Making Values Work

by Michael Maccoby

Research Technology Management, Vol. 41 No. 5 Sept-Oct, 1998. pp. 55-57.

Changing people's behavior requires more than redesigning structures and incentives. During the past few years, top management teams have spent hours in offsite meetings hammering out those corporate values they believe will steer employees in a new and common direction. Lists of values are printed, framed, and hung in corporate offices. All too often, however, they stimulate cynicism in employees who have had no say in their formulation and see no change after they are adopted.

These managers are not wrong about the importance of shared values. Shared values lead to consistent behavior. They provide a basis for trust and minimization of transaction costs within an organization. Particularly, when work calls for discretion, judgement, cooperation and relationship - building, values determine the kind of work management can expect.

But the understanding of values by managers is usually superficial. In my experience managers can improve their ability to lead effective change if they will take the trouble to understand the relationship of values to both individual and organizational behavior.

The process of instilling organizational values requires an interactive dialogue which:

• Develops a shared logic of what kind of behavior is essential for the organization's success.

• Educates people about the organization as a social system so that recruitment, training, measurements, and incentives can be aligned with goals,

• Improves communication and trust

• Develops leadership

What makes it difficult for managers to make values work is that there are three different meanings of the concept: values. Managers need to understand these different meanings and address them in the way I shall describe.

One meaning of values describes ideals. Another describes behavior. And the third describes character. When all three of these meanings are aligned with an organization's strategies, the result is a highly motivated corporate culture. When they are not, the result is sub-optimal organizational performance, costly conflict, frustration, and bad faith or cynicism.

[There is another very different meaning of value, as distinct from values, from economics, as in value-added. This has to do with what someone is willing to pay for a product or service]

Aligning the three meanings of values begins with understanding that each has its own logic. Each requires different kinds of dialogue.

Values as Ideals

What are the right ideals for an organization? The answer is that they should motivate customers, employees, and owners (or other stakeholders) to behave in ways that strengthen the organization and are essential for its success. These ideals should inspire the right kind of behavior. Customers should want your products. Employees should be motivated to work together to satisfy customers and continually improve the organization. Their work should be meaningful in terms of personal fulfillment as well as organizational success. They should want to work in this organization. Shareowners should be motivated to buy and hold equity in the company.

When a company is prospering, little attention is paid to values. People assume the organizational values must be right. Top management typically rethinks values only when it becomes necessary to support a change in strategy and organizational culture. This may not call for describing totally new values but rather reinterpreting old values in the light of a changing business environment. For example, a number of technical companies are learning that the meaning of customer focus has changed from selling boxes or meeting specs to understanding how to customize solutions that help the customer to succeed.

New values or ideals are typically proposed by the CEO, consulting with senior executives. Together they agree on the relationship between the values and organizational strategy. For these ideals to be internalized and truly shared, everyone in the organization should be able to interpret them and through a dialogue, test that interpretation with the organization's leadership.

The same dialogue started by the CEO with direct reports must be cascaded down the organization.

A way of structuring this dialogue is to use a simple gap survey with the team. For example, ABB-USA uses questions like this:

The dialogue at ABB is started by the team's leader asking the team to list the meanings of the value-ideals. Once there is agreement on meaning, there should then be a vote on the importance of the value-ideal by a show of hands. Let us assume there is overwhelming agreement that a particular value (customer focus, say) is essential to the organization's success. (If not, top management needs to rethink their logic or recruit a different team.) Then ask how well this team is practicing these values. Typically, when change is needed, there will be a range of scores. It is a mistake to use the mean average. Important issues and promising ideas come from hearing diverse views and experience. The leader of the dialogue should first ask those who gave low scores to explain why they did so. Then those who gave high scores should be asked for their reasoning. Once there is agreement on what is lacking to fully realize the value - ideal in terms of behavior, the next step is to determine how to close the gap between ideal and behavior.

