing to do.

When our best leaders create ethical environments, they understand that doing the right thing is not simply an act of political correctness, it is good business. They also understand the bottom-line advantages it brings.

In an increasingly cynical world of overselling, consumers of goods and services now value integrity and values more than ever, and in the service sector in particular consumers prefer doing business with people they like and trust and whose values they respect.

In the architectural and engineering professions specifically, these values include taking into account the social, environmental and economic impact of design solution. And, because consumers appreciate these values, this ultimately goes straight to the iconic and monetary bottom line.

While this hypothesis may not be immediately obvious there is evidence to support it. For example, every year, the Ethisphere Foundation honors the World’s Most Ethical Companies by industry sector. The foundation then plots the performance of their honorees against other companies on the Standard & Poor’s 500. Their results have shown that, in good times and bad, their honorees have consistently performed better than those not honored.

If one advantage of creating an ethical environment is to improve innovation dramatically, we have to ask this: What is “innovation”?

Innovation

Innovation is the ability to come up with practical and imaginative ideas and solutions that others haven’t found and that add value. It’s the ability to think out-of-the-box — and to stretch boundaries. Iconic reputations are built on the ability to innovate.

While there are many experienced professionals who have solved problems the same way over many years, the innovators are those who find different ways to solve those problems in a way that adds value that the old solutions didn’t.

As we put innovation and its magical qualities under a magnifying glass, we notice that innovation needs oxygen. We see that it rarely blooms and flourishes in solitude. This isn’t to suggest that anyone sitting alone in a dark office or smoky bar can’t come up with a remarkably innovative idea. They can. The chances are, however, that the idea will improve dramatically if someone is around to test the idea’s assumptions and to ask probing questions — and to share thoughts about improving the idea.

Innovation is a collaborative process if its fruits are to be realized, an innovation without collaboration is just an idea.

It was George Bernard Shaw who offered this profound truth about collaboration and sharing: “If you have an apple and I have an apple and we exchange apples, then you and I will still each have one apple. But, if you have an idea and I have an idea and we exchange those ideas, then each of us will have two ideas.”

Haven’t we all experienced how one shared idea can seamlessly lead to another idea and yet another — with the final refined idea being much better than the original version?

As innovation flourishes and blooms in a collaborative sharing culture, we need to ask how the icons have created this culture. And we also need to ask again why creating an ethical environment is so necessary in creating that collaborative culture…

Leadership

As we’ve all experienced, if our leaders inspire us, we always perform better — and we’re far more likely to collaborate more effectively and enthusiastically. And, as night follows day, this will inevitably lead to vastly improved innovation. The role of inspirational leadership looms large.

But how can anyone inspire us if they don’t command and earn our respect, admiration and trust by leading by example? And how can leaders inspire us if they rule by fear and threat? The answer to both questions is simply that they can’t.

What is clear is that, unless our leaders are themselves ethical and act with integrity — and unless they demand that we do the same — we’ll never trust them. And without trust, collaboration and innovation suffocate. For those leaders to truly inspire, therefore, they have to establish their moral authority that only comes from operating an ethical organization and leading by example. While a more detailed exploration of the topic of inspirational leadership is outside the scope of this article, what we can say with some certainty is this: All inspirational leaders communicate in much the same way.

Inspirational leaders have perfected the art of articulating and explaining the raison d’être of their organizations — why their organizations exist and why they, as leaders, get up in the morning to go to work. And somehow they have found a way to communicate this in a way that their followers can enthusiastically embrace as their own. And, incidentally, this raison d’être is not “making a profit,” because this is the purpose of all businesses. The reasons people choose to do more than just deliver a task is because they believe in the social, economic and environmental value in what they are doing.

The raison d’être can be as simple as “We exist to make a positive difference in people’s lives” or “We believe in the power of social and environmental responsibility” or “We want to leave our planet in a better condition than we found it.”

Whatever the message, however, it must resonate with those who strive to work together under that banner. The next question we must address is the connection between an ethical environment and the creation of a collaborative culture that will yield the quality of innovation that has created the icons we so admire.

The Connection

The connection is clear: Every necessary element to create a collaborative culture is also a necessary element of an ethical environment.

Starting With Trust

Unless leaders can create an ethical environment that breeds trust, collaboration will inevitably suffer. And without a high level of trust, it is impossible to create an environment in which people are enthusiastic, positive and happy about coming to work. And people who are unenthusiastic, negative and unhappy about coming to work can’t seriously be expected to collaborate effectively.

