The Human Side: Making Values Work

Abstract

Changing people's behavior requires more than redesigning structures and incentives. During the past few years, top management teams have spent hours in offsite meetings hammering out those corporate values they believe will steer employees in a new and common direction. Lists of values are printed, framed and hung in corporate offices. All too often, however, these lists stimulate cynicism among employees who have had no say in their formulation and see no change after they are adopted. These managers are not wrong about the importance of shared values. Shared values lead to consistent behavior. They provide a basis for trust and minimization of transaction costs within an organization. Particularly, when work calls for discretion, judgment, cooperation and relationship-building, values determine the kind of work management can expect. But the understanding of values by managers is usually superficial. In my experience, managers can improve their ability to lead effective change if they will take the trouble to understand the relationship of values to both individual and organizational behavior. The process of instilling organizational values requires an interactive dialogue that: Develops a shared logic of what kind of behavior is essential for the organization's success. Educates people about the organization as a social system so that recruitment, training, measurements, and incentives can be aligned with goals. Improves communication and trust. Develops leadership. What makes it difficult for managers to make values work is that there are three different meanings of the concept of values. Managers need to understand these different meanings and address them in the way I shall describe. One meaning of values describes ideals. Another describes behavior. And the third describes character. When all three of these meanings are aligned with an organization's strategies, the result is a highly motivated corporate culture. When they are not, the result is sub-optimal organizational performance, costly conflict, frustration, and bad faith or cynicism. (Another very different meaning of value, as distinct from values, comes from economics, as in value-added. This has to do with what someone is willing to pay for a product or service.) Aligning the three meanings of values begins with understanding that each has its own logic. Each requires a different kind of dialogue. Values as Ideals What are the right ideals for an organization? The answer is that ideals should motivate customers, employees and owners (or other stakeholders) to behave in ways that strengthen the organization and are essential for its success. These ideals should inspire the right kind of behavior. Customers should want your products. Employees should be motivated to work together to satisfy customers and continually improve the organization. Their work should be meaningful in terms of personal fulfillment as well as organizational success. People should want to work in this organization. Shareowners should be motivated to buy and hold equity in the company. When a company is prospering, little attention is paid to values. People assume the organizational values must be right. Top management typically rethinks values only when it becomes necessary to support a change in strategy and organizational culture. This may not call for describing totally new values but, rather, reinterpreting old values in the light of a changing business environment. For example, a number of technical companies are learning that the meaning of customer focus has changed from selling boxes or meeting specs to understanding how to customize solutions that help the customer to succeed. New values or ideals are typically proposed by the CEO, consulting with senior executives. Together they agree on the relationship between the values and organizational strategy. …