In a globalised and pluralistic world, the thorny issue of corporate values is being laid in the lap of management: is the task to create them or clarify them, or perhaps live up to them? By Jarek Czechowicz
The role of management has extended beyond maximising profits. Profitability is no longer the sole purpose of an organisation’s existence, if indeed it ever was. The focus is shifting from a “shareholder” to a “stakeholder” model of understanding the business of management. The stakeholder concept implies that management needs to take into account the diverse needs of various groups that may have an interest in the operations of the company.
Such a model assumes that companies have a social responsibility and this, in turn, has drawn attention to the issue of corporate values. The implication is that the longevity of an enterprise is not just dependent on cashflow or profitability, it also depends on a sustained set of values. Economic conditions fluctuate; values, it is suggested, do not.
The focus on values is in part due to the rising importance of business: as business becomes more powerful, it is expected to do more. Futurist Willis Harman writes: “Business has become, in this last half century, the most powerful institution on the planet. The dominant institution in any society needs to take responsibility for the whole, as the Church did in the days of the Holy Roman Empire. But business has not had such a tradition. This is a new role, not yet well understood or accepted.”
But business can contribute profoundly to social values. Doreen Wainer is director of the Community Relations Advisory Service in the Community Relations Commission for a Multicultural NSW. Wainer believes that companies can come together for positive social improvement. She says: “In South Africa, during the apartheid regime, businesses went to Zimbabwe and held a symposium about what they could do to advance the social and the economic ecology of the country and to circumvent the political constraints. They knew that they had to do something and it wasn’t about improving the bottom line.”
In a paper entitled “Corporate social responsibility and business success”, Marcello Palazzi and George Starcher write: “A newly appointed manager of the Londonderry plant of DuPont in Northern Ireland established a community advisory committee grouping a cross-section of leaders of the community in which the plant was located. Bringing together some of DuPont’s friends in the community but also some of its critics, this committee meets quarterly to review and consult on issues of concern to the community.”
The ethical values behind such moves have stimulated thinking in two broad directions. The first points to the practical social concerns that affect the organisation and the world at large. The other points to the fuzzier philosophical question of whether an organisation can have values per se. Peter Pruzan of the Department of Management, Politics and Philosophy at Copenhagen Business School, argues: “Organisations have the potential competency to develop values via a continuing self-reflective dialogue process and, if this competency is realised, the shared values that emerge from this process can be said to be an expression of a collective consciousness.”
In theory, values provide an organisation with a range of benefits. They help to shape a common identity; they form the basis of a culture; they add meaning to work; they provide a basis for planning and decision making. Values seem to provide the foundation for the vision, the mission and the rules of the game. Robert Haas, chairman and CEO of Levi Strauss, is quoted as saying: “We’ve learned that the soft stuff and the hard stuff are becoming increasingly intertwined. A company’s values what it stands for, what its people believe in are crucial to its competitive success. Indeed, values drive the business.”
Hewlett-Packard has formulated what Bill Hewlett calls the “Four Musts”:
- The company must attain profitable growth.
- The company must make its profit through technological contributions.
- The company must recognise and respect the personal worth of employees and allow them to share in the success of the company.
- The company must operate as a responsible citizen of the general community.
But can values be managed? Wainer says: “I think that it’s impossible for a top team to sit down and organise some values and drive it down through the organisation, either by instruction or through an iterative process of saying, here are the values, you consider them and let us know what you want. I don’t think that’s the way that human beings work.”
Wainer thinks that indoctrinating employees into artificially constructed value systems can be counter productive. “You will get mechanical compliance and an apparent agreement. People will agree in order to keep their jobs but, underneath, they are seething because something of their essence has been denied.”
Sharon Orrman-Rossiter is managing director of Clarity Now, which specialises in coaching, including coaching organisations in guiding their leadership teams. She says corporate values can look a bit superficial. “It is easy to have a mission statement that hangs in the foyer. But, what really matters is much deeper than that. It is about creating something for someone else, so that someone else can have a better life in some way.”
Many corporate values read like a blend of broad spiritual or social values combined with more specific corporate goals. James Collins and Jerry Porras, the authors of Built to Last, speak of corporate “core values” that seem to have an objective character and to be independent of a charismatic leader. They also argue that corporations have the potential to develop existential qualities. Perhaps consciousness is one of them.
In Built to Last, the authors aim to uncover the factors that contribute to the success of “visionary companies”. They note that visionary companies display a remarkable ability to bounce back from adversity. The examples they provide are worthwhile reading.
