Why do an organizations values matter?

by

Peter Mark Adams

Management Consultant & Trainer
petermarkadams@gmail.com

In recent years a lot of attention has been given to the topic of organizational values. One of the worlds leading companies, the 160 year old Proctor & Gamble, has recently renewed its commitment to values with its purpose inspired growth strategy. A small sample of this framework (illustrated right) includes such values as:

Integrity: We always try to do the right thing Leadership: We are all leaders in our area of responsibility Ownership: We all act like owners Passion for winning: We are determined to be the best Trust: We respect our P&G colleagues, customers, consumers, and treat them as we want to be treated

Many organizations have Value Statements but only values-driven organizations:

Live their values each and every day Ensure that people know, understand and agree with the values Apply the same values to everyone from the Board of Directors down Have processes that reinforce the values Use the values to drive daily decision-making The importance placed on values seems to characterize many of the longest lasting, world leading companies.

Why are values so important to them? Do values really have a serious place in modern business life and if so, what is it?

Throughout the 1950s and 1960s as consumption expanded, products remained basic and there was little competition, management by instruction (MBI) was a feasible way of controlling the workplace.

From the 1970s onwards increasing competition, more sophisticated products and the need to compete through service quality created a much more complex environment that made management by objectives (MBO) the only realistic way of maintaining organizational control.

By the late 1990s globalization had created conditions of hyper-competition. In many countries services exceed manufacturing by many orders of magnitude. As a result, the management challenge has been changed fundamentally.

In addition to operational excellence, continuous innovation and even higher levels of service have become key determinants of success. Trying to obtain competitive results using only instructions (MBI) or objectives (MBO) simply doesnt work. The only solution is to leverage the skills and talents of every single employee. For this reason companies are moving towards becoming far more entrepreneurial. High levels of employee engagement result when people are enabled to do a good job, feel valued and are treated fairly. This is only possible in a values-driven environment. This is one of the main reasons that management by values (MBV) is now the preferred approach when competition is a critical factor. People acting according to shared values will always try to do the right thing without the need for supervision. And that is what is needed to cope with the much greater complexity of the modern fast changing, high-speed business environment. Another reason that values are important is that the modern networked world is more transparent than at any time in human history. Extra-governmental organizations, consumer groups and social networks working through the internet can provide news and information at a speed and at levels never seen before. Independent reviews and price comparisons can be used to determine if a companys products and services are competitive as well as check on its record on environmental stewardship, fair treatment and social justice. One of the fastest growing and most activist market segments, people who espouse a range of green values, now constitute some 30% of the population of the US, Japan and Europe. Concern for sustainability, the environment, global poverty and social justice is leading an increasing number of people to practice ethical consumption, described as the biggest movement in branding today. What ethical consumption means for companies is that if people associate a company with unethical behavior or practices they will not buy their goods and services and they will dissuade other people from buying them as well. Many of these consumers are also employees and their workplace commitment is also affected by the level of social responsibility displayed by their company. These realities are leading many companies to also develop their position in respect to Corporate Social Responsibility (CSR) as a key part of their business strategy. Recent research in neuroscience has demonstrated that values play a fundamental role in life in how we make sense of the world and prepare for action. Even before we are consciously aware of it, we react to and morally assess each and every situation that we experience. Whether we are aware of it or not, we lead with our hearts and our moral intuition. These emotions and values are central to effective decision making. It is known that people who suffer impairment to the emotional centers of the brain also suffer from difficulties with decision making. The idea of the purely rational decision maker and planner is just a myth. Emotional health and strong values are essential for good decision making.

What these studies demonstrate is that whether we are aware of it or not, values are deeply involved in everything that we do and every situation we are aware of. A positive environment drives excellence. A negative environment is indifferent to performance. Ignoring the role of values in an organization is to risk the loss of one of the most powerful drivers of competitive performance that exists today.