“I believe a new set of values are necessary to take us to the next level…to be a great company, integrity must be at the core of what we do.”
David Sacks, CEO Zenefits, 2016
From day one in early 2016, the newly appointed CEO of Zenefits—a fast growing software company for HR—spoke with some force about his personal commitment to culture and values.
His lengthy and commendably frank e-mail to all staff spelled out his dissatisfaction with the present culture and how it must alter:
“Our culture and tone have been inappropriate for a highly regulated company.”
But if his heart is in the right place, will his head lead the firm to properly link culture and values?
That kind of linkage tends to escape many firms. CEOs will gladly boast about their core values and self-praise their company’s culture. Yet the real challenge remains how to turn expressed values into actual behaviour on the ground. That is, actions people can readily describe, explain, observe, discuss, measure and if necessary reward.
This is widely termed “bringing values to life, though Making Values Matter (MVM) seems more down to earth. But forget the semantics. The route to the destination has a clear and practical starting point: Adopt a meaningful set of values with which employees can identify—make sure these readily translate into daily forms of behaviour.
And where possible, involve employees in both identifying and naming the core values, rather than issuing them from high.
Next stop along the route to making values matter (MVM) is embedding them into the culture, by constantly returning to them. Sometimes they are already built in, it’s just that hardly anyone speaks about them in everyday working.
It’s at this point swathes of CEOs and their subordinates stumble. The complexities of affecting an entire culture routinely proves too much. In one well known case, for example, three successive CEOs came and went as each wrestled with cultural reform.
The more these leaders tried to make a difference, the more cynical and distrusting their employees became.
Finally, a fourth CEO arrived and made no attempt to change the culture. Instead, he spent the early days of his new role meeting people at all levels listening intently to their perspective on the current culture. He kept asking what they felt needed to change within the company. When he finally announced changes they were widely supported.
Early doubts about the present tactics of the new CEO at Zenefits have surfaced about his emphasis on radical change: How quickly can Sacks expect to alter a presumably long-standing way of doing business?
As a new CEO, Antony Jenkins of Barclays memorably declared, he needed five years to reform the culture. Notoriously, Saint Antony, as he was briefly dubbed by the sceptics, lasted only three years, before receiving his marching orders.
For CEOs the message must be “make sure YOU are fully embedded in the company before you try messing with its culture!
Next stop—create a decision framework
What exactly are values? They’re actually enduring beliefs, hard-wired into individuals and shaped by cultural context.
Merely listing them, or defining “General Principles”, may be useful, and quite fun to do, yet the results won’t readily convert into new forms of actual behaviour at work.
Rather than a prolonged process of value definitions, it’s more sensible to establish a broad analytical framework enabling people throughout an organisation to
- Adopt a common language for discussing decisions and values
- Build a culture that uses values regularly in ordinary decision making
All decisions reflect values—even the smallest, low level ones imply some kind of a trade-off between alternative actions. For example, merely leaving your desk to get a coffee implies a hidden trade-off. This might be between the benefits from a short break, versus the alternative gain from staying focused on the work.
Making values matter (MVM) is therefore all about helping employees accept each and every decision or action rests on values—even hidden ones.
Failing to properly evaluate what seem routine choices can even undermine company values and strategy. The UK payment protection insurance (PPI) scandal is a recent example of this actually occurring.
Several large banks failed to properly evaluate a decision–namely to seek profit by being less than honest with consumers. This year Santander for instance has set aside another £450m to pay compensation to mis-sold customers. Royal Bank of Scotland too has added another £500m to its PPI compensation fund.
Similarly, there’s the settlement announced in late February 2016 when Morgan Stanley agreed a fine for misleading investors in residential mortgage-backed securities, during the 2008 financial crisis.
Morgan Stanley failed to adopt a proper decision framework to tease out short and long term benefits of the actions it took towards clients. The cost: $3.2 billion in penalties. Similarly Bank of America, paid $16.6 billion in its 2014 settlement. In both cases the long-term consequences must heavily outweigh the earlier short term gains.
It can therefore prove to be a costly mistake not to have a decision framework that every employee can use to avoid costly mistakes.
Regularly drilling bank employees in values statements and codes of conduct which happens in so many firms, would not have avoided the PPI fiasco, nor the penalties suffered by Morgan Stanley and others.
Indeed, current research suggests such favoured company actions with staff undergoing sporadic values training tend to be symbolic rather than likely to affect reality. Recent research suggests around 70% of companies surveyed by Navex expect to spend even less than the previous year on training in the coming months on values and compliance training.
Similarly, in VW the choice to mislead customers and regulators over emissions ultimately came down to a failure of not teaching people how to properly evaluate the alternatives.
Hidden values behind the unethical VW decision to cheat were never fully exposed to the light of day. This might help explain the cries of anguish by several senior VW leaders at learning what had occurred under their watch.
