A decade or so ago, we met with the CEO of a Fortune 250 company that was the focus of sharply negative front-page headlines and Congressional hearings. At issue were a series of irregularities that, it was alleged, illegally boosted the company’s earnings.
The criticism leveled against the company belied its perennial recognition by national media outlets as being “most admired” and among the “best places to work.” The juxtaposition wasn’t lost on the CEO, who observed that the allegations were “unrecognizable” to a company so widely feted for the integrity of its culture. Shortly thereafter, the CEO stepped down under mounting pressure.
That’s the thing about company values: Unless they have tangible, longstanding effects on how a business operates, they are, at best, mere window dressing. At worst, they are an indictment of a business’ failure to make good on essential promises—a self-inflicted wound that can be ruinous to a company’s reputation.
Given the erosion of trust in institutions, as well as increased expectations that businesses invest in society’s greater good, many companies are taking a fresh look at their vision, mission and value statements. In so doing, they are asking tough questions about what is most important to their employees, customers and other stakeholders—and how to hold fast to the corresponding values in their daily operations.
Based on our experience, here are several critical success factors for how companies should express, measure and promote their core values to help ensure that they have the desired effects on their businesses:
Strike a balance between substance and inspiration.
While mission, vision and values statements take many forms, far too many are written (and recognized by the news media) largely for their ability to inspire stakeholders. This approach can undermine their primary purpose of guiding employee behaviors. Inspiration can be a powerful element of such statements. However, when overemphasized, it can result in ornate platitudes offering little perspective on how to demonstrate a company’s values in one’s work. Mission, visions and values statements that are not prescriptive are mere statements of hope.
Another reason mission, vision and values statements are often laden with impractical, inspirational language is that many businesses hope it will strengthen their bond with customers. This is a prudent objective, but since such statements amount to a code of conduct for employees, they should be written primarily for them. Moreover, our research reveals that customers give significant credit to companies that are good employers, including cultivating a strong, values-based culture for employees. Given as much, most customers will surely recognize and appreciate employee-centric vision, mission and values statements.
Measure your company’s adherence to its values.
A tenet of Peter Drucker’s management orthodoxy is “you can’t manage what you can’t measure.” Nevertheless, few companies effectively measure the extent to which individual employees adhere to their values—and, no less importantly, employee attitudes regarding the integrity of the organization’s overall conduct.
A company’s values should be a prime focus of performance reviews, potentially in the form of a scorecard used to gauge an employee’s demonstration of these values. The eventual score should carry significant weight when determining adjustments in his or her responsibilities and compensation. In addition, employees should be polled no less than annually for their confidential opinions on the extent to which the organization as a whole, and its leaders specifically, adhere to the company’s vision, mission and values.
The annual performance review and employee polling data should be tracked longitudinally so that any relevant trends can be identified. The company’s board of directors should be informed of the key findings and any resultant actions taken by senior management, especially those aimed at strengthening the operating culture.
Be transparent about what you measure—and what it means to the business.
Companies making a significant, ongoing priority of their values should initiate a CEO-led discussion each year with employees about the state of their culture, ideally at town hall meetings. In addition to unpacking the aggregate findings of the employee polling—warts and all—the CEO should reinforce how businesses with strong, value-based cultures often enjoy competitive advantages. He or she should explain how the company’s values are integral to the successful implementation of the business strategy.
Given the fundamental link between a company’s culture and its overall performance—and the fact that payroll is the largest expense for most businesses—companies should take the extraordinary step of providing an annual accounting of the culture to investors. Not only should leaders provide key metrics derived from the employee polling, they should detail their performance goals for the next year and the investments they will make to achieve them.
We frequently encounter RFPs from large, well-known companies with the expressed goal of securing a choice spot one of the media-generated “most admired”, “most innovative” and “best places to work” lists. We understand the value of headlines, including their ability to attract and retain industry-leading talent, but how much insight does any media outlet have into the inner workings of a company?
Fortune, which has no shortage of proprietary lists, anointed Enron in January 2001 as “the best company to work for”—a designation that included a cover photo of then Chairman Ken Lay smiling ear-to-ear. (Evidently, the magazine’s editors weren’t yet in on the joke.) Also, an extensive financial analysis revealed that the stocks of Fortune’s least admired companies outperformed those of its most admired companies between April 1983 and December 2007.
In contrast, imagine the universal appeal of a company whose commitment to its core values includes specific performance metrics—as gauged by its employees, no less—and the same hit-or-miss disclosure as its year-end financial results. For companies making a significant, ongoing priority of their values, this approach constitutes a powerful message to employees, customers, shareholders and other stakeholders: Culture counts here. The balance of companies can either play catch up by implementing similar measures—or hope to find itself on one of the many “best” or “most” lists.