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Weekly UpdatesEXECUTIVE SUMMARY
A cohesive culture based on values is rapidly becoming one of the most important criteria for business success. Why? Not just because it's the right thing to do. It's also the profitable way to behave. Before you commit to changing your culture make sure you know how to measure it so you can gauge your progress.
I am often asked "Why are values important?" My answer usually follows the following lines:
Every individual and every organization on this planet is involved in making decisions on a daily basis. The decisions individuals make are a reflection of their personal values--what they think is important. The decisions organizations make reflect the cultural values of the organization--what the leadership team or decision-making authority thinks is important.
In other words, the decisions we make are a reflection of our personal values (personality) and organizational values (culture).
When the values of an individual are the same as the values of their organization, values alignment exists. When the values of an individual are different from the values of their organization, values misalignment exists.
Research shows that companies that actively seek to align the values of the organization with the values of employees (and vice versa) are more successful because they are focused on the needs of employees and customers. Organizations that don't have this alignment tend to be more inward looking, bureaucratic, and stressful. They may be financially successful, but they find it difficult to hire and retain talented people.
Companies with good values alignment, on the other hand, have very few problems attracting and retaining talented people. They know what employees want and they know how to provide it.
The first step in creating values alignment is to carry out a culture assessment. Based on this information, organizations are able to choose core values that are meaningful to all employees. This is important not only because happy employees create happy customers but because the core values that an organization chooses provide employees with guidance in making decisions even when supervisors are not present.
A strong set of organizational core values allows organizations to remove layers of hierarchy because employees can be trusted to make good decisions--decisions that reflect the values of the organization.
For an organization to reap the benefits of a strong set of core values, the values must be lived by the senior people in the organization. They must become part of the organizational culture. For this to happen the values have to resonate with everyone and they must be measured on a regular basis. If core values are to be effective, they have to be integrated into every facet of the organization's culture, particularly in the organization's relations with employees, customers, and society at large.
Measuring the culture
Until recently, measuring corporate culture was pretty much a hit-and-miss affair. This is no longer true. Used properly, corporate transformation tools provide a comprehensive framework far measuring cultures by mapping values. This technique has been used by more than 600 organizations in 24 countries and 15 languages during the past six years. It has been adopted by the international management consulting firm McKinsey & Co. as its method of choice for mapping corporate cultures and measuring progress toward achieving culture change. These tools have been used to measure organizational cultures of organizations such as Nortel Systems, Microsoft, Unilever, Ericsson, Siemens, Ford, L'Oreal, Masterfoods, Kraft, PricewaterhouseCoopers, KPMG, and 15 major banks on five continents.
What I realized when I became the values coordinator at the World Bank in the early 1990s was that there was a lot of talk about values but no consistent way of measuring them. I developed a framework for mapping values known as the seven levels of organizational consciousness (Figure 1). By modifying Maslow's hierarchy of needs, I expanded it to create a model to explain the motivations of individuals, groups, and organizations.
I found that I could test the cultural alignment of an organization by asking employees to select the 10 values that best described who they are, the 10 values that best represent how their organization operates, and the 10 values that represent for them a high-performance organization. By mapping these values to the seven levels of consciousness, I could compare the alignment among personal values, the current culture of the organization, and the desired culture of the organization as perceived by different demographic groupings in the organization. The differences in perception could then be shown between hierarchical levels, business units, age groupings, lengths of service groupings, ethnic groupings, and gender.
In addition to the values alignment, it's possible to use this method to measure the cultural entropy within an organization. Cultural entropy is the amount of energy consumed by the people in an organization that is not available for useful, productive work. Cultural entropy increases when there is bureaucracy, internal competition, information hoarding, and blame.
The degree of cultural entropy in a corporate culture is measured by looking at the proportion of votes for potentially limiting values (such as bureaucracy, hierarchy, empire building, internal competition, and blame) in the total number of votes. The proportion of votes for potentially limiting values represents the amount of energy consumed by the organization that is unavailable for useful work.
I found that low-entropy organizations strongly correlated with high values alignment, and organizations displaying both these characteristics--low entropy and a high number of matching values between their current and desired culture, and between their personal values and desired culture were the healthiest, the most resilient, and the most profitable.
Culture and performance
Having conducted more than 600 values assessments, I have never found a company with a high degree of values alignment that had high entropy, and I have never found a company with a high degree of values alignment that was not financially successful. The best of the best, from a performance perspective, always have a high degree of values alignment, positive values at every level of organizational consciousness, and low levels of entropy. They score highly on cultural capital.
Whatever results your company is getting, you can be sure they are strongly correlated with the degree of values alignment in the culture of the organization. If you want to improve your results, then improve your cultural capital.
We have found from experience that the most successful formula for improving financial performance and shareholder value is to focus on:
* Leadership development. The culture of an organization is a direct reflection of the values of the leadership. There is a strong correlation between the values embraced by the leadership team and the strength and degree of values alignment found in the current culture. If you want to change the culture of your organization, begin with the personal transformation of the leadership team. Leadership development builds better leaders. Self-actualized leaders build better relationships with their staff.
* Employee fulfillment. The key to high performance in any organization is the loyalty and commitment of staff. The most important drivers of loyalty and commitment are the values embraced by the organization as demonstrated by the leaders; the alignment employees feel with the vision, mission, and purpose of the organization; and the ability of employees to make a difference in the organization.
* Customer satisfaction. There is little doubt that happy employees lead to happy customers. That is why leadership development and employee fulfillment should always be an equal or slightly more important priority than customer satisfaction. Customers are the lifeblood of a company. They should always figure highly in the current culture of an organization.
* Profit and shareholder value. When a company pays attention to the first three priorities, profitability and shareholder value normally take care of themselves.
Prosper through culture
Every employee wants to find as much personal fulfillment as possible through his or her work. Everyone in an organization is seeking to satisfy physical, emotional, mental, and spiritual needs.
Our physical needs are met when we receive payment for our work that allows us a certain degree of comfort and security and when we have the right tools and equipment to do our work. Our emotional needs are met when there is friendship and open communication in our immediate working environment. Our mental needs are met when we are invited by our superiors and peers to share our ideas and we are able to see that our opinions count. Our spiritual needs are met when we find meaning in our work, when we have the opportunity to make a difference and we feel we can be of service.
Creating such a culture is the challenge that organizations face if they are to survive and prosper in the 21st century.
REDUCE COSTS by leaving limitations behind
The first diagram shows an example of the values found in a high-entropy culture that is struggling financially. This assessment was done with 53 members of the senior management team of a telecommunications company. The values are listed in order of the number of votes received. For example, in the current culture, confusion, the top scoring value, received 30 votes.
The red dots represent positive values. The white dots represent potentially limiting values. The letter L also denotes a potentially limiting value. Every participant in the survey picked 10 personal values, 10 current culture values, and 10 desired culture values. Therefore, there were 530 votes cast for the current culture values. Of these, 35 percent were votes for potentially limiting values. Five of the potentially limiting values scored so highly that they appeared in the top 11 values of the current culture.
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