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Do Corporate Values Matter? 

Andrew Rudin | Aug 8, 2016 609 views 16 Comments

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Visit the website of a great company, and you’re certain to find a values speil.

UnderArmour dedicates an entire web page to explain its Mission and Values. Whole Foods describes its Core Values, offering a subtitle, What’s truly important to us as an organization, to drive home the point. IBM outlines Our Values in a nearly-tweetable 153 characters. Brevity you’d expect from a company that sells productivity solutions: “Dedication to every client’s success; Innovation that matters, for our company and for the world; Trust and personal responsibility in all relationships.”

But value statements alone don’t make companies wholesome. Right now, UnderArmour is piggybacking off the brand appeal of the Rio Olympics, without shelling out a penny for sponsorship. A term has been coined for this, with an appropriate tint of bellicosity: ambush marketing. “Technically speaking, that’s not against the law . . .” a radio commentator said yesterday.

The disclaimer, technically speaking, should trip a circuit in the company’s Department of Competitive Ethics – assuming one exists. Danger Will Robinson! Fortunately, UnderArmour has a superb excuse: its admirable Core Values are silent about the morality of siphoning revenue from the investments of others – a tactic that’s existed since the birth of sponsorships.

Whole Foods strayed from one of its core values, healthy eating. “We sell a bunch of junk,” said CEO John Mackey in a 2009 interview, adding that the company had “veered off-course” by selling junk food and products that are unhealthy for consumers, according to a case study from the University of New Mexico.

IBM, too, has been muddied by ethics issues. And this April 20, 2012 post from exIBMandenjoyingit represents how the most aspirational corporate values can have the rug ripped right out from underneath:

IBM is thoroughly corrupted inside and my former colleagues are playing the game. As US employees we accepted the internal corruption ourselves. We saw organizations providing bogus sales numbers yet we look the other way because we too may have been paid on those numbers.

The IBM help desk in India participates in the corruption by closing older tickets and informing their internal customer to open a new ticket so that their time to resolution is not badly affected. This fish stinks through and though from decades of internal brain washing reducing employees [sic] integrity a little bit at a time.

Glad to be gone but I wonder if my soul is intact.

For these companies, public values statements did not inoculate them from ethical problems. If anything, they manufactured embarrassing hypocrisies. Despite producing stern values proclamations, unethical [stuff] happens at these companies and many others, seemingly unabated. Do corporate Core Values Matter? Or, are companies better off not defining them?

One researcher has examined these questions. Edward J. Conlon, faculty director of the Notre Dame Deloitte Center for Ethical Leadership within the Mendoza College of Business at the University of Notre Dame, studied corporate values by surveying at random the stated values of 150 multinational corporations.

The top ten values Conlon and his colleagues discovered, along with the number of surveyed companies that included the word or phrase:

1. Integrity (111)
2. Concern for customers (62)
3. Respect for all (58)
4. Teamwork (49)
5. Respect for employees (45)
6. Innovation (37)
7. Ownership of actions (31)
8. Excellence (30)
9. Safety (24)
10. Quality (23)

Curious that integrity was so dominant. I wonder what, if anything, companies do to establish and perpetuate that value.

In a follow-on exploratory survey of alumni from Notre Dame’s MBA program, “70% of respondents reported that their employer had a formal values statement, although 27% couldn’t recall any of the values it actually contained. Still, all of the respondents to the survey believed that the company had clear values. And for those reporting a value statement, most felt there was a strong correspondence between the statement and what was truly important to the firm’s managers and owners.

“The survey also included an experiment on the impact of values statements on employee judgments, assessing the extent to which a stated company value affected judgment when that value could be served by favoring some options over others. Overall, the simple inclusion of a value in a value statement didn’t affect decisions respondents made in the experiment. But when a value was frequently discussed with one’s boss, or when it was included in formal performance evaluations, it tended to have a greater effect. Discussions with peers and subordinates, or more casual discussions of values, didn’t have the same impact,” according to a Notre Dame column, Do Corporate Values Make a Difference? (emphasis, mine.)

Values are not a checkbox. “Corporate values and Guidelines for Ethical Conduct? – sure! We’ve got them. Let’s move on to the next topic . . .” Many executives feel safer by having these documents in the inventory of corporate communications and marketing collateral. But too often, they collect dust. What’s key is how they are used, as the Notre Dame follow-on survey uncovered. That goes well beyond including it in marketing fluff for wowing prospective customers and employees.

“When you lead an organization – big or small – you are inevitably going to cross decisions where it’s not obvious what the right thing to do is,” said Tom Linebarger, Chairman and CEO of Cummins. “In other words, there are consequences on both sides. When those things come up, you have to apply good judgment and ethical frameworks to think through the thing.”