Values as Behavior

Closing the gap between ideal vs. the actual behavior requires that the team understand that behavior is shaped and sustained by the corporate culture, which is a social system. If customer focus is an essential value, the first question to be asked is: What is the meaning of customer focus? The next question is: what kind of behavior does customer focus require of us? Is this behavior in fact modeled by top management? Is this behavior recognized, measured and rewarded? Does the behavior require knowledge and skills that are lacking? Does the behavior require different kinds of information about customers? Does the structure of the organization, the roles and authority support this behavior?

At every level, leaders have the opportunity to teach, and to develop a common understanding of what kind of behavior is required, so that this behavior is shaped by the whole corporate social system. Partial solutions like training, or recognition will not be enough, if other parts of the system are not aligned.

Thus, the interactive dialogue both educates and develops a new model of leadership. The leader has the responsibility of facilitating the dialogue, teaching and making decisions about how to close the value gaps on the basis of full discussion. By explaining the logic of these decisions, the leader will diminish resistance and equip those he leads to explain decisions to their own subordinates.

Values as Character

The difference between a value as behavior and character gets at emotional attitudes that can resist logic. This can be illustrated in relation to the value of teamwork. Suppose there is agreement that a certain type of teamwork is essential to reach corporate goals. The behavior required is described, recognized, and rewarded. There is training in team skills. Yet, an individual with a strong value of autonomy and strong drive for control resists becoming a teamplayer.

Suppose this is affirmed by a 360° evaluation by the individual’s boss, colleagues, subordinates, and, perhaps customer.

Can people change their character values?

This depends on how strong the values are and how much the person experiences the need to change. Some character values which are shaped and reinforced by a national or professional culture are particularly resistant to change. When we studied L. M. Ericsson's efforts to introduce the AXE switch to the deregulated telecommunications market of the late 80s, we found that Swedish technical experts, used to selling in less developed countries, tried to sell what they considered the best solution to more sophisticated U.S. companies. It was hard for them to hear the customer, but their motivation to succeed finally balanced their drive to be super experts (see M. Maccoby (ed.) Sweden at the Edge, University of Pennsylvania Press, 1991).

Some technical managers with strong values of autonomy and control have tried to change. They are helped by coaching (see “Coaching Technology Leaders” Research Technology Management, Jan-Feb, 1998) and books like 7 Habits of Successful People by Steven Covey. (see “Personal Change in the Information Age” Research Technology Management, May-June, 1994).

The combination of logic, incentives and coaching can result in behavior change for some people, but there will usually be others whose discordant values conflict with the strategic ideals. Jack Welch of GE has described the leadership dilemma of dealing with a manager who gets results but treats people badly, and Welch concludes that unless the manager is replaced, the organization will not trust or practice the value of respect for people.

Bill Hewlett once told me that in the late '60s, H-P had hired a group of engineers to start its first computer division. They turned out to be jungle fighters, unable to fit into cooperative H-P culture. Hewlett decided to pay them off and develop the computer division according to H-P values. A major strength of that company is that it selects people with values of cooperation, respect and self development which are also employed in the decision-making process.

In summary, to make values work, managers need to differentiate ideals, behavior and character and to initiate an interactive dialogue which creates understanding about why the values are necessary, describes the gaps between ideal and behavior, and produces steps to close the gaps. In the course of the dialogue, the leader will have to find the right answers to the kinds of questions listed in the box concerning teamwork as a value.

Questions to AnswerAbout the Value of Teamwork

As Ideal

• Why is teamwork needed?
• What kind of teamwork is needed?

As Behavior

• Are team roles made clear?
• Are teams held accountable?
• Are team skills understood and developed?
• Is teamwork measured and rewarded?
• Do people get to know each other?
• Are employees selected and positioned to lead because they are team players?

As Character

• Are people made aware of their team attitudes and values (honest evaluation)?
• Do people care about the team's success, and not just their own?
• Do non-team players make an effort to change?
• Does the hiring process select people who help others and share information?