The Journal of Values-Based Leadership

Volume 2 Article 5
Issue 2 Summer/Fall 2009

July 2009

Values-Based Leadership and Happiness: Enlightened Leadership

Improves the Return on People
Charles A. Millick
Wheeling Jesuit University

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Return on People," The Journal of Values-Based Leadership: Vol. 2 : Iss. 2 , Article 5.
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 Happiness can be defined as the
positive conscious and emotional
experience that accompanies or
stems from achieving one’s values
or goals and exercising one’s
individual human potentialities,
including talents, abilities, and
virtues. In other words, happiness
results from personal flourishing.

— E. W. Younkins (2002)

— — E.W. Younkins (2002)

Values-Based Leadership and

Happiness: Enlightened Leadership
Improves the Return on People
CHARLES A. MILLICK
ASSISTANT PROFESSOR OF MANAGEMENT
DEPARTMENT OF BUSINESS, WHEELING JESUIT UNIVERSITY
WHEELING, WEST VIRGINIA

Introduction
In Management Challenges for the 21st Century, Peter Drucker wrote, ―one cannot manage
change. One can only be ahead of it… . But unless it is seen as the task of organization to lead
change, the organization…will not survive.‖ This paper will discuss how values-based enlightened
leadership — understanding the challenges faced and using the proper tools — can lead the
organization to become a flourishing (happy) enterprise with a strong return on people and
finances.

Background
The past 100 years have seen massive changes in the field of management and employee -
labor relations — from a violent period of strikes and confrontation to the evolution of labor law

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that includes workers‘ rights and safety considerations. To meet the challenges for continued
performance improvement, effective leaders now seek further betterment in the management of
employee relations and personal commitment. With the evolution of positive psychology,
enlightened leaders are seeking a better understanding of the effect of creating and stimulating
a positive mindset within the organization and a clearer comprehension of employee needs as
well as the tools necessary for improved employee motivation.

A leadership-centered culture develops leaders who do not consider employees to be mere cogs
in a machine or links in the bureaucratic process, but as human capital worthy of nurture, trust
and respect. Enlightened leaders strive to attain results from committed people who maintain
both personal and professional stakes in the organization. Human capital (intangible assets) —
including employee knowledge, customer relationships, patents, and trademarks — represent
approximately 75% of the market valuation of the S&P 500 companies versus the tangible
assets of property, plant, and equipment (Baker, Greenberg & Hemingway, 2006). In most
organizations, the value of human capital is a very heavily-weighted asset. It has been argued
that to arrive at an accurate accounting of worker productivity, people should be considered as
long-term assets on the balance sheet (Mansuy, 2003).

Leadership-centered cultures look to the future and seek not just ―smiley faces‖ and singing
―kumbaya around the campfire,‖ but a better understanding of employees‘ needs. The ultimate
result is an environment where all can constructively work together toward a common goal, find
personal and professional worth and fulfillment, and make positive differences in the lives of
others. Some are calling this a definition of happiness in the workplace. Personal happiness has
been defined as the following:

Happiness can be defined as the positive conscious and emotional

experience that accompanies or stems from achieving one’s values or
goals and exercising one’s individual human potentialities, including
talents, abilities, and virtues. In other words, happiness results from
personal flourishing. — E. W. Younkins (2002)

In summary, we are witnessing an evolution in the treatment of employees. Enlightened, values-

based leaders see their task to understand these changes, future challenges, and lead the
enterprise.

Objectives for Values-Based Leadership

To work toward a goal of becoming a flourishing, high performance enterprise and a workplace
that enables employees to grow on a personal basis requires a close linkage among the leader,
organizational situation, and the employees. For purposes of this review, flourishing (happiness)

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in a high performance workplace is achieved by values-based enlightened leaders understanding
immediate challenges in the global marketplace. These leaders utilize the results from the
positive psychological movement, treat employees as stakeholders, combine the latest
approaches in employee motivation and the balanced scorecard approach, and measure their
return both with respect to employee contentment and financial returns.

