How important are company values?
16 November 2015 -
With the scandals surrounding “sustainability” advocates Volkswagen and the “community-focused” Co-Op Group, company value systems are often criticised as nothing more than words in an annual report. Here, Insights shows you how getting staff to live by your values can help boost performance and drive success
From Virgin founder Richard Branson to the Tesla chief Elon Musk, the world’s most accomplished business leaders have credited values-based strategies as the background of their entrepreneurial success.
Yet, while buzzwords such as integrity, collaboration and innovation are ever-present in company literature and the About Us section of the firm’s website, a succession of blue-chip scandals, from “sustainability” advocates Volkswagen to the “community-focused” Co-Op Group, suggest the values are little more than lip-service.
But building a strong set of company principles, which employees can live each day, can be vital for propelling their business to the next level. They just need to be properly executed.
As golfer Jordan Speith putted his way to a four-stroke victory at the FedEx Cup last month, the American not only perfectly capped off a fantastic 2015 season where he won two major tournaments and scooped $22m (£14m) in earnings, the moment also underlined the emergence of sportswear company Under Armour as an elite force in the apparel business.
The company, which also sponsors the NBA’s most valuable player Steph Curry and Pay-Per-View boxing star Saúl "El Canelo" Álvarez, has already been heralded by some onlookers as the number two sports apparel brand in America overtaking Adidas – as its most recent earnings results blew estimates out of the water.
And while some clever – or lucky – marketing moves, such as movie studio Warner Brothers kitting out the teams in the Al Pacino film Any Given Sunday in its apparel, have been key in Under Armour’s ascendance, founder and chief Kevin Plank has repeatedly identified the company’s values and leadership principles as being the most important.
Built around the philosophy of producing fitness clothing which stays fresh and dry, Plank has spoken at length about the significance of building a “great product, tell a great story, provide great service, and build a great team”.
Underpinning these values are actionable messages in which every employee can support, such as focussing on teamwork rather than any star individual by trying to maximise the limited resources they have and to understand that everything they wish to achieve must be done by working hard every single day.
Under Armour are of course not alone in holding these values. Large firms as diverse as Google, Lidl and Pearson’s have similar ethical standards.
The importance of these values-based cultures, however, are heavily based upon how they intentionally shape the actions and interactions of employees. Acting as a framework for gathering the masses of different people, opinions and ambitions – from employees to customers and other stakeholders ¬– values help determine how a company spends its time and money; driving priorities and decisions.
As Financial Times columnist Lucy Kellaway explains, the problems many employers face when implementing company values is its failure to engage and inspire either employees or customers.
She said: “Part of the trouble with values is that it isn’t clear what they are supposed to be doing. You could say they are there to tell the outside world how the company behaves (or would like to behave) and how that is different from other companies. This is a fine aim, but it doesn’t work for three reasons.
“First, self-describing is always dodgy. If someone goes out of their way to tell me they are honest or creative, I immediately conclude the reverse. Second, far from being a point of difference, values make every company look the same, as there is only a finite list of desirable corporate traits. And third, public professions are a hostage to fortune. Volkswagen must be ruing the day it made “sustainability” a core value.”
At its best, company values are largely determined by where the organisation invests its resources and how its employees behave, as opposed to what the leader says or what’s written on a post-it note.
By building a culture that values each employee’s contribution, workers are likely to feel more confident, safe and free to express themselves. This is a helpful foundation for attracting and developing happy staff, and as a plethora of research has demonstrated – happy workers work harder and are more productive.
There are even some studies that suggest firms that make values-based business decisions and uphold strong ethical standards generally have a positive effective on an organisation’s bottom line. A 2009 study entitled The Economics and Politics of Corporate Social Performanc" by David P. Baron, Maretno A. Harjoto, and Hoje Jo found that, “for consumer industries, greater CSP [corporate social performance] is associated with better CFP [corporate financial performance], and the opposite is true for industrial industries… Empirical studies have examined the relation between CSR and corporate financial performance, and while the results are mixed, overall the research has found a positive but weak correlation.”
Online shoe and clothing retailer Zappos has been a recent pioneer of centring its operations around an empowering and human-focused company culture and values.
From paying employees to quit after they have worked for five or six weeks to replacing 'jobs' with 'roles', Zappos has been unafraid to experiment with processes to get the best from their staff. Turning their culture into revenue, the Las Vegas-based firm has built a business teaching thousands of companies from around the world how Zapponians "live their 10 WOW values," which include “Create Fun and A Little Weirdness” and “Be Adventurous, Creative, and Open-Minded”.
So company values don’t need to be the boring buzzwords that litter so many annual reports, but they do need to be lived by. And, sometimes, a little weirdness can go a long way towards building success.