A Primer on Corporate Values

Abstract

Corporate values articulate what guides an organization’s behavior and decision making. They can boost innovation, productivity, and credibility, and help deliver thereby sustainable competitive advantage. However, a look at typical statements of corporate values suggests much work remains to be done before organizations draw real benefits from them.

In a Word Corporate values articulate what guides an organization’s behavior and decision making. They can boost innovation, productivity, and credibility, and help deliver thereby sustainable competitive advantage. However, a look at typical statements of corporate values suggests much work remains to be done before organizations draw real benefits from them.

Some Facts on Corporate Guidance Systems

Advertising strong, positive corporate values is à la mode.¹ Why? In a globalizing world, meaningful values can, for example, instill a sense of identity and purpose in organizations; add spirit to the workplace; align and unify people; promote employee ownership; attract newcomers; create consistency; simplify decision making; energize endeavors; raise efficiency; hearten client trust, loyalty, and forgiveness for mistakes; build resilience to shocks; and contribute to society at large.²

However, corporate values can backfire with glare when management or personnel fail to live up to the messages, a sure recipe for disenchantment or cynicism among clients, audiences, and partners, not to forget personnel itself.³ In most such cases, the cause of tension is that organizational goals, principally couched in financial terms, often do not reflect (when they do not conflict with) the corporate values propounded and the underlying organizational culture from which such values are supposed to spring. Lest they become debased, corporate values should not be platitudes, orders of preference expressed in operational jargon, or even simple aspirations.⁴ They should not be politically correct. To serve as real guidance systems , living values that spring from integrity , morality , and ethics must be internalized by personnel⁵ and reviewed at intervals to maintain relevance in changing contexts⁶; that rarely happens.

In The Neuroscience of Leadership, Rock and Schwartz (2006) share a few home truths on organizational transformation. They bear relevance to the subject of these Knowledge Solutions since change is what the introduction of corporate values usually purports, at least from the outset. According then to David Rock and Jeffrey Schwartz:

• Change is pain Organizational change is unexpectedly difficult because it provokes sensations of physiological discomfort.

• Behaviorism does not work Change efforts based on incentive and threat (the carrot and the stick) rarely succeed in the long run.

• Humanism is overrated In practice, the conventional empathic approach of connection and persuasion does not sufficiently engage people.

• Focus is power The act of paying attention creates chemical and physical changes in the brain.

• Expectation shapes reality The preconceptions of people significant impact what they perceive.

• Attention density shapes identity Repeated, purposeful, and focused attention can lead to long-lasting personal evolution.

The Meaning of Corporate Values

People don’t resist change. They resist being changed!

—Peter Senge

To note, corporate values do not equate with organizational culture : that describes the attitudes, experiences, beliefs, and values of the organization, acquired through social learning, that control the way individuals and groups in the organization interact with one another and with parties outside it.⁷ Corporate values are first-order operating philosophies or principles, to be acted upon, that guide an organization’s internal conduct and its relationship with the external world.⁸ (To be clear, corporate values do not drive the business; however, if they are imbedded in business processes—and made credible to skeptics—they inspire the people who deliver the business, with a healthy balance between work and life and between the short term and the long term.) The ultimate glue that bonds the best organizations, they are usually formalized in explicit—often espoused, not just embedded—mission statements, tag lines, and branding material. Important elements are content and context.⁹

Box 1: The Corporate Values of the United States National Park Service

Shared Stewardship—We share a commitment to resource stewardship with the global preservation community.

Excellence—We strive continually to learn and improve so that we may achieve the highest ideals of public service.

Integrity —We deal honestly and fairly with the public and one another.

Tradition—We are proud of it, we learn from it, we are not bound by it.

Respect—We embrace each other’s differences so that we may enrich the well-being of everyone.

Source Author

Drawing Real Value from Corporate Values

The W. Edwards Deming Center for Quality Management has shown that organizations waste up to 50% of productive time through lack of trust (Whitney 1995), a fundamental intangible that corporate values can certainly promote. In view of that, beginning about 10 years ago, some organizations have engaged in values-driven management improvement efforts, including values training, appraising management and personnel on their adherence to corporate values, and employing organizational development specialists to help them understand how their corporate values affect performance . Have any trends emerged from their activities?

Usefully, in 2005, the Aspen Institute and Booz Allen Hamilton executed a major global study of corporate values (Kelly et al. 2005). They surveyed senior management in 365 companies in 30 countries in five regions, almost one-third of whom were chief executive officers or board members.¹⁰ The fundamental findings of the study were the following:

How can an enterprise build capabilities, forge empowered teams, develop a deep understanding of customers, and—most importantly—create a sense of community and common purpose unless it has a relationship with its employees based on trust and caring?

—Robert Waterman

• Ethical behavior is part of a company’s license to operate Of the 89% of companies that had a written corporate values statement, 90% singled ethical behavior and integrity as an operating philosophy or principle. Further, 81% believed that formal statements of corporate values were important to reinforce these.

