Sunday 28 July 2013

The 'value' of organisational values :: Do they matter during times of organisational change?

I wrote about ‘right-sizing’ in my last update. One thread of discussion that arose from that was whether organisational values published in an organisation's Annual reports are meaningless given that organisations are constantly making changes that negatively impact the employee relationship contract. I wanted to take this opportunity to outline my thoughts on the 'value' of organisational values (the play on words is intentional!).

Values at an individual level refer to “important and lasting beliefs or ideals shared by the members of a culture about what is good or bad and desirable or undesirable. Values have major influence on a person's behaviour and attitude and serve as broad guidelines in all situations.” 

Values exhibited by an individual become a hallmark of the person. For example, I come from a very close knit merchant community whose members are predominantly entrepreneurs and have values that emphasise a strong work-ethic, entrepreneurship, family networks, long term thinking, investment based on fact-driven decision making criteria rather than emotion etc. Now imagine an organisation consisting of only members of my community. Clearly the organisational norms will be very close to these values.

Organisational values are typically written words or statements that outline to the stakeholders of an organisation the core principles that are the basis of the manner in which the organisation operates. Organisations make the generation of values a priority and go to tremendous lengths to publish their values (as a part of their brand and allure) and also take steps to indoctrinate their employees on them. 

Organisational values that are derived largely by the founders of an organisation seem to be more apt for organisations that have a smaller employee base and where the management style can make a very visible and deep impact. My concern has always been on how an organisational value system might scale to the magnitude required by most Fortune 500 organisations as well as work within the cross-cultural paradigm of a majority (if not all) of these organisations. I know the difference as I have worked in start-up type environments (I was employee # seven) to being an employee of substantial multinationals.

I reviewed the values of five large organisations with global operations, headquartered in different countries and from different industries - Hewlett Packard ; Procter & Gamble ; Petronas ; AngloGold Ashanti and Volvo. What struck me was that there are some fundamental things (such as integrity, honesty, environmental care etc.) that were articulated that made me wonder whether the absence of the same implied that there would be a ‘lack of integrity’ or an ‘element of dishonesty’ or ‘absence of environmental care’ if these values were not clearly stated [I must commend AngloGold Ashanti on a very comprehensive set of values with good detailing!].

Putting an organisation’s values in writing is not sufficient. In fact, Enron’s Annual report for 1998 had a whole page on values (p 73 at the back of the report) with integrity identified as a value but nevertheless Enron went on to implode due to practices that violated the tenets captured under its values! Clearly there was a difference or incongruity between what was written and what was practiced at Enron, which ultimately lead to huge value degradation for shareholders!

Researchers commonly refer to those values that are published and against which employees are held accountable as ‘espoused values’ and what is ultimately practiced by the employees (individuals) as ‘practiced values’ or ‘enacted values’. The challenge for an organisation is to ensure that the two sets of values are aligned as any misalignment will lead to bad press and/or degradation of performance and/or conflict. Towards this organisations outline their values as a set of unified or over-arching values so that employees at the individual level can internalise the same. However, employees can give priority to their own individual survival (for political gain or financial gain or to improve their promotional chances etc.) thereby increasing the likelihood of violating an organisational value. The 'trick' is in allowing for ‘safe identification’ of violators of an organisation’s value system as well as a system to undertake training and communication to align employees on the organisation’s value system. This can be in the form of a code of conduct or standards of business that provide further clarity and detail to what is being espoused in the organisation’s values.

Another area that has raised most serious debate is on how an organisation ensures that the management of the organisation lives by the organisation’s values in an open and visible manner? Any visible disconnect in the behaviour or conduct of management will raise doubt in the minds of employees. This disconnect erodes the beliefs of employees in the organisation’s value system and also ensures skepticism leading to deterioration in employee engagement and value congruence.

Organisational values set the pace for internal goal-setting and internal adaptation but do they create sufficient understanding of the “behaviours necessary for the organisation to survive in its environment (i.e., external adaptation).” This is an inherent contradiction but “it is possible for an organisation's culture to emphasise values that are not appropriate for its survival. In such a case, employees may interact in a highly efficient manner while the organisation fails to survive.” Organisational values (by definition) cannot be dynamic but today’s organisations (particularly in sectors such as Information Technology) are finding it difficult to ‘honour’ organisational values that were created for a different time and place but now cannot endure as market realities hit home! Can we blame managers for undertaking and enacting actions that are in conflict with an organisation’s values that were written for a different time and place? They may appear to be correct and aligned to the values but are not aligned to the substance of what the organisational values are aiming for! This is why it is critical that organisational values provide sufficient guidance on behavioural aspects and ensure that the entire organisation can make valid “assumptions about the likely behaviours of their subordinates when first-order control mechanisms (such as rules) or second-order mechanisms (such as direct supervision) are not present.”  Linked to this is the reality that values can (and should be!) be updated to reflect the organisations maturity and senior management focus/strategy.

Having a set of organisational values, publishing the same and ensuring deterrents for those who fail to comply are of great benefit during times of organisational change. Clearly espoused values provide critical “sense-making cues” to employees (including senior management) where espoused values become the charter against which senior management can ground decision making during times of upheaval and change. Staying true to an organisation’s espoused values is even more critical when senior management has reason to undermine the same if the values are absent. [This can be undertaken via 360 degree feedback mechanisms; performance reviews by senior management of next level management; mechanisms to ensure articulation by senior management of how they lived up to the values at open forums/'town-halls'/'coffee-talks'].

The opportunity cost of not having a clear set of organisational values during times of organisational change is too high to contemplate and hence my answer to the question of whether organisational values matter during times of organisational change is a resounding YES. What do you think?


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