Stephen Covey makes millions by selling a simple doctrine: You're the one responsible for your fate.
By Elizabeth Fenner

(FORTUNE Magazine) – LOVE HIM OR HATE HIM, you must admit that Stephen Covey is a phenomenon. In 1989 this former Brigham Young University professor wrote The 7 Habits of Highly Effective People, a book that describes how to solve personal and professional problems by becoming "principle-centered." The book has sold 15 million copies and has been translated into 38 languages; it is still on the Wall Street Journal's business bestseller list. Covey, 72, is a star on the lecture circuit, earning millions from his speeches on leadership. He's also vice chairman of FranklinCovey, a publicly traded Salt Lake City consulting firm with nearly 1,500 employees in 95 countries and $307 million in annual sales. Now Covey is back with a new book, The 8th Habit: From Effectiveness to Greatness (see excerpt following this story). In late October, assistant managing editor Elizabeth Fenner asked him a few questions.

After The 7 Habits was published in 1989, people were running around writing mission statements and talking about being moral at work. Since then, we've entered arguably the least moral period in the history of American business. What happened? Were people just not listening?

Many were, but a lot weren't. I do think there has been an increased emphasis on trying to build trust inside organizations in order to get quality up and costs down and get more innovation. A lot of people and organizations haven't really learned how to do that well. It requires more change in organizational structure and systems and in thought processes than many people thought. You've got to build the principles right into the structures and the systems in order to make them sustainable. It does take time for organizations to do this. Many companies have made progress. There's been a tremendous success with a lot of the divisions at GE, and there's been success at Toyota, with building a kind of philosophy of empowerment.

Why do we need an eighth habit--"Find your voice and inspire others to find theirs"?

Because of the movement into the Knowledge Worker Age. It's a whole different reality. Probably 70% to 80% of all the value added to goods and services today comes from knowledge work. Twenty years ago it was only maybe 20% to 30%. That to me is the most significant reason for a new paradigm, a new way of thinking about leadership, so that you have a higher level of empowerment throughout organizations so that people can essentially find their voice and align it with the voice of the organization.

What's the biggest problem in large companies today?

People are not on the same page regarding the top priorities. They really aren't. It's amazing how confused and distracted and misdirected so many people are. Because of that, you have people focusing on urgent things that are really unimportant. This results in the disempowerment or alienation of workers. Their hearts and minds aren't engaged or committed. The net effect is that there are lots of low-trust cultures and unionism and protectionism and turfism that ultimately will reflect itself in performance in the marketplace.

Are you suggesting that following the eighth habit will cause unions to vanish?

If they got an alignment of the people's voices with the voice of the organization, and the trust was high, either there would be no need for unions or they would change their character, becoming more of a partner in the management process.

Do you have any examples of how the eighth habit has transformed a company?

Well, The 8th Habit is not coming out until next week [Nov. 9]. So in terms of the actual impact of The 8th Habit material, it's too soon to answer that. But in terms of the idea of empowerment, and distributing the leadership throughout an entire organization, this is happening among the more progressive companies throughout the whole country and throughout the world. Every time I see high-trust cultures, I see a lessening of adversarialism. [Car company] Saturn, one of my former clients, developed more of a partnership, and it's a lot less adversarial and it affected their whole organization.

Can you really expect a receptionist or a coal miner to have the same commitment and passion as the top executives?

I tell a story about working with janitors, which is considered a pretty low-end job. We asked the janitors' supervisors: Who does the planning of the janitors' activities? "Well, we do." Who selects the materials they use for cleaning and so forth? "We do." Who evaluates the performance? "We do." Little by little, we started transferring more of the responsibility of the supervisors to the janitors--to interview the supplying organizations, to come up with the criteria of cleanliness, to come up with their own work schedules, to evaluate their own performance. They were quite simply empowered and trusted more. And over a period of a few months they became really close-knit. The quality had gone up considerably, and morale had gone up tremendously.

How do you feel about performance reviews?

It's a repugnant process. It's insulting to people and unnecessary. I'm more in favor of open accountability against previously decided criteria that everyone agrees upon. Light is the greatest disinfectant in nature and also in organizations. If you have real-time information, against the goals you've established together, then people can evaluate their own performance, and you can become a source of help to them.

You talk about the need to treat employees as people rather than things. How do you feel about outsourcing jobs to other countries? Doesn't it treat people as things that are disposable?

If you're up against global competition, you go wherever you can find core competency. Sometimes if you're going to really compete, [outsourcing] will happen. But that doesn't mean you don't constantly do everything you can to invest in your own people and involve them in the decisions. Outsourcing is inevitable, and I don't think it's necessarily treating people like things.

What's the best-led company in the country right now?

I don't know. But I'm very impressed with the empowerment that the hotel chain Ritz-Carlton has. They are extremely well run and an extremely empowered organization. Southwest Airlines is another example.

Do you use the eighth habit with your family?

The idea of finding your voice and inspiring others to find theirs is the perfect illustration of the responsibility of a parent. This has been a huge area that [my wife] Sandra and I have worked on all our lives. Each one of our children has gone in the direction of their own competency and their own passion. They've all graduated from college, and almost all have master's degrees. They're trying to raise their own children now, and each of them has a family mission statement that is focused on the values they believe in. They feel a lot of fulfillment in terms of finding their voice. But you're talking to a prejudiced dad.

How many children do you have?

I have nine children and 42 grandchildren--43 in December.

Are they involved in your business?

Yes, the kids get involved in it. My son Sean wrote The 7 Habits of Highly Effective Teens a few years ago. And it's going like wildfire through all sorts of schools and youth groups. I think it's sold something like three million copies.

What are the major misconceptions people have about you?

A lot of people think I'm idealistic and don't deal with the real world. I talk about "win-win," and people think, "Well, it's kind of a win-lose world." I try to respond by saying that in the long run, win-win is the only realistic approach. Sometimes I get criticized for not being focused enough on strategy. And I say, "That's not my expertise. My expertise is on executing strategy and creating cultures that focus on that." Some also say I'm too theoretical. My wife tells me, "Lighten up! Everything isn't seen through the lens of a paradigm." [Chuckles.] She's very intuitive.

You are a devout Mormon, and there's a fair amount of God talk in your books. How do you respond to those who say your teachings are just Mormon dogma repackaged as management advice?

I don't teach anything that is uniquely Mormon. In fact, I have taught my full presentations from the Koran, from the Bhagavad-Gita, from the teachings of Buddhism. I work on principles that are universal, like integrity, fairness, kindness, respect. I personally believe that God is the source of those principles. But I challenge anyone to find anything in The 7 Habits or The 8th Habit that is unique to my own religion.

Is there going to be a ninth habit?


When will you retire?

Oh, I don't believe in retirement. I just want to keep working. I enjoy what I do immensely. It's a good life.

Anything else you'd like to talk about?

I'm working on an interesting project to put up a Statue of Responsibility on the West Coast that would complement the Statue of Liberty on the East Coast. Do you know about Victor Frankl? He taught the concept that freedom--liberty--is only half the equation. The other half is responsibility. If we don't use our freedom responsibly, we will lose it. The statue would be put up outside Seattle, on an island, and it would be the same size as the Statue of Liberty. We hope to get it built by 2008.

TURN THE PAGE for FORTUNE's excerpt of Covey's The 8th Habit