Introduction
Let’s imagine that you lead a climbing expedition, and your team is striving to beat the record as the fastest to summit a particular mountain. A rival team is also seeking to claim that record, and while they are taking a different route than you are, you can see in the distance that they are proceeding at a similar pace. Fortunately for both of you, the weather is clear and you stand a good chance of getting to the summit with half an hour to spare.
Suddenly, a layer of snow dislodges from ahead of the competitor and while it does not cause a full-scale avalanche, it does sweep the other party away and into perilous situations. You can see that most, if not all of them, have been incapacitated by the slide. You think that the able ones will likely be able to assist the others, and either make it down the mountain in time or hunker down for the night in their tents. Maybe the oncoming storm won’t be so bad. Maybe they might be able to call for help — which may or may not make it up the mountain in time. What you do know is that your team, with all of your gear and supplemental oxygen, can get across to assist and take them down the mountain. However, you also know that if you do so, you will have neither the time nor the gear to beat the record.
What would you do?
This decision describes the essence of values. Values are easy to follow when they line up the way you want them to: “Hey, we can save them AND still make it back to beat the record.” But it is in those situations where you have an “OR” rather than an “AND” that having, sharing and living your values is critical.
For example, would your decision change if:
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Most of your group members want to go on and leave the others’ fate to chance?
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You have been striving for this record for twenty years, have had numerous failed attempts, and you know this is the last opportunity you will have to claim it?
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You made a promise to a dying climbing friend that you would claim this record in their honor?
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You and your rival team have had animosity for years?
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You warned the rival team against taking the route they were planning to take, and they scoffed at your guidance?
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All of the above?
Similarly albeit less dramatically, companies and their team members face challenging decisions and questions daily, and occasionally ones that have bet-the-company stakes. Up to this point, we have looked at the company’s Purpose, Vision, and Mission components of The Company Promise Statement. Where the Purpose defines the “Why,” the Vision provides us with a long-term, big-picture view of the “What,” and the Mission specifies the short-term “What” that we do on a daily basis to fulfill the Vision. Now we look at perhaps the most important of them all: your Values.
Your Values answer the “How.” Values, both personal and corporate, are the bedrock of your belief system and culture. They are the touchstone that you go back to when faced with difficult decisions. And they define who you and your team are in the face of adversity.
To summarize them in questions:
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Purpose: “Why (are we working)?”
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Vision: “What world are we creating?” (Long-term what)
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Mission: “What are we striving to do?” (Short-term what)
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Values: “How do we behave?”
As with the prior posts, we will look at the definition of Values, how they apply to companies, the benefits of having strong values (and by extension, the costs of not having or following them), what makes for a good value, how to come up with them, and commentary on some examples. Let’s get started.
What are Values?
Oxford Dictionary defines the noun form of value as “the regard that something is held to deserve; the importance, worth, or usefulness of something,” and “a person’s principles or standards of behavior; one’s judgment of what is important in life.” Merriam-Webster provides us with “relative worth, utility, or importance” and “something (such as a principle or quality) intrinsically valuable or desirable.” Equally important, the verb forms are “consider (someone or something) to be important or beneficial; have a high opinion of” and “to rate or scale in usefulness, importance, or general worth.”
What really stands out from these definitions? Two things:
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A high level of worth, regard, utility or importance; and
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A scale on which the principle or standard in question is compared to others.
And there we have it. A value is a principle or behavior that you care about, for whatever reason, above and beyond the extent you care about other principles or behaviors.
Company Values
So how does this apply from a company perspective?
A company is, at its essence, a group of people coming together to pursue a common purpose. There are countless choices that one makes in the course of starting and growing a business, and they all involve some form of trade-off. You want to start an accounting business? That means you are not starting a construction business. You want to have everyone work in the office? That means you are not choosing to have your team work hybrid or remote. You want to focus on accounting for medical doctors in Canada? That means you are not focusing on accounting for sustainability professionals.
With every choice you make, you are moving toward something and, implicitly, you are moving away from other things. There is a reason for every choice you make. In some cases, you may be very mindful and aware of the reason, and be able to explain it clearly to yourself and to others. In other cases, you may have a feeling behind your choice, but there is likely some reason behind that feeling as well, even if you are not able to verbalize it at the time.
How does this apply to company values? Values, whether they be personal or for a company, are also a choice. Going back to the definition, they are a choice of what principles or behaviors we hold in high regard, relative to other behaviors. They are a choice with respect to what behaviors we want to move toward and, implicitly, which ones we either want to move away from or that are not important enough for us to emphasize them.
“How do you convey that you value those values?” – Jared Schrieber, Co-founder and CEO, InfoScout (Numerator)
Summing up, company values are a choice of behaviors that you place in highest regard, above all the other possible behaviors, and that you would like to see in yourself and in those you work with and hire into the company. Whether you like it or not, company values are a form of promise that communicate what others, inside or outside the company, can expect in their interactions with the people from the company, and the company itself. Taken together, the company values form a foundation for the company’s culture; in fact, the two are so inextricably intertwined that “72% [of the companies in a study cited in the Sloan Review] referred to their company’s culture as values or core values.”. Company culture is often defined colloquially as “how we do things around here”. Similarly, company values can be defined colloquially as “how we behave around here”.
The Value of Values
Okay, so we have defined what values are, both generally and specifically within companies. Now, the question is why is it important to have company values? Said another way, with no pun intended: what is the value of establishing and adhering to company values? There are both qualitatively archetypal examples and quantitative research evidence for the value of having company values, and living them.
Case Studies
Let’s look at some high-profile anecdotal cases that demonstrate the value of the company’s leadership adhering to its values, and the value destruction when it does not.
1. Living its Values: Johnson & Johnson – Tylenol Recall
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.”
Situation
In 1982, some extra-strength Tylenol pills were found to be laced with cyanide and contributed to multiple lethal poisonings in the Chicago area.
What They Did
J&J quickly recalled 250,000+ Tylenol batches with the same lot numbers connected to the deaths. Then, they recalled all Tylenol in the country.
