• Categories: Role of the board
  • Author: Graeme Nahkies
  • Published: Oct 25, 2021
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There was a time when boards would have had little interest in specifying organisational values. A generation or two ago this would have been seen as a matter for the chief executive, if indeed it was worth paying any attention to at all. However, society and its expectations have changed markedly in recent years. Inquiries into corporate failure of various kinds increasingly point to boards that paid insufficient regard to organisational culture. Google, Volkswagen, and Boeing are frequently referred to in this light. The Financial Services Royal Commission in Australia found numerous practices that were also adverse to the interests of stakeholders.

The purpose of value statements is to shape the actions and decisions of people in an organisation. They are therefore at the core of organisational culture. In The value of values, Dave Winsborough links his own firm’s deep engagement with organisational culture to recent research findings. In particular, he highlights the persistent gap between official statements of organisational values and what staff in organisations typically experience.

Formal values statements, he finds, frequently serve little real purpose beyond virtue signalling. For example, Winsborough refers to research that found proclaimed values in organisations bore absolutely no relationship to their financial performance. On the other hand, however, productivity, profitability and the state of industrial relations are directly related to employee perceptions of managerial ethics and trustworthiness.

Winsborough cites an MIT study examining the corporate value statements for 500 large US companies. The most commonly cited values were integrity, collaboration, customer focus, respect, and innovation. The study then looked at over 1.2 million employee reviews of the culture in those companies. There was no positive association between the cultural values espoused by those companies and the experience of employees. In fact, there was a negative correlation if a firm listed collaboration, customer orientation, execution, or diversity as its core values. So, a firm listing diversity as a value actually predicted that staff would describe a non-inclusive workplace.

Values that go beyond what a colleague calls ‘bumper sticker’ values are powerful in several ways. Winsborough describes the benefits for team formation and organisational belonging. He refers particularly to important lessons for leaders. For example, the MIT research identifies the best predictors of an organisation’s culture rating are (in order):

  • employees feel respected
  • leaders are supportive
  • the firm offers job security
  • leaders live the core values
  • toxic managers are absent.

Winsborough concludes by suggesting the following practical steps to align behaviour with company values:

  1. Make sure your own behaviour is an exemplar of what you want others to do.
  2. Make sure the values are actionable: what do they mean in practice? (e.g., how do you do ‘integrity’?)
  3. Explain why these values matter: is there a reason to care and make the effort to model the values?
  4. Get out on the ground and understand the daily reality of life for people in your company.

These steps are as applicable to directors as they are to senior managers—perhaps even more so, given the expectations now placed on boards to exercise influence over corporate culture. To be effective in this, a board depends on its ability to influence management behaviour. The slightest hint of a gap between what the board says and what it does will be problematic.

The gap we come across most often is between what the board says is important and where it actually puts its time and attention.

Another common gap arises when the board sets high expectations for the performance of the chief executive and senior management team and shows less regard for the desirability of applying comparable standards and expectations to itself.