The New Bottom Line
This story appears in the February 1998 issue of Entrepreneur. Subscribe »
Wouldn't it be great if you could give your business the gift of a magnificent and promising future while also discovering a way for all your employees to be satisfied? You can--with a little work.
Boosting your business and satisfying employees means changing the way you do business. It means implementing a broader approach that builds on the foundation of an effective organization--namely, its mission and values.
Rather than focusing solely on results, winning companies first emphasize values--the beliefs and attitudes that you, as the business owner, have about your employees, customers, quality, ethics, integrity, social responsibility, growth, stability, innovation and flexibility. Managing by values--not by profits--is a powerful process that will set your business on the path to becoming what I call a "Fortunate 500" company.
Ken Blanchard, Ph.D., is chair of Blanchard Training & Development Inc. in San Diego, California, and author of The One Minute Manager (William Morrow & Co.) and Managing by Values (Berrett-Koehler).
Fortune Telling
What is a Fortunate 500 company? Over the past few years, my colleagues and I have devoted significant time to defining exactly that. So far, we've identified the following 10 characteristics:
1. Vision. Fortunate 500 companies have a clear vision that stems from the business owners as to what they are about and what they want to be. That vision is communicated to all employees and used daily as a basis for decision-making.
2. Empowerment. Employees are treated as partners in the business--not just cogs in the machine. Business owners and managers expect a lot from every employee, and in return, they help employees do their jobs with minimal barriers. You can expect your employees to constantly learn and grow--as long as you back up your expectations with solid training and career development options to facilitate that growth.
3. Performance. Employee performance is measured and monitored in a way that encourages your employees to give their best. Set performance goals and routinely provide feedback to let your workers know how they're doing.
4. Team approach. Employees are organized into teams to find the best means to solve problems, build morale and achieve company goals.
5. Customer service. Customers are treated as the most important part of the business--which they are.
6. Quality. The business prides itself on producing high-quality goods and services and never letting standards slip. Your company's long-term success depends largely on its long-term reputation, so make it a priority to build exceptional products.
7. Communication. This is the oil that keeps the company running smoothly. Make sure the doors are open for employees to communicate in any direction within the company.
8. Ethics. The company expects all employees to be ethical.
9. Wellness. The business is concerned about the wellness of its employees. Healthy employees are more energetic--and less absenteeism means higher productivity.
10. Profit. The company is profitable--but it does not treat this as its sole purpose for existing.
Getting There
Any company can be a Fortunate 500--if it can keep employees and customers happy and make money. Businesses driven by these values possess a certain operating philosophy. The work environment is fulfilling, customers are "raving fans," and shareholder value is enhanced. Your company can become a Fortunate 500 company by identifying and communicating core values, and aligning values and practices.
- Identifying core values. Managing by values begins when you identify a set of operating values. Many companies claim they have core values, but typically what they're referring to are generic beliefs: having integrity, making a profit, responding to customers and so on. These values only have meaning when they're defined in terms of how people behave and are ranked to set priorities.
For example, Disney's core values for its theme parks are, in order of importance, safety, courtesy, the show (performing according to a role's requirements) and efficiency. If these values had not been ranked, employees would have been left to decide which was most or least important.
Today, your company must know what it stands for. Values-based business behavior is no longer simply an interesting option--it's crucial to your survival. Once you understand your mission and values, you have a strong basis for evaluating your practices and aligning them accordingly.
- Communicating core values. First, make sure your chosen values are clear to all stakeholders--employees, customers, suppliers, stockholders and the community. Look at Norstan Inc., a telecommunications company in Minneapolis, for example. Rapid growth and a series of acquisitions had made the company diverse, and it needed a binding force to pull it together. The company determined its core values were to be ethical, responsive and profitable. It then defined these values in terms of its major stakeholders:
"Norstan is a full-range provider of integrated voice, data and video solutions that satisfy both today's and tomorrow's business needs. Through ethical, responsive and profitable actions, Norstan will provide a fulfilling work environment for our employees, legendary service for our customers, enhanced value for our shareholders and a spirit of shared responsibility with our community."
- Aligning values and practices. Once you articulate the values, make sure they are actually put into practice. Are you ready to walk the walk? Aligning your behavior with the values you've set is inherent in the concept of the Fortunate 500 company. "Do as I say but not as I do" will get you nowhere with employees--and defeats the purpose of working toward a values-led company.
Norstan found that aligning its values was a challenge. To help ease the process, the company set up a helpline for employees to air ethical concerns anonymously. Training sessions were offered to all employees. Key responsibility areas were defined, and leadership styles became part of the performance planning process. Employee committees were organized to recognize peers, and the company set up a program to recognize long-term outstanding performers.
Employees were not the only ones to benefit. Surveys showed an increase in customer satisfaction--from 86 percent in fiscal year 1988 to 94 percent in fiscal year 1997. Norstan's earnings per share have grown at a compound annual rate of 17 percent since 1994.
Achieving excellence and becoming a Fortunate 500 company comes more from managing the journey than just announcing the destination. Too often, changes are announced by managers who revert to a "leave alone" leadership style--and later wonder why nothing happens.
While one company's path to managing by values will differ from another's, to make the journey smooth and successful, there are seven basic steps all companies should follow. The first five involve diagnosis; the last two involve implementation.
1. Articulate values. Establish a clear set of values. This includes descriptions of how each value would be practiced every day, as well as a way to measure each practice on an ongoing basis. For example, if one of the desired values was "outstanding customer service," this could translate into employees going out of their way every day to help customers.
2. Identify and describe key business practices. Evaluate your business to determine a baseline of company operations. This information would come from various sources, including interviews, historical documents and so on.
3. Compare values with practices. Does your company practice what it preaches? This is crucial to building credibility among customers and employees. After all, if your employees see you tout honesty and then watch you mislead customers, how can you expect them to believe in your mission and values? It's helpful to obtain additional feedback from other sources such as focus groups and employee and customer surveys.
4. Establish priorities for realignment. Once you've seen where your values and practices are not in sync, set priorities for aligning them.
5. Recommend changes and an implementation strategy. The strategy should incorporate a vision of how your business will continually change as new priorities dictate and should include an implementation timeline.
6. Make changes. This will take some serious effort--from you and your employees--over a period of several years. Outside expertise may be helpful in specific areas, such as management training, performance management, team-building, customer responsiveness, and reward systems.
7. Monitor progress. Finally, measure the company's ongoing progress. This encourages everyone to stay involved and can alert you to the potential need for midcourse corrections.
Managing The Journey
Making changes in your company is an important step. But to manage the journey over the long-term, four systems should be in place:
- Accountability system. Everyone needs to know whose responsibility it is to do what. The primary reason change often doesn't last is people don't know what's expected of them.
- Information system. Too often in business, only financial data is gathered--and then it is distributed only to management. Other key indicators that relate to performance areas also need to be tracked. Information on performance has to be made available to those people who can best use it--those doing the work.
- Feedback system. It's difficult for employees to improve their performance if they don't have a clue how they're doing.
- Recognition system. For change to last, good performance must be acknowledged. If current performance is below expectations, you must reprimand or provide training as needed.
Way To Go
A Fortunate 500 company is driven by values--not results. When values prompt change, every employee is involved and customers will benefit. But keep in mind the journey is never complete--one never achieves perfect alignment of values with practices in a company--just as one never truly achieves excellence. Yet the journey is well worth taking.
