TOOL KIT

Your corporate values statement may be doing

more harm than good. Here's how to fix it.

Make Your ValuesMean Something

by Patrick M. Lencioni

TAKE A LOOK at this list of cor-porate values: Communication.Respect. Integrity. Excellence.

They sound pretty good, don't they?Strong, concise, meaningful. Maybethey even resemble your own com-pany's values, the ones you spent somuch time writing, debating, and revis-ing. If so, you should be nervous. Theseare the corporate values of Enron, asstated in the company's 2000 annual re-port. And as events have shown, they'renot meaningful; they're meaningless.

Enron-although an extreme case-ishardly the only company with a hollowset of values. I've spent the last ten yearshelping companies develop and refinetheir corporate values, and what I'veseen isn't pretty. Most values statementsare bland, toothless, or just plain dis-honest And far from being harmless, as

some executives assume, they're oftenhighly destructive. Empty values state-ments create cynical and dispirited em-ployees, alienate customers, and under-mine managerial credibility.

Want proof? Here's what happenedat a recent management conferenceheld by a financial services company.The CEO began by proudly announcingthe important role that a new set of cor-porate values-teamwork, quality, andiimovation -would play at the firm. Hethen showed the assembly, includingdozens of top executives from aroundthe world, a slick video that illustratedeach word with stock footage of world-class athletes, swelling music, and shotsof employees waving awkwardly atthe camera. The whole effort reekedof insincerity. When the CEO cheerfullyasked audience members if they wanted

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to watch it again, he was met by a loudchorus of "No!" It was painfully clearthat his credibility was shot.

Given the risk, why do executives putso much work into developing valuesstatements in the first place? Becausethey believe they have to. At least that'show they've felt since 1994, when JimCollins and Jerry Porras published Builtto Last. The book made the case thatmany ofthe best companies adhered toa set of principles called core values, pro-voking managers to stampede to off-sitemeetings in order to conjure up somecore values of their own. The values fadswept through corporate America likechicken pox through a kindergartenclass. Today, 80% of the Fortune 100 touttheir values publicly - values that toooften stand for nothing but a desire tobe au courant or, worse still, politicallycorrect.

The debasement of values is a shame,not only because the resulting cynicismpoisons the cultural well but also be-cause it wastes a great opportunity. Val-ues can set a company apart from thecompetition by clarifying its identityand serving as a rallying point for em-ployees. But coming up with strong val-ues-and sticking to them-requires realguts. Indeed, an organization consider-ing a values initiative must first come toterms with the fact that, when properlypracticed, values infiict pain. They makesome employees feel like outcasts. Theylimit an organization's strategic and op-erational freedom and constrain thebehavior of its people. They leave exec-utives open to heavy criticism for evenminor violations. And they demand con-stant vigilance.

If you're not willing to accept the painreal values incur, don't bother going tothe trouble of formulating a valuesstatement. You'll be better off withoutone. But if you have the fortitude to see

Patrick M. Lencioni is the founder andpresident of the Table Group, a manage-ment consultancy specializing in execu-tive team development, located in Emery-ville, California. He is also the author ofseveral books, including The Five Dys-functions of a Team (Jossey-Bass, 2002).

the effort through, you can leam someimportant lessons from the few compa-nies that have adopted meaningful cor-porate values. Whether their valuesstemmed directly from the vision andcharacter of their founders or were de-veloped later through formal programs,these companies all followed four basicimperatives in creating and implement-ing their values.

Understand the DifferentTypes of ValuesI once asked the CEO of a Fortune 500networking company to tell me one ofhis firm's core values. "A sense of urgen-cy!" he replied without hesitation. "So,"I asked, "your employees take quick ac-tion and hit all their deadlines?""No,"he replied, "they're complacent as hell,which is why we need to make urgencyone of our core values."

That response reveals the confusionunderlying many values initiatives. Farfrom being a core value, a sense ofurgency didn't even exist in the organi-zation. It was just an aspiration-a goalfor the future. Too often, executivesmistake other kinds of values for corevalues. The resulting hodgepodge be-wilders employees and makes manage-ment seem out of touch.

Companies, therefore, should estab-lish some basic definitions to ensurethat people know what they're talkingabout and what they're trying to ac-complish. I've found it helpful to orga-nize values into four categories.

