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Transcript: Alanna McKee

April 2, 2020

MAUREEN DINGUS: Welcome to Leading Forward, the Virginia Society of CPAs podcast where we focus on innovation, leadership and the CPA profession. I'm your host, Maureen Dingus, and I invite thought leaders for short, casual conversations on topics and trends important to the CPA profession. Today, we have Alanna McKee with us from the McKinley group. She just spoke at our Leaders' Summit, which is a an annual event that we do for all of our volunteers to kick off their year. And she did a wonderful session on leadership character. So we're going to ask her some questions and let her give us a download on some of the key highlights from that. So before we jump into that, Alanna, could you tell us a little bit about McKinley? 

ALANNA MCKEE: Absolutely. So McKinley Advisors is a research and strategy consulting firm that specializes in nonprofits or mission-driven organizations, particularly professional associations and trade associations. And a lot of our work is done around market research to explore member needs, strategy, organizational strategy, but we also have delved into organizational strengths and how to increase efficiency and effectiveness. And as part of that is really focusing on the leadership of an organization and making sure that our CEO and senior leadership team is well positioned to lead our organizations to success, right?

MAUREEN: You obviously have a passion for leadership development, organizational development. Can you give us a little bit of an insight to your leadership journey and how you got to this point where you're talking to groups about leadership?

ALANNA: Absolutely. So I actually started my career as a social worker, clinical social worker, really passionate about helping people, I worked with children and adults with mental health and developmental disabilities for a number of years. At a certain point, I realized that the systems and organizations that were built to serve these individuals were, for lack of a better term, broken. And I felt like I was continuing to run into barriers, and I wanted to affect change at a higher level. So after getting my degree in social work, I went into an organizational and systems level of change, first at an association and then eventually to McKinley, where I now get to help organizations solve problems. And in my eyes, we reach a wider net of people.

MAUREEN: Right? Yeah, yeah. Great. So your presentation talked about leadership character, and the way that you outlined it was really intriguing because you talked about the kind of the combination of factors that lead to better results. And the the one differentiator was that senior leadership effect. So could you tell us a little bit about what is that model? And what is the senior leadership effect?

ALANNA: Yeah, absolutely. So frequently, when we talk about the success of a business, we're really focused on two elements. Those are macroeconomic factors and the business model. So macroeconomic factors are common for all competitors within a market sector. So it's things like the political realm, or the economy. And a business model would be relatively consistent within a market sector, but it's how we're operating our business. It's our marketing strategy. It's the technology we're using. 

So as an example, most airlines are known for kind of nickel and dime, naming their customers. But Southwest is quite different, right? They don't charge for extra bags, they don't charge to change yours, or to pick your seat or to change your flight. So the business model also impacts business results. What we found is that those two elements business model and macroeconomic factors, they only make up 70 percent, of business results. And there was this variance, this error variantvr, and we couldn't figure out what that was, for a long time. And after some research done by John Kiel, we realized that that was really defined as the senior leadership effect. And what that means it says it's a source of unique competitive advantage. But it's the leadership character of both your CEO and your senior leadership team. And we know that the character of these individuals has a direct impact on the health of an organization, on their return on assets on staff productivity, and several other factors that that impacted the health and sustainability of our business.

MAUREEN: Yeah. So you said it's not just the CEO, but it's the senior leadership team. So that means it can't just be one person, of course, one person makes an impact. But what does it well, who's included in that team? What does that really look like?

ALANNA: Yeah, I mean, ideally, it's the senior leadership team and those in charge of making organizational decisions and managing and impacting a lot of the staff around us. So the data shows that for an organization that has self focused leadership, their return on asset assets, hovers around about 1.93 percent. For organizations that might have a high character leader, but maybe not a full leadership team, their average ROI is going to be around 4.83 percent for virtuoso organizations or organizations where we see really high character, strong leadership teams, not just the CEO, their average ROI was 9.35 percent.

MAUREEN: That's dramatic. Yeah, that's a huge difference. And I think one of the things that is different of what you're telling us is you actually have some data. A lot of times when we talk about leadership development or character development, it's it's more of that that softer side is more models, but there's actually a study that looked into this so that that's where the state is coming from, right?