“Walt Disney faced a serious cashflow crisis in 1939, which forced it to go public; later, in the early 1980s, the company nearly ceased to exist as an independent entity as corporate raiders eyed its depressed stock price. Boeing had serious difficulties in the mid-1930s, the late 1940s, and again in the early 1970s, when it laid off more than 60,000 employees. 3M began life as a failed mine and almost went out of business in the early 1900s.
“Hewlett-Packard faced severe cutbacks in 1945; in 1990, it watched its stock drop to a price below book value. Sony had repeated product failures during its first five years of life (1945-1950) and in the 1970s saw its Beta format lose to VHS in the battle for market dominance in VCRs. Ford posted one of the largest annual losses in American business history ($US3.3 billion in three years) in the early 1980s before it began an impressive turnaround and long-needed revitalisation. Citicorp (founded in 1812, the year Napoleon marched to Moscow) languished in the late 1800s, during the 1930s Depression, and again in the late 1980s, when it struggled with its global loan portfolio. IBM was nearly bankrupt in 1914, then again in 1921, and was having trouble again in the early 1990s.”
According to Collins and Porras, companies do not have to start with a great product or charismatic leaders. They need an ideological commitment by employees to the company. They note that visionary companies displayed an uncommon devotion to a core ideology. The implication is that a consistent alignment with the core ideology is more important than its content.
The study also showed that visionary companies have generally put ideology before profits. When commenting on Ford Motor Company’s “mission, values and guiding principles”, former CEO Don Petersen said: “There was a great deal of talk about the sequence of the three Ps: people, products, and profits. It was decided that people should absolutely come first, products second, and profits third.”
This also demonstrates the difference between centralised economies and market economies. In market economies, the successful company or business is distinguished by the fact that it puts the customer first.
Orrman-Rossiter believes that the way an organisation conducts itself expresses its values. “Different organisations take on a different flavor as a result of the leadership. Nordstrom (a United States fashion chain) excels in paying personal attention to the customer. I went shopping there once not realising that I had arrived right on closing time. The staff didn’t even mention it. One person took me everywhere I needed to go in the shop and got everything for me. I have heard similar stories from other people.”
People are drawn to groups that share their own values. They recognise the need to co-operate, and values, at the very least, provide a path to achieving social balance and harmony. But groups within or without an organisation can have their own, sometimes differing, value systems. Management then needs to decide which groups the organisation will engage in business relationships.
The question then is whether the values are top management’s values or the organisation’s values. When a company is establishing its presence and its identity, the values of the founders or senior management prevail by default. Once the organisation has established its presence and succeeds in the market, then the values associated with that organisation become part of the organisation’s culture and identity. This can give the impression that the values of an organisation are independent of the leadership.
Tom Peters and Robert Waterman wrote in their book In Search Of Excellence: “Let us suppose that we were asking for one all-purpose bit of advice for management, one truth that we were able to distil from the expert companies research. We reply, figure out your value system.”
Wainer believes that having a short-list of corporate values does not work. “I think the organisation and the leaders that are able to create the vessel for individual values will ultimately create some form of value system that will be the personality of the organisation.”
Some management teams may well think they have responsibility for creating the organisation’s values. Even if management puts forward guidelines in the first instance, it cannot influence the values of its stakeholders, although it can request or insist on compliance. That is because values cannot be implemented. They are a personal matter and have to be applied, or at least accepted, by each individual.
A disturbing case
Some values are subconscious and are only discovered in hard times or in unusual situations. Pruzan describes an experience he had in the early 1990s. He had been asked by a European-based multinational to develop a seminar for 49 of its leaders from eight countries. Each of the participants was given a list of “values”, including such terms as success, love, trust, excitement, respect, wealth, freedom, good health and power. They were told to reflect on which of these were most important for them in their daily lives.
Later in the day, the exercise was repeated. The focus this time was on “company values”. Reporting on the seminar, Pruzan wrote that the values that emerged were not those that appeared in glittering brochures, but were values that could be said implicitly to underlie decisions made on such matters as hiring and firing, new investments, entering and leaving markets, advertising and lobbying. “The result was shocking, to say the least.”
There was no correspondence between these two sets of values for any of the groups. The personal values tended to include terms such as “truthfulness”, “love”, “justice” and “peace of mind”, but the list of organisational values tended to include terms such as “success”, “efficiency”, “power”, “competitiveness” and “productivity”.
Pruzan recounted that this led to a series of nervous discussions, after which the CEO announced that he would consider resigning. If such a discrepancy existed at the highest levels of management, then you can only imagine what the workers thought about the company’s values.