Yet another recent example is GM’s failure over its starter motor. In a spooky echo of a similarly bad decision decades earlier by Ford over a faulty gas tank, GM executives looked only at the short term outcomes of remedying the fault. They entirely under estimated the longer term consequences, which proved both costly and traumatic.
Helping employees understand the distinction between outcomes and consequences in decision making is another stop along the way to making values matter within the culture.
Outcomes are the immediate results of a decision, the consequences are the longer term implications.
An effective decision structure using decision mapping can therefore reveal the potential differences between consequences and outcomes from a proposed decision. This approach should be taught within companies as part of promoting values and culture.
For instance, if people only consider short term outcomes—“we make money from PPI; or we fiddle the emissions data for the benefit of better sales”—the longer term consequences may never fully surface and get debated.
Yet research confirms:
This explains why values training only makes sense as part of a broader decision making process.
The whole point of decision mapping is to systematically explore: values, motivations, outcomes and consequences. This result is not a magic formula, but a way to compare, contrast and understand what’s at stake with each decision.
Had the likes of Morgan Stanley, Bank of America, VW, GM, Siemens and many companies that have suffered massive reputational hits in recent years used some form of decision mapping they might have avoided the later expensive consequences.
For example, what if VW had used decision mapping to consider the implications of the choice to hide the results of emmision testing of its cars? This worked example below is a best guess”, not an insider’s analysis!
Apart from the above, what else can leaders and others concerned to promote the right choices do to create sustainable values—that is, ones with long term importance? One key action is:
Aim to win ethical engagement from employees
Few companies though, have cracked the ethical engagement challenge. Such commitment means each person takes responsibility for ensuring the company does the right thing—that is, sustains its values in action—making values matter. It’s been estimated that less that 4% of all employees feel genuinely ethically engaged.
Each company must arrive at way of winning ethical engagement that reflects its particular needs and constraints. It’s where inspirational leadership plays such an important part and cannot readily be delegated to a technological solution.
“I don’t think there’s been a day in the office recently when we have not thought about values in some capacity, or engaged with them—even if we sometimes get it wrong.
They’re mentioned in the team when we’re talking about pitching, recruiting, making decisions or discussing marketing. I’m somewhere between being grateful for how useful values are, and feeling Value Fatigue Syndrome.”
Stuart Mackenzie, Managing Director, Maynard Leigh Associates, February 2016
While companies and their leaders that keep their values alive are critical to success, the issue still poses problems. One is the sheer fatigue which Mackenzie points out, of constantly ensuring values are driving daily performance.
This is a current concern of the US Financial Industry Regulatory Authority. In a new letter to a selection of firms it asks information about how they handle things from communicating their values across their organizations to addressing those individuals who undermine that approach.
“We are particularly interested in how your firm measures compliance with its cultural values, what metrics, if any, are used and how you monitor for implementation and consistent application of those values throughout your organization”
FINRA letter Law360, February 18, 2016
Just because people talk often about values doesn’t mean they’re necessarily being used to make decisions.
So an important part of making sure values stay alive is having an inbuilt process that checks regularly on “how are we’re making decisions”. As Coca-Cola puts it, “values serve as a behavioral compass.”
Regardless of company size here are seven key ways to tackle the challenge of making values matter
These are ways of encouraging all employees to keep taking values into account in daily work. Adopting these helps avoid the fatigue syndrome where all the onus for making values matter falls on the senior leadership.
Martin Sorrel is paid over £40 million a year to be CEO of WPM the communications company. Now that’s what you’d call an incentive! Or is it?
Incentives have a chequered history. Numerous studies, show using cash to steer people’s behaviour seldom not works for long.
Would Sorrel work any harder to communicate his company’s values if paid an extra million, or even £5 million?
Financial incentives for people to behave in a particular way have a dreadful habit of going spectacularly wrong. And formal rewards for good ethical behaviour, such as using values for making a decision, tends to be rare.
This is partly because the results are hard to nail down. Instead, companies often prefer non-financial incentives, such as public recognition like “Best Colleague”, nominations for Customer excellence” or an “Integrity in Action award.”
The role of managers and supervisors remains critical for promoting values—making sure these are alive and being used daily. Re-enforcing the behaviour of people who are demonstrating core values needs to happen in real time—that is, when the behaviour occurs.
in one study:
- 87% of employees with formal, values-based recognition programs reported feeling appreciated, vs. 78% of those without values-based recognition and 57% with no recognition at all
- 79% of employees said recognition tied to core values gave them a stronger sense of company goals and objectives
Incentives to use values should occur on the spot or soon after the event. Often this comes down to public recognition, talking about values openly and sometimes providing long-term promotion.