“The company also offered to replace the worrisome capsules with the safer tablet form for free. It marked the first mass recall in U.S. history, involving more than 31 million bottles and costing the company $100 million.” (Tribune) Tylenol’s market share dropped from 37% to 7%.
The company introduced tamper-evident safety-sealed packaging after the incident, which is now featured in thousands of medications and food products on the market today.
The Outcome
Johnson & Johnson suffered a massive loss of $100m.
Within just a year, Tylenol had recaptured 85% of its market share rebounded and surpassed previous numbers.
Today, Tylenol is in the top leading brands of internal analgesic tablets in the USA.
2. Living its Values: CVS Caremark – Stopping Cigarette Sales
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Inspire Trust
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Champion Safety and Quality
Situation
Historically, tobacco and tobacco-related products were widely available at all major pharmacy chains in the US, including CVS Caremark, Walgreens, and Rite-Aid.
These products were (and in most cases, still are) profit-generators for the pharmacies.
What They Did
In 2014, CVS Caremark announced its intention to stop selling cigarettes and other tobacco products in all of its 2,800+ stores, and to launch a national smoking-cessation program. It also changed its name to CVS Health.
Larry J. Merlo, the company’s CEO, said in a statement: “Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health. Put simply, the sale of tobacco products is inconsistent with our purpose.”
The Outcome
In the short term, the company lost up to $2 billion in sales from tobacco and tobacco-related products.
The company did not make up those sales directly. However, they viewed the decision as an inflection point that marked their focus on being a healthcare company, and are confident that they have more than made up the amount through their increased focus on health.
From a societal perspective, the company estimated that people who bought their cigarettes exclusively from CVS were 38% more likely to stop buying cigarettes altogether, and that 100 million fewer packs of cigarettes were sold across the country.
A year and a half after the announcement, the share price hit a record high, double what it had been before the announcement.
3. Living its Values: Ben & Jerry’s – Black Lives Matter
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Deep respect for human beings
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Nonviolent ways to achieve peace and justice.
Situation
On May 25, 2020, police arrested George Floyd, an African-American man, for the suspected use of a counterfeit twenty-dollar bill. During the arrest, a police officer pressed on Floyd’s neck for 9 minutes, resulting in Floyd’s death. The violent nature of the arrest and its fatality sparked nationwide protests against racially motivated police brutality in the United States, and worldwide in a show of solidarity for the Black Lives Matter (BLM) movement.
What They Did A week after George Floyd’s murder, at the height of the BLM movement, Ben & Jerry’s made a powerful statement committing to and urging readers to “dismantle white supremacy” and publicly outlined four specific steps to accomplish this objective. Numerous other companies made statements in support of BLM however many of these were seen to be either insincere, opportunistic, hypocritical or as forms of gaslighting given the companies’ records in diversity hiring, compensation, and treatment of ethnic and other minorities.
The Outcome
In the weeks following its strong statement on BLM, Ben & Jerry’s buzz scores and perceived reputation almost doubled, and a measure of whether customers have bought from a brand in the past 30 days went up by more than 250%.
In a 2021 interview about why the company speaks out on issues it cares about, Matthew McCarthy, Ben & Jerry’s CEO, said: “We do these things not to sell more ice cream but because we care about people and have values. All businesses are collections of people with values. If you’re not making your values known publicly, you’re putting your business and brand at risk.”
4. Not Living its Values: Enron – Falsifying Revenues
Relevant Values
Enron’s company values — Integrity, Communication, Respect and Excellence — were painted on the wall and proudly displayed in their annual report.
Situation
Enron was an American energy-trading, commodities, and utility corporation based in Texas. At its peak, the company employed over 20,600 people with reported revenues of almost $101 billion in 2000, and was named “America’s Most Innovative Company” for six consecutive years by Fortune.
What They Did
Enron’s leadership fooled regulators with falsified holdings and off-the-books accounting practices.
In August 2001, Sherron Watkins, an Enron VP, reported accounting irregularities to the Chairman, Kenneth Lay. In October of that year, the company announces third quarter losses of $638M and an equity write-down of $1.2B. Over the following months, the company unravels with more losses, high-level firings, and criminal proceedings.
The Outcome
Enron admitted that it had inflated its income by $586 million since 1997, and proceeded to write off billions in value. It faced an SEC probe and ultimately, was forced to declare bankruptcy.
In the four years preceding Enron’s bankruptcy, shareholders lost $74 billion and employees lost billions in pension benefits.
Numerous Enron executives were subsequently charged with insider trading, conspiracy, and securities fraud.
5. Not Living its Values: Volkswagen – Cheating Emissions Tests
Relevant Values From the 2014 Volkswagen Annual Report: “Our Code of Conduct, which is applicable throughout the Group, provides guidance for our employees in the event of legal and ethical challenges in their daily work. It embodies the Group values of customer focus, top performance, creating value, renewability, respect, responsibility and sustainability. All employees are equally responsible for adhering to these principles.”
Situation
VW was aggressively pursuing growth as a plan for VW to become the world’s largest automaker by 2014.
What They Did
VW created a special group to come up with a system for enabling their diesel vehicles to limit performance during emissions tests in order to underreport harmful nitrogen oxide levels, and thereby pass the test.
The manufacturer installed these devices on millions of their diesel vehicles. The nitrogen oxide levels emitted during normal driving were 10 to 40 times above regulated standards.
A May 2014 report by the West Virginia University Center for Alternative Fuels Engines and Emissions (CAFEE) flagged the discrepancy between real-world and lab testing.
On Sep 18, 2015, the EPA formally informed VW of its violations of the Clean Air Act and issued a recall for affected vehicles sold from 2009-2015.
On Sep 20, 2015, the company admitted the extent of its deception and issued a public apology.
The Outcome
The share price dropped over 40% following the EPA letter and VW’s announcement, and over 60% from its March high.
The CEO resigned on Sep 23, 2014.
By 2020, the company had paid over $33 billion in costs related to the affair.
At least 15 executives have been criminally charged for their involvement in the matter. Martin Winterkorn, VW’s CEO from 2007-2015, is currently a fugitive of justice in the United States, and is wanted by the EPA for conspiracy to commit various forms of fraud and violate the Clean Air Act.
