Weighing your choices? Our experts say the most effective decisionmakers think beyond the bottom line to balance the needs of all parties.

George joined the board of an organic products company that had recently been purchased by a private equity group. Six months later, when George became CEO, he discovered the company had been tweaking its financials to show a greater profit margin and mislabeling some of its products to increase sales. He was faced with a difficult decision: he could expose the company and send hundreds of people to the unemployment lines, or he could remove potentially harmful products from the market immediately, leaving the others to be fixed at a later date. He chose the latter. Would you?

According to Peter Roy, co-author of The Book of Hard Choices: How to Make the Right Decisions at Work and Keep Your Self-Respect (Morgan Road Books, 2006), there is no formula for making difficult decisions—what is right in one set of circumstances could be wrong in another. But in interviewing more than 30 leaders and executives, Roy and his colleague, James Autry, discovered a few key themes that should be kept in mind, whether a decision will affect three people or 3,000.

The majority of tough decisions are not about money. They are about people. “The most difficult decisions challenge your ethics and integrity. You have to act in the best interest of the company, but your choices could seriously impact other people’s lives, people you care about deeply. Those are the really hard decisions,” said Roy.

For instance, if George had decided to expose his company’s fraudulent behavior, the whole ship would have sunk. He would have proven his point and taught the private equity firm a lesson, but innocent employees would have taken the heat for others’ transgressions.

No decision is black or white. Decisions are specific not only to the circumstances, but also to the people making them. Roy states that the art of making a good decision is to find balance. “Executives get into trouble when they elevate one stakeholder above all others. They need to balance the interest of shareholders, employees, customers, and the community while staying in tune with their own values and morals,” he said. This means that all parties may be forced to make sacrifices but walk away with a deal they are at least comfortable with.

You don’t have to leave your emotions at the office door. Many executives try to play the Superman game—just the average Joe at home but action hero at work. The truth is, you are the same person in your weekend sweats as you are donning a business suit. “We found that effective leaders aren’t different people at work. Instead, they are clear about their personal values and are able to bring compassion, empathy, and good listening skills to all aspects of their lives.”

Good decisions take courage. Take David, who went to California in pursuit of the next big career opportunity at a large, planned-community developer. He was sorely disappointed to learn that the company was more interested in projects that could gain political approval than doing the right thing. It also had a less-than-desirable reputation in the community. His integrity was put to the test when his supervisor charged him with a project that could harm the environment, merely to settle an old grudge. David worked with community leaders despite getting the evil eye from higher-ups and eventually stood up in court to support a viable project, which brought the company into a positive light for the first time in years. David was tempted to leave his job many times, and his company was tempted to fire him, but he had the guts to stand up for what was right.

It is never wrong to make the right decision, even if the result isn’t ideal. You know you’ve made the right decision when you can sleep at night. Tom, a fighter pilot in the Air Force during the Cold War, needed to test the flying skills of a fellow officer who made it very clear he was on track to become commander, and failing this test would ruin his career. When the officer missed several checkpoints, Tom flunked him. Years later, Tom was up for early promotion, but received a negative evaluation by his former trainee who had also moved up the ranks. He lost the job with an unsettling explanation: “What goes around comes around.” Tom’s career was thrown off track, but he slept soundly knowing an unqualified pilot was not putting innocent lives in danger.

Ethics is just a word. Anyone can claim to have strong ethics—let’s recall Enron, Tyco, and World-Com. They flaunted the words integrity and morals, yet they did not back up their statements with actions.

Tim led the turnaround of a tile manufacturing company by first establishing an environment of respect and trust. He made his expectations for behavior clear to all employees, so when a high-performing manager made a racist comment, Tim didn’t think twice about firing him. At the time, the manufacturer was struggling to keep its head above water, and Tim’s colleagues questioned his actions. To him, racial comments were “fundamentally contrary to respect” and he would not tolerate them, regardless of whose mouth they came from.

Walking the talk has the greatest impact. When George took over as CEO of the organic products company, he wrote a letter to employees outlining not only what he expected from them, but what they could expect from him. In addition, he made a list of simple demands, including “don’t whine, don’t gossip, and come prepared to meetings.” Of course, some employees found it harsh, but others saw George with a whole new respect and rallied behind him. When he set a goal to have all products labeled correctly within six months, employees gladly worked round the clock and got the job done.

“It was brilliant,” said Roy. “He created a two-way line of communication: here’s what I expect of you, and here’s what you should expect of me. If I don’t live up to the standards I’ve set, you can question me the same way I’ll question you if you don’t live up to them.”

Roy has found that communicating important messages like George’s requires repetition and multiple modes of communication. “Just because you say something once in an e-mail doesn’t mean everyone understood it or is going to remember. I advise executives to speak, write, and repeat their expectations and values every chance they get and live up to them. Walking the talk sends the most powerful message of all.”