His advice: “not to use a financial framework first, and use my ethics to rationalize my decision later . . . instead, think about what you should do and then figure out what the financial consequences are, and then figure out how to mitigate those. The post-rationalization is a slippery slope.”

Linebarger should teach a course on marketing and sales ethics, because he has aptly described the conundrum biz-dev professionals face every day: make goal, but in accordance with corporate values. And you thought Marketing and Sales were mis-aligned? Look higher, my son!

In The Vision and Values of Wells Fargo , five primary values are given “that are based on our vision and provide the foundation for everything we do:”

• People as a competitive advantage
• Ethics
• What’s right for customers
• Diversity and inclusion
• Leadership

Odd that Wells Fargo cited ethics – but didn’t indicate whether they meant ones that are good, or bad. In fact, the value mentioned just below ethics, What’s right for customers, is open for debate. In November, 2015, The Wall Street Journal published an article, At Wells Fargo, How Far Did Bank’s Sales Culture Go? Regulators examine whether San Francisco-based lender pushed employees too hard to meet quotas. Here, in the interest of transparency, what’s right for customers should carry an asterisk, followed by the explanation, “provided we meet our audacious revenue targets.”

“Some of the worst transgressions start out by a very simple decision to maybe choose the more expedient way or the more financially attractive way with some post-rationalization for the next one and the next one, and before you know it, you’re down in a place thinking ‘how did I ever get here?’ and wishing you weren’t there,” Linebarger said.

He’s right. Perhaps the greatest benefit of having a statement of Corporate Values is that it lets people know when they’ve deviated from what’s ideal, and possibly how far they’ve gone.

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16 Responses to Do Corporate Values Matter?

  1. Michael Lowenstein August 8, 2016 at 12:25 pm (1287 comments) #

    Integrity has layer upon layer of emotional context for all stakeholder groups, reflecting the importance of trust. It really isn’t that much of a surprise that it is such a predominant core value: http://customerthink.com/building_trust_its_a_matter_of_fairness_confidence_authenticity_openness_sincerity_and_exceedin/

  2. Graham Hill August 8, 2016 at 1:09 pm (992 comments) #

    Hi Andy

    Moral philosophy is such an interesting topic…

    Channeling another conversation… If you don’t believe in corporate values – in effect, statements of business principles – then I can only assume that you expect companies to write a detailed ethical rulebook about how staff should behave in all circumstances. If staff can’t remember even one of their values, what chance is there that they would abide by any rulebook?

    Your picking-out Under Armour for engaging in entirely legal ambush marketing is interesting. In criticising it you make the tacit assumption that the IOC has the legal right and the moral authority to explicitly police all aspects of the Olympic brand and to suppress other brands around venues. It most certainly has the legal right, as it is handed to the IOC on a plate by countries willing to go to the vast expense of holding the Olympics. However, I would challenge whether the IOC – an organisation mired in financial corruption, doping scandals and naked greed, and several of whose sponsors clearly fall foul of the first of the six Olympic principles – has the moral authority to do so.

    If ambush marketing is entirely legal and the IOC does not wield moral authority, who are we to say that Under Armour is behaving unethically?

    Let him who is without sin cast the first stone.

    Graham Hill
    @GrahamHill

  3. Ian Golding August 9, 2016 at 6:25 am (110 comments) #

    Great post Andrew – this is a topic that anyone who has ever been an employee will be able to relate to. The major problem (as I see it) is that corporate values are often created without any translation into a ‘so what’ instruction to their people. The veritable ‘dust gatherer’, values sit alongside ‘missions’ and ‘visions’ as wonderful looking corporate wallpaper.

    If organisational values are to be useful and ACTIONABLE, it is critical that two things are considered. Firstly, how well do organisational values align to the individual values of employees? If you have recruited people with very different personal values, they may find it impossible to abide by conflicting corporate ones.

    Secondly, it is vital to demonstrate HOW people should act and behave to consistently and constantly bring the values to life – I call this ‘operationalising them’. It is important to be able to measure the application of values and understand the difference they make to the employee and customer experience.

    Thank you for stimulating the debate.

  4. Andrew Rudin August 9, 2016 at 7:51 am (208 comments) #

    Michael and Graham: thanks for taking the time to comment.

    Michael: while the Notre Dame survey of 150 multi-national companies I mentioned should not be considered conclusive, I still find it curious to see such lopsided emphasis on ‘integrity’ relative to other commonly-invoked platitudes like ‘teamwork,’ ‘innovation,’ ‘excellence,’ and ‘quality,’ which also have layers of emotional context.

