‘How many values is the right number of values?’. This question is one that rears its head time and again in the board rooms of modern-day organisations and thus unsurprisingly was one thrown by an audience member to a panel of leaders sitting in the Sydney Opera House at TDM Growth Partner’s inaugural People & Culture Growth Summit. Another one that confronted the panel and also seems to bear down on most successful organisations as they scale is: can an organisation change their values?
Values are the principles that define culture; if culture is a living, breathing organism, then values are the DNA. On the surface this sounds straightforward, but dig a bit deeper and you discover that they’re a bit of a self-contradiction — elusive and intangible, yet the bedrock of culture and behavioural norms.
In the many strategy processes that we have facilitated or observed, values often prove to be the hardest to pin down, but for those that manage it successfully, one of the most powerful and enduring outputs for delivering on the company’s purpose. Inspired by the Summit and the panellist’s remarks, we hope this blog can help provide a framework to support you and your business in shaping, reshaping or leaving alone(!) your company values.
‘Values are your identity and your identity is there from the beginning…you shouldn’t change them,’ pronounced one founder/CEO.
This is hard to dispute as values start with the founders and the founding environment. Yet, as many scaling organisations discover, the elements that help newer organisations see, feel and taste cultural values in the beginning — accessibility to founders; small offices; new hires attracted almost solely by purpose — naturally fall away as the business grows. As more people join the organisation, other values naturally begin permeating the culture and interpretations of the pre-existing values can diverge. Moreover, the first substantiation of these values, whilst they still may be representative of the company’s founding identity, might not have aged all that well in their rawest “start-up” form. In fact, as the organisation’s ambition has grown and the type of people you’re now attracting are more aligned to the company’s revised vision, the values might not be representative of the more refined company identity.
This is where a values refresh can sometimes serve an effective purpose. The most important trait of a good set of values is that they guide behaviours, decisions and actions in a way that is consistent with the organisation’s purpose and underlying cultural identity, especially in times of adversity. Therefore, once the values can no longer be clearly understood by the unwritten signals of a small group, they require codification — and the way the values are coded is crucial. One of the most unpardonable misuses of values is where corporations plaster pithy one-word nouns by the office printer (think Enron with their four core values of “Respect”, “Integrity”, “Communication” and “Excellence”), believing that this constitutes the complete exercise in evangelising values. Unless you can whole-heartedly state that the underlying behavioural nuances that truly represent your company’s identity can be gathered from those words, then they need elaboration (at the very least). Fundamental personal values that you look for when hiring great people, often encapsulated by virtues like those spelled out by Enron, should be table stakes. What sets your corporate values apart is that they are more specific way-markers of what makes your company different from the rest and can guide you to make specific decisions. Whilst seemingly trivial, the words you choose are fundamental to a successful deployment of values.
As one panellist remarked after recounting the journey their company went on to refresh their values, you need to ‘sharpen them [your values] to an edge.’ The more narrowly they can be defined, the less likely it is that they get weaponised in ways that are at odds with the intended meaning (the ‘shadow side’ of values, as one panellist described it). Since phrases allow more specificity, this is also why they tend to be more effective than single words. If the way your values are expressed are in a manner that doesn’t wholly reflect the types of behaviour that were originally contemplated, then reshape them. In fact, an excellent exercise suggested by a panellist to help you test the poignancy of your values is to consider what is hard about living the value. If the answer is ‘not much’ — then they need honing.
A word of warning — whilst encouraging organisations to relook at the expression of their values if they’re failing to elicit the specific behaviours that are intended, we do not encourage two types of ‘values refreshes’ that we have witnessed all too often:
1/ throwing out all the pre-existing values in what proves to be a largely performative process; and,
2/ adding more and more values.
Both processes fail to confront the very dysfunction that they are likely trying to solve for: behaviours and decisions are not reflecting the values. Instead of getting to the heart of why this is happening, simply discarding the old and rolling in the new (or bolting on additional values) just delays and perpetuates the dysfunction.
Notwithstanding our earlier comment on the significance of language, ultimately words alone cannot carry a company’s values. As all panellists agreed, the most important component of any values exercise is to ensure that your organisation is continuously living the model behaviours through action — whether that be ceremonies, signals, rhetoric, decisions, stories or symbols. Whilst interpretations of culture can vary from department to department, geography to geography (particularly in larger organisations), ultimately, the values need to represent the identity of organisation that they’re tied to authentically. Remember, culture exists irrespective of what statements you have emblazoned on your walls and websites — the key is to behave in a way that aligns the organisational culture to the values you want to foster, rather than let the assortment of unguided bottom-up behaviours dictate your culture. Crucially, you must also be willing to hire with respect to the values otherwise you risk diluting the very essence of your organisation (which can then propel you further into values dysfunction). The way you relate, communicate and make decisions (including hiring) creates a powerful feedback loop, that can equally help (see Figure 1) or hinder (see Figure 2) your efforts to embed values, depending on how aligned they are.