• Most companies believe values influence two important strategic areas—relationships and reputations—but do not see the direct link to growth Commitment to clients was a value included in corporate statements in 88% of companies. Substantial majorities also categorized employee recruitment and retention and corporate reputation as both important to their business strategy and strongly affected by values. However, although companies said that such values as adaptability, productivity, and product quality and innovation are important to strategy, few thought that these values directly affect revenue and earnings growth.

• Most companies are not measuring their return on values In a business environment increasingly dominated by attention to definable returns on specific investments, most senior executives were surprisingly lax in quantifying a return on values. Less than 40% volunteered they can directly link revenue and earnings growth.

• But financial leaders are approaching values more comprehensively Companies that reported superior financial results emphasized values such as commitment to employees, drive to succeed, and adaptability far more than their peers. They were also more successful in linking values to the way they run their companies: a significantly greater number reported that their management practices were effective in fostering values that influence growth, and they were more likely to believe that social responsibility and corporate citizenship as well as environmental responsibility have a positive effect on financial performance.

• Values practices vary significantly by region Asian and European companies were more likely than North American firms to emphasize values related to the corporation’s broader role in society, such as social responsibility and corporate citizenship and environmental responsibility. The manner in which companies reinforced values and aligned them with their strategies also varied by region.

• The tone of the chief executive officer matters As many as 85% of the respondents reported their companies relied on explicit chief executive support to reinforce corporate values. And 77% claimed it was the most effective practice for reinforcing the company’s ability to act on its values. (Respondents considered it so irrespective of geography, industry, or company size.)

The Strategic Value of Values

Kanter (2009), in a book concerned with the global crisis of business and American-style capitalism, echoes Julian Birkinshaw’s view that new business models must arise: specifically, in the corporate sector, these are to be models that serve society in addition to rewarding shareholders and employees. She sees strong potential synergy between financial performance and attention to community and social needs, unique competitive advantage from embracing the values and expectations of a new generation of professionals, and growth opportunities from stressing corporate values and restraining executive egos when seeking strategic alliances and integrating acquisitions. Drawing from her book, the range of advantages that values-based organizations tap through their strategic use of operating philosophies or principles are:

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

—Warren Buffett

• Competitive differentiation An emphasis on corporate values builds specific lines of business and strengthens an organization’s brand. Success means that competitors may start emulating particular initiatives but that merely raises the bar: a clear sense of societal purpose provides a wellspring that can produce the next wave of activity. Competitors who attempt to copy initiatives without underlying corporate values will always be behind the vanguard.

• Public accountability via end-to-end responsibility Corporate values help meet the public’s request that organizations should know, care, and communicate about all aspects of their products and services—from sources to applications to ultimate disposal. Greater contact with stakeholders across the value chain builds an organization’s brand and triggers opportunities for innovation.

• Rationale for long-term thinking Corporate values that include operating philosophies or principles of sustainability help organizations create continuity. They become values-based organizations that have meaning¹¹ beyond their current bundle of assets or lines of business. Such values help them avoid “short-termism” and make choices with an eye on the future.

• Common vocabulary and guidance for consistent decisions Corporate values are an essential guide to organizations that need to make fast decisions and take quick action in far-flung or differentiated operations. Their clear articulation helps personnel select among alternatives in a consistent manner.

• Talent magnets and motivation machines Talented people are mobile but, essentially, they are attracted (and faithful) to organizations whose corporate values match their key concepts and ideals. (An organization’s brand and reputation affect its ability to attract the right people.) If organizations are networks of people working toward the same end, corporate values should help ensure that personnel are proud of what they are doing and are motivated by that.

• “Human” control systems—peer review and a self-control system Belief in corporate values strengthens peer responsibility for keeping one another aligned; it also generates self-guidance and self-policing. Such human control systems do not work perfectly but they reduce the need for rules and help make people feel free and autonomous¹²: personnel become willful actors who make their own choices based on values they support.

Box 2: A Corporate Values Start-Up Kit

• Do you know what your organization’s corporate values are? Is the potential tension between multiple aims explicitly acknowledged? Is the language original or reworded from elsewhere? Is it memorable? Are appropriate meanings clear, without restricting the scope of the values? Does a psychological contract suggest an unwritten set of mutual expectations between the organization and its personnel? Has psychological safety been created?

• How did your organization identify its corporate values? Which office or department developed them? Was a formal audit of existing values conducted?

• What difference would it make if your organization really practiced its corporate values? Would you be happier at work?

• How do your organization’s corporate values show up in its operations? How are they communicated? How does your organization distinguish between its corporate values and its policies, strategies, structures, systems, and business processes? Has it drawn a learning charter citing commitment to corporate and individual actions?

• What is challenging about practicing, promoting, and living your organization’s corporate values? What are the obstacles?

• Is the behavior of your organization’s personnel measured against its corporate values through the performance management system? How are new alignments created? How are misalignments identified and corrected?

• What do your organization’s corporate values mean to you? How do they fit with your individual values? How do you express these?

• How are you practicing, promoting, and living your organization’s corporate values? How do they show up in your daily working life? In which parts are they weak or missing? What can you do differently to start living them, even when it is hard?

• What are you doing to bring your organization’s corporate values to your team?

• What support would be helpful to you and your team so that you may better practice your organization’s corporate values? To whom can you talk?

Source Author