Core values are the deeply ingrainedprinciples that guide ail of a company'sactions; they serve as its cultural cor-nerstones. Collins and Porras succinctlydefine core values as being inherent andsacrosanct; they can never be compro-mised, either for convenience or short-term economic gain. Core values oftenrefieet the values of the company'sfounders-Hewlett-Packard's celebrated"HP Way" is an example. They are thesource of a company's distinctivenessand must be maintained at all costs.

Aspirational values are those that acompany needs to succeed in the futurebut currently lacks. A company mayneed to develop a new value to support

a new strategy, for example, or to meetthe requirements of a changing marketor industry. The CEO who claimed hiscompany's core value was a sense of ur-gency, for instance, was substituting anaspirational value for a core one.

Aspirational values need to be care-fully managed to ensure that they donot dilute the core. One company Iworked with valued extremely hardwork and dedication; its employeeswere known to work late into the eve-nings and on weekends. At some point,the executive team felt compelled toadd "work-life balance" as an aspira-tional value, but they ultimately decidedagainst it because doing so would con-fuse employees about what matteredmost to the company.

Permission-to-ptay vatues simply re-flect the minimum behavioral and socialstandards required of any employee.They tend not to vary much acrosscompanies, particularly those workingIn the same region or industry, whichmeans that, by definition, they neverreally help distinguish a company fromits competitors.

A CEO I worked with confused corevalues with permission-to-play valueswhen he insisted that integrity was acore value of his company. When I askedwhy, he said,"Because we refuse to hirepeople who misrepresent themselves ontheir r^sum^s or who provide inaccu-rate information about previous em-ployment experience " I pointed out thatwhile his declaration was no doubt true,most organizations had similar policies.Unless his company was willing to adoptunusually tough measures to demon-strate that it held a higher standard ofintegrity than most companies, integrityshould be classified as a permission-to-play value, not a core one.

Accidental values arise spontaneouslywithout being cultivated by leadershipand take hold over time. They usuallyreflect the common interests or person-alities of the organization's employees.Accidental values can be good for acompany, such as when they create anatmosphere of inclusivity. But they canalso be negative forces, foreclosing newopportunities. Managers always need

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to distinguish core values from merelyaccidental ones, as confusion here canbe disastrous.

One fashion apparel company, theSak Elliot Lucca, initially struggled todistinguish its accidental values fromits core. Located in the edgy South ofMarket district of San Francisco, its earlyemployees were single adults who par-tied on weeknights and owned a dis-proportionate amount of black cloth-ing; accordingly, the company wasaccidentally imbued with the valuesof these employees - trendy, youthful,and cool.

But as the company grew, two thingsbecame apparent to executives: Therewould be no way to adequately staffthe company if only young, hip, "Sak-looking" people were hired. And older,married workers who could make greatcontributions might be inadvertentlyoverlooked. So the company activelyworked to help employees understandthat hiring only trendy people had noth-ing to do with the Sak's core values oftrust {being honest and credible), action

{making independent decisions), andownership (treating the company as ifone were a founder). Even "unhip" peo-ple should be recruited, as long as theyshared the company's cherished corevalues. Today the Sak is a truly diverseorganization, and it has broadened itsproduct line to appeal to a much widermarket.

Be Aggressively AuthenticMany companies view a values initia-tive in the same way they view a mar-keting launch: a onetime event mea-sured by the initial attention it receives,not the authenticity of its content. Thiscan undermine the credibility of an or-ganization's leaders, as the CEO of thefinancial services company who showedan insincere video promptly discovered.

Even executives who take values ini-tiatives seriously can sabotage them byadopting blandly nice ideals that fail todifferentiate their company from com-petitors. Consider the motherhood-and-apple-pie values that appear in so manycompanies'values statements-integrity.

teamwork, ethics, quality, customersatisfaction, and innovation. In fact, 55%of all Fortune 100 companies claim in-tegrity is a core value, 49% espouse cus-tomer satisfaction, and 40% tout team-work. While these are inarguably goodqualities, such terms hardly provide adistinct blueprint for employee behav-ior. Cookie-cutter values don't set a com-pany apart from competitors; theymake it fade into the crowd.