21st Century Challenges

As leaders assess or reassess strategic moves, develop roadmaps, detail and manage
operational plans, and evaluate projects implementation, they face multifarious challenges. The
workplace is more dynamic than ever with increased global competition, complexity, rate of
change, new technologies, economic uncertainties, and movement to a service-oriented
economy. As a result of the recent recession and the current economic situation, leaders will
require new skills tailored to an external environment of urgency, high stakes, and uncertainty —
even after the current economic crises subsides. It would be reassuring to label the current
economic crisis as simply a temporary glitch, but economies cannot build a firewall to insulate
against intensifying global competition, energy constraints, climate change, and political
instability. We must plan ahead to prevent immediate economic uncertainty from morphing into
a sustained or even permanent crisis of serious and unfamiliar challenges (Heifetz, Grashow, &
Linsky, 2009).

There is little doubt that as organizational hierarchies continue to collapse and decision-making
continues to become more decentralized, employees will take on increased levels of
responsibility for their own job performance (Gebert, Piske, Baga, Lanwehr, & Kearney, 2006).
We have witnessed a growing trend for many years toward increasing the level of employee
participation in workplace management. Employees throughout organizations participate in the
decision-making process from problem definition to operational implementation. Participation
has been defined as a new form of joint decision-making in which employees are invited to help
solve organizational problems (Tjosvoid, 1987).

With fewer non-renewable resources available to sustain business operations, a leader must
have employees who are more intelligent, skillful, willing to learn, and committed. High-
performing employees are ostensibly more valuable to the organization, but are concomitantly
more mobile than ever before. It is also most likely that employees are using a low percentage of
their strengths on a daily basis in their respective work environments which deficits could be
contributing to a lack of commitment to their employers and the business they serve. Based on
the Gallup Poll database of 1.7 million employees in 101 companies from 63 countries when ask
the ―opportunity to do what I do best‖ question only 20% felt their attributes were being used on
a daily basis (Buckingham & Quinn, 2001).

Beginning at an early age, most people have been steadily guided by their parents, teachers, and
managers and by psychology‘s fascination with pathology. We have become experts in our
weaknesses and in methods designed to repair our flaws, while our strengths lie dormant and
neglected The Peter Principle — a 1960‘s study which evolved into a book (Peter & Hull, 1969) —
describes the corporate phenomenon of promoting people according to their individual levels of
expertise, ultimately reaching a level of promotion which exposes their incompetence. Through

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the decades, The Peter Principle has become widely accepted as prosaic business jargon.
Business still views promotion to the highest level of responsibility and competency as the most
appropriate method of recognizing and rewarding individual contribution. How many of us can
think of one or more colleagues in our own organizations who have been promoted ―to their
levels of incompetence?‖

Six Keys to the Corporation

The keys to success in the corporation begin with the values that establish our identity. Next we
decide to value employees as much as investors and treat them as stakeholders. Enlightened
leaders also utilize the results from the positive psychological movement, combine the latest
approaches in employee motivation and the balanced scorecard approach, and measure their
return both on people and financial returns. It is also important to institutionalize our working
model for continuous improvement.

(1) Values-Based Leadership:

―CEOs set the values, the standards, the ethics of the organization. They either lead or they
mislead‖ (Drucker, 2007). A.G. Lafley, Chairman and CEO Chief Executive Officer of Procter &
Gamble (P&G), believes values are about organizational behavior and serve to provide
identity to the organization. In his first year at P&G, Lafley incorporated the establishment
and identification of operational values as an integral part of the company‘s strategic
operations. Those values already in place were not immune to review and revision to
comport with the overall corporate structure. P&G‘s ethical priorities include trust, integrity,
ownership, leadership, and a passion for winning (Lafley, 2009).

As stated above, managerial leaders serve themselves and others best when they are
committed to a set of core values:
Leaders need to be clear about what values they champion;
Leaders must effectively communicate their values clearly and meaningfully to key
stakeholders; and
Managerial leaders need to ensure their actions are in alignment with their espoused
values. The positive psychology approach also tells us that ―factors such as character
strengths, optimism, and resilience can play significant roles in how goals are
managed‖ (Kerns, 2005).