Consistent, continuous and widespread behaviours underpinned by values will fortify a culture. On the flip side, much like Warren Buffet’s adage on building a reputation — what takes years to build, can be corrupted in an instant. Whilst chronic action and inaction disassociated from values statements can destroy cultural alignment, don’t underestimate the impact single events can have either. Thoughtless displays of misaligned behaviour, typically surrounding culture-carrying symbols or ceremonies, can undermine months of effort. This is also why fewer values are normally easier to live by as it reduces the likelihood of errant or conflicting behaviour. This brings us onto our next question: what is the right number of values?
‘Four’, ‘Three, then four’, ‘Nine’, and, ‘Six’. These were the number of values at each of the panellist’s respective companies. Ultimately, there is no “right” number, and, as one speaker called out, in many ways it’s the wrong question. As we have discussed, authenticity is a fundamental attribute to a successful set of values. If your everyday organisational and cultural milieu runs at odds to the professed values — they’re probably worse than worthless, they’re damaging. Inauthenticity is a powerful demotivator as it signals a lack of trust and honesty. This boils down to being able to walk the talk when it comes to your values — living, breathing, rewarding, behaving, acting, deciding and managing performance all with your values at the top of the tree. The number of values is a red herring — the real effort should be directed towards the behaviours and structures that you’re willing to live by every day in your organisation. Therefore, if you can capture the essence of your business’ identity in three powerful phrases, then stick with three. If, like Amazon, you can live and breathe fourteen values and having fewer might mean you have to abandon a chunk of your cultural fabric, then have fourteen.
This is why one of the most compelling litmus tests for your values is — would you turn to your values in times of strife? Likewise, as one panellist asked, would you sacrifice something to remain true to the values? If you aren’t willing to use your values when a business case won’t help you or when you are confronted by a “wicked problem”, then there isn’t much point in having them. They are supposed to be a team’s behavioural north star. This shows its true value only when the group’s compass fails and you’re running out of food. Recounting an interaction with a professional sports team, one panellist told a story about a team member describing values as defining you in the years that you don’t win the championship. It is during these moments that values come into their own. Real personal examples provided by the panellists included the decision to fire a star salesperson due to cultural and behavioural differences (aka Reed Hasting’s “brilliant jerk” concept); prioritising strategic work ahead of a demanding customer’s tactical request; and, communicating a privacy blunder to a customer that may not have found out otherwise. The myths and legends that weave their way into your organisational tapestry and end up being the most powerful stimulant for your values are usually those generated during these moments of trial and tribulation.
Whilst there is no “right” set of values, there are “better” or “worse” values. Consequently, there are some practical pitfalls that you should look to avoid when shaping your values. These are manifestations of the underlying traits of effective values that we have described above. For instance, typically having more than ten values means that they are hard to recall, which undermines the ability to use them when making decisions, particularly when under duress. Likewise, echoing Jim Collins’ words in his book Good to Great : Why Some Companies Make the Leap…and Others Don’t, if you have more than three priorities, you don’t have any. Having too many values normally means that you haven’t thought deeply enough about what matters most. A lack of prioritisation can also cause overlap, duplication and even conflict between values. Practically, therefore, it can result in team members pulling in different directions by latching on to alternate values or, worse, it can cause confusion and dilute the whole purpose of having values in the first place.
Unfortunately, there is no panacea when it comes to values. However, the following checklist is designed to help organisations navigate their values journey.
Feel free to print these off for future values sessions!
If your values fall short of several of these tests, consider involving your teams to think deeply about how you could reshape them. Canvas honest viewpoints broadly on what is and isn’t working with your values, then go deep on those aspects that resonate most strongly with your organisational purpose and mission. Ultimately you won’t be able to capture everyone’s views, but you will have learnt a lot through the process and helped engender acceptance of any changes. That’s the thing with values — they need to be defined in a way that won’t resonate with everyone, otherwise they’re so broad that you may as well not have any.
Article authored by James Revell, Investment Team Member at TDM Growth Partners.