How Companies Thrive When
Their Core Values Sing
In a speech given at the American Accounting Association's annual meeting in 2003, Arthur Wyatt describes in detail, with particular reference to Anderson Accounting, how the majority of big accounting firms' adherence to their professional core values slowly eroded over a period of 30 years. The auditing divisions of these firms became less and less central as other more profitable consulting functions moved to the forefront.
As a result, Anderson and the other big firm's emphasis shifted from strict accounting professionalism to generating new business and making profits. In an effort to hold their own financially within their own firms, the accountants gradually made more and more compromises with their clients. Anderson's Enron accounting disaster was the result of a slow, thirty-year build up, Wyatt said.
Wyatt reminds his audience that in the 1970's "reputations were gained, in part, from an accounting firm's policy of taking a tough stance on interpretation of accounting standards." Thirty years ago, Anderson actually resigned from a large railroad engagement because "the firm disagreed with a particular accounting principle that was accepted in that industry." Later, Anderson did the same with all its savings and loan clients because it took issue with an industry-accepted accounting principle involving deferred taxes. Hard to believe, isn't it?
What happened in the accounting industry is a good example of how a strong, vital connection to core values, both for a whole profession and for a particular company, can slowly fade into the background and be made to seem irrelevant to current market realities. It doesn't happen all at once, there are no smoking guns. A core values entropy process usually takes place subtly and slowly. One small compromise with a core value becomes the basis for the next small one, and so on.
There is only one way that I know of to prevent this insidious decline. And that is for a company to commit to making its core values sing as clearly as possible in every phase of its business.
Do you know the core values of your business or organization? If you do, then I'd like you to give them the following reality check. Read each of your company's core values one at a time, and ask the following question after each one: In what ways do I actually experience this core value regularly and consistently being brought to life throughout the entire organization?
If you could think of several ways for all of the core values, you probably love working for your company. My experience is that people's wholehearted commitment to who they work for decreases as the ratings on this question go down. What tends to happen in too many organizations is that some Founding Fathers identified the company's core values a long time ago at a strategic planning retreat, and then they were put into gold frames and hung in hallways where they gather dust.
I categorize the audibility (ability to be heard amidst the routines and crises) of a company's core values in this way:
So my point is that there's a lot more to the significance of core values than the process of identifying them. That's just the first step. After that, they need to be brought to life, to sing as it were, by creatively expressing and applying them. Core values should be inspiring all the subsystems of a company, from recruitment to performance evaluations, compensation and rewards, work processes, and customer service. How core values are applied needs to be regularly reviewed and updated. The core values themselves don't change, what changes is how they are made visible and tangible to employees and customers.
So why is this so important? Because the strength of a company's perceived trustworthiness and integrity level is directly related to how well the company aligns its core values to its systems, structures, and cultural practices. Whoever identified a company's core values went out on a public limb by doing so - from that moment on every future employee and customer will be judging the company's trustworthiness and integrity on how they personally experience the way the company walks its core values talk.
If employees consistently experience a high degree of correlation between what happens day-to-day at work and its espoused values, then employee commitment stays very high. The same is true for customers. It's not hard to see how this benefits the bottom line. The company becomes an employer of choice while customers remain loyal.
I recently heard William McDermott, CEO and President of SAP America, Inc. participate in a roundtable discussion on this very topic. He stated that SAP America, the world's largest business solutions software provider, has a 0% voluntary turnover rate (industry average is 25-30%, he said) and a sustained profit margin of 40% at a time when industry profit margins have been flat.
He attributed this success to SAP America's commitment to making their five core values totally align with all their systems and structures. One of their core values is corporate citizenship which means volunteerism and community involvement. For instance, new employee orientation focuses more on the company's core values than the actual job that the person was hired to do.
In support of this value, all SAP America employees must commit to performing a certain number of community volunteer hours which they can choose from a wide menu of opportunities. Employee's annual bonuses are linked to their fulfilling this commitment. Employee job performance, including how they're doing in their volunteer assignment, is evaluated quarterly, not annually. At SAP America, promotion depends on successfully following through on community involvement.
McDermott said that he attributes a large degree of SAP America's zero voluntary turnover rate to their commitment to volunteerism. People just feel good doing it and they want to stick around even though they may have plenty of job possibilities elsewhere. Employees' respect for the company's alignment between its stated core value of corporate citizenship and the actual practice of it is immense, he said.
He also pointed out that there is a direct connection between their superb sustained bottom line and SAP America's commitment to giving back to the communities where they do business. "If you want to do well and at the same time do good, you become an employer of choice," McDermott said.
Core values can shrivel and die from neglect. The smart thing for any business to do is to periodically revisit its core values with a "beginner's mind." Forget you know anything about them. Start all over getting to know them. Are these four or five values still the ones we believe in and aspire to? Are they serving our people, our customers, the community? If not, perhaps they need to be updated or revised.
If yes, then review every structure and system with an ear towards how well the core values can be heard singing in each system. Start with recruitment and hiring practices and proceed from there. Ask these questions:
Anderson Consulting is a poster child for what can happen to a company that allows the bottom line to take complete precedence over its core values. It might work for awhile. SAP, America is one of many companies who have discovered it really pays when everyone hears the voice of their core values on a daily basis.
For more free online information about trust and integrity in business, go to Phoenix Consulting Associates, www.phoenixleadership.com, or call Joe DiSabatino at 301-906-0623.
Many more articles in Creative Leadership in The CEO Refresher Archives