(2) Employees as Stakeholders:

With the political realignment occurring in many countries and the effects of the worst
destruction of wealth and economic meltdown since the Great Depression, the odds appear
to be favorable that enlightened leaders will keep stakeholder interests at the forefront by
respecting the needs not only of the investors, but also of the stakeholders who are
customers, employees, and suppliers. In this age of knowledge work, outsourcing, global
supply chains, and activist interest groups, enlightened leaders know that establishing a
meaningful relationship with each of the stakeholder groups is important for organizational
success.

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 Employees are all stakeholders — and sometimes shareholders — of the companies where
they are employed. Several recent studies have shown gains in both profit and productivity
by companies that have implemented certain historically unconventional work practices
including investing in decentralized decision-making, training, and establishing pay practices
which are contingent upon organizational, as opposed to the more traditional individual,
performance. There has also been a tendency to employ other non-traditional practices
designed to measure not only the financial success of the organization, but to engage
stakeholder participation as an indispensible cog to successful organizational performance
(Pfeffer, 2009).

(3) Positive Psychology:

It is important for enlightened leaders to help employees capitalize on their strengths to fully
participate in the organization‘s success. Although the universal human need for prestige,
recognition, and respect are seemingly all pervasive, it has been suggested that not everyone
is driven by a craving for power over others but rather that many people derive person
prestige and satisfaction in other ways. Such acquisition of self-confidence, satisfaction, and
work pride can be related directly to the full use of that employee‘s attributes. Of course,
such strengths must first be identified before they are further developed and fully activated.
Identifying strengths can also enable assigning people to those tasks and responsibilities for
which they are best suited. Imagine an organization in which all persons are doing the job for
which they are best trained and for which they will be accorded prestige that will best satisfy
their personal needs. While not necessarily infallible, this process is certainly worth
considering (Buckingham & Quinn, 2001).

Ostensibly, management and organizational researchers have made significant strides in the
field of goal and performance management. Additionally, the emerging field of positive
psychology appears to offer many findings and insights that can help managers become
more effective as they define and manage their organizational goals, individuals in the
organizations, and the organizations themselves. Positive psychology, as opposed to
traditional management methods, focuses on employee strengths and psychological
capabilities. This movement is further characterized as ―the new positive psychology
movement that has shifted from the traditional emphasis on illness and pathology, towards a
focus toward a focus on human strengths and virtues‖ (Seligman and Csikszentmihalyi,
2000). Consistent with the positive psychology movement, additional work has been done to
investigate the positive side of organizational processes and how individuals in organizations
and the organizations proper can become exceptional. Positive psychology is further defined
as:
Concerned primarily with the study of positive outcomes, processes, and attributes of
organizations and their members, Positive Organizational Scholarship (POS) does not
represent a single theory, but focuses on dynamics that are typically described by
words such as excellence, thriving, flourishing, abundance, resilience, or virtuous…. It
channels attention to enablers (e.g., processes, capabilities, structures, and methods);
the motivators (e.g., unselfishness, altruism, and contribution without regard to self);
and the outcomes or effects (e.g., vitality, meaningfulness, exhilaration, and high-

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 quality relationships) associated with positive phenomena. (Cameron, Dutton & Robert
Quinn, 2003).

This positive psychology movement and how positive mindsets can help transform
organizations positively is the subject of additional work on organizational processes and
performance more commonly known as the ―Science of Happiness.‖

(4) Employee Motivation – Needs, Levers and Actions:

Evolutionary psychology has also provided additional information about employee
motivational needs and drives. Recent research identifies four drives that underlie employee
motivation. This research is particularly focused upon two studies — one targeting two global
businesses (i.e., a Financial Services giant and an IT services firm) — and a second focusing
on 300 Fortune 500 Companies. This work outlines four drives (i.e., emotional needs) that
motivate people, as well as primary levers and actions that managers can take to achieve
maximum motivation, all of which are more particularly described as follows:
(a) To Acquire: Managers can use the reward system and tie rewards closely to
performance.
(b) To Bond: Managers can work to develop a culture that fosters mutual reliance and
cooperation among co-workers, values teamwork, and encourages best practices.
(c) To Comprehend: Managers can use job design to give employees distinct and
important roles in the organization that is meaningful and fosters a sense of contribution
to the organization.
(d) To Defend. Managers can use performance management and resource allocation
processes to increase transparency of all operations, emphasize fairness, and build trust
in granting rewards, assignments, and recognition.