    What fascinated me in writing this article is the apparently superficial way values statements are used. For most companies, they seem little more than a list on a page, and research corroborates that by themselves, values statements make little to no impression on employees.

    Graham – agreed that moral philosophy is an interesting topic, especially when Big Data and analytics effectively channel people into fervent commitment to ‘what the numbers tell us . . . ‘ To clarify: I’m no fan of the IOC either, and I make no value judgement about UA’s ambush marketing tactics, other than to raise the question of its ethics. Sure – UA couldn’t find a more monopolistic, underhanded organization to take advantage of, but do two wrongs make a right? The answer, of course, depends on how one defines wrong. Moral philosophy, again.

    In my article, I embedded a link to a July, 1998 paper published in Psychology and Marketing, titled Ambush Marketing: The Ethical Issues. “Four ethical perspectives —utilitarianism, duty-based ethics, stakeholder analysis, and virtue ethics-can provide a framework for the debate on the ethics of ambush marketing. A range of possible actions to create more ethical commercial sponsorship are identified and briefly evaluated. In particular an international code of conduct for event sponsorship seems to be an idea whose time has come.” —Hmmm. That assertion was made almost 20 years ago.

  5. Michael Lowenstein August 9, 2016 at 8:07 am (1287 comments) #

    In the late 1970’s, Tom Peters and Robert Waterman developed their management model for ongoing enterprise improvement, called the 7S Framework. One of the key elements is Shared Values/Superordinate Goals, the principled underpinning of corporate culture and aspirations. Integrity is core to that: http://www.1000ventures.com/business_guide/mgmt_inex_7s.html

  6. Andrew Rudin August 9, 2016 at 8:54 am (208 comments) #

    . . . also, @graham: one more thought which I meant to include in my previous comment. Many business actions are entirely legal while being morally repugnant. I’m not saying that the actions in my examples here fit that category – just that people should never allow themselves to be deluded that putative legality makes a business choice ethical or acceptable. “The 20 Worst Kids Toys Ever” – http://heavy.com/comedy/2012/12/the-20-worst-kids-toys-ever/: Few could disagree that it’s appalling for people to target children as consumers for these products. Yet, most – or all – are legal.

    Ian: thanks for your comment. I’ve wondered the same thing about alignment of corporate values to employee values. In particular, would a prospective employee “self-select” out of the interview process if a company’s stated values didn’t comport with his or her own values? I’m not sure. In business development, we use variable compensation for a similar purpose: candidates who don’t like the idea self-select out of the hiring process. Since values are not a direct “pocketbook” issue, I’m unclear whether they could have the same effect.

  7. Mukesh Gupta August 9, 2016 at 9:49 am (20 comments) #

    I am of the firm opinion that corporate values do matter. Just because a few corporates put out detailed values statement and dont end up following them doesnt mean that corporate values dont matter..

    Corporate values exists, whether or not they are codified in exact words.. They exist in the way the people in the organisation behave. As organisations grow, sometimes you need to codify how work gets done in the organisation – what is important and what is not,, What is acceptable and what is not..

    People mimic what they see and not what they are told.. So, It is not important to have a defined and listed out values statement on your website or corporate brochure but for the leaders to exhibit the values that they want to be emulated in their organisation..

  8. Howard Lax August 9, 2016 at 11:25 am (25 comments) #

    It’s all about whether leadership walks the talk or just yaks about it. Values are important only insofar as they are lived — otherwise they can be printed and used as toilet paper.

  9. Gautam Mahajan August 9, 2016 at 10:47 pm (173 comments) #

    Andy, you make a great point. Companies are so concerned about the bottom line, that they forget what their purpose is. They then embellish what they are to show to the world: they have values, they are customer led etc. Often these are just words.
    Our past work has proved that Values create Value for the customer and the company.

    Do see my article on unethical practices: do they create or destroy value?
    https://wordpress.com/read/feeds/2724725/posts/1033669905

  10. Graham Hill August 10, 2016 at 1:37 am (992 comments) #

    Hi Gautam

    What is the telos of business?

    Is it to ‘create a satisfied customer’ as Drucker suggested. Or is that a somewhat wishy-washy, pre-shareholder value notion that is outdated in today’s hyper-competitive, real-data, data-driven economy?

    Customers have a pretty clear view. The balance of evidence is that customers prioritise value over corporate values. Maybe we should too.

    Graham Hill
    @GrahamHill

    Further Reading:

    Booz & Co, ‘Values vs Value’, Strategy + Business
    http://www.strategy-business.com/article/11103?gko=03d29

  11. Steve DiGioia August 10, 2016 at 6:17 am (56 comments) #

    Andrew, I love this article!