For a values statement to be authen-tic, it doesn't have to sound like it be-longs on a Hallmark card. Indeed, someof the most values-driven companiesadhere to tough, if not downright con-troversial, values. Siebel Systems, forinstance, adheres to a set of authenticvalues that fiagrantly counter the cul-ture of Silicon Valley, where the com-pany is headquartered. Professionalism,which tops Siebel's list of values, sets itapart from the frivolous cultures ofmany technology companies wherepizza boxes, foosball tables, and sandalsare de rigeur. Siebel's employees arebarred from eating at their desks or

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decorating their walls with more thanone or two photographs. As unaccept-able as this may seem within SiliconValley's playground-like corridors, itdistinguishes Siebel from competitorsand gives prospective and current em-ployees a clear understanding that tosucceed, they must act professionally atall times.

Intel, likewise, takes pride in the prick-lier aspects of its culture. Employees arepushed to embrace the value of risk tak-ing by challenging the status quo andengaging in constructive confrontation.During orientation, for example, newemployees are taught the art of verbaljousting without holding on to hardfeelings. And founder Andy Grove is leg-endary for his willingness to challenge,even berate, executives during meet-

money. According to CEO Andy Ball, themove was "motivated by our culturalcommitment to innovation as much asit was by market opportunity."

Ovwn the Process

What's the first thing many executivesdo after they decide to embark on a val-ues initiative? They hand off the effortto the HR department, which uses theinitiative as an excuse for an inclusivefeel-good effort. To engage employees,HR rolls out employee surveys andholds lots of town meetings to gatherinput and build consensus.

That's precisely the wrong approach.Values initiatives have nothing to dowith building consensus-they're aboutimposing a set of fundamental, strategi-cally sound beliefs on a broad group of

If you're not willing to accept the pain real

values incur, don't bother going to the trouble

of formulating a values statement.

ings. One of Grove's former direct re-ports fondly recalls being chastised bythe fonner CEO during a presentation.Just a few minutes into the executive'stalk. Grove interrupted him by saying,"If this isn't going to get more inter-esting, you might want to stop rightthere and come back next week with abetter story."

Aggressively adhering to one's valuescan also help a company make strategicdecisions. For example, Webcor Build-ers, a leading construction managementfirm in the San Francisco Bay area, usedits core value of innovation as a strate-gic compass last year when it decidedto purchase one of its vendors, a con-sulting firm that wired constructionfirms with high-bandwidth technology.The acquisition might have seemedfoolish for a bricks-and-mortar companyin the stodgy construction industry,but it worked. Thanks to Webcor's newbusiness, architects and engineers whoformerly relied on telephones and un-wieldy blueprints can now collaborateelectronically, saving both time and

people. Most executives understand thedanger of consensus-driven decision-making when it comes to strategy, fi-nance, and other business issues, yetthey seem oblivious to the problemwhen it comes to developing values. Sur-veying all employees about what valuesthey believe the company should adoptis a bad idea for two reasons. First, it in-tegrates suggestions from many em-ployees who probably don't belong atthe company in the first place. And sec-ond, it creates the false impression thatall input is equally valuable.

Consider what happened when a CEOof a technology company agreed to letthe HR department spearhead a valuescampaign. When HR suggested, aftermany meetings and surveys, that col-laboration should be one of the com-pany's core values, he agreed withoutmuch thought. But just a few weekslater, while chairing an open meetingwith managers, he completely dis-avowed this value by saying, "I don'treally believe in teams; I believe thatachievement occurs when individuals

work independently." It's no wondermanagers felt baffied and disappointed.As a senior executive who eventuallyleft the organization explains: "The gapbetween what we were saying and whatwe were doing was just too great."

The best values efforts are driven bysmall teams that include the CEO, anyfounders who are still with the com-pany, and a handful of key employees.Tony Wild, the CEO of pharmaceuticalcompany MedPointe, wanted his busi-ness to have a unique culture, so heknew better than to make the valuesdiscussion a democratic process. Work-ing with seven top managers, many ofwhom had helped launch the company.Wild focused on two core values: a can-do attitude and the tireless pursuit ofresults. The group chose those valuesbased on an analysis of a few employ-ees who personified qualities that ex-ecutives most wanted to see adoptedthroughout MedPointe's culture. As forthose employees who can't embrace orembody these values. Wild explains,"That's okay. They might be a better fitat another company."

Top managers also need to under-stand that a good values program is likea fine wine; it's never rushed. It is farmore important for a values team toarrive at a statement that works thanto reach a decision it may later regret.Executives should discuss values over anumber of months; they should con-sider and reconsider how the standardswill play out within their corridors.