All employees need to grasp what their company is for. An employee who finds it hard to explain what the purpose of the company is, will certainly not be able to do so for a wider audience including clients and other stakeholders.
“To make the most money for shareholders” used to be the easy answer to “what is your company for?
This is now widely seen as too short-term and even destructive. It misses out any social responsibility beyond satisfying a relatively small group of vested interests.
When employees understand the prime purpose of their organisation they are more likely to underpin its core values with appropriate daily actions. It therefore makes makes sense to ensure the prime purpose is not taken for granted. A sound way to encourage employees to act responsibly and underpin corporate values is to make them feel that they are doing something meaningful.
This occurs when “purpose” forms part of a regular dialogue amongst employees about “why are we here?”
A recent report by the Aspen Institute in Washington DC throws further light on the destination organisations’ want to reach—namely their purpose. A serious divergence in views emerged about company purpose amongst senior executives which helps explain why building values into a culture for daily use can sometimes be an uphill struggle.
See also our recent article: “What exactly is your company purpose?
These are the policies and practices that guide a company’s everyday behaviour. It consists of rules, regulations, codes of conduct and general principles.
Potentially these can make an important contribution to making values matter. By setting out boundaries and expectations that govern how the company is run, employees can learn what is acceptable and what is not, and which values count and why.
Values don’t just just appear in a company. Nor do they automatically form part of the everyday decision process. They reflect the governance arrangements which include ownership, the board and stakeholders.
It’s important governance arrangements spell out the values that are driving the organisation and why. The “why” is just as important as the values themselves, since when employees fully appreciate the “why”, they will understand better the whole idea of being “values driven.”
So good governance must not only spell out the underlying values but ensure the right structures are in place to ensure these values are used, not merely talked about.
Good governance helps align the actions of senior leaders with the needs of stakeholders, particularly shareholders. In this way governance plays a permanent role in making values matter (MVM) and ensuring they are never taken for granted.
The importance of having a decision structure and the role of decision mapping was made earlier in Part 1.
Though often no more than a few regularly used critical questions, this device helps people stay conscious about how values affect decisions.
Here are some popular decision frameworks:
More at: Help in making ethical choices
Yet another important way to bring or keep values alive in a company is by using decision mapping. This sounds geeky and a bit theoretical. In fact, it’s a relatively easy way to systematically tease out potential outcomes and consequences from any decision or action.
However these are macro actions. To be fully useful they must be carefully focused onto specifics.
There is also the equally important contribution of making sure all company decisions are regularly put through a common filter that reflect its values and ethics. This is at the micro level within the company. Three examples of doing this are
Hiring for values
This ensures all new recruits are in alignment with the company’s core values.
Competency-based recruitment focuses on hiring people based on the below the surface competencies that cannot easily be trained. It is harder to train a person to have the same values as your organisation that to train them to do an actual job.
It’s helpful to tell the story behind each of the values and what the organisation expects in terms of behaviour based on these values.
At the interview stage, explore this further by having structured questions around each value. Don’t just ask people if they agree with them – they’ll just tell you what they think you want to hear! Instead, ask what the values mean to them & how they demonstrate them.
For example, if your values are Respect, Innovation and Accountability, use questions such as
“How do you show you respect people in your day to day life?”
“Give me an example of when you were particularly innovative in your approach”
“Tell me about what accountability means to you” etc.
Reviewing for values
Most organisations conduct some kind of assessment of employees, on a regular basis. It’s important these events take into account not just prosaic criteria such as “works hard”, “gets on well with people,” or other conventional job related factors.
Each core values comes with a set of behaviours that are measurable and specific
Leaders need to take responsibility for ensuring all assessment include an emphasis on corporate values and whether the person both understands them is takes them into account in their work.
Letting go for values
Personal values and beliefs are no reason to fire someone or let them go. But if someone cannot demonstrate company values in action in their work it’s either requires targeted training or perhaps it’s time they moved on.
Letting someone go because they don’t demonstrate company values can be tough and upsetting. Yet it’s the right thing to do if, after every effort has been made to help them understand the values and know how to use them they cannot apply them on daily basis.
It’s not hard to make decisions when you know what your values are.
Roy E. Disney
The degree to which employees are engaged with the work is now widely recognised as a critical factor in a company’s continued success.
This used to mean a great emphasis on motivating people to “be engaged.” In practice this is not something you “do” to people. Instead engagement stems from unlocking people’s natural desire to to a good job.
There are two sorts of engagement that make values matter in a company:
Basic Engagement and Ethical Engagement
The first is a normal degree of involvement which all stakeholders might be expected to demonstrate. It’s a readiness to go the extra mile, to be committed to supporting the purpose of the organisation and what it’s trying to achieve.
In contrast, ethical engagement goes deeper. This is when people feel so involved with a company and its values they are willing take responsibility for seeing its values are maintained and speaking up if they’re not.
