“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 memorable 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 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.
Here are some of the essentials for achieving a culture in which values matter.
These seven essentials are explored more fully in a new post on March 8th 2016.
- 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