Any organisation – any group of people working together – needs to have a shared view of what they are trying to achieve, the structures through which this will be achieved and a guiding set of operational and environmental ‘rules of engagement’ to guide behaviour and ethics. Whether these are explicit or implicit, good or bad, they will exist and they will guide how companies operate.In order to try and guide organisational behaviour and development, increasingly, companies around the world are adopting formal statements of corporate values.
These values were often entrenched in the companys ethos by the founders of the company. Most of these lists of values are fairly generic and common sense, including such items as honesty, integrity, trust, respectand other basic human decencies. A few of them, however, go further than just the obvious and common sense, and add values that are specific to the functioning of the company.
But there are three major problems:
1. Values that are not really values
Many of the values on corporate lists have more to do with brand, customer service and market reputation than actual guiding principles for organisational behaviour. They are often mainly stated as business outcomes, rather than human attributes. Most executives appear to link values to branding, rather than to bottom line business performance.
For example, Xeroxs values include: customer satisfaction, quality and excellence, premium return on assets, use of technology for market leadership, valuing employees, and corporate citizenship. This is not an unusual list for a multinational corporate. But these are not so much values as they are business imperatives. And they may even be self-contradictory (if we value employees are we allowed to retrench them when were not getting a premium return on assetsand shareholders are demanding greater returns?).
The reason most corporates dont focus on behavioural values is that it is much easier to measure ROA (return on assets) or ROI (return on investment), than ROV (return on values). In fact, I do not know of a company that measures ROV (return on values, or something equivalent). In a recent survey by the American Management Association, only 63% of Executives surveyed indicated that their companies even made an attempt to reward people based on their adherence to corporate values.
But that raises the interesting question of how to measure your values. True values are not, and cannot be, objective. Its therefore absolutely essential to decide up front who gets to measure them, and what yardstick will be used.What information will they need, and how often will they do an analysis? And what will you do with the feedback?
2. Incentivising adherence to the values
If companies truly believed their values, they would incentivise adherence to them, and punish any deviance from them. While many companies have vague scorecards that measure how their people stack up against some ofthe business performance linked values, very few actually reward staff for brave ethical behaviour.
In our consulting work, we find that only a very few of our corporate clients refer regularly to their values, or use their value statements to guide behaviour in meetings and interactions, both internal and external. One of the best in this regard is Investec (http://www.investec.com/GroupLinks/AboutInvestec/MissionStatement) a bank, focusing on high end private clients. Its not just their hard hitting statement of values, but also our knowledge of how these values are applied and referred to during meetings. Another company phrases it like this: Everyone may demand that these values be applied, and everyone’s behaviour is assessed for compliance with them.
Consider the following questions:
Quadrant I is an easy decision. Theyve got to go. Get rid of them quickly. Quadrant IV is excellent give them a raise, hold them close, keep them happy and working.
But given the choice of working with and retaining people from either Quadrant II or Quadrant III, which would you choose. This can be tough, but Jack Welch says you have no choice: you must get rid of the person who is bringing in the numbers but not living the values. Thats where leadership has to step in and make the difficult decisions.Quadrant II people can always be trained and developed. You can teach skills. You cant teach attitude, character or values.
Values cannot be imposed on a company. When doing an exercise to create a list of corporate values, most companies end up with an idealistic wish list. However, a better approach would be to identify what values actually exist in the company. These are the only ones that will actually be lived through thick and thin. Your values are what you are, not what you want to be. You can possibly have a few aspirationalvalues on your list, but these should be clearly marked as such.
In a small company, thats easier to do, as it relates to the individual founders. As companies grow, it becomes increasingly harder to ensure that employees live by the original values of the company. And the only way to change the values of the organisation is to get more people into the organisation who actually believe and live the values you want to exhibit. This is just another reason why people are our most important asset, and deserve the full attention of the senior leaders of every organisation in the world.
These values were often entrenched in the companys ethos by the founders of the company. Most of these lists of values are fairly generic and common sense, including such items as honesty, integrity, trust, respectand other basic human decencies. A few of them, however, go further than just the obvious and common sense, and add values that are specific to the functioning of the company.
But there are three major problems:
1. Values that are not really values
Many of the values on corporate lists have more to do with brand, customer service and market reputation than actual guiding principles for organisational behaviour. They are often mainly stated as business outcomes, rather than human attributes. Most executives appear to link values to branding, rather than to bottom line business performance.