Both forms of engagement rely on people understanding and know the core values. Recent research for example show 88% of employees who know their core values say they’re engaged, compared to 54% who say they don’t know any of the company’s core values.
Engagement has been subject to considerable attention in recent years and there is an extensive network of help for organisations wanting to tackle this issue. Ultimately though each company needs to evolve it’s own approach to promoting engagement. For example, talent management can be one effective way of narrowing down the task of building at least selected engagement.
Making values matter relies heavily on helping employees become aware of the values are and what they mean.
While an annual exercise such as the one shown here at Carlson Wagonlit can be a great way to re-enforce intentions, the aim should also be to adopt a continuous process for creating awareness.
A frequent company error is treating raising awareness as mainly an internal branding exercise. Programs involving PR and other techniques to convey key messages can be useful. Yet they are no substitute for a properly designed on-going learning experience for all employees.
For example, a company that operates to high ethical standards is one where ethics are simply “the way we do things around here.” But how do you communicate something as vague as “integrity”, or “care” so they’re both understood and embedded in all decision making?
It is simply too much to ask the senior leadership to be always fronting on communicating value awareness.
It must become everyone’s’ responsibility. The only way that can happen is by building awareness values training into the fabric of the culture.
In some companies, for instance the leadership team expects every team will meet monthly around some aspect of the values such as talking about an ethical dilemma, or debating what should be done in a particular situation.
Such meetings are monitored to see they happen and there is an onus on those who run them to report back on the contents.
The IBE guide on Communicating Ethical Values Internally is also a useful overview of some key actions to take—see panel below.
Adapted from IBE: http://tinyurl.com/zewb9bm
A strategy of continually raising awareness about values needs to deter people from switching back to business as usual mode. Some of the above can help counter this.
A particularly useful approach is the use of story telling to retain everyone’s interest about values. That is systematic encouragement to collect and share stories of the values being lived on a daily basis.
Again, many companies do this but in a sporadic and somewhat disorganised way. Far better to build the collection and sharing process into the culture. That way the leadership does not need to keep searching for these examples and then making a special effort to distribute them widely.
Instead this becomes part of the culture–“the way we work around here.”
There is a clear difference between leaders who do the basics—for example talk about values or hold occasional sessions on them, and ones who are genuinely driven by their passion for values.
The latter form of leaders are inspiring and make a considerable impact on others.
All the above six ways of making values matter rely on leaders who inspire. Those who do will have become extremely clear about their own values, and what matters to them and who they are.
Such leaders use their personal actions to show what the values are, and how they affect daily life at work. These are not the hero leaders beloved by the media and constantly in the news. They’re ones who reject constant exhortation and instead model values in action.
Inspiring leaders also pay attention to the kind of strategic actions such as those described earlier, that is promoting a clear framework for company decision making and adopting simple tools such as decision mapping.
Another leader contribution is being willing to promote conversations about “who” they are, what the culture is and in which direction they’re taking their business. Through regularly exploring organisational culture and rigorously defining and articulating it, they affect performance.
“A wrestling match with your culture can be a valuable exercise and is the real value behind espousing corporate values.
D. Charles Galunic INSEAD Professor of Organisational Behaviour
Why do so many leaders struggle to hold regular conversations with their team members about their organisation’s values?
First, many forget to take responsibility for keeping their organisational values alive by talking about them with team members.
Others do plenty of talking, yet end up exhausted with the effort. They rely too much on their personal energy and less on implementing structured solutions.
Secondly, too many corporate leaders are poor story tellers. While everyone knows how to tell a story, telling one that is effective is different and requires a proper structure.
Finally, one highly practical leadership action is to regularly ask people throughout the organisation if they can actually state the core values—without resorting to a computer or a written check list.
Since the crisis of 2008, a realisation of how values drive corporate culture has become a major concern of industry regulators, particularly in financial services. Yet the way firms actually make values matter daily seems less clear the closer you get to asking companies “how do you do it?”
This present paper (Part 2) and also Part 1 therefore looks at how to make values matter at work. It suggest numerous ways companies can promote core values in their culture and in the every day working of employees.
No definitive list emerges from our detailed trawl through numerous papers and case studies. It’s clear each company must discover its own way through the maze to reach successful implementation. Even when they succeed there remains the challenge of how to sustain this success on a permanent basis, and how to avoid over exposure and even a fatigue reaction.
What remains clear though, is companies that take time to focus on values and make them matter tend to do better financially than ones that don’t.
- Popperfeb Morgan Stanley to Pay $3.2 Billion Over Flawed Mortgage Bonds N. York Times 11 Feb 2016
- Rehak, Tylenol made a hero of Johnson & Johnson: The recall that started them all, N. York Times, March 23, 2002