Managing to make a difference involves creating a culture that encourages people to become their best selves. As a manager, there are a number of ways you can help employees pursue this noble goal. You can recognize and reward people for exemplary behavior. You can punish people for unacceptable behavior. But the most powerful strategy is to exert moral authority.

That, ladies and gentlemen, is moral authority. It does not arise from power or title. When a manager exerts moral authority, people behave better in his or her presence. And they do so not because they fear punishment or seek reward. They do so simply because the manager's mere presence inspires them.

Moral authority includes integrity, but it is much more. One can act with integrity, but not be kind. One can be scrupulously honest, but not be generous. To exert moral authority, one must be the kind of person others look up to and want to emulate.

How do you exert moral authority?

Epitomize the values you espouse. Walk your talk. This maxim has come up in multiple places in this book because it is so central to managing to make a difference. Who you are speaks more loudly than what you say. Failure to walk your talk will earn you a well-deserved reputation for hypocrisy. Think about politicians who forcefully espouse family values while committing adultery. Disgusting. Who wants to follow a hypocrite?

Walking your talk is easy when the weather is good. But do you adhere to your stated principles when it is difficult, when doing so costs you in some way? Do all of your decisions and actions build your moral authority—everything from the big decisions about your business to the small actions (or inactions) in your daily interactions? The more consistently you exemplify the character traits and behaviors you espouse, the more likely you will earn—and exert—moral authority.

Your reputation is built by your decisions and actions as you move through life. Doing the right thing is easy when it is convenient and painless. But what about when it is not?

• What do you do when “the right thing” is not at all clear?
• What do you do when it is inconvenient and likely to cause you some pain?
• What do you do when you have done something wrong?

Discuss the alternatives. The right thing to do is not always clear. The world does not fit neatly into the categories we create. Vigorous, candid discussion is healthy. And well-meaning, intelligent people can disagree. Discussing alternatives transparently creates a powerful demonstration that you are willing to ask hard questions and that you are striving to find the right answers. Ultimately, however, you must act. Not everyone will agree with your point of view. When you have to make these types of decisions, ask yourself, “Am I comfortable explaining this decision in a public forum?” If not, find a different course of action.

Avoid even the appearance of impropriety. A senior partner taught Larry this when he was practicing law. It is not enough to know you are doing the right thing. You must be aware of how others might see it. The appearance of impropriety often causes huge damage even if one's innocence is later established. At the very least, it tarnishes your reputation. If something will look wrong even though is not, choose not to do it. If you are called upon to explain why you have done something, you have already made a mistake.

Operate with transparency. As our friend and colleague, Bill Kerrey, says, “Sunshine disinfects.” Mysteries breed suspicion. Transparency is the best way to avoid the appearance of impropriety.

Don't do something just because you can get away with it. Temptation is all around us. Giving in to temptation can bring heavy costs. Volkswagen's culture of cheating on emissions tests cost the company billions of dollars. Wells Fargo's culture of defrauding customers put more than 5,000 employees out of work. In many cases, a manager can do things that are not right because nobody has the power to hold him or her accountable. This is how bullying, sexual harassment, and other abuses of power arise. A company president who forbids HR to record her vacation time invites people to wonder, “What else is she getting away with?”

If you do things just because you can get away with them, you not only create suspicion; you also set an example that others are likely to emulate. You will create a culture that makes it okay for people to see what they can get away with. No ethics, no integrity, no honor, no trust. As a manager, don't do this and don't condone it when you find others doing it.

Admit your mistakes, apologize, and do your best to make things right. We have written about this earlier in the book, but it bears repeating here. Too many managers think it is a sign of weakness to admit a mistake. On the contrary, it is a sign of strength. Who in their right mind believes their manager is incapable of error? Managers who do not admit mistakes undermine their moral authority.

Adhere to your principles even when it is difficult, costly, and painful. We have shining examples of this. To name just a few: Mohandas Gandhi; Abraham Lincoln; Socrates; Nelson Mandela; the demonstrators in Tiananmen Square; Dr. Martin Luther King, Jr.; the protesters who crossed the Edmund Pettus Bridge in Selma; and Rosa Parks. You can add your own examples to the list. These kinds of role models inspire people to action through their moral authority. We would all do well to emulate their example.

Research has established that the impact of moral authority on organization culture extends beyond your personal experience as a manager. It drives measurable business results.¹ Economist Luigi Guiso and his colleagues analyzed data from 385 firms. The vast majority of those firms advertised values on their websites related to integrity, but those advertised values had no impact on business results. What did influence business results were employees' perceptions of management integrity to those cultural values.

They studied workers' ratings on two statements related to management integrity:

1. Management's actions match its words.
2. Management is honest and ethical in its business practices.

Higher levels of perceived integrity based on those statements were correlated with better business outcomes—higher productivity and profitability, better industrial relations (less unionization), and greater attractiveness to potential job applicants.

As a manager and leader, you are “management” in the eyes of your organization's employees. Your moral authority drives their perceptions not just of you as an individual but of your company's culture and its management as a whole. Those perceptions connect to measurable business outcomes.