Mind the Values Gap — and Conquer It

R. Edward Freeman and Ellen R. Auster

Many businesses experience a values gap. This gap is a result of several factors. Business as an institution is experiencing very low levels of trust from the public. This is due to a number of well-publicized scandals as well as the dominant belief that business is concerned only with money and profits. Even when executives want to live by a set of values, it is not easy. We do not always know what our values are, and sometimes they can conflict. Personal values can also conflict with company values. The concept that we can simply live our values, or walk the talk, is more complex than it seems.

There are four main aspects of the values-through-conversation (VTC) process: introspective values, historical values, connectedness values and aspirational values.

The Values Violation Problem

A company that operated in an industry in which routine work was fraught with physical danger had a stated value of safety first. A new executive team took over, and though they often talked about safety, the executives were also adamant that the company meet or exceed Wall Street’s earnings expectations. The previous CEO had spent a lot of time talking about values and the important role of employee development rather than focusing solely on earnings and performance. Under the new regime, employees began to take small shortcuts with respect to safety. For several years there were no big problems, and the shortcuts continued. Unfortunately, there was eventually a fatal accident that claimed the lives of several employees.

How can values through conversation ever be reinstituted in such a company?

One of the hallmarks of VTC is that we can admit our mistakes and learn from them. Given legal liabilities and the litigiousness of Western society, however, this is often difficult to do. Nonetheless there must be a reckoning about the accident. Employees and other stakeholders need to know that the company is committed to doing the right thing and to preventing future accidents.

Recall that in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, British Petroleum fairly quickly issued a statement that it was going to “make it right.” In such a difficult situation, a company could look to its history for strength. Perhaps there was an incident in the past where the company made a mistake but “made it right.”

A second avenue of conversation would be to do a systems check across the company to see whether key processes were consistent with the stated values. And of course an after-action review needs to be done as well. At some point in the conversation, the acknowledgement that it was a mistake to imply that earnings were more important than safety must be made — and that this mistake was a values mistake. A fruitful conversation would uncover not only the reasons why employees thought they were getting signals that earnings were more important than safety but also what could be done to prevent such a communication breakdown in the future.

After admitting to a values violation, what is most important is that action be taken that addresses how the company will deal with the violation. Discussions about “what is really important around here” are difficult, but over time they can yield results. A conversation about a values violation needs the support of the company’s top management and the participation of many levels of employees and external stakeholders.

The Derailed Values Process

A company in a competitive retail sector began a values process and had as one of its stated values We love our customers. The retailer passed out buttons with “We ♥ our customers.” Meetings were scheduled for 7 a.m., before the stores opened, and all employees were ordered to attend, to begin the day with a rally aimed at realizing the value. Unfortunately, the company began laying off some employees while still requiring others to attend the customer rallies. The employees did not see the connection between doing a better job for their customers and the layoffs, except to see them as a contradiction that “proved” that the company was not serious about the values conversation. Needless to say, company morale was extremely low.

How would we think about values through conversation in such a derailed process?

The employees believed that the company’s executives saw customers as more important than employees. Employees recognize a situation like this, often long before executives do. Addressing this problem can begin with examining the employee survey. If no such survey exists, conducting one conveys to employees that they are more important than they previously thought.

Clearly, there needs to be better introspection and communication in this company. Executives need to put themselves into the shoes of all of their stakeholders, not just their customers. Regardless of how important we may think our customers are, we simply cannot build a great business without the support of employees and others. There is no real tradeoff here. We must have the support of both. This company can look at its aspirations and ask, How do we make this a great place to work, where employees want to work for us? Once again, involving employees and other stakeholders in this process is a necessity, not an option.

Values conversations get derailed all the time. Any one of the four aspects of VTC can get them back on track. In this particular case, starting with connectedness is a good idea. The simple questions How can we get the interests of customers and employees going in the same direction? and What does it feel like to be an employee [and a customer] on a daily basis here? are great conversation starters to get things back on track.

Taking It to the Next Level

A new company in a traditional industry started with a business model that paid attention to all of its stakeholders. The company had a set of values that was unusual for the industry, and it tried very hard to live by them. The founder was still the CEO, and there was no doubt of his commitment to operating in this values-driven way. For a number of years, the company grew and was quite successful. Recently, however, the industry was undergoing a great deal of change. Although the company had long been ahead of the change curve in the industry, there was now a feeling among some employees that it was falling behind. Now that the company was much bigger than when it was in the startup phase, it was less dynamic and the values conversation was stagnant.

How can VTC be used to reenergize the company and reinvigorate the employees?

This is an extremely difficult situation in part because the founder is so committed to leading with values. The company’s history is rich with good stories, and there has always been acknowledgement of connection. So, in this company and for this challenge, the levers that hold the most promise are introspection and aspiration.

Perhaps processes and systems have emerged that once reflected the values but have now atrophied. Many business executives do not understand that the processes we use today must reflect the reality of our situation, not some reality that existed when the company was started. Beginning a conversation by revisiting the company’s aspirations and linking those to the changes in the industry could be a good start. Or we could address the issue of the diminished level of reflection and introspection. If the founder is sensitive to having an honest conversation about values, the question could become, What has happened to our conversation about our values, and how do we improve it?

In our experience, when there is a plateau in values, absent some wake-up call from outside forces, employees inside the firm must deliver the message. Unfortunately, this message is often delivered by a key executive on his or her way out, but even those incidents are often explained away by the phrase better opportunities elsewhere.

None of the conversations are easy, and all require the commitment of organizational members to work together to have conversations that enable the business to fulfill its purpose and values.

This post is excerpted from Darden Professor R. Edward Freeman and Schulich School of Business Professor Ellen R. Auster’s book Bridging the Values Gap: How Authentic Organizations Bring Values to Life (Berrett-Koehler Publishers Inc.). Please see its companion piece, “More Than Face Values: Have a Conversation,” for an overview of four types of values that help form the values-through-conversation process.

Professor Freeman teaches in the Executive Education program True Leadership: Leading With Meaning, which helps leaders reignite their sense of purpose, move past reactive forms of leadership and inspire others while balancing personal and professional values.

About the Faculty

R. Edward Freeman