ALANNA: Absolutely. So there was a study done by John Kiel. It was a seven-year return on character study that was done between 2006 and 2013. It was done with 84 different companies, Fortune 500, 100 companies, privately held firms, nonprofits. And they looked at 121 CEOs, and tried to assess what made up that kind of senior leadership effect. Was it birth order? Was it where someone went to school, their education, their tenure? What was it that made them really effective leaders? And what are the attributes that that directly correlated with successful businesses or business results? 

MAUREEN: So what did they find?

ALANNA: They found that it wasn't any of those, in fact, that it was actually their character, and particularly four character attributes. And those are integrity, responsibility, forgiveness and compassion.

MAUREEN: So those attributes are, are the things that you go out and recruit for? Or do you develop them internally?

ALANNA: Yeah, so they're not something you're born with, we found that these are habits that we can develop over time, there are things we can learn and practice. And that also means that the things that we can change, so if we're not too good at at forgiveness, something that with coaching, with work, with some self-reflection, we can really change.

MAUREEN: How does that change work? How do you even start that change? 

ALANNA: Absolutely. Well, before I get into that, actually, I'd love to tell you a little bit. Yeah, each element. So first, integrity, when we think about this kind of actualizing in an organization, this looks like telling the truth, following through on what you say, walking the talk. It's standing up for what's right. It's keeping our promises. And this leads to a culture of accountability, right? We've all seen this in our organization. So that's the first, the first element is this idea of integrity. 

The next is responsibility. So that's taking responsibility for our personal choices. It's being accountable for our actions. It's admitting mistakes and failures, and really embracing responsibility for serving others. So a great example of that there was an organism or a company, rather, Fortune 500 company in the U.K. that made some poor choices, and some egregious breaches. And a lot of their officers actually had to testify in front of several parliaments and governments. And there was a huge outing of several of their senior leadership team. And the organization realized that their company to get back on track, they really need to do some serious self-reflection and fix their organizational culture. And that started with looking at both kind of the integrity and responsibility of their leadership team. So what they did is they started by having the remaining senior leaders who weren't fired or testifying at that point to they had them take a survey or an assessment to understand their their character attributes, and really how they were performing. And then they share those results with the full staff. 

And really speaking to that, that level of accountability and honesty and transparency, they held a full-team meeting with all of their directors, and shared the results, and also apologized, did kind of a universal mea culpa. And although these existing executives were not the ones who were making those poor choices, they were involved in allowing the culture to deteriorate to a point where those choices could be made, right. So they, they needed to apologize for that. And they all so brought together a cross-functional team to kind of monitor the organizational culture, monitor the performance of their executives, as it relates to those character attributes, and make sure that moving forward, they are going to be held to a certain standard and that choices, strategic decisions that the company was faced with, were going to be met with their core values in mind.

MAUREEN: So that begs to the issue of having some core values, right, and saying them and living up to them. 

ALANNA: I'll say, you know, we've worked with hundreds of associations and companies, and you'd be surprised how many don't have core values. We feel these are really good bedrock of organizational strategy. They're the tenants that should guide decision-making, when faced with a really tough decision, in turn a strategy there, what we should review and look at to decide what's the best path forward. The other two elements of the other two elements of high character were identified that were identified with forgiveness and compassion. So for forgiveness, we need to have an organizational culture of letting mistakes go, we need to know that it's okay to make an error, that we're going to focus on what's right, and not what's wrong. And that's going to lead to a culture of innovation. We know how important innovation is to the success of an organization, people are only going to try new things and innovate if it's a safe place to make a mistake.

MAUREEN: And we talked so much right now about innovation for our CPAs, and you know, at the outset, it's not maybe something that seems very natural for them. I think that the the type of work has been focused on accuracy and reliability. But as far as the evolution of the profession and different services and client development, that innovation part is so important. And we have a lot of conversations about what does that really mean? And failure is not something that they're comfortable with. But, you know, I think that what what I hear you saying is a lot of is experimentation. It's being able to try new things. Yeah, there might be also some mistakes that we learn from, but it's really being able to put yourself out there, putting your firm out there and try something new.