    Gone are the days when a leader would “take the sword” for his/her team. When the Whole Foods founder admitted “the company had “veered off-course” by selling junk food and products that are unhealthy for consumers” he showed true leadership…and honesty.

    All that is left for him and others is to make the corrections needed to do what is “right” and in the best interests of their customers.

  12. Andrew Rudin August 10, 2016 at 7:46 am (208 comments) #

    Hi Mukesh: interesting point – I think there is a link between corporate values, which are often expressed in a list and posted on a website, and corporate culture which develops based on implied values and behaviors over time. It may sound cynical to say, but I think that for the most part, statements of corporate values present little more than lists that employees rarely aspire to or embody, let alone even read or know about. If the intention for expressing corporate values is to impress customers, then those lists should be owned by the marketing department as public relations collateral.

    Howard – agree. As a practitioner who thinks about operations, the ‘lived’ part you refer to presents opportunities for bringing values into processes. I think the Notre Dame study I mentioned provides a promising start for how to do that.

    Gautam: Your point reflects what I have discovered all too often about values. When I learn of dishonesty or lawbreaking at an organization, I examine their mission statement and values, and wonder, in light of these wonderful written values, how could their processes be so devious (Wells Fargo is a prime example)?

    There is a remedy, but it first requires acknowledging that executing values has a lot of gray area, and that opening conversations is the first step toward ensuring values can be preserved. Many executives are in a dangerous state of denial. When it comes to deviating from corporate values, I can’t tell you how many times I’ve heard, “Those types of things could never happen here.”

  13. Graham Hill August 10, 2016 at 11:48 am (992 comments) #

    Hi Andy

    I note in my response to your earlier response to my even earlier response (I am sure there is some Dr Seuss lurking in here somewhere), that, you had not made the case that Under Armour had in fact behaved unethically. Without having first proven your argument – I have a number of papers that directly contradict the single paper you offered as evidence – surely your comment that “two wrongs don’t make a right” is moot.

    As you acknowledge in your later comment, there is absolutely no suggestion that Under Armour behaved illegally, and in the absence of significantly stronger evidence, no suggestion that it behaved unethically either.

    I note your failed attempt to tar Under Armour’s still intact reputation by not comparing it with the irrelevant case of awful kids toys (also know as, fallacy of association). Good try though. 🙂

    Graham Hill
    @GrahamHill

  14. Bob Thompson August 10, 2016 at 1:04 pm (222 comments) #

    Great discussion!

    Andy, perhaps a better title for your post would have been: “Do Written Corporate Values Matter?”

    You rightly take issue with the gap between what some companies say are their values versus how they behave. But you could say the same about most anything on a corporate web site, from business strategy to product capabilities.

    Values exist whether they are written down, or not. However, I think it does matter to write down and communicate company values. But it matters a whole lot more how they are inculcated. I’ve heard of some companies that print them on the back of employee badges and make everyone memorize!

    Values that truly become part of the culture will influence behavior. If that behavior is focused on doing things that customers value (including being treated fairly), and drives business value too, the enterprise will prosper.

  15. Gautam Mahajan August 11, 2016 at 1:49 am (173 comments) #

    Why does this not happen?
    Are they getting bad advice?
    Or they don’t care?
    Or they see no competitive advantage?
    Or they think they can get away with bull shit?

  16. Andrew Rudin August 11, 2016 at 8:32 am (208 comments) #

    The question remains whether corporate values matter. I concentrated on written values because they are so conspicuous. But as other people have pointed out, values can be tacit, too. And they are equally meaningful.

    Why don’t companies just skirt values altogether, and establish minimalist expectations, e.g. ‘we strive to give customers what they want while staying within legal boundaries’?

    I think the reason is that most companies want to stand for something more – or at least give others the perception that they do. This is why it seems such a cop out to me when senior executives attempt to justify a decision by saying ‘It’s perfectly legal’ or creepier, ‘it’s not illegal.’ Legal litmus tests are a pathetically low bar for deciding how to design, build, market, and sell products. Set higher standards, and the market should express its admiration through continued purchases. I’d be an idiot to say that applies to every company and every market, but there are real-world examples where standing for concrete values has been an indispensible component of strategic success.

    Thinking a bit more about Bob’s comment that “Values that truly become part of the culture will influence behavior,” I came up with some elements that portend that outcome:

    1. Values must be defined and available – not just ‘backroom’ or C-Suite.
    2. Values must be routinely shared and disseminated
    3. Values must be repeated at the right time (e.g. brought up at meetings and presentations where interactions with customers are discussed)
    4. Values must be routinely open for debate regarding interpretation and relevancy, and not cloaked in terms that stifle recognition of inevitable gray areas.
    5. There must be accountability for values in decision making at every level

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