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How To Define Your Organization’s Values

2015 December 9
by Greg Satell

Corporate leaders love to talk about values. They put them on web sites, frame them, place them prominently in boardrooms and proudly espouse them in media interviews. The notion of values has become so pervasive that it’s hard to find any CEO who doesn’t tout their importance.

Yet all too often, values are little more than window dressing. Key stakeholders, including employees, customers and partners are either completely unaware what the stated values are or don’t believe that they ring true. In some cases, corporate talk about values amounts to no more than a cruel joke.

I doesn’t start out that way. It’s hard to imagine even the most jaded executive team affirming values they don’t believe in. Rather, the problem is usually that values are easy to write down, but hard to live up to. So what begins with a sincere effort ends with a lofty checklist of anodyne virtues that don’t reflect reality.  Here’s how to create values that stick:

Values Cost Something

In workshops with executive boards, I often ask what the company’s values are.  Invariably, I get a list of things like, “excellence,” “serving customers” and “innovation.”  Then I ask a follow up question, “What do these values cost you?”  Usually, all I get is blank stares.

Make no mistake, values cost something.  For example, both Nucor and Southwest show that they value employees by pledging never to do layoffs and both companies have paid a price for that policy.  In the decades they have been in operation, there have been times when there was a strong business case for letting some people go.  But they didn’t.

There was a heavy price to pay. In 2009, Nucor lost $294 million dollars.  With the airline industry decimated by the recession, Southwest posted a few rare quarterly losses that year as well. If they had broken their pledge, investors would have cheered and most employees probably would have understood.  Nevertheless, they valued their employees more than a few bad earnings reports.

In an article in Harvard Business Review, management expert Patrick Lencioni writes that, “If you’re not willing to accept the pain real values incur, don’t bother going to the trouble of formulating a values statement.”

Values Have A Purpose

Many leaders who want to stress customer service like to cite the famous story about Nordstrom taking back a tire from a customer, even though the company doesn’t sell tires or anything like them.  The tale is supposed to support the notion that the company will do anything, no matter how seemingly outrageous, to serve its customers.

Yet the story blurs the lines between stupidity and virtue.  Someone asking for a refund for a product that they did not buy from you is more likely to be a charlatan than a customer. Even worse, any firm following such a policy would have to lay the costs of fraudulent returns on real stakeholders such as customers, employees and shareholders, betraying their good faith.

And in fact, the real story is somewhat different than the one often told. The location had been a tire store which was recently converted to a Nordstrom store.  The manager, concluding that the customer was confused, but sincere, decided to allow the refund.  That’s not quite the same thing as taking back any random product.

Values need to have a purpose, which in this case was to always err on the side of living up to promises—even if they are merely perceived promises—to inspire absolute trust. Giving refunds for any claim, no matter how fraudulent or far-fetched, would serve no one but bankruptcy lawyers.

Values Lead To Action

At my former company, we valued a collaborative approach. Many organizations do. However, we took the idea further and pledged to fire nasty people. It cost us.  By routinely parting ways with people who were abusive to junior staff and disrespectful toward their peers, we lost some very talented people.

Yet we gained a lot more. By following up our values with action, we created a much nicer place to work. That helped us reduce employee turnover and recruit more talented people. It also allowed us to demand more of our employees, such as instituting an “always help” rule in which nobody was allowed to say, “sorry, but that’s not my job.”

I don’t mean to imply that we became a perfect company or that all of our people were perfect.  Some who were inherently nasty managed to fake it enough to become merely occasionally prickly and avoid getting fired. Nevertheless, the message was clear: We valued a positive workplace environment and would do what was needed to make it happen.

Some time after instituting the policy, I found that there was a body of evidence that supported our reasoning. Bob Sutton’s The No Asshole Rule outlines a wealth of research showing the hidden costs of holding on to nasty people in your organization. More recent research reveals that great teams are more valuable than individual talent..

At the time though, we didn’t know any of that.  We just valued nice people and were willing to take the actions needed to create the environment we were seeking.

Values Must Further The Greater Mission Of The Enterprise

With such energy and enthusiasm devoted to corporate values it’s kind of astounding that they so often become nothing more than empty platitudes. After all, what’s the point of spouting meaningless bromides that end up looking ridiculous? Especially when, as in the case of Enron, it becomes clear that the stated values are diametrically opposed to the real company culture.

The problem as I see it is that values are often confused with beliefs. When you’re sitting around a conference table, it’s easy to build a consensus about broad virtues such as excellence, integrity and customer service. True values, on the other hand, are idiosyncratic. They represent choices that are directly related to a particular mission.

When Google says that it is a “quantitative company that uses data to make decisions,” you believe them because it’s intrinsically related to how they run their business. And when Southwest Airlines values underline the importance of having fun, it is not only differentiating itself from competitors, but also making a choice about the type of people it will hire and retain.

So the best way to define values that will stick is to focus on choices rather than beliefs. Will you follow what your heart tells you or wait for the data to come in. Google chooses data. Will you fire someone who doesn’t smile enough? Southwest probably would. Are you willing to incur a loss for a customer that is “confused but sincere?”  Nordstrom is.

And that’s why an organization’s values—or lack thereof—define it in a way that nothing else does.  They determine how an enterprise will pursue its purpose.

– Greg

2 Responses leave one →
  1. December 10, 2015

    Hi Greg, As always, great topics. This one in particular strikes an important nerve.
    The age of superficiality is dead. Those that did not get that memo will learn the hard way. As many know, we are still in a believability crisis. As you know, people-powered online trust networks are putting incredible pressure on companies to transform to their core. What they stand for has to have a deep purpose and their actions have to be genuine. I only see this escalating as without it, companies fall into bureaucracy, greed, control and people are tired of that. The old expression “Actions speak louder than words” seems to be today’s credo for evaluating any organization.

    When I worked at HP in its Bill & Dave led years 1978 through the late 80’s. character, integrity. MBO, respect and quality permeated every action. As Bill & Dave aged and retired, HP failed to identify the right leadership qualities to replace these two legends so over time character and values eroded. There are clear ways to return to their past glory but so far that discussion is happening with the wrong people.

    Change, value alignment and value creation – what I help companies to see and manage – takes courage and conviction to do what’s right by a higher standard. REI demonstrated that of late when they opted to close on Black Friday so employees could enjoy their holiday as intended. That spoke highly of their character and will earn far higher regard at a time when most brands that fail to embrace the requirements of a value economy seem headed downhill on a faster trajectory than they can relate and respond to.

    I have faith a new breed of marketer can emerge so those of us that understand it now have to crack through the veneer of ambivalence, and show companies how to adapt and thrive in the value economy. That is where I will invest my time knowing the value it plays back is huge. As always you remain a great compass for those who can challenge convictions of the past that no longer hold true today but that want better answers.

  2. December 10, 2015

    Thanks Bill. It really is a shame about HP. Bill and Dave built not only a great company, but a great culture. They were true pioneers!

    – Greg

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