In significant matters, individual managers must manage in accordance with their personal ethics. Reverend Dr Gordon Moyes, superintendent of Wesley Mission, says: “A manager’s responsibility is always to bring the issue up for discussion [for example, to the board] and resolve it. Rarely is the conflict between values; it is usually between doing what is right and what is expedient or more profitable in the short term.” There is also the question of the subtler, long-term conflicts that managers experience.
Discrepancies between corporate values and personal values can have a dangerous effect on high-level managers, according to Pruzan. He tells of a friend who was a long-time director of personnel at Scandinavian Airline Systems. The airline had developed an extensive database of demographic statistics on a number of Scandinavian business and community leaders. One finding was that high-level Scandinavian managers had a life expectancy of one year after leaving their jobs.
Pruzan’s friend died at the age of 63, having retired at 61. Pruzan writes: “The hypothesis here is that business leaders find it stressing and difficult to live in a world of personal values when so much of their time and energy has been devoted to promoting values dealing with economic efficiency, growth, power and reputation.” Moyes believes that there should be no difference between corporate and personal values. Working towards that ideal may well be one of the keys to improving the health of managers and organisations.
The emergence of “social accounting” systems highlights the shortcomings of classical economic models and the struggle with the complexities facing today’s corporations. The notion of accountability is defined in the context of an organisation’s financial reporting to shareholders, its legal compliance and its reporting to governmental authorities.
More recently, accountability has, in small measure, been extended to environmental reporting. However, the social effect of ethical performance remains largely unmeasured because of imperfect information and measurement systems.
One attempt at developing a new form of accounting has been made by the British group AccountAbility. Founded in 1996 as an international membership organisation, AccountAbility aims to improve the accountability and performance of organisations worldwide; and here may lie its problem. AccountAbility 1000 (AA1000) provides a foundation standard in social and ethical accounting, auditing and reporting but, when applied to different cultures, it raises concerns.
Mayumi Otsubo, professor of management at Shizuoka Sangyo University, is quoted as saying: “AA1000 is very much Northern European in its orientation; the standards that AA1000 is trying to establish may not be readily accepted in other cultures with different religions and histories. From a practical viewpoint, it may be a good idea to have a series of discussions among a wider set of different cultural groups and those of different religions, say, Buddhism, Islam, Hinduism and Taoism as soon as possible. Also, I feel that Russian and Chinese participation will be important.”
Orrman-Rossiter says: “It is going to be of prime importance that we use our communication skills to understand other cultures and values. We need to be more careful than ever not to assume that everyone is going to have the same values. If we look for differences in values, we will find them. If we look for similarities and build on those, that could be very powerful. Perhaps we need to create a simpler value system. When we simplify our values, we might find one or two primary tenets. Perhaps simplicity is the way.”
In relation to social responsibility, one way of doing this might be to avoid confusing goals with values.
In his book entitled The Japanese Art of War: Understanding the Culture of Strategy, Thomas Cleary writes: “Christian thinking tends to absolutise particular frameworks of good and evil as laws of God; Buddhist thinking deals with the relativity of good and evil. This is believed to be one reason for the flexibility of Japanese morality as it is applied in life situations, as compared with Western conceptions of ethics rooted in Christian dogma.”
There are undoubted points of difference, but there may be sufficient grounds for agreement. Moyes believes that global values already exist. “All major religions agree on honesty, treating people fairly, being environmentally responsible, equitable treatment for all involved, social justice and so on. When we find companies acting wrongly, the company can find no religious excuse. Even when a culture accepts bribery as part of the process of doing business, both the managers and the authorities in those cultures know bribery is wrong. In the short term, the power structures may get away with it, but what has happened in the Philippines and Indonesia shows that power structures change, politicians are overthrown and people are brought to justice. As the French courts have demonstrated, Government-owned petroleum companies endure, and bad practices of even decades ago still haunt current management and depress share prices.”
An organisation’s goals may need to be formulated into a clear and memorable format. But values go deeper than goals, underpinning all the activities that get organisations to their goals. They require deeper reflection.
The challenge with goals is to achieve them. The challenge with values is to live up to them. Wainer believes that people need to take time to develop their spirituality, as this development will be reflected in an organisation’s values. “We have a social responsibility to re-open that which creates spirit in the individual and thereby in the organisation. I think you get better thinking. It will improve the bottom line. But we cannot measure it. Conventional measurement does not make it easy to draw a linear process between this chirpy spirit-filled being and the bottom line.”
Collins, C. and Jerry I. Porras. Built to Last.
Palazzi, Marcello and George Starcher. Corporate Social Responsibility and Business Success.
Pruzan, Peter. Individual Well-Being, Social Cohesion and Globalisation.