The Value of Values: More Than Just a Statement
Dissecting the Role of Corporate Values in Shaping Business Culture and Performance.
Here's what I want to share this week:
Boeing is in the news again because of safety concerns regarding its 737 Max plane. This is a company that has SAFETY as one of its corporate values. It makes sense, of course, for Boeing to publicly laud safety. Any accidents when flying have enormous consequences and often end in the unfortunate loss of life. The passengers aboard an Alaska Airlines flight early in 2024 escaped uninjured, although seriously shaken, as part of the fuselage fell away. But writing you value something on your corporate website and the actual reality of the way things get done in your organisation often differ (wildly). Unfortunately, Boeing doesn't appear to have learned from the tragic accidents in 2018 and 2019 that killed 346 people. Safety is perhaps still an aspirational rather than a core value for the company.
Here in the UK, we have a massive miscarriage of justice in the news because of the inquest into the Post Office and its flawed implementation of the Horizon accounting software.
What has already become apparent from the enquiry is a business culture that lacks ethics, avoids responsibility, shuts down criticism, bullies and exploits those without powers and fails in its duty of care to its employees. The senior Post Office executives refused to listen to feedback about problems with the system with the result that lives were ruined as families were bankrupted because subpostmasters (who are self-employed and run brank post offices under contract for the Post Office) were blamed for missing funds. The evidence of a problem with the system kept mounting. Still, the people in charge wore blinkers and only listened to those closest to them who said there wasn't any issue.
These real-life stories are two examples of poor management, weak leadership, dubious cultures, and ways of doing things that do not meet stakeholders' expectations. This brings me to VALUES - specifically corporate values (again). I last wrote about this topic four years ago. It feels appropriate to revisit, as values are still paraded by organisations as reasons to be proud to work long hours for them and critical ways that this organisation is different and better than the competitors. But has the gap between corporate marketing and the workplace way of doing things incrementally grown into chasm?
Corporate Values - Opposing Views
"What is the value of corporate values?"
Was the question posed by Lucy Kellaway, writing in the Financial Times back in 2015. For me, two key points jump out from her evergreen content. First, she reviewed the values of the FTSE 100 companies. Eighty-three had an explicit statement of values, while 17 had none. Guess what? The 17 valueless company share prices had outperformed the others in the FTSE 100 index by approximately 70% over the past ten-year period.
The second point is the (unscientific) test that Lucy Kellaway had carried out on a group of executives from well-known UK companies. Could they recognise their corporate values when read out one after the other? Unsurprisingly, only 20% of the executives correctly identify their company's values.
So basically, values are valueless because 1) they don't help you outperform competitors and 2) more often than not, they become words on a page (or website), not drivers of desired behaviour.
So, we have one bookend on the value of values. What is another?
Values help set a company apart from the competition by clarifying its identity and serving as a rallying point for employees. An organisation's values and the corporate brand are closely aligned. Think of the most successful or admired companies, and you will think of their brand. A company's brand represents the perception of a company, from its reputation for quality and customer service to how innovative it is or its impact on the environment.
A strong brand built on a foundation of strong organisational values will not only increase the value of the company by helping it gain new customers or retain loyal customers. It will also provide employees with direction and motivation by telling the company's story and mission.
But to achieve this list of positive impacts, the company values must be inconvenient (at times).
What do I mean?
Paraphrasing the excellent Patrick Lencioni in his 2002 HBR article, Make Your Values Mean Something, "Values help set a company apart from the competition by clarifying its identity and serving as a rallying point for employees. Yet a value is something you must persevere with even if you know it might lead to a short-term outcome you don't prefer."
For values to have value a company cannot violate them, which requires discipline, persistence and consistency.
Values place restrictions on an organisation and constrain the behaviour of its people.
You must not deviate from values, even in the short-term and especially not for economic gain.
Values are the most important things that the organisation stands for. Therefore, it follows logically that it would help if you had more of them than everyone else.
The different types of values
As Lencioni says in, Make Your Values Mean Something.
If you are not willing to accept the pain that real values incur, don't bother going to the trouble of formulating a values statement.
In this excellent article, the author describes the different types of values:
Core values are the most important things the organisation stands for. You must have more of it than everyone else and not deviate even in the short term, especially not for economic gain.
Permission to play values are important but generic and not a differentiator. Examples are saying you value teamwork and collaboration when almost all modern organisations do.
Accidental values creep into an organisation over time. They are true but should not exist. This probably means a lack of discipline when hiring new talent, which eventually leads to a culture that won't serve your clients.
Aspirational values are values are not true, but you wish they were. Aspire to have them, but it is best not to pretend they exist already. Often, an organisation may need to develop a new value in response to a changing market or industry. For example, innovation is a universal aspirational value in more substantial and older organisations that are watching agile, more nimble, and smaller new entrants in the market.
Misaligned incentives that lead to accidental values
Accidental values are true but unintentional. They can be good, but they are more often than not bad. Organisations may not be aware of them as they have slowly crept into their culture over time.
Do you recognise any of these in your workplace?
Short-termism: the focus is on short-term economic gain (the next quarter)
Presentism: long hours, always-on, must be in the office or online
Uniformity: hiring people like you, from the same schools and colleges, with similar interests
Siloed: businesses don't always work together and often work against each other
Consensus: speaking up to question and disagreeing may be frowned upon, which leads to groupthink
More often than not, accidental values will arise because the incentive structure rewards them. For example, you say you value:
Collaboration but reward (through promotion and monetary bonuses) revenue brought into the firm - leads to short-termism.
Teamwork but reward individual performance - leads to silos.
Innovation but punish divergence or unexpected outcomes - leads to groupthink and uniformity.
People management but expect sales managers to have significant individual production against their names - leads to transactional outcomes.
As the late Charlie Munger is famous for saying,
"Show me the incentive; I'll show you the outcome."
Do your incentives truly align with your desired behaviours? On a scale of 1 to 10 (1 is low, 10 is high), what honest ranking would you give? What can you do to raise the score by 1 or 2 points?
📫 - A quote that I am currently pondering
"The temptation to draw tangent lines to sine waves seems universally irresistible."
Doomberg
How many simplistic and overly optimistic projections have you seen during your career that turn out to be tangents drawn on sine waves? Too many, for sure! You may have been guilty of doing so as well. The best way I have learned to find out if this is the case is to ask, "Why did you start the time series at that point?" Then, request a longer look back, which will expose the hidden sine wave if it exists.
🧾 - An absorbing and insightful (short) read
An insightful article on absentee leadership (one of many bad manager categories that exist)
Corporate gaslighting, absentee leaders and the emotions of work by Laura McHale. Here is a snippet to whet your appetite:
"Absentee leadership is especially sneaky in how it marginalises legitimate needs around leader presence. The experience can lead employees to blame themselves for having these needs in the first place as if they are somehow shameful or irrational. Then, if employers expect and ask their staff to manage increasing amounts of ambiguity and uncertainty, that puts the burden on individuals rather than leadership systems. It also disables inquiry and discourse around root causes and adaptive solutions for ambiguity and uncertainty."
🤔 - If you did have the answer to this question, what would it be?
What hassle are you trying to eliminate that is an unavoidable cost of success?