Thursday, May 13, 2010

The Corporate Values Questions

In the wake of the financial crisis, I have given much thought to the value that is realized when corporate values are widely embraced by a firm’s employees. Do values change or influence behavior? Do they impact growth?

An interesting and relevant study on the topic was published in 2005 by the Aspen Institute and Booz Allen Hamilton. A global survey of 365 top executives — almost a third of whom were CEOs or board members — “Deriving Value from Corporate Values,” is definitely worth a closer look … despite the fact that it’s five years old. Among the top-line findings:

• Areas Affected — Most companies believe values influence two important strategic areas – relationships and reputations – but do not see the direct link to growth. A majority of respondents categorize employee recruitment and retention, in addition to corporate reputation, as important to business strategies and believe they are strongly affected by values.
• Most Common Values — Of the 89% of companies that have a written corporate values statement, 90% specify ethical conduct as a principle. Other values commonly set forth in value statements include commitment to customers (88%) and employees (78%).
• CEO Factor — Tone at the top really does matter. Eight-five percent of respondents state that their companies rely on explicit CEO support to reinforce values, and 77% say it is one of the most effective practices for reinforcing the company’s ability to act on its values.
• Ethics and Candor — Curiously, among corporate leaders — those public companies that outperform their industry averages by at least 10% — 98% include ethical/behavior issues in their values statements, compared to 88% of other public companies. Differences between companies defined as “leaders” and “others” are even more pronounced on other issues. More leading companies profess a commitment to employees (88% to 68%) and honesty and openness (85% to 47%) than other public companies. (It would be interesting to know the extent to which the recent financial crisis would alter those findings, if at all.)
• Return on Values — Most companies are not measuring their “ROV.”

We must come up with a way to measure ROV. For example, as values are more deeply inculcated, does employee effort, productivity, longevity and morale also change? Is there greater growth? Are there fewer crises?

Definitely food for thought.

Technorati Tags: financial crisis, Aspen Institute, Booz Allen Hamilton, Return on Values, Deriving Value from Corporate Values, communications, public relations, Makovsky


Anonymous Michael Sater said...

Interesting observations, Ken. To the need "to come up with a way to measure ROV," I can't think of a concrete formula, however, there are many ways of calculating benefits to values in areas of an organization.

If you have not read The Sustainability Advantage by Bob Willard, do so.

Industry studies show that companies with more transparent and aspirational values have the lowest turnover, attract highest quality candidates and increased productivity.

And when those values are tied to the core business and effectively communicated, the result is what I call "reputation credit" in the minds of employees, consumers and partners.

In so far as a direct link to growth, I believe if we measure corporate values, tie them employee advocacy and loyalty you'll find a higher percentage of innovation throughout the organization. That can lead to greater service and industry leadership which is so often tied to corporate growth.

Looking at Fortune's 100 most admired companies - most have strong corporate values, a powerful brand and premier position in their respective industries. I think we can tie corp. values to corp. growth.

Those values must be true. What happens when a company's supposed "greater" values are superficial statements? Just ask BP.

Wednesday, June 16, 2010 12:09:00 PM  

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