Change is a fact of life and an inherent part of business. With technology, the relentless pace of change has accelerated forcing businesses to either catch up or keep up. Companies are compelled to evolve with the times. Phone companies evolved from switchboards and rotary phones to smart phones with data plans. Record producers evolved from phonographs and vinyl records to digital downloads and playlists. Car manufacturers evolved from hand-cranked motor cars in one-color models to keyless ignition vehicles with self-driving engines in most every shape, size and color. Change is indeed unrelenting, affecting almost every aspect of business. Almost.
There is one aspect of a business that should never change: a company’s core values. Despite the battering winds of change, the one intractable, immutable, and unwavering element of a business should be its core values. But if you asked the leadership of most any typical small or mid-sized businesses, many would be hard pressed to rattle of their company’s core values. So what are “core values” anyway? And does every company really need to spell out its core values and should employees know what those values are?
Fundamental, Enduring, Actionable and Meaningful
An organization’s core values define what it stands for, highlighting an expected and ultimate set of behaviors and skills. A company’s values lie at the core of its culture. Values are fundamental, enduring, and actionable. It is the nucleus within the company’s DNA.
Core values help a company’s leadership to determine how it spends time and money. They drive priorities and decisions. The actual values of an organization are determined mainly by where it invests its resources and how its employees behave, not what the leader says or what’s posted on company walls, websites, marketing materials, earnings reports or employee manuals. Core values are evident in the company’s allocation of resources, its actions and its decisions.
Case in point. Communication. Respect. Integrity. Excellence. Those were the core values stated by one of the one of the world’s major electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $111 billion during 2000. In fact, Fortune Magazine named that American energy, commodities and services company – with over 20,000 staff — “America’s Most Innovative Company” for six consecutive years. Indeed, those were the corporate values stated by Enron in the company’s 2000 Annual Report, shortly before it filed for bankruptcy in December 2001 and it was revealed that its reported financial condition was sustained by institutionalized, systematic, and creatively planned accounting fraud. Enron’s stated core values — which seemed strong, concise, and meaningful — were just empty words. Enron’s actual core values were totally devoid of the respect, integrity or excellence it claimed.
If 2001 seems too far back to resonate, here is a more recent case in point. For decades, German car maker Volkswagen touted itself as a manufacturer of environmentally-friendly vehicles. This was communicated in its sales and marketing as a key core value. Meanwhile, the company deliberately set out to design a means to circumvent emissions control—a stratagem known at the highest levels—with the aim of giving the company an unfair advantage over its competitors. Their total rejection of ethical standards in engineering led to the resignation of the CEO, Audi’s head of Research and Development and Porsche’s engine chief. The command chain that led to the development of certain lines of software that could put an engine into test mode and then return it to “dirty mode” are on record. All the testing that was done is documented. Those responsible were identified and found to be at all levels throughout the organization. So despite Volkswagen’s claims touting eco-friendliness as a core value, its resources, actions and decisions showed a dissonance between what they claimed was a core value and their actual core values.
The Value of Core Values
Core values are important for a multitude of reasons. It helps employees to know what a company stands for; it mission and ways. Core values can also:
- set a foundation for the organization’s culture.
- improve morale.
- be a rich source of individual and organizational pride.
- align a large group of people around specific, idealized behaviors.
- guide difficult decisions by determining priorities in advance.
- positively influence how employees interact with one another.
- attract, hire, and retain the right type of employees. (Hire people that ‘fit’.)
- help assess performance (both individually and organizationally).
- prevent conflict and mitigate conflicts that do arise.
- improve innovation. (In today’s business environment, that is key.)
- differentiate a brand in the minds of customers and partners. (With all the noise, companies today must differentiate or die.)
- impact how the organization serves its customers.
- attract the right breed of customers.
When properly executed at the leadership level, core values can and should play a fundamental role in attracting and retaining talented employees, making difficult decisions, prioritizing resources, reducing internal conflict, differentiating the brand, and attracting the right breed of customers.
It is important to understand that a company’s core values are separate from its brand’s values. An organization’s values extend in two directions: Inward, which guide the company’s culture and outward, which communicates to its customers. The inward core values are determined by the organization’s actions, behaviors and decisions. The outward brand values are based on the collective consensus of the business’ customers; what they observe and feel. The company’s leadership directly controls its core values but it can only influence its brand values.
Unfortunately, the core value statements of many companies are bland, toothless, or just plain untrue. And far from being harmless, as some executives assume, they can be highly destructive. Empty core value statements create cynical and dispirited employees, alienate customers, and undermine managerial credibility, as evidenced at Enron, Volkswagen and other such companies. Next week, we will look at specific steps a company can take to define its true core values, communicate those values to its employees and infuse it into every aspect of the organization. Stay tuned.
Quote of the Week
“It’s the job of any business owner to be clear about the company’s nonnegotiable core values. They’re the riverbanks that help guide us as we refine and improve on performance and excellence. A lack of riverbanks creates estuaries and cloudy waters that are confusing to navigate. I want a crystal-clear, swiftly flowing stream.”
© 2016, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.