Ironically, leaders are often the greatest obstacle to creating this level of trust. For example, when they create environments with high levels of internal competition and fear, they are creating barriers to collaboration by rewarding individualism. But, why is internal competition sometimes so potentially toxic?

Internal competition generates fear and mistrust. Colleagues fear that others will steal ideas in an attempt to move up the corporate ladder ahead of them, with this quite predictable result: ideas become valuable commodities that are often jealously guarded and protected, rather than shared. And without sharing, the collaborative process is stopped dead in its tracks.

But how does trust often directly affect the bottom line?

In our present economic climate, because clients place a great value on trust and values, the trust that ethical environments create almost always filters down to your clients. Quite simply, if your clients and suppliers don’t trust you and if they believe your main concern is simply a short-term gain, they will soon be contacting your competitors.

People like doing business with people they like and trust — and, if you can persuade them to like and trust you, this will go straight to your bottom line. Incidentally, clients and customers also like to be a part of a collaborative process in which they are working with you for better results.

The Need to Share

Central to creating a collaborative culture is the connection between trust and sharing. Without trust, ideas aren’t shared — and without sharing ideas, the whole collaborative process grinds to a halt. Sharing is the very essence of not only collaboration, but also of the very decision-making processes upon which all businesses rely. Refusal to share will create the toxic class of information hoarders, who will emerge from every nook and cranny of the organization.

Information hoarders are the people who view information as a valuable chip they can later cash in on their way up the corporate ladder. They see information as a strategic tool that will make them indispensable. And as they jealously guard their hoarded information and as they refuse to share it, they soon become a barrier to the collaborative process.

The refusal to share has another potentially crippling result: It will almost certainly adversely affect decision-making. And this too can have an adverse impact on the bottom line.

One key to eliminating the information hoarders is by creating an ethical environment and by encouraging everyone in that environment to share. And as for the industry icons, they don’t simply encourage sharing, they demand it.

Communication Skills

What could be more important in the collaborative process than effective communication skills? What the icons have discovered is that communication skills are required at every level — and not just at the senior leadership level. It is no longer a question of whether one should communicate “top-down” or “bottom-up.” Everyone in the collaborative process must have superior communication skills.

There are at least two broad facets of communication skills that every organization must address: these are both personal and organizational communication skills.

In the context of personal communication skills and its relevance in the collaborative process, most icons understand this basic inconvenient truth: We often think more creatively and collaboratively away from the office. We’ve all experienced sitting in bars and restaurants talking about new ideas while scribbling furiously on napkins and paper tablecloths. Brainstorming seems easier in relaxed environments than in boardrooms. Why is that? Perhaps it is about the comfort that informality brings. Informality and comfort clearly and understandably help people collaborate. This is a truth that leaders can’t afford to ignore.

The converse, however, is also true: The more formal the environment for brainstorming, the more difficult is the collaborative process. Why is this? Perhaps it is because formality seems to create a sense of finality. Perhaps there is a sense that, once you are in a formal session, there is no escape from a mistake. Unlike scribbling on a napkin that you can easily and quickly throw away, what you say in a formal setting brings with it a sense that it will live with you forever. Again, this is why trust is so important in addressing these more formal situations.

Organizational communication is equally important. Unless an organization is set up to allow and encourage people to communicate easily across departments and even locations, an essential element of the collaborative culture is missing.

While the organization’s talk might enthusiastically embrace collaboration and innovation, the structure of their workplaces might reflect something else — as might the body language of those delivering the messages of collaboration and innovation. Leaders who ignore workplace design and their own body language risk stifling the workforce by design.

The most effective leaders often encourage networking and communication by inserting informal meeting places with comfortable seating or coffee bars and vending machines in high-traffic areas. This is where people will congregate. This is where people from different departments will meet, interact and network. Accidental interaction is as important a source of idea generation as planned interaction.

Organizationally, leaders have important decisions to make that will have an immediate effect on bringing effective collaborative skills to the table. For example, do they embrace a “handing-off” organizational approach in which each department (e.g., marketing, design and engineering) hands off the project to the next department after it has completed its respective task? In this scenario, if problems arise, responsibility can be avoided. The result is often finger pointing with each department blaming the other. This tends to undermine collaboration.