Allowing time for refiection provedhelpful to an intemational pharmaceu-tical company that wanted to establisha common culture after a series of ac-quisitions. The executive team, impa-tient after just a few hours of discussionto select the company's values and moveon to other topics, nearly approved a listthat included the word "transparent."The CEO wisely tabled the proposal inorder to let the team ruminate on it andreview it with key employees. They dis-covered that the term held a very dif-ferent connotation in Europe than itdid in the United States. The team madean important modification - changing"transparent" to "collaborative" - with

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the result that the chosen values weremuch more compatible with the firm'sglobal culture.

Weave Core Valuesinto EverythingSo let's say you've nailed down the rightvalues. What now? If they're going toreally take hold in your organization,your core values need to be integratedinto every employee-related process-hiring methods, performance manage-ment systems, criteria for promotionsand rewards, and even dismissal poli-cies. From the first interview to the lastday of work, employees should be con-stantly reminded that core values formthe basis for every decision the com-pany makes.

Comergent, a young e-business com-pany, has successfully created a strongculture around dependability, dedica-tion, and self-motivation by integrat-ing these core values into every systemthat directly touches employees. Jobcandidates, from receptionists to vicepresidents, are screened not only fortheir skills and experiences but alsofor their fit with the company's values.During interviews, CEO Jean Kovacsand her staff ask frank questions aboutworkload expectations and past accom-plishments. To test their self-motivationand dedication, for example, Kovacsasks candidates to describe somethingthey've accomplished that other peoplethought would be impossible.

to let someone go is driven by values."1 can work with someone who needsmore coaching or training, but when itcomes to our core values, I have to be in-tolerant," Kovacs explains. "That's whatensures the strength of our culture."Indeed, companies with strong cultureslike Comergent's avoid having to firemany people.

Another company that effectivelyweaves its values into its organizationalfabric is Siebel. It's impossible for a newemployee to spend a week there with-out realizing that customer satisfactionis a core value. All the artwork on thewalls comes from customers' annualreports, and all the conference roomsare named after customers. Even bo-nuses and compensation packages areawarded on the basis of customer satis-faction surveys conducted by an outsideauditor.

After a company has embedded itsvalues into its systems, it should pro-mote those values at every turn, it'sbeen said that employees will not be-lieve a message until they've heard it re-peated by executives seven times. Giventhe cynicism surrounding values thesedays, executives would do well to repeatthem every chance they get.

Many companies publicize their val-ues on T-shirts and coffee mugs, but themost effective mechanisms are far sim-pler and less expensive. Consider howNordstrom, a well-known example of avalues-driven organization, constantly

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.

After employees arrive at Comergent,they are reminded again and again thatthe company's values are more than justwords. People are evaluated against thecore values, and when it comes time toaward stock, bonuses, and raises, Ko-vacs and her team again use the valuesstatement as a metric. Even the decision

reminds employees of its core value ofcustomer service. During orientation,rather than receiving a detailed hand-book describing how to deliver greatservice to customers, new employees aretold elaborate stories recounting thelengths fellow employees have gone toin order to wow clientele. The story of

the representative who took back a cus-tomer's two-year-old blouse with noquestions asked, told over and over,reinforces employees' belief that theywork for an extraordinary company.And during nonstore hours, managersread customer comments, both positiveand negative, over the intercom so thatemployees can hear firsthand how theyare doing.

Another company that continuallycommunicates its values, often in a waythat verges on corny, is Wal-Mart. Fromcompany cheers to computer-basedtraining, the retail giant constantlystresses its core values of excellence, cus-tomer service, and respect to employ-ees."! come from Europe, where we findthings like cheers to be typical of Amer-ican superficiality," one managementtrainee told me. "But I must admit thatthe posters on the walls in the breakroom and the Sam Walton quotes thatwe read about are not silly at all."That'sbecause management reinforces thecore values with action. Historically,when employees have come up withnew ways to provide excellent serviceto customers, for instance, they've beenrewarded with cash and other fonns ofpublic recognition.

Given all the hard work that goes intodeveloping and implementing a solidvalues system, most companies wouldprobably prefer not to bother. And in-deed they shouldn't, because poorly im-plemented values can poison a com-pany's culture.

Make no mistake: Living by statedcorporate values is difficult. After all, it'smuch harder to be clear and unapolo-getic for what you stand for than to cavein to politically correct pressures. Andfor organizations trying to repair thedamage caused by bad values programs,the work is even harder. But if you arewilling to devote your time and energyto creating an authentic values state-ment, there's a good chance that the re-sulting values will stand your companyin far better stead than Enron's did. 9

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