6. Not Living its Values: Wells Fargo – Cross-Selling Fake Customer Accounts
“Our values should guide every conversation we have, every decision we make, and every interaction among our team members and with our customers. Our values should anchor every product and service we provide and every channel we operate. If we can’t link what we do to one of our values, we should ask ourselves why we’re doing it. It’s that simple.
All of our team members should know our values so well that if we threw out all the policy manuals, we would still make decisions based on our common understanding of our culture and what we stand for. Corporate America is littered with the debris of companies that crafted lofty values on paper, but when put to the test, failed to live by them. We believe in values lived, not phrases memorized. If we had to choose, we’d rather have a team member who lives by our values than one who just memorizes them.
We have five primary values that are based on our vision and provide the foundation for everything we do:
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People as a competitive advantage
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Ethics
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What’s right for customers
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Diversity and inclusion
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Leadership*”
*This is a long passage but I have included all of it to demonstrate the critical distinction between having values as a company, and living them. If you are not sufficiently outraged by the clear disconnect between talk and action and want to see how self-congratulatory Wells Fargo was toward its own vision and values, stating that “Corporate America is littered with the debris of companies that crafted lofty values on paper, but when put to the test, failed to live by them,” see pages 8-10 of its 2012 Vision and Values.
Situation
Wells Fargo, founded in 1852, was (and is) one of the top 3 banks in the US ranked by total assets.
The bank and its executives enjoyed a stellar reputation:
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Praised by Fortune for “avoiding the rest of the industry’s dumbest mistakes.”
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Chairman and CEO John Stumpf was named “Banker of the Year” and Carrie Tolstedt the “Most Powerful Woman in Banking.”
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Ranked 7th on Barron’s 2015 list of the “Most Respected Companies.”
Wells Fargo’s key “cross-sell metric”, which was the ratio of the number of accounts and products per retail bank household, plateaued in Q2 2014 and decreased in Q3 2014.
What They Did
The cross-sell metric was such a focus of Wells Fargo’s growth story to investors and so fundamental to executive and sales compensation that employees at the bank, with the knowledge of some executives, opened at least 3.5 million fraudulent accounts for customers in order to meet performance goals and compensation objectives.
The Outcome
In 2016, the bank announced it would pay $185 million to settle a lawsuit related to fraudulent accounts.
In 2020, the company agreed to pay $3 billion to settle claims by the United States Department of Justice and the Securities and Exchange Commission.
Wells Fargo’s market capitalization is 40% lower than it was in 2016. The market cap of its largest competitors, JP Morgan Chase and Bank of America, is 25% and 17% higher, respectively.
Former CEO John Stumpf retired in Oct 2016. He was later banned from the industry and fined $17.5 million. Toistedt faced a $25 million penalty.
Following a settlement with the Consumer Financial Protection Bureau (CFPB), Wells Fargo will pay a record “$1.7 billion civil penalty and more than $2 billion in redress to customers.”
Case Study Findings
In each of these cases, we can see how the positive results distinguished themselves from the negative ones. In all cases, the companies had values. In all cases, the companies stated that they were working in accordance with their values. However, in the positive cases, the companies took a stand for their values, even when it was not in their best short-term financial interest to do so. And while doing so clearly ended up benefiting them in the longer term, the financial or reputational benefit was not the reason they took the actions that they did. Rather, it was that they felt compelled to take the actions they did to be in integrity with their stated values.
In the other cases, we see a reversal of those priorities: quite simply, the companies, and their executives, prioritized growth in revenues or profitability ahead of living their values. All of these firms had values. Some of them even extolled their adherence to their values, in some cases in a self-righteous manner. However, in reality, the CEOs were either blind to the impact that their focus on growth over values would have on their employees, or wilfully ignorant, or outright deceptive. It is worth noting that in all of these cases, the executives earned substantial bonuses based on their growth objectives, and thus were highly monetarily incentivized to turn a blind eye to their employees’ behaviors, even perpetuating the deceit for years after it was first reported. Unfortunately for them, their reputations were subsequently destroyed, and they were subject to hefty fines and, in some cases, criminal proceedings.
“Whether values are articulated or not, behaviors, especially those of senior leadership, send a message about what is important to them and to the organization.” – Elizabeth Dalzell, President, Talent + Culture
In summary, while the values you choose are a clear statement of what you place in the highest regard, there is also a clear business rationale for establishing and reinforcing them: customers, regulators and the public generally will reward those companies who have and adhere to positive values, while punishing monetarily and reputationally those companies and their executives who violate them.
“If you’re not willing to accept the pain real values incur, don’t bother going to the trouble of formulating a values statement. You’ll be better off without one. When properly practiced, values inflict pain. They make some employees feel like outcasts. They limit an organization’s strategic and operational freedom and constrain the behavior of its people. They leave executives open to heavy criticism for even minor violations. And they demand constant vigilance,”writes Patrick Lencioni, President of The Table Group (HBR).
Values and Company Health
To be fair, these are only six high-profile examples of the value of having and following company values, and cherry-picked ones at that. That said, there is abundant research into the direct and indirect connections between values, strategy, leadership, company culture, engagement, performance and retention (see Flamholtz, Sull, Tuconi and Sull (MIT Sloan Review), Groysberg, Lee, Price and Cheng (HBR), Gallup, Lencioni (HBR), and Kantar Consulting, to name a few). For the purposes of this post, the Cliffs Notes version is that we see values as the foundation for a company. If the foundation is solid, and leadership puts in place a sound strategy with objectives based on fulfilling the company’s purpose, vision and mission, one can build a great culture. If the culture is vibrant, the team will be engaged. If the team is engaged around a strategy they believe in, they will generate strong performance. If the company is performing well and the team is engaged, the stronger performers who align with the values and fit with the culture will stay with the company, thereby reinforcing the company’s values, culture and performance. And if all of these are in good condition and in alignment, then we have a healthy company.