For example, Xeroxs values include: customer satisfaction, quality and excellence, premium return on assets, use of technology for market leadership, valuing employees, and corporate citizenship. This is not an unusual list for a multinational corporate. But these are not so much values as they are business imperatives. And they may even be self-contradictory (if we value employees are we allowed to retrench them when were not getting a premium return on assetsand shareholders are demanding greater returns?).
The reason most corporates dont focus on behavioural values is that it is much easier to measure ROA (return on assets) or ROI (return on investment), than ROV (return on values). In fact, I do not know of a company that measures ROV (return on values, or something equivalent). In a recent survey by the American Management Association, only 63% of Executives surveyed indicated that their companies even made an attempt to reward people based on their adherence to corporate values.
But that raises the interesting question of how to measure your values. True values are not, and cannot be, objective. Its therefore absolutely essential to decide up front who gets to measure them, and what yardstick will be used.What information will they need, and how often will they do an analysis? And what will you do with the feedback?
2. Incentivising adherence to the values
If companies truly believed their values, they would incentivise adherence to them, and punish any deviance from them. While many companies have vague scorecards that measure how their people stack up against some ofthe business performance linked values, very few actually reward staff for brave ethical behaviour.
In our consulting work, we find that only a very few of our corporate clients refer regularly to their values, or use their value statements to guide behaviour in meetings and interactions, both internal and external. One of the best in this regard is Investec (http://www.investec.com/GroupLinks/AboutInvestec/MissionStatement) a bank, focusing on high end private clients. Its not just their hard hitting statement of values, but also our knowledge of how these values are applied and referred to during meetings. Another company phrases it like this: Everyone may demand that these values be applied, and everyone’s behaviour is assessed for compliance with them.
Consider the following questions:
- If we value staff development, how much money and time do we allocate to this every month?And is it the staffs decision about whether they have been developed/valued or not?
- If we value innovation, do we encourage experimentation, and therefore expect (and measure and reward) the failures that will go along with it?
- If we value honesty, what do we do to someone who withholds information from colleagues or clients?Do we reward the people who through honesty, reduce profitability?
- If shareholder wealth creation is never a stated core value, why do we place it at the top of our company priority lists?
- If living your values means that you will lose money for a period, or have a competitive disadvantage, will you stick by them?
3. The Personality (and Behaviour) of the CEO/MD
The final major problem with living out corporate values is that every piece of research done on values indicates that one of the single most important factors is the involvement and attitude of the CEO. For example, in a 2004 Booz Allen Hamilton and Aspen Institute survey of senior executives across 30 countries, 85 percent of the respondents said their companies rely on explicit CEO support to reinforce values, and 77 percent say such support is one of the most effectivepractices for reinforcing the companys ability to act on its values.
Ultimately, the CEO shapes the company, not just by corporate directives and organisational design, but also by sheer force of personality and character. To ensure that your corporate values are lived out, you need to be absolutely dogged about ensuring that your leaders have the values you espouse (rather than simply acknowledge them or aspire to them).
Living the Values
Jack Welch, former CEO of General Electric used a very simple matrix to explain how values and work environment connected at GE. He talked about two ways of thinking of employees: whether or not they bring in the numbers(i.e. their performance and contribution), and whether or not they live by the values of the organisation.
| Has the values | ||
| Does not have the values |
But given the choice of working with and retaining people from either Quadrant II or Quadrant III, which would you choose. This can be tough, but Jack Welch says you have no choice: you must get rid of the person who is bringing in the numbers but not living the values. Thats where leadership has to step in and make the difficult decisions.Quadrant II people can always be trained and developed. You can teach skills. You cant teach attitude, character or values.
Values cannot be imposed on a company. When doing an exercise to create a list of corporate values, most companies end up with an idealistic wish list. However, a better approach would be to identify what values actually exist in the company. These are the only ones that will actually be lived through thick and thin. Your values are what you are, not what you want to be. You can possibly have a few aspirationalvalues on your list, but these should be clearly marked as such.
In a small company, thats easier to do, as it relates to the individual founders. As companies grow, it becomes increasingly harder to ensure that employees live by the original values of the company. And the only way to change the values of the organisation is to get more people into the organisation who actually believe and live the values you want to exhibit. This is just another reason why people are our most important asset, and deserve the full attention of the senior leaders of every organisation in the world.