May 4, 2010

Henry J. Kaiser: “Leading by example"

Contributed by Tom Debley, Former Heritage Archives director

Black and white sketch of Henry J. Kaiser

“Leading by Example” is the theme of national Corporate Compliance and Ethics Week (May 2-8), so it seems a good topic on which to reminisce about how Henry J. Kaiser, the co-founder of Kaiser Permanente, instilled a culture of ethical behavior in all of his businesses.

“A key attribute Kaiser demanded in any executive was rock solid integrity,” noted Mark S. Foster in his biography “Henry J. Kaiser: Builder in the Modern American West” “Kaiser occasionally taught lessons in personal integrity even to ‘outsiders.’” Foster added.

Anecdotes illustrating ethical themes often became legendary in Kaiser’s organizations, and he sometimes spared no expense in creating such stories in order to lead by example.

Once, for instance, a building inspector spotted a construction error when Kaiser was building his famous Hawaiian Village Hotel at Waikiki Beach in the 1950s. Two free-standing guest cottages were too close together by six inches, the building inspector found. Albert P. Heiner, another of Kaiser’s biographers, recalled that the inspector intimated the problem could be “settled by a small payment.”

“…All of his life Kaiser had an inviolable rule against payoffs of any kind,” Heiner explained in his book, “Henry J. Kaiser: Western Colossus.” So when the cottage issue came to Kaiser’s attention on a Friday and he was told the inspector would return on Monday, Kaiser told key executive Lambreth Hancock, “Get a crew, hold them overtime, cut off six inches from the end of that cottage, put it back together, repaint it, and get it all finished before Monday when the inspector comes back to work.”

The inspector re-measured the distance on Monday morning, repeating the task several times in disbelief. He entered Hancock’s office humbled and apologetic. “I must have been mistaken,” he said. “I’m sorry.”

Weeks later, still puzzling over the matter, the inspector asked Hancock what really had happened. Hancock finally told him, adding, “Kaiser would do that a thousand times before he would pay anybody a nickel.”

This episode came near the end of his life, but Kaiser’s reputation for integrity had been lore throughout his life.

On one of his early jobs, Foster recounted, the road building company for which he worked was caught up in a power struggle. When one faction gained the advantage, they asked Kaiser to line up with them and to “doctor” his construction reports. They wanted to make the other side look bad.

“This roused Henry’s ire,” Foster wrote. “He said that there wasn’t enough money in the world to make him do it. His supervisors advised him to cooperate, or he would be fired.”

When Kaiser’s paychecks stopped, Foster continued, “Kaiser proved his basic integrity then and there.” The 31-year-old spent the next four months meeting unfinished contracts without pay.

“He could have walked off those jobs, and few would have faulted him,” Foster concluded. Instead, “Kaiser’s conduct won him warm admirers and future customers.”

“Leading by example” was no motto to Henry Kaiser. It was a way of life.