Values as Foundation
The Role of Values in Leadership and Organizations
by Harvey Kaufman

Several months ago, I attended a conference on Corporate Social Responsibility, hosted by the marketing department of the MBA program at a local university. As you might expect --- although I didn't --- a major focus of the conference was how to use and promote social responsibility to increase profits. The case for simply "doing good" as a reflection of an organization's core values was noticeably and sadly absent from our discussion. In this article, I will focus on why it is important for companies to practice their values in action in their day-to-day interactions with their employees and customers.

While there were certainly companies who employed them effectively earlier, core values emerged as organizational mainstays in the mid-70s. This emergence followed the anti-establishment, anti-government and social protests of the 60s. Making news were Watergate, and the discovery of illegal campaign contributions to the Nixon re-election effort, the discovery of widespread bribing of foreign officials by American corporations trying to secure defense contracts, and allegations that multinational corporations (such as Nestlé) were unethically marketing their products in the third world. As a response to what was viewed as a lack of "business ethics" in American society, core values gained in popularity and prominence. Today it is not uncommon for companies to print "Our Values" on wallet-sized cards, or for plaques with the company's values to adorn their hallways and lobbies. Unfortunately, while the popularity of core values has increased, their importance and relevance to organization functioning has diminished. Too many organizations have adopted core values as a fad, rather than an integral ingredient in their success, both in their day-to-day operations and longer term strategy.

You are much more likely than not to encounter organizations with written core values. In my work with people at various levels of organizational hierarchies, I frequently ask how many of them know their organization's core values. About 30% can tell me most or all of their values. When I ask, "What is the importance of core values to the organization?" many people are at a loss to answer. They refer to Enron or Tyco and what can happen in companies that ignore their values. These companies make the strongest case possible for developing core values if they are not already in place, and promoting them if they are. But it probably would not come as a surprise to find they, and other corporations guilty of criminal misbehavior, indeed have a written set of espoused core values. While not having clearly defined and operationalized core values leaves the door wide open for any kind of behavior, just adopting them is not enough to guarantee a commitment to a standard of behavior of which your organization can be proud.

By identifying your core values and announcing them to your organization, you are saying, "I/We are accountable for these behaviors. This is what we stand for and this is how we will behave in the day-to-day course of doing business." Many leaders espouse a set of core values, but behave in a fashion that does not reflect that orientation. Instead of establishing a standard of behavior, they establish a double standard: a "Do as I say, not as I do" environment. In my experience, this is the leading cause of cynicism and discontent in organizations today.

Core values were originally intended to provide a standard that would guide the thinking and actions of all employees, from the mailroom to the corner offices. In early adopters (e.g., Hewlett Packard), it was not uncommon for the core values to be introduced and promoted by the founders of the organization as a reflection of the way they thought business should be conducted and some people still feel that for values to really be part of the fabric of an organization, the founder has to be present to promote them. This is not my experience, nor do I believe it a necessary condition for a successful values-based organization. Values that come from founders, properly modeled and reinforced, can live on in organizations through many subsequent generations of leaders.

The first tangible application of core values shows itself in hiring practices. Many companies bemoan the cost of turnover, but few conduct an analysis of "integrity of fit" of candidates during the recruiting and hiring process. A good hiring or functional manager, equipped with a set of questions to determine the consonance between the candidate's values and the organization's values, will make a much better choice than the manager considering credentials alone about whether or not the candidate will work well in that company's environment. Integrity of fit reduces the likelihood of friction between the employee and organization, turnover, and time consuming and costly employee relations work later on.

The second place values play an important organizational role, is in helping to set direction. In conjunction with mission and vision, values help form an organization's identity and culture. Leadership must align around a set of behaviors by which they will conduct their business, communicate them verbally, and demonstrate them behaviorally. While there are many opportunities for leaders to be inclusive and egalitarian, when it comes to setting the example for what success looks like in an organization, all eyes are on them. When leaders delegate this responsibility, it is tantamount to abdicating a core element of their role and sending the message to the organization that the leaders are unwilling to be held accountable for their behavior and are operating a "we'll make it up as we go along" culture. In the best cases, organizational leaders are acutely aware of how they demonstrate the organization values and reinforce them in all their interactions with people on a daily basis. These behaviors, on display for everyone to see, become normative models for all others to emulate.

Clearly defined values provide critical assistance in decision making, particularly for leaders who are not at the very top of the organization. One of the biggest challenges for middle managers is making decisions that can stand up to scrutiny and the second-guessing of stakeholders who don't reap immediate benefits from those decisions. Under the right conditions, decision making can come virtually to a halt, as managers seek approval and advice from those stakeholders who live higher up on the food chain.

Naturally, many of these stakeholders have conflicting interests, and their advice is too often influenced by those interests as opposed to what the best outcome would be for the organization. Of course, what is good for the organization is reflected in its values. Any decision maker, at any level in an organization, who makes decisions that align with the organization's values will be able to justify a decision to any other stakeholder in that organization (and will derive the fringe benefit of being able to sleep better). While alignment does not guarantee their decision will be implemented, it does ensure they will be able to answer the second guessing, and stand behind any decision they make.

Finally, values have a relationship to an organization's strategy. Strategy is the plan leaders put in place to achieve their mission.(1) As leadership teams conduct strategic planning, they rightfully focus on how well they have performed against their goals. I have worked with leadership teams who, in assessing their level of success or in thinking about adjustments to their strategy for the coming year ask questions like, "What is our competition doing about this? What are the political ramifications of that move? Is that the most profitable or expedient way to get this done?" What I hear much less often is, "Did we do this in a way that was consistent with our core values?" That is the question more executives should be asking themselves and encouraging leaders in all parts of their organizations to be asking.

While core values that are a true reflection of the best leadership has to offer can and will last a very long time, they are not immutable. Industries and societies evolve over time, and this can have an effect on the relevance of an organization's values, and cause leadership to re-evaluate their values. Whatever changes are made to the values at these key transitional points (and they don't come often), it is critical that the changes accurately reflect leadership's beliefs about how their organization should conduct its business. While changes in core values will be relatively minor, revisiting the core values and questioning whether they are still relevant, indicates a willingness on the part of leadership to look at its behavior to make an assessment of their own integration of the desired behaviors.

Changes in the core values should reflect the actual explicit behaviors favored by the organization to achieve success ethically. In my experience, when leadership teams embark on such a journey of honest self-exploration, it is their behaviors, and not the core values, that are most likely to change.

Action: Align espoused values with strategic decision-making and day-to-day customer interactions.

Reference

(1) Missions are also too easily forgotten. Written on a piece of paper, a laminated wallet sized card or posted on walls around the company, most employees cannot recite the mission --- and even when reading it, cannot say what it means to them or explain how their work contributes to it.


Harvey Kaufman is a Consultant with Interaction Associates, Inc. and is lead designer of Interaction Associates' new workshop, "Managing with Impact." His expertise in helping organizations overcome resistance to change has resulted in the development of high performance work systems. Some of his clients include: America Online, Library of Congress, Hewitt Associates, MCI and Motorola. Visit www.interactionassociates.com for additional information.

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Copyright 2004 by Harvey Kaufman. All rights reserved.

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