ALANNA: And it's a delicate balance. I understand that in a field where you have clients you need to serve, and we can't be handing our clients work with errors. And McKinley is in the same position as a consulting firm. So you need to make sure that your employees are meeting a certain standard. But at the same time, we also want our employees to know that they they can make mistakes, they can try new things, and that we support them and in trying to innovate at McKinley, it are there two things that really come to mind that I think we do a nice job of the first is one of our internal mottos is, the bigger mistakes, the greater the learning. So we really do encourage our staff, and we give our younger staff quite a lot of responsibility early on. Because we also tell them that nine times out of 10, we know that they're going to get it right. And it's going to be huge when that other time there will be a mistake, but we value the 90 percent over the 10 percent.

MAUREEN: And I can imagine with the competitive market out there for talent, that knowing that you work at a place where you can make a mistake and have that the focus be on the learning not on the mistake is is very valuable and would be very attractive for a young person. 

ALANNA: Yeah, absolutely. 

MAUREEN: They want to do good work. You know, they don't want to do the mistake. But pushing is key, I guess. 

ALANNA: Yeah, absolutely. And the last element is compassion. So that's having empathy for others. It's asking for help. It's empowering our staff. That's a huge one in terms of staff satisfaction as well is having your employees really feel like they're able to own their work. And they're empowered to do their best and actively really caring for our staff or peers. And having that compassion leads to to a culture of collaboration.

MAUREEN: So it's very, I think you said in the presentation, very heart-centered.

ALANNA: Yes, heart-centered and head-centered, those last two, forgiveness and compassion, very heart-centered.

MAUREEN: So I tried to jump right into how do you get better?". You know, I think that we all hear those and we go, of course, but we might look at someone else and say, Oh, you're not so great. That so how do we look at ourselves and figure out where maybe we need to grow?

ALANNA: Absolutely. So what I said earlier is the characters are their habits, right, which means that they can be taught and that you can strengthen them, we know that you know how you engage or connect with it with other people is a matter of habit, and habits, by definition, operate below conscious awareness. And so that means that we can strengthen or even replace habits if if we put in the work. So what that means is we need to start by figuring out, where are we now? What is our reputation? 

So character is not about our intent. It's about our reputation. What I mean by that is you can have the best intentions of the in the world. But if you're not following through on your promises, and if you hold grudges, you're not going to have the best reputation. And your reputation might not match your intent. So the first thing we need to do is we need to explore what our reputation is, we need to have hard conversations with our staff, with our peers. At McKinley Advisors, we actually use 360 evaluations to try to gain that unbiased feedback and make your staff feel comfortable sharing that feedback. There are also several different great leadership assessment tools that you can use to gain that. But you have to start by collecting data. And then you have to figure out, what are you willing to work on? Right? This is tough stuff as a social worker, right? I'll tell you, you know, it's hard for people to admit failures and mistakes and work to change to change habits or to change their character. 

MAUREEN: Would you need to pick one? Or can you work on more than one, or...?

ALANNA: Great question! That really boils down to your level of comfort, the time and energy you have, and also where you might have strengths or weaknesses. For most people, I'd say you're probably not going to need to make major changes, you're probably not going to find wild success, if you're not a least moderately high-level character.

MAUREEN: So maybe some fine-tuning.

ALANNA: Yeah, exactly. But we think about kind of the steps and changing habits, there's four things there, four steps that that we like to think about. The first is finding your blind spots, and I just talked about that a minute ago. So getting data, collecting feedback from your peers, from your friends, family, to help you recognize where you might be stuck. Because often it's it's not where you think you're stuck, right, we might not, our intent might not align with our reputation. 

Next, we need to discover the motivation to change. Change is hard, even when it's a good change. The examples I always give are changing jobs or moving to a new house or apartment is an exciting or positive change. But even those are scary and stressful. So we need to give ourselves that carrot to work towards whether it's chocolate, or a vacation, or taking yourself out to a fancy dinner, give yourself that reward at the end of your hard work to work towards. 