The authors reference different companies that were successful in utilizing an organizational
lever to help employees satisfy their emotional drive in these particular four areas to achieve
motivation. Their conclusion is that if you can fulfill all four of the drives for employee needs,
your company will be in a leading position in terms of motivation; this, in turn, will generate a
major competitive advantage in terms of employee satisfaction, engagement, commitment,
and retention (Nohria, Groysberg, & Lee, 2008).

(5) Balanced Scorecard:

To keep track of their total organizational efforts and employee-related programs, managerial
leaders can utilize a ―Balanced Scorecard.‖ This is an equitable approach that not only
addresses the financial aspects of the business, but complements these concerns with
improving customer satisfaction, internal processes, innovation, and the learning
perspective. The innovation and learning aspects emphases focus on the intangible assets
that include human capital (i.e., skills, talent, and knowledge) as well as organizational
capital (i.e., culture and leadership). ―The balanced scorecard approach provides an

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 excellent vehicle for the managerial leader to develop people-based metrics for measuring
their return on people.‖ (Kaplan & Norton, 1996).

(6) Leadership Centered Culture:

To provide the lasting leadership that will use positive psychology, understand and implement
actions for employee motivation, and utilize a balanced scorecard requires institutionalizing
these activities. To constructively work together toward a common goal, find meaning and
satisfaction means institutionalizing a values based leadership centered culture. Leaders
provide motivation and inspiration to energize people, not by pushing them in the right
direction but by leadership satisfying basic human needs. To institutionalize this type of
leadership requires activities such as ―1) Recruiting with leadership potential as only the
first step, 2) Providing significant challenges early in the career to learn from triumphs and
failures 3) Plan for development of high potential employees and 4) reward people who
successfully develop leaders‖ (Kotter, 2001).

Results from the Return on People

Research has further demonstrated how positive mindsets can take hold in organizations and
transform their character by focusing upon a return on people. This process is accomplished by
integrating vision, energizing spirit, encouraging life-long learning, developing trust, seizing
opportunities, stimulating employees to use their talents beyond those merely comprising the job
description, and elevating unquestioned integrity. Fulfillment of these goals produces a
flourishing, ―happy‖ enterprise:

The definition of a ―happy‖ company is ―an organization in which individuals at all

levels of authority exhibit a diversity of strengths, constructively work together
toward a common goal, find significant meaning and satisfaction in producing
and providing high-quality products and services for profit, and through those
products and services make a positive difference in the lives of others.‖
(Baker, Greenberg & Hemingway 2006)

In addition to the above definition, a study of 750 firms across the world, ―companies with the
best people practices provided a 64 percent total return to shareholders over a five-year period,
more than three times the 21%Hemingway,2006)
(Baker,Greenberg,& return for companies with weakest practices‖ (Baker,
Greenberg, & Hemingway 2006). Additionally, on average, when employees are actively
engaged in the organization, customers are happier, productivity is up, turnover is low, and the
organization is financially productive and profitable.1

When calculating the business utility and the probability of business units being successful as a
function of employee engagement, the relationships are clearly nontrivial. Business units that
use principles of positive psychology may be able to influence employee engagement which may
then enhance the bottom line. The above studies have demonstrated a relationship between
happiness and workplace success. There are a number of additional research studies that

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suggest satisfied and happy employees are relatively more successful in the workplace. There
appears to be a direct correlation between happiness and the production of income (Diener &
Biswas-Diener, 2002), favorable evaluations by superiors (Cropanzano & Wright, 1999), and
social support from colleagues.2
Furthermore, people in a good mood are more likely to enter into novel situations, interact with
other people, and pursue new goals (Carver, 2003). A safe and comfortable environment allows
one to ―broaden and build‖ intellectual, social, and physical resources, which can be utilized in
later times of need. Armed with previously acquired resources and primed to pursue new goals,
people who experience positive emotions are well suited to experience success. (Boehm &
Lyubomirsky, 2008).

