Why Companies Thrive When Their Core Salues Sing
In a speech given at the American Accounting Association's
annual meeting in 2003, Arthur Wyatt describes in detail, with
particular reference to Anderson Accounting, how the majority of
big accounting firms' adherence to their professional core
values slowly eroded over a period of 30 years. The auditing
divisions of these firms became less and less central as other
more profitable consulting functions moved to the forefront.
As a result, Anderson and the other big firm's emphasis shifted
from strict accounting professionalism to generating new
business and making profits. In an effort to hold their own
financially within their own firms, the accountants gradually
made more and more compromises with their clients. Anderson's
Enron accounting disaster was the result of a slow, thirty-year
build up, Wyatt said.
Wyatt reminds his audience that in the 1970's "reputations were
gained, in part, from an accounting firm's policy of taking a
tough stance on interpretation of accounting standards." Thirty
years ago, Anderson actually resigned from a large railroad
engagement because "the firm disagreed with a particular
accounting principle that was accepted in that industry." Later,
Anderson did the same with all its savings and loan clients
because it took issue with an industry-accepted accounting
principle involving deferred taxes. Hard to believe, isn't it?
What happened in the accounting industry is a good example of
how a strong, vital connection to core values, both for a whole
profession and for a particular company, can slowly fade into
the background and be made to seem irrelevant to current market
realities. It doesn't happen all at once, there are no smoking
guns. A core values entropy process usually takes place subtly
and slowly. One small compromise with a core value becomes the
basis for the next small one, and so on.
There is only one way that I know of to prevent this insidious
decline. And that is for a company to commit to making its core
values sing as clearly as possible in every phase of its
business.
Do you know the core values of your business or organization? If
you do, then I'd like you to give them the following reality
check. Read each of your company's core values one at a time,
and ask the following question after each one: In what ways do I
actually experience this core value regularly and consistently
being brought to life throughout the entire organization?
If you could think of several ways for all of the core values,
you probably love working for your company. My experience is
that people's wholehearted commitment to who they work for
decreases as the ratings on this question go down. What tends to
happen in too many organizations is that some Founding Fathers
identified the company's core values a long time ago at a
strategic planning retreat, and then they were put into gold
frames and hung in hallways where they gather dust.
I categorize the audibility (ability to be heard amidst the
routines and crises) of a company's core values in this way:
1. Petrified Core Values. These core values are specimens or
museum exhibits that people stare at through a glass case. They
feel remote and irrelevant to the individual. Nobody hears them
or takes them seriously anymore. 2. Background Hum Core Values.
People know they are there if they stop to listen or to think
about the core values, but the connection between day-to-day
work and these values is not very clear or compelling. 3.
Gestalt Core Values. You know the images that are two-in-one,
where one image is in the foreground if you choose to look at it
a certain way, and then the background image moves to the
foreground if you want it to. Well this is analogous to a
company occasionally shifting its core values to center stage
for a period of time or for a certain purpose, and then the
attention given to them fades out again. 4. Singing Core Values.
In these companies core values are clearly heard and experienced
all the time throughout the organization in creative, inspiring
ways. Everyone understands from Day 1 that what the company does
is a unique expression of its core values.
So my point is that there's a lot more to the significance of
core values than the process of identifying them. That's just
the first step. After that, they need to be brought to life, to
sing as it were, by creatively expressing and applying them.
Core values should be inspiring all the subsystems of a company,
from recruitment to performance evaluations, compensation and
rewards, work processes, and customer service. How core values
are applied needs to be regularly reviewed and updated. The core
values themselves don't change, what changes is how they are
made visible and tangible to employees and customers.
So why is this so important? Because the strength of a company's
perceived trustworthiness and integrity level is directly
related to how well the company aligns its core values to its
systems, structures, and cultural practices. Whoever identified
a company's core values went out on a public limb by doing
so--from that moment on every future employee and customer will
be judging the company's trustworthiness and integrity on how
they personally experience the way the company walks its core
values talk.
If employees consistently experience a high degree of
correlation between what happens day-to-day at work and its
espoused values, then employee commitment stays very high. The
same is true for customers. It's not hard to see how this
benefits the bottom line. The company becomes an employer of
choice while customers remain loyal.
I recently heard William McDermott, CEO and President of SAP
America, Inc. participate in a roundtable discussion on this
very topic. He stated that SAP America, the world's largest
business solutions software provider, has a 0% voluntary
turnover rate (industry average is 25-30%, he said) and a
sustained profit margin of 40% at a time when industry profit
margins have been flat.
He attributed this success to SAP America's commitment to making
their five core values totally align with all their systems and
structures. One of their core values is corporate citizenship
which means volunteerism and community involvement. For
instance, new employee orientation focuses more on the company's
core values than the actual job that the person was hired to do.
In support of this value, all SAP America employees must commit
to performing a certain number of community volunteer hours
which they can choose from a wide menu of opportunities.
Employee's annual bonuses are linked to their fulfilling this
commitment. Employee job performance, including how they're
doing in their volunteer assignment, is evaluated quarterly, not
annually. At SAP America, promotion depends on successfully
following through on community involvement.
McDermott said that he attributes a large degree of SAP
America's zero voluntary turnover rate to their commitment to
volunteerism. People just feel good doing it and they want to
stick around even though they may have plenty of job
possibilities elsewhere. Employees' respect for the company's
alignment between its stated core value of corporate citizenship
and the actual practice of it is immense, he said.
He also pointed out that there is a direct connection between
their superb sustained bottom line and SAP America's commitment
to giving back to the communities where they do business. "If
you want to do well and at the same time do good, you become an
employer of choice," McDermott said.
Core values can shrivel and die from neglect. The smart thing
for any business to do is to periodically revisit its core
values with a "beginner's mind." Forget you know anything about
them. Start all over getting to know them. Are these four or
five values still the ones we believe in and aspire to? Are they
serving our people, our customers, the community? If not,
perhaps they need to be updated or revised.
If yes, then review every structure and system with an ear
towards how well the core values can be heard singing in each
system. Start with recruitment and hiring practices and proceed
from there. Ask these questions:
1) Are we relying on outdated formulas for applying our core
values? 2) Are there more fresh and creative ways to breathe
life into them? 3) What are some of the best practices out there
for doing this? 4) How can we infuse our core values both deeper
and wider into our business practices? 5) Do we dare to link
performance evaluations, compensation and rewards to
demonstrated individual commitment to our core values? 6) What
fear or concerns do we have about bottom line success and doing
the above?
Anderson Consulting is a poster child for what can happen to a
company that allows the bottom line to take complete precedence
over its core values. It might work for awhile. SAP, America is
one of many companies who have discovered it really pays when
everyone hears the voice of their core values on a daily basis.