The next thing is it helps if you go public. So it we know research shows that if you share what you're working towards, you're more likely to achieve it. So you know, this can be challenging, and often takes courage and willingness to be vulnerable to share your weaknesses. But most people are going to want to help. So it also helps to let them in. And then the last, the last element is making mindful choices. So because we're dealing with habits, they happen quickly, right, we're used to behaving in a certain way. And so to rework these habits, it requires us to really slow down and recognize the choices that we're making. So it's super easy to get swept up into the the natural evolution of our of our habits. But we have to be able to stop and take a step back, realizing realize what we're doing in the moment, rethink how we're going to frame that question or frame that response and pay attention to our behaviors. So slowing down is is hard, because we rarely have time to do it. But we have to do it. 

MAUREEN: Yeah, and I know that for myself, personally, I might be working on something. And then when you're under stress, you slip back. So you know, it's not that all your good work is, you know, thrown away. But maybe it's just understanding that it's never done. 

ALANNA: It's being patient with yourself. Change takes time. And we have to give ourselves the time and space to to work on it. 

MAUREEN: Have you had a habit that you've needed to change?

ALANNA: Oh, yeah. Many, I'm sure. Most recently, well, as I shared with the group, I am going to be a new parent this fall, and I've had to change quite a few habits as a result of this new existing lifestyle. But again, even when it's a positive change, it can be difficult to adjust to a new lifestyle or just to new behavior is to reframe your your character to be a better person to be a better employee, a better wife or parent. And so I would really just encourage people to take the time to do some self-reflection, particularly as it relates to the success of your business. 

Rarely, I said this earlier, rarely do we talk about our leadership teams and how that impacts our business. We're so focused on the bottom line on the kind of technical skills on the dollars coming in and how we're finding clients and the technology we're using. Take some time to think about yourself and your behavior and how that's impacting the people around you. Take time to think about the team that you've built to support your organization, and how their behavior is affecting the teams, your team and your organization. And then take the time to really work on it to be honest about yourself, strengths and weaknesses. And by also taking the time to look at your own internal strengths, that can help you build a team around you to kind of balance out your innate strengths and weaknesses. 

MAUREEN: Yeah, yeah. I imagine just taking this little bit of information and having a conversation with your senior team could make such a difference. I mean, yeah, there is a lot of hard work that can be done. But it just starting the conversation and opening yourself up to that vulnerability is a great first step, to step away from, whether it's this conference or this podcast, is have the conversation.

ALANNA: I am glad you said that word, "vulnerability." That's exactly what came to mind for me as well. You know, being vulnerable, goes a long way in terms of building trust with our teams as well, and building that strong foundation and culture.

MAUREEN: Alright, so we're going to wrap up here. And I have to two last questions that I like to ask all of our guests. But as just given all the you know, and all the work that you've done with clients, what would you recommend that our listeners be on the lookout for in this next year? What do our business leaders need to be paying attention to?

ALANNA: Sure, I would say it's time to sit down and really think about those four elements of character to see where you fall on the scale of forgiveness, of integrity, of responsibility and compassion, we can no longer ignore the fact that 30 prtvrny of our business results are coming from our leadership character. We spend enough time worrying about politics in enough time worrying about the economy, and in our business strategy. So let's sit down and have an honest conversation. Let's reflect on where we are and what we can do to change.

MAUREEN: Yeah, great. Great. And then the final question is, do you have you been reading anything or watching anything or streaming anything just for fun that you'd recommend?

ALANNA: Absolutely. So I would absolutely recommend the book "Return on Character." And I'm realizing now that with my pregnancy brain, I've misspoken the author of this fantastic book and the research, it's actually done by Fred Kiel. This book kind of outlines all of the research I went through during this podcast, but it's a fantastic kind of study into the data behind high-integrity leaders, how they can have explored this intricate question, the things you can do to improve your character. It really delves into the four aspects of, of high-driven characters, so I would highly recommend.

MAUREEN: Great. Yeah, check that out. So it's "Return on Character." 

ALANNA: "Return on Character: The Real Reason Leaders and Their Companies Win" by Fred Kiel.

MAUREEN: Perfect, perfect. Well, thank you, Alanna. We appreciate your time visiting us at the Leaders' Summit and also a little extra time recording this podcast. It's really been great. So appreciate your time. All right now, thank you, everyone, for listening to Leading Forward. Make sure that you subscribe to the podcast and listen in next time. We will catch you later.