World-Class Deliverables
When employees are actively engaged in an organization, customers are happier, productivity is
up, turnover is low and the organization is financially productive and profitable. Enlightened
leaders want their organizations‘ performance to improve. They know their businesses and have
designed managerial strategies, roadmaps, operational plans, and projects, but they have not
forgotten the human capital aspects of their respective businesses which are critical to positive
reformation. Business is about relationships. Based on the previously discussed tools and
research, the following represent the next steps in the process to improve performance.

(1) Assess the organization‘s status and possibilities for transformation into a positive
organization using the results of the positive psychology movement studies and
developing action plans to begin to close the loop between the ―as is‖ and ―to be.‖ One
method of benchmarking could be to assess the impact on leadership measured
against a culture built around a forward-looking and constructive teamwork, the
institution of a viable belief system, and increasing emphasis on accountability and
autonomy.
(2) Assess the feasibility of implementing the latest approaches designed to stimulate
employee motivation. Such approaches should include reward systems and job
performance designs. Inevitably, the query must be asked: Is the business providing the
levers for action necessary to satisfy the drives (emotional needs) of its employees
which will ultimately improve the performance of the organization?
(3) Develop and implement a ―balanced scorecard‖ for the organization to track not only
the financial aspects of the business but also those factors which help to determine the
return on human capital.
(4) Evaluate the results. As we have seen from past studies, organizations with the best
people practices and engaged employees have a better track record for improved
performance. Performance metrics can include improved work place productivity, lower
employee turnover, improved customer satisfaction, and reduced costs. These four
steps are more succinctly demonstrated in Chart 1.

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 Chart 1

ASSESS THE STATUS &

POSSIBILITIES
FOR IMPROVEMENT
1 2 3 4

……………. ……………. ……………. …………………………

+ + = Evaluate results
Positive Improved Utilized the Improved work place
Psychology on: Employee Balanced performance
Scorecard for: Lower turnover
Motivation
Leaders Improved customer
Individuals Reward Accountability to satisfaction
Organizational Systems track return on Higher productivity
Processes Job Design people Improved
Institute Action Institute Programs performance
Plans Action Plans Financial metrics Happiness in the
workplace

Conclusion
Enlightened leaders regard the human element as an integral part of the organization‘s future
success by understanding the challenges employees face. These leaders utilize the results from
the positive psychological movement combined with the latest approaches in employee
motivation and the balanced scorecard approach to implement action plans. Values-based
enlightened leaders understand that in order to develop and maintain continuously flourishing,
high-performance enterprises and workplaces, they must enable employees to use their full
potential, be engaged and dedicated, and ultimately flourish to achieve happiness.

______________________________________________________________________________________________

Endnotes
1 For profitability measures (which were all calculated as a percentage profitability of sales), the
difference between employee engagement, top and bottom quartiles ranged from 1 to 4 percentage
points in profitability. On average, business units in the top quartile on the employee engagement
produced 1 to 4 percentage points higher profitability. For many organizations in a highly competitive

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market, 1 to 4 points per business unit is quite substantial and can represent the difference between
success and failure (Harter, Schmidt, & Keyes, 2002).

2 Happy people, compared to their less happy peers, earn more money, display superior performance, and
perform more helpful acts. A preponderance of researchers has stated that the accomplishments of such
indicators of success in the workplace cause a person to be happy. The alternative hypothesis — that
happiness causes success — may be equally plausible. (Iverson, Olekalns, & Erwin, 1998).

__________________________________________________________________________________________

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Author Biography
Charles A. Millick is an assistant professor of Management in the Department of Business at
Wheeling Jesuit University. He also is a professional engineer and is an experienced army officer,
corporate executive, entrepreneur, and professional consultant. Professor Millick earned his
undergraduate degree in Engineering from the U.S. Military Academy at West Point, New York
and an M.B.A. from Xavier University in Cincinnati, Ohio. He continued his education with General
Electric (G.E.) in its Management and Advanced Management Programs, BOC Group‘s Senior
Management Program, and the Harvard School of Public Health for decision support to the U.S.
Department of Energy. He has instructed GE‘s Management Training Program as well as
maintained a series of managerial positions in Operations and Corporate Staff with General
Electric and other major corporations, completed evaluations in Europe and Japan, and provided
consulting services for commercial clients and federal agencies.

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