CEO values replace corporate values

But no one wants to carve “bottom line comes first” over the doorway

Corporate values as we know them are on the verge of extinction. Today’s business world is fundamentally different than even two years ago, and for many organizations their original guiding principles have not adapted to this changing climate; as a result their values have lost importance and applicability. In their place, a new approach has emerged — executive values.

These are principles that are developed, owned and driven by the CEO and the rest of the leadership team. This is quite a shift and, while it may ultimately prove to be a stronger and more resilient change, it is a vague and confusing topic for employees. Human resources professionals can help make it more clear through planning and communication.

The origin of corporate values

To more fully appreciate the shift to executive values it’s important to understand what corporate values are and how they emerged.

Corporate values are a set of principles that guide and define how companies should treat employees, shareholders and customers. By definition, corporate values should:

•remain intact regardless of changing business cycles or economic swings;

•be relevant and applicable to every person in the organization;

•consistently be applied regardless of issues; and

•not be affected by staff or management changes.

Corporate values have their roots in the era of the entrepreneur. For companies such as Disney, Ford and MGM, values were a way of realizing a founder’s beliefs and putting their personal imprint on the organization. Sometimes this was conscious, sometimes not, but over time as the organizations grew, it became more and more important to these entrepreneurs that their ideals be re-coded, communicated and lived throughout the company. Through these values, powerful internal and external brands were developed resulting in a strong competitive advantage. Other organizations picked up on this — and despite not having the personality of a Walt, Henry or Louis B. Mayer — saw the potential of having a common set of values and behaviours for their companies.

Why the change

There have been a number of fundamental shifts that explain why most corporate values have been overwritten by executive values — and none more apparent than ownership and compensation. Because a hired president and an appointed board of directors run most large companies, accountability has shifted to the shareholder. Their expectation is that return on investment comes first followed by corporate deeds. Also, executives are promoted and compensated on financial results and this is a huge driver of behaviour. Consequently, the bottom line is frequently valued above all else.

The new reality

Corporate values are really executive values. The CEO and the leadership team — through their management style and behaviour – dictate what is valued and what is not. Management and employees take their cue from this, not the framed poster on the wall. Technically, there are no corporate values if they conflict with executive values because in the end the latter takes precedence.

The bottom line is the biggest value never stated. Most decisions made in a company are driven by money. The question usually asked first is, “What are the financial implications of our options?” not, “What is the right thing to do here regardless of the cost?” Ideally, values and profit must co-exist, but often — because of the way executives are rewarded and recognized — the two conflict and the bottom line usually wins.

Executive values are not static. Since the leadership team set the values through both their words and actions, it’s important to realize that when they leave the organization and new leaders arrive, the values often change. Pick up any newspaper and you’ll read things like, “We lost our focus, and we are now totally customer driven,” or “We didn’t change fast enough, innovation will now be at the heart of what we do.” New leaders want to make a mark and they want to appear to be doing something differently than the old regime. This most often means a new set of values.

The challenge

The challenge facing executive values is communication. Few leaders have taken the time to explain what the new principles are and then invest the time, energy and dollars to roll them out across the organization. This results in a number of issues:

Confusion: Employees may still believe the values on the wall, yet they see and hear something different.

Credibility: Employees often conclude that the executives lack credibility because the corporate values say one thing but executive behaviour says another.

Inconsistency: Consistency is critical. Employees need to clearly understand what behaviour is acceptable. Should I focus on customers? Quality? Speed?

Morale: If employees are confused or feel the leadership team lacks focus, this often leads to morale issues. Low morale in itself is a driver of other problems, such as attraction and retention, quality and customer focus.

Values are important. They set the tone for how the company will operate and how all employees relate to customers and each other. So as a HR practitioner what can you do? Here are some ideas:

•make sure your leadership team has clearly defined their guiding principles;

•ensure these principles cover all areas of the organization including financial objectives;

•adapt these principles into a set of values the company and all employees can rally behind; and

•clearly and consistently communicate the values to all employees on an ongoing basis.

Your influence may touch any or all of these areas and ultimately you can be the champion by taking the values off the wall and instilling them into the culture of the organization.

Sandy French is the president of Northern Lights, a marketing and communication company. He can be reached (416) 593-6104, ext. 222 or [email protected]

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