“I was immediately struck by the description of core ideologies that separated the visionary companies from the mediocre companies. The visionary companies had a set of core values that were unchanging and a core purpose that fueled everything they did.” – Roy M. Spence, Jr., Former CEO, Southwest Airlines
Unlocking the Value of Values
Summing up, a company’s core values are a foundational element to the company’s culture, and performance. However, it is not enough to have values: as we have seen from the case studies, at least as critical as having values is living them authentically and continually reinforcing them. This is supported by a study in the Sloan Review from Sull, Turconi & Sull: “There is no correlation between the cultural values a company emphasizes in its published statements and how well the company lives up to those values in the eyes of employees.”
Ultimately, the long-term health and sustainability of your company will be influenced by the level of intention you place on the establishment and promulgation of your values. Figure 1 below provides a flowchart to diagnose how values play into how happy you are with the state of your culture. Having and positively reinforcing your company values puts you on the path to having a thriving company culture, which correlates very well with company performance. Having values but not following them leads to cynicism and disenchantment, if not outright unethical behavior (see Enron or Wells Fargo above), while not being intentional about defining and reinforcing your company values can easily lead to an inexorable deterioration of the culture as you scale the company beyond a cohesive group of early employees.
Incidentally, whether the individual team members’ values align with the company’s core values is a related but separate topic. Needless to say, the greater the degree of alignment that each individual team member feels, the more engaged and productive they will be; conversely, the less there is alignment, the more that the company and team members would be advised to consider parting ways.
What Makes for a Good Value?
Okay, we have established what are company values, and the importance (or value) of having and living them. Which begs the question: what actually makes for a good company value?
ATEAM Framework
In the past posts, we have been assessing purpose, vision and mission using the ATEAM framework: Authentic, Transcendent, Enduring, Activating, and Memorable. Let’s see how the framework holds up when being applied to company values.
Authentic
Above all else, you want your company values to accurately reflect your culture, your team members’ behaviors, and who you are as a company. In a seminal article on values in the Harvard Business Review, Patrick Lencioni writes, “Empty values statements create cynical and dispirited employees, alienate customers, and undermine managerial credibility.”
“It’s honestly better to NOT have core values than to have ones that don’t feel authentic or genuine.” – Megan Paterson, CHRO, Kinaxis
Transcendent
In my prior post on Purpose, I defined “transcendent” as being about serving others rather than oneself. In order for a company to be sustainable over the long term, it stands to reason that on balance, the team members must be serving customers (and by extension, the company) to a greater extent than they are serving their self-interest exclusively. If the customers win, the company wins, and the team members win.
Enduring
Jim Collins states that visionary companies have core values that are “timeless and do not change” and Patrick Lencioni sees company values as “imposing a set of fundamental, strategically sound beliefs on a broad group of people.” While you will want to have accountability check-ins to ensure that you are living in accordance with your values, your core values will ideally be in place throughout the life of your company.
Activating
The only way to have values guide behavior is to live them. Faith Tull, Former Head of Global Talent at Intelex says values “can’t just be statements that live on a wall or in onboarding videos”. Once they have been established, communicate them, recognize and promote examples of when they are being used effectively, and determine a way to compensate team members on them. In this way, your company values will become infused in your culture, and continually, positively reinforced.
Memorable
In order for values to truly be integrated into the fiber of the company, they must be memorable. You want all of your team members to be applying your values on an ongoing basis to guide decisions, especially difficult ones where trade-offs are inherent, and that can only happen if your team members can actually remember and recite the values, which starts with their being written in a simple and straightforward way. You want to balance brevity with being an effective guide for action and decision-making. For example, in the event that you choose one word for each core value, provide additional context and examples to help clarify the intention behind the choice of that value. It absolutely helps if the values are posted prominently throughout your company’s physical or virtual office environments. It also helps to only have 4-5 core values, so they are easy to remember.
“Everyone must know the values of the company, no matter the tenure of the employees.” – Faith Tull, Former Head of Global Talent, Intelex
Values Checklist
In addition to the essential ingredients of values outlined through the ATEAM framework, below is a checklist of additional requirements of company values compiled from experience, personal interviews and exchanges with over 15 CEOs, HR leaders, and team members, in addition to copious industry research:
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Consistency: Are all of your core values consistent in terms of how your team will perceive them? There is a difference between the ‘basic’ values that are requirements for anyone being engaged with the company (e.g. honesty, respect), the ‘core’ values that you want to use as the guide for and authentically reflect everyone’s behaviors (see below), and the ‘aspirational’ values that you would like to emulate but that you cannot genuinely say are reflective of your company at the present time. This post is primarily focused on the core values, but it is worth making a list of the basic, minimum requirement, values (as in you don’t get hired or stay if you don’t abide by them) and to the extent that you want to guide behavior in a certain direction in the future, potentially outline some aspirational values. However, it is critical to not dilute attention and focus from the core values that are meant to be at least enduring, if not timeless. (For a further read on this topic, Patrick Lencioni provides a useful distinction between four different types of values: core, aspirational, permission-to-play, and accidental.)
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Behavior and Decision Guides: Will the core values you have established guide everyone’s — especially the executives’ — behaviors and decision-making? Well-implemented, values clarify tactical decision-making and even strategy as core values provide an established and agreed touchstone that everyone can point to as a reference for those decisions. As Jared Schrieber, co-founder and CEO of InfoScout (now Numerator) said, he knew the values were taking root when he heard team members use a discussion of the company’s values as a way of resolving difficult decisions.
“Values are essential, the critical glue that holds everything together. It is your behavior, day in and day out, that is the most critical. How people perceive you is 1) what they hear comes out of your mouth every single day, 2) what they see you do, and 3) who they see you associate with.” – Carol Leaman, Co-founder and CEO, Axonify
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Incentives: As with body language, what is your body saying while your lips are moving? Team members will infer much more from what gets recognized and rewarded than what is stated. As we saw with Wells Fargo above, a company and its CEO can say whatever they like, but it is the behaviors, and the incentives underlying these behaviors, that ultimately clarify what the company truly values. In Wells Fargo’s case, the bonuses and promotions that were awarded to those who hit aggressive cross-selling sales targets, with insufficient checks and balances on what team members did to reach those targets.