A better organizational option is to embrace a “team” approach in which the entire team works together and participates in all decisions. In this scenario, everyone knows the current status of the project. This avoids finger pointing and the easy shifting of responsibility. It also encourages collaboration. The problem is that this is an approach that only works in ethical environments in which trust, sharing and effective communication flourish.

Collaboration and Goals: ‘Do You Know Where You’re Going?’

At the risk of stating the obvious, what the icons all know is that, unless the collaborators agree on the problem they are trying to solve and what they are trying to accomplish, they’ll never accomplish it. The ability to articulate goals effectively, therefore, becomes absolutely critical.

What exactly is the exam question you are solving and can everyone articulate it, remember it and focus on it. When the answer is yes then you are flying, if you think the answer is yes then ask someone to tell you what the question is and check that it’s true, and if the answer is no then don’t expect to be delighted with the outcome.

But, whatever the goal, the icons have all come to understand this one fundamental truth: without creating added value, and without creating something new, all that the collaborative process accomplishes is to reinforce the status quo. So, without adding value, collaboration effectively adds nothing. The agreed goal for the collaborators, therefore, must be something that offers a clear value-added proposition. The focus must always be on value creation.

Creating a Sense of Community

A natural outgrowth of having to articulate clear goals for collaboration is yet another requirement for creating a collaborative culture: This is the need to create a sense of community amongst our collaborators. This is a sense of belonging the team must feel. It is a sense of joining a common journey in which everyone is devoted to reaching a common destination.

Again, it is almost impossible to create this sense of constructive community in an environment in which leaders do not act with integrity and where the leaders are neither respected nor admired. Here, the leaders inadvertently create a community in which the only common bond is the lack of respect for leadership. This is no way to build a successful collaborative culture.

Creating and Encouraging an Unstructured Debate

Having recognized the importance of trust, sharing, communication, inspirational leadership and creating a sense of community, there are some mechanics of collaboration that our icons have already mastered.

This begins with acknowledging a reality: On the one hand, a predictable approach to problem-solving will generally yield predictable results. On the other hand, an unstructured and unpredictable approach that encourages risk-taking and that isn’t stifled by a fear of failure will almost always yield the innovative results.

Some have called this unstructured and unpredictable approach a form of “collaborative chaos,” in which leaders actually promote and encourage an unstructured exchange of ideas. They have pointed to examples where some remarkable discoveries have occurred by accident or mistake. While researching influenza, for example, Alexander Fleming stumbled across what later became known as penicillin. Similarly, Scotchguard was inadvertently discovered when a lab assistant spilled an experimental liquid onto her shoes.

One underlying goal of this approach, therefore, is to encourage the unexpected. For this to occur, leaders have to encourage taking unusual approaches. They have to create a culture in which their followers are not paralyzed by a fear of failure. Success comes easier if you remove the fear of failure. Again, this is best achieved in an ethical environment in which there are high levels of trust and support from leadership and colleagues.

Another underlying goal of this approach is to encourage something that has become known as “constructive confrontation.” Here, the challenging of ideas is encouraged. But what the icons emphasize is that this confrontation must never become personal. It must always be constructive. This should always be about challenging ideas and concepts — not people.

Is there any doubt about these conclusions?

Getting back to the question asked in that smoky bar or trendy coffee shop, is there any doubt that what has separated the icons from the others is that they have each found that elusive key?

Is there any doubt that they each have the ability to inspire by creating ethical environments in which they have created collaborative cultures that have yielded extraordinary results?

And is there really any doubt that the icons have appreciated that all consumers value integrity, values and an ethical approach to business — and the innovative skills needed to enhance and sustain the world’s natural resources?

All that remains is for those who are interested in becoming icons to start work on creating ethical environments that will yield the collaborative cultures that will create the spectacular innovation to which everyone should aspire.

Steve Burrows is the senior vice president, Building Engineering, Americas for AECOM. He has more than 25 years of experience and has been involved in a wide range of projects, including serving as project director for the Bird’s Nest Stadium in Beijing. Burrows is a registered professional engineer, and in 2009, he was awarded a CBE by Queen Elizabeth II for services to civil engineering overseas.

Michael Friedlander is an international business attorney, corporate executive, author and speaker. Originally from South Africa, he has lived and worked in Johannesburg, London, Zurich, Paris, Montreal prior to moving to Los Angeles in 1979. In 2005, he was invited to serve as the CEO of an international architectural design company. In 2008, Michael left the architectural firm to complete his now critically acclaimed book, Detecting the Scam: Nelson Mandela’s Gift.