Developing Core Values

Developing Core Values

Core values should capture what’s essential to the long-term, sustainable success of your company or organization. Defining your company’s core values means taking the time to engage in a deep exploration of what truly is essential to its success.

What steps should you take? How do you begin the process?

Developing core values begins with exploring questions like these: “What would someone who is acting in the best interest of this organization say is most important to ensure its success?” This is the essence of John Rawls’s “neutral man” standard, which he articulated in his groundbreaking book A Theory of Justice. Here’s a trick: I’ve discovered that people need to explore certain broad categories of core values to make sure that they identify all the core values relevant to their organization. The following diagram shows these different categories:

Why these seven? Customer satisfaction and reliability are obvious, since they cut to the heart of attracting and retaining customers, regardless of your product or service. Ethical integrity is essential as well. Given the transparency revolution, companies simply risk too much by not behaving ethically. Attracting and retaining talented people is also essential. Safety is critical to success in many companies. And environmental protection, while at one time not viewed as an essential activity, is now seen by many companies to be a core value, both because it’s the right thing to do and because damaging the environment can be ruinous to a company’s reputation. And finally, financial sustainability is essential. Without financial resources, the enterprise cannot function.

In short, these broad categories of core values are a good starting point for exploring what is essential to the success of your organization. By exploring all of them, you can be sure that you’ve left no stone unturned. Knowing the broad categories is just the starting point, however. You must develop the details surrounding each core value, including the management and employee behaviors that support each core value (what I refer to as the “we statements”). You also have to peg the core values to a scorecard, so you can measure whether they’re being achieved.

Here’s a five-step process to help your organization define its core values.

Step One: Form the Core Values Planning Team

Defining the core values planning team is an all-important step, because the rest of the company will look to see whether this team owns the core values, consistently communicates them, and champions them when conflicts arise, as they inevitably will. In most cases, this team should consist of the senior-most leaders of the organization. After all, they’re the current stewards of the enterprise. The CEO or top leader definitely needs to be a part of the planning team. This is not a job to delegate. His or her strong participation is crucial, given that the outcome will be the essential values and performance measures for the company. If he or she chooses not to actively take part, it’s a sure sign that the exercise is not serious.

Step Two: Reflect on the Core Values

The basic question is this: What activities are essential for our organization’s success? In an earlier part of this post, I listed the seven categories of core values that one should explore. Use those seven categories to begin writing down your company’s core values. In parallel, reflect on how you would measure success with regard to that core value. For example, for the core value of financial sustainability, you might measure “maintaining competitive prices” or “assuring access to credit.” As you hone your core values, it’s very helpful to discuss and define how you’ll measure them. This is a critical step. By articulating how you’ll measure your core values, you help make sure people understand what they mean. Ultimately, as the adage goes, what you measure is what you do. So metrics are key to aligning people around the core values.

What are some examples? Customer satisfaction can be measured by asking customers to rate your products or services. Competitive pricing can be measured via an index of competitors’ prices. Reliability can be measured by the percentage of defects. Integrity can be measured by asking people what they think (your employees, your customers, your shareholders). The process of determining how to measure each value will help you clear away any lingering cobwebs about what the value means. For example, if innovation is a core value, then figuring out how to measure it will help clarify what it means. Is it generating a certain number of new products and services or entering specific new lines of business? Is it being perceived as innovative by your customers? Is it continuous improvement in quality? There are many different ways to measure it.

Step Three: Discuss Potential Conflicts

Before you too quickly decide on a set of core values, you should talk about areas where conflict could occur between the core values. Not all core values will be in harmony with each other—some will be in discord. A core value of financial profitability might be discordant with a core value of customer satisfaction. Talk about cases where these conflicts have occurred—or might occur—between the values. For example, a planning team member might say: “We currently don’t measure customer satisfaction in any rigorous, systematic way. To do so will be expensive. We assume it will pay off in increased customers and higher sales per customer. Those assumptions are untested. And it will put pressure on our core value of financial profitability.”

Another planning team member might say: “It is not clear to me that doing no harm to the environment is a core value. It is not entirely within our span of control. There are things we may need to do that would conflict with this value. I want to see us motivated to do the right thing in making our decisions—but not at the expense of doing the smart thing for our company.”

These are exactly the discussions you should be having at this point. Start to talk about how you might measure your success in achieving each core value (I’ll talk more about that in a moment). Discuss how the team might need to communicate to resolve those conflicts. How should you make decisions when two or more core values are in tension? There’s no right answer to the question. The right response is that you’ve thought it through and trust that you can communicate effectively with each other to strike the right balance.

Step Four: Link Behaviors to the Core Values

As you start to pin down your core values, it’s important to list the management and employee behaviors that support them in the form of “we statements.” In the example below, you can see how one company translated its core value of customer satisfaction into we statements.

Inevitably, someone will ask: “How many we statements do we need?” The answer is: “As many as there are behaviors that support the core value.” Typically, there will be ten to fifteen we statements for each core value.

One note: You’ll find yourself tempted to use the word “quality” in your we statements, as in: “We maintain quality customer service.” There’s a problem with this. Every single core value is about quality. My suggestion is to find words other than quality. And don’t, by any means, create a separate category for quality. Down that road lies confusion!