“Holding everyone to account for values, irrespective of role, is what builds a strong culture. And when you have a strong culture and values, employees will self-select based on whether or not they fit.” – Byron Darlison, Founder & former CEO, Rise Vision
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Commitment: Do you have what it takes to live these values and continually reinforce them? If not, then you either don’t have the right values, or the intestinal fortitude to be a leader. I say this in full empathy and humility as someone who has failed, at various times in my career, in this capacity. Values are a choice. Choices imply trade-offs. And there is no more impactful, and yet more nuanced, choice than what you set out as your core values. As we have seen, they will impact everything you do in the company, from setting the culture, to hiring, compensation, promotion and firing decisions, to how you represent yourself and interact with customers and stakeholders, to the strategic and tactical decisions you take. When you choose your core values — and they are a choice, not a decision based on observable, empirical quantitative data — you are burning the boat with respect to the other choices that were available. You are either all-in, or adrift.
“Values appear in every interaction. If well formulated, values can facilitate decision making and reduce conflict as decisions in line with the values will be more easily accepted.” – Sue Heywood, Director, HR Practice and Head People Officer, Business Sherpa Group
Crafting Your Values
When Is the Right Time to Establish Your Core Values?
Borrowing from the Chinese proverb about the best time to plant a tree, the best time to establish your values was when the company was founded; the next best time is today.
As we have discussed, there is a connection and correlation between values, culture, engagement, performance, and retention. A CEO seeking to maximize the long-term value creation of their company (as opposed to maximizing their short-term compensation) will be aiming to maximize company longevity and performance. Values are the foundation of the company’s culture and all that is built upon it. If you don’t have values established, aligned, lived and reinforced, you are effectively diminishing both your company’s performance, and its longevity. Scaling companies are particularly vulnerable to overlooking the establishment of values or disregarding them as they are overcome by the urgency of forming, building, entering new markets, and pushing growth.
“In a scaling company, values are continually put to the test.” – Margo Crawford, Founder & Chair, Business Sherpa Group
That being said, not all is lost if you did not establish your values from the company’s very founding. Everyone makes mistakes in business all the time, and what doesn’t kill you can make you stronger — if you learn from it. In Built to Last, Jim Collins outlines how successful companies got things right from the get-go; in Good to Great, he profiled companies that hit an inflection point and either turned things around, or accelerated to a new rate beyond that of their prior pace. Furthermore, some startup CEOs argue that waiting until you have achieved product market fit is the better time to align on values as you know at that point that you actually have a business opportunity worth pursuing. (An important caveat here is that if the founders sense early on that there are fundamental disconnects in their values, it is unlikely that they will be able to proceed very far down the path of achieving product market fit without the two or more parties concluding that they would be better off parting ways.)
Personally, having gone through this a few times and seen the impact of not aligning on values early on, I make it a very high priority at the start of undertaking any new venture or collaboration, and misalignment on values has become my number one reason for not pursuing opportunities. There is enormous value to be unlocked from putting your core values in place, and every day, week, month and year that they are not in place increases the probability of the company’s culture and performance sliding downhill, deteriorating company value and diminishing the potential for getting back to where the leadership and investors want it to be.
Approaches
You are now sitting down to craft your core values. Great! How do you go about it?
Bearing in mind that the ideal time to have crafted company values was at the company’s founding, some would argue for a top-down approach (well, there is no “down” at company founding, but you get the point). Others, especially if the company is already in operation and has a number of employees, would argue for a bottoms-up approach as it can be used as an exercise to involve the team. In other cases, some might consider a hybrid approach, where the team has involvement but the CEO and leadership team and/or board decide.
There is no absolute right or wrong here but I am strongly in favour of a top-down or, at most, hybrid approach. Why? Here are some considerations on the various approaches:
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Top-down: If you establish values at the company’s founding, they become a very effective filtering mechanism for all new hires, and it becomes much more seamless to integrate the values as the guide to behaviors and decision-making when they are understood from the very start. Even if established, communicated and implemented at a much later point in time, the CEO is the person most responsible for embodying the values, and they are chosen by the board of directors. As such, to ensure continuity the board effectively become the guardians of the company’s purpose and values, and thus their engagement in crafting them is essential to ensure alignment starts at the very top.
“Take input but it’s not a democracy where everyone gets a vote. You want to be more firm, outlining what you want, what we should be doing, the guardrails and the focus.” – Mike Potter, CEO, Rewind
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Bottoms-up: From a superficial engagement perspective, there are persuasive arguments for having the team discuss and bubble up the values to the executive team. However, the result of such an exercise will often be a popularity contest as opposed to a what is right contest. As Ray Dalio outlines in Principles, every person’s opinion counts, but not every person’s opinion is weighted the same. To use an extreme example to illustrate the point, one cannot consider the input of someone who has been with the company for a month with the same weight as a founding CEO who has been there for many years: imagine an Apple that did not have the same focus on innovation and product quality as Steve Jobs instilled in it over the years.
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Hybrid: Another possibility, which again applies to the extent that the company is instilling values after initial founding, is a hybrid approach — for example, informed by the team, decided upon by the CEO or a designated team of core employees. In terms of the core team, you want the CEO and leadership team to identify and nominate the individuals who best embody the kinds of team members they want to have working in the company. If you can all agree on who are the most valuable players, you can then count on them to surface the most core values.
Whichever path you choose, you want to be very clear about who is involved and what is their role. A framework such as RACI (responsible, accountable, consulted, informed) can be useful for clarifying who does what in this process. As mentioned previously, I would lean strongly to the CEO, in collaboration with the leadership team and board, ultimately being responsible and accountable for the decision on the core values; what you definitely don’t want to do is delegate it to your People or HR function as an “engagement initiative”, or to a randomly-selected team of employees.
“Values initiatives have nothing to do with building consensus — they’re about imposing a set of fundamental, strategically sound beliefs on a broad group of people. The best values efforts are driven by small teams that include the CEO, any founders who are still with the company, and a handful of key employees.” – Patrick Lencioni, Co-founder and President, The Table Group (HBR)
Process
Irrespective of what approach you decide to take, you will likely follow a process somewhat similar to the following:
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Hone In: Start by distributing a comprehensive list of values to the members of your values crafting group. Have each member of the group cull their own copy of the list from the hundreds included to 50, then to 20, then to 10, and finally down to 5.
