How do we keep our values and stay competitive internationally? The question alone assumes that there is an “either/or” decision for companies to make in the present global economic climate. Nicholas Coyle, Senior Consultant & Kate Jennings, Managing Director BlessingWhite Europe, explores this catch-22 conundrum.
Should British companies hold on to their values and risk being uncompetitive, or sacrifice values and level the playing field with those less scrupulous than ourselves? With the rise of whistleblowing social media and bad press for companies that display poor values and poor Corporate Social Responsibility (CSR), it is not an either/or, but a determining factor of success.
Let’s not confuse Corporate Social Responsibility (CSR) with what are commonly understood to be business values. The two are inherently linked, and CSR is certainly a reflection of a company’s core beliefs and guiding principles, but they are not the same. CSR comprises of policies and processes that a company puts in place, to ensure it complies with the law, ethical standards and international norms, making a company accountable for its wider impact on its stakeholders. A company’s values on the other hand define what is important to it and how employees should behave. Values are the foundation, or building blocks, of an organisation’s culture, they are what holds the organisation together through thick and thin.
When shared widely, these organisational building blocks are important tools for making judgements, contemplating actions and choosing among alternatives. In simple terms they ensure everyone is singing from the same hymn sheet. Values are adopted when they become taken for granted and non-negotiable across an organisation and it is at this point they become shared tacit rules about “how to do things around here”, and the basis on which to make decisions on. Values and culture have sometimes been seen as a soft, nice to have addition to a focused business strategy, but several research studies and compelling business examples provide solid evidence that values to the bottom line are linked. Take Barclays Bank. As the Salz Review was drawing to a conclusion on 17th January 2013, the new Group CEO of Barclays Bank, Antony Jenkins, announced the launch of the new group-wide values. The £17m review aimed to convince the public and business community that Barclays is committed to change following years of scandal: the miss-selling of PPI and its role in LIBOR fixing. It has sought to understand whether the events of recent years pointed to a gap between Barclays’ articulated values and the way the bank operated in practice. Not surprisingly, it found that there was. As the report describes, Barclays needs to address “deep-rooted cultural challenges” and that this can only be done by re-defining a common purpose and a clearly articulated set of values. Previously, there had been too much emphasis on financial performance in recruiting, performance evaluation and promotion, with insufficient focus on values and behaviours. In a group that had grown and diversified significantly in less than two decades, there were no clearly articulated and understood shared values. Consequently, there was little consensus among employees as to what the values were and what should guide everyday behaviours.
As Antony Jenkins said in the 2012 Annual Report: “For the past 30 years, banking has been progressively too aggressive, too focused on the short term, too disconnected from the needs of customers and clients, and wider society and we lost our way.” Clearly, values are synonymous with culture. Culture matters because it is a powerful force that determines both individual and collective behaviour, ways of thinking, feeling and perceiving. “Leadership and culture are two sides of the same coin” (Edgar Schein), and as the Salz report describes, the “board sets the tone from the top of the organisation, and must carry ultimate responsibility for its values, culture and business practices”. Leaders have a unique role in determining, managing and evolving culture. Their exhibited values, stated beliefs and assumptions significantly influence those lower down in the organisation. Consciously or otherwise, employees take their cues from their managers and leaders; seeing how leaders react to critical incidents and organisational crises; how they allocate the scarce company resources; the criteria by which rewards and status are allocated; how colleagues are selected and promoted; what executives say and what they don’t say. Fundamentally, the behaviour of leaders acts as the model for others to follow.
When driven by a passionate leader, core values and a strong purposeful culture can be the very source of a company’s success. It wasn’t only economic necessity that inspired Dame Anita Roddick to start The Body Shop in 1976. Anita believed that businesses have the power to do good. Hence, the Body Shop’s Mission Statement: “To dedicate our business to the pursuit of social and environmental change”. Throughout her life, Anita used the stores and their products to help communicate human rights and environmental issues and arguably blurred the distinction between company values and CSR. It was impossible to separate the company’s values from the issues that Anita cared passionately about, because of Anita’s stand, rather than in spite of it, The Body Shop became a successful global operation with over 2,000 stores in over 60 countries, all working towards common goals and sharing common values. Arguably that was the source of its competitive advantage and gave it its commercial strength and consumers embraced an organisation that lived by such values.
Less well known, although successful is Zappo’s, a privately-held online retailer of shoes, clothing, handbags and accessories, which was Acquired by Amazon in 2009 and valued at between $650 and $905 million. Zappo’s founder and CEO, Tony Hsieh, knew that much of Zappo’s growth – and hence its value – was due to the company’s strong culture, obsessive emphasis on customer service and focus on their three C’s; company culture, customer service and clothing. From very early on, Hsieh viewed the company culture as a differentiator that gave them a competitive advantage: “Our belief is that if you get the culture right, then most of the other stuff, like great customer service or building a long lasting brand, will happen naturally. We may have 1,200 to 1,500 brand relationships and a good head start against our competition, but that can be copied. Our websites, policies, all can be copied, but not our special culture”.
Recognising the importance of clear values, Zappo’s captured the essence of its culture in what they call their WOW philosophy and ten core values, from which, their brand and their business strategies derive. To them, the core values put the ‘zap’ in Zappo’s and have been key in enabling them to scale their business so quickly. Zappo’s Executives genuinely believe that the culture and the corresponding values are so important that they offer to pay each employee, at the end of their first five weeks training, $4,000 to leave… few take the offer. Zappo’s seriously wants to challenge the thinking of their employees. They want people to ask themselves; “is this the right role for me? Is this a culture I want to be part of? Are these the core values I’m actually going to live by”? In their view, it’s proved to be a successful way of weeding out the people that are not aligned.
Whilst values and culture are key drivers of performance, rather than an expensive handicap, we do not mean just a “great place to work” (although that is often part of the picture). Great places to work have certainly been linked to strong business results, but HR-driven “employer-of-choice” efforts that are disconnected from ‘the business’ can fall prey to budget cuts as profits fall or the balance of power in the job market shifts. A high-performance culture that supports your organisation’s success — even in hard times — needs to be deliberately shaped around these components: A clear, compelling corporate purpose or mission that informs business decisions, generates customer loyalty, ignites employee passion, and inspires discretionary effort. It answers the question of why the company exists.
Shared organisational values that guide employee behaviour and influence business practices as your organisation delivers on its promises to customers, employees, and other stakeholders. They provide the bedrock of your company and form the basis of its culture. They answer the question: What are your company’s guiding principles? Business strategies will shift; core values do not. Values and culture are necessary for success. However, they are not the only factor. An intentionally managed culture needs to be paired with a clear strategic vision and the execution of a sound business strategy. Companies that have too great a focus on business performance and focus on driving results at the expense of a values-driven culture (see diagram, quadrant 2) may be riding the momentum of a ‘big idea’, a short-term focus on profits, a churn-and-burn work environment, or some other condition whose long-term strength is uncertain or inherently difficult to sustain.
Alternatively, a company with an overriding focus on culture (quadrant 3) may enjoy a great morale which it finds hard to maintain. Companies need to aim for a solid business performance generated by a motivated workforce a combination of the two. At the time of this writing, Google and Starbucks offer two strong examples of what can be called ‘4th Quadrant’ organisations, with a clear business purpose, a strong culture based on key values, an acclaimed work environment and strong profits. An organisation’s culture and the values which underpin it represent its unique form of competitive advantage – something nearly impossible to replicate. Each organisation must follow its own unique path to shape and sustain a high-performance culture, but what must underpin any approach is the understanding that it is a continuous cycle.
Jim Collins & Jerry Porras Built to Last & Kotter & Hesketts Corporate Culture and Performance