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Create Clusters: Have each member of the group submit their top 5. To maximize team effectiveness, do it in a manner that does not identify who chose which value. As a group, and with a facilitator (ideally external to enable everyone to participate fully), look for commonalities and clusters amongst the selected values.
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Craft Your Values: As you narrow down the clusters, identify resonant words or phrases that best encapsulate the behavior you are seeking. You may also want to consider distinguishing the basic and aspirational values from the core one, separating your values into groups headed “we require”, “we are”, and “we aspire to be”. You will want to get down to three to seven core values. Five is a typical number but what is most important, irrespective of the exact number, is that you come up with the behaviors you feel best capture what you are seeking to convey internally and externally about your company and its culture. Expect to do a fair amount of wordsmithing at this stage.
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Cross-reference and Gut Check: Cross-reference the distilled list of values against your top employees. Ask yourself how well they embody those values and, in cases of misalignment, consider whether you want to change the values, ask the employees to change, or be prepared to see the employees leave the organization for no longer being the fit that you would like them to be.
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Refine Your Values: After you are comfortable that you have captured your true core values that represent behaviors that you value more highly than any others, you will want to refine them to a state that will optimize for communication, understanding, acceptance, and action. There will be a lot of wordsmithing to get the phrasing to a level you are comfortable with. Some of your considerations will include: maintaining a consistent form (e.g. verbs vs nouns vs adjectives) to minimize the friction of cognitive dissonance and enhance memorability; length as in one word each vs a short phrase; and focus on positive words of what you espouse, rather than what you don’t want.
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Clarify: Once you have finalized your list of values, consider adding clarifying context and examples to help reinforce the meaning of each value. Your team members will likely only remember the value itself, but the additional context will help them better understand and integrate that value into their behaviors and decision-making. For example, for the value of “Integrity”, you might add “We do the right thing, even if it costs us. We are honest to a fault. We behave at all times as if everyone could see what we are doing.”
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Communicate and Reinforce: Finally, as we have discussed, values require constant reinforcement, ideally through both appropriate consideration in incentive plans, and frequent public recognition of team members who demonstrate their application of the values.
“It takes continuous positive reinforcement to get people to think about and remember the values. Over time, if you can do that in an enjoyable, fun way, then it can have a huge powerful impact on the business.” – Pierce Ujjainwalla, Co-founder & CEO, Knak
What Do You Value?
This is what it all comes down to: what values do you want to live by, both personally and through your company? If you are a CEO, you have the benefit of being able to craft values for the company and being the ultimate guide and shaper of the company’s culture. If you are not the CEO of your company, are you clear on what the company values are, and do those align sufficiently with your personal values so that you are motivated to deliver your best effort?
As we explored, company values are a choice of what behaviors are not merely tolerated but actively encouraged. Well-defined, instilled, and reinforced continually in alignment with the company’s strategy, they provide a roadmap for decision-making, and form the foundation for a unique company culture that engenders employee engagement, productivity, retention, and ultimately company health. Not well defined or not well reinforced, and you run the risk of your culture and company performance starting to drift and decline.
There are numerous real-world examples of companies that benefited from successfully living by their values during challenging times, such as Johnson & Johnson sacrificing a significant portion of their near-term revenues but building public trust that continued to pay dividends to the company in publicly declaring an emergency and pulling all Tylenol tablets from shelves as a preventative measure; CVS Caremark sacrificing but ultimately surpassing their revenues in banning the sale of cigarettes in their pharmacies due to their being counter to the company’s purpose; and Ben & Jerry’s boldly and quickly expressing their support for the Black Lives Matter movement and gaining additional brand converts and revenues. The common thread here is the willingness to stand by the company’s values, irrespective of the consequences.
“The core values embodied in our credo might be a competitive advantage, but that is not why we have them. We have them because they define for us what we stand for, and we would hold them even if they became a competitive disadvantage in certain situations.” – Ralph S. Larsen, CEO, Johnson & Johnson
Conversely, there are also myriad cases where companies suffered enormous losses and even insolvency when ignoring their core values, such as was the case for Enron in fraudulently overstating their revenues, Volkswagen in installing systems to cheat emissions tests in a clear prioritization of their desire to become the #1 automotive manufacturer in the world over basic ethics; and Wells Fargo in strongly incentivizing cross-selling to the point where their sales representatives manufactured customer accounts without their knowledge.
It is never too soon to establish and promulgate the company values. Crafting your company’s core values is a process that requires both very careful consideration by the CEO and a team of senior leaders and individuals that best exemplify the company’s desired values, and will be most effective when aligned with a company’s mission and strategy. The ATEAM framework (authentic, transcendent, enduring, activating, and memorable) ensures that the values will resonate with your team and strengthen the culture, engagement, productivity, and the company’s overall performance.
What do you value?
Epilogue
This post on values draws to a close our four-part series on the Company Promise Statement: the Purpose; Vision; Mission; and Values. Together, these form a statement of what it stands for to a company’s team, customers, investors, and community and other stakeholders.
As with the prior posts in this series, keep reading if you want to see some more real-world examples of company values, and my perspective on them.
Examples
win, win, win
create solutions where the customer wins, the community wins, the company wins.
think sustainably
make decisions that last longer than you will.
keep it real
cultivate authentic food and relationships.
add the sweet touch
create meaningful connections every day.
make an impact
leave people better than you found them.
live the sweetlife
celebrate your passion and your purpose.
ATEAM Check:
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Authentic: Fair. Unfortunately, the negative reviews from Glassdoor suggest that they are not quite living up to their values.
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Transcendent: Excellent. It is clear in multiple values that they are thinking of the good they can do beyond themselves to their customers, stakeholders, and the world.
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Enduring: Excellent. It’s hard to argue otherwise when they want to “make decisions that last longer than you will.”
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Activating: Excellent. All of these values inspire positive action (though execution may not be at the same level).
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Memorable: Very good. Six is a bit much for most people to remember but they are written in a memorable way.
What do I like:
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The values are relatively short, and phrased as verbs.
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There are clarifying statements after each one to provide additional context and guidance.
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They demonstrate thoughtfulness in being distinct and unique to Sweetgreen.
What could be improved:
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They could consider adding more examples of each value to make them less vague. For example, what are some ways in which they might guide their team to make meaningful connections every day?
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Execution on these values to call them truly authentic.
Procter & Gamble
Integrity: Doing the right thing is the only thing
Leadership: We Lead in our area of responsibility, with a deep commitment to delivering results, and a clear vision of where we are going.
Ownership: We accept personal accountability to meet our business needs, improve our systems and help others improve their effectiveness.
Passion for Winning: We are determined to be the best at doing what matters most
Trust: We work from a foundation of trust having confidence in each other’s capabilities and intentions.
ATEAM Check:
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Authentic: Very good. While these may be reflective of P&G culture, they are also very generic and could be transplanted into many other companies..
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Transcendent: Good. With the possible exception of “Doing the right thing is the only thing,” I find these to be very inwardly focused, with little regard for customers or other stakeholders.
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Enduring: Excellent. These could be dropped many years in the future and still apply.
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Activating: Very good. They could potentially be more activating if written in verb form (e.g. Do the Right Thing; Lead with Vision; Be Accountable; Focus on Winning; Trust). Note also that they are activating for a certain kind of person who is more focused on the company and themselves than the broader world.
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Memorable: Excellent. It is easy to remember these.
What do I like:
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The values are short and memorable.
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They will stand the test of time.
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There are clarifying statements after each one to provide additional context and guidance.
What could be improved:
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These values are generic and could apply to any company. In P&G’s defense, a company of their size will want to appeal to a very broad set of team members, consumers, and partners, thereby making it challenging to have the same level of uniqueness as a an earlier stage or younger company seeking to differentiate to make its mark on the world.
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They could consider adding more examples of behaviors for each value.
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For a company of P&G’s breadth and impact, I am not inspired by their values, which convey a message of performance and efficiency. While that is important and we don’t want to lose what distinguishes P&G culture, I would like to see at least a reference to their impact on and care for the broader world, such as in the area of sustainability (e.g. plastic packaging). This would not be conveyed in the value itself, but in the additional context. For example, Ownership: We take accountability for our products and their impact, continually seeking ways to improve ourselves, our customers and partners, and the world we live in.
Meta
Move Fast
Move Fast helps us to build and learn faster than anyone else. This means acting with urgency and not waiting until next week to do something you could do today. At our scale, this also means continuously working to increase the velocity of our highest-priority initiatives by methodically removing barriers that get in the way. It’s about moving fast together – in one direction as a company, not just as individuals.
Focus on Long-Term Impact
Focus on Long-Term Impact emphasizes long-term thinking and encourages us to extend the timeline for the impact we have, rather than optimizing for near-term wins. We should take on the challenges that will be the most impactful, even if the full results won’t be seen for years.
Build Awesome Things
Build Awesome Things pushes us to ship things that are not just good, but also awe-inspiring. We’ve already built products that are useful to billions of people, but in our next chapter we’ll focus more on inspiring people as well. This quality bar should apply to everything we do.
Live in the Future
Live in the Future guides us to build the future of distributed work that we want, where opportunity isn’t limited by geography. This means operating as a distributed-first company and being the early adopters of the future products we’re building to help people feel present together no matter where they are.
Be Direct and Respect Your Colleagues
Be Direct and Respect Your Colleagues is about creating a culture where we are straightforward and willing to have hard conversations with each other. At the same time, we are also respectful and when we share feedback we recognize that many of the world’s leading experts work here.
Meta, Metamates, Me
Meta, Metamates, Me is about being good stewards of our company and mission. It’s about the sense of responsibility we have for our collective success and to each other as teammates. It’s about taking care of our company and each other.
ATEAM Check:
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Authentic: Very good. Whatever any one of us may feel about Meta as a company, these values ring true to what we know of them and we can see their lineage going back to Zuckerberg’s initial founding of the company.
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Transcendent: Very good. While these are not Mother Teresa-level of transcendence, they are focused on the team, their users and the world, as opposed to individuals. Again, one (big) concern here is whether the company is as focused on inspiration and the good of the world as they say they aspire to be, or whether it is the execution that has been lacking.
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Enduring: Excellent. Yes, these would almost certainly still apply if we were reading them many years in the future.
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Activating: Very good. Two issues to address here: 1) the use of a noun for the last value when all of the other five are much more activating verbs; and 2) the use of the word “should”, which evokes a disempowering sense of obligation and can be modified for more inspiring and activating wording. For example, “We should take on the challenges that are most impactful…” could be rephrased “Let’s strive to take on the challenges that are most impactful…” and “This quality bar should apply to everything we do” as “This quality bar applies to everything we do” would
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Memorable: Excellent. These are more challenging to remember than one-word values, but they have used clever turns of phrases that most team members would be able to recall repeated exposure and usage.
What do I like:
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It is clear that a lot of thought went into crafting these values, and that they apply well to Meta and the development and maintenance of its culture.
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The context that follows the values is equally well thought-through. It is much easier for team members to understand the values with such additional and rich elaborating statements.
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They use clever turns of phrases that, while not as memorable as one-word values, will be easy to draw upon for guiding behavior and decision-making.
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They will stand the test of time and, for the most part, are inspiring.
What could be improved:
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The use of disempowering words, which can be easily updated.
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The use of a noun for the last value of Meta, Metamates, Me. It seems that their intention is to convey the notion that if the company wins, and the team wins, the individual will win as well. However, all of the other values are written in an activating verb form, while the last one is in a passive noun form. How do I “Meta, Metamates, Me”? The different form also causes cognitive dissonance, which creates unnecessary friction for their audience in absorbing the values. Frankly, this last value comes across as an add-on, and might be better worded as “Put the team first”, or “Pursue our mission as one” or “Contribute to our collective success”.
Deloitte
Lead the Way
Deloitte is not only leading the profession, but reinventing it for the future. We’re also committed to creating opportunity and leading the way to a more sustainable world.
Serve with Integrity
By acting ethically and with integrity, Deloitte has earned the trust of clients, regulators, and the public. Upholding that trust is our single most important responsibility.
Take care of each other
We look out for one another and prioritise respect, fairness, development and wellbeing.
Foster inclusion
We are at our best when we foster an inclusive culture and embrace diversity in all forms. We know this attracts top talent, enables innovation, and helps deliver well-rounded client solutions.
Collaborate with measurable impact
We approach our work with a collaborative mindset, teaming across businesses, geographies, and skill sets to deliver tangible, measurable, attributable impact.
ATEAM Check:
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Authentic: Fair. Based on my numerous interactions with employees of Deloitte over the years, I believe that they aspire to these values. That being said, as is all too often the case with larger organizations, there are breakdowns in the application of the values, particularly in the area of integrity (for example, google “Deloitte scandal” to see a few). These values could also apply to pretty much any large consulting firm, and there is nothing that calls out any uniqueness to Deloitte.
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Transcendent: Fair. There is too much smugness and self-congratulations in the wording of the first two values: “Deloitte is not only leading the profession…” and “Deloitte has earned the trust of clients, regulators, and the public.” I am reminded of the saying “You cannot propel yourself forward by patting yourself on the back”. Deloitte may want to believe these statements, but my perspective is that they let others praise them rather than seeking to praise themselves for what they are hoping that others think of them. The last three values are worded in a much more objective and altruistic manner.
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Enduring: Very good. Aside from the self-congratulatory wording noted above, which may change over time, these values are written to stand the test of time.
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Activating: Very good. Once again, with the exception of the examples noted above.
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Memorable: Very good. These would take a bit more effort to remember, but any committed Deloitter could get there.
What do I like:
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Limited to five short and pithy statements, each one with clarifying context.
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The values are written in very form, and serve as an effective behavioral guide for their team.
What could be improved:
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Adding more context to better elucidate each of the values.
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Drop the self-congratulatory claims. Let others speak of your deeds rather than you doing so yourself.
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As much as many large organizations suffer from some bad actors that undermine our trust in them, any company that claims integrity as a value really has to live up to it.
ChatGPT Sample Values
While using ChatGPT to come up with your values goes against everything we have written above about the importance of personalizing and tailoring your company’s values to what the principles and behaviors that you hold in highest regard, I thought it would be instructional to see what it would come up with in response to the a query about examples of good company values, written from the company’s perspective. Here is what ChatGPT came up with:
Integrity – We act with honesty and integrity in everything we do. We hold ourselves accountable to the highest ethical standards, and we always do what we say we’ll do. We strive to be transparent in our actions and communicate openly and honestly with all stakeholders.
Innovation – We embrace innovation and creativity in all aspects of our business. We encourage experimentation and risk-taking to drive breakthrough ideas and solutions. We are committed to staying ahead of the competition by anticipating and adapting to changing market trends.
Customer focus – We put our customers first in everything we do. We are dedicated to understanding their needs and exceeding their expectations with high-quality products and services. We listen to their feedback and use it to continuously improve our offerings.
Respect – We treat everyone with respect, fairness, and dignity. We value diversity and inclusivity and strive to create a work environment where everyone feels valued and supported. We act with empathy and understanding towards all stakeholders.
Collaboration – We believe that the best results are achieved through collaboration and teamwork. We encourage open communication and active listening to build trust and foster a positive work environment. We believe that diverse perspectives lead to better decision-making and results.
ATEAM check:
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Authentic: Poor. Given that these were provided as an example and are not particular to any company, we cannot possibly deem them authentic.
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Transcendent: Excellent. Almost every value and clarifying statement speaks to a focus beyond themselves and to creating a better environment for their customers and the broader world.
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Enduring: Excellent. There is no reason to think that these values will not be just as applicable many years in the future.
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Activating: Good. These would be better phrased as action-oriented verbs.
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Memorable: Excellent. Five simple words, easy to remember.
What do I like:
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The altruistic and better world nature of the values, and the vast majority of the clarifying statements.
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The clarifying statements of what behaviors are implied by the value are very well written, and sufficiently numerous to provide significant elaboration on the value for the reader.
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It’s very easy to remember the five one-word values.
What could be improved:
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The values are too generic and could be copied and put in place for any company. They are a sample, after all.
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Consider phrasing the values as verbs, as in what are the actions or behaviors that you want your employees to take (e.g. Do the Right Thing; Innovate; Focus on the Customer; Treat Everyone with Respect; and Collaborate).
In closing, it seems fitting that ChatGPT also added the following statements, which aligns very well with everything we have shared to this point: “It’s important to note that these values and statements should be customized to fit the specific needs and goals of the company, and should be communicated clearly and consistently to all employees. They should also be used as a guide for decision-making and behavior, and should be reinforced by the company’s leaders through their own actions and communication.”
Acknowledgments
I would like to thank the individuals listed below for their contributions that have been incorporated into this post, and say a special thank you to Sonya Gankina for all of the research and editorial assistance she provided.
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Byron Darlison – Founder & former CEO, Rise Vision
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Carol Leaman – Co-founder & CEO, Axonify
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David Booker – President, Kingscroft Consulting
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Elizabeth Dalzell – President, Talent + Culture
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Jared Schrieber – Co-founder and CEO, InfoScout / Numerator
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Margo Crawford, Chair, Business Sherpa Group
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Megan Paterson, CHRO, Kinaxis
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Mike Potter, Co-founder and CEO, Rewind
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Name Withheld, Assistant Brand Manager, Consumer Packaged Goods Company
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Name Withheld, Website Design Manager, Digital Marketing Agency
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Name Withheld, Business Development Representative, Technology Sales Company
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Pierce Ujjainwalla, Co-founder & CEO, Knak
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Sue Heywood, Director, HR Practice and Head People Officer, Business Sherpa Group
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Todd Luckasavitch, CEO, Business Sherpa Group
My name is Alexander Rink. Drawing upon over 20 years of experience growing early-stage companies, my team and I help CEOs and Boards of Directors of companies from $1M to $25M in revenues identify and resolve strategic and organizational challenges to accelerate their company’s growth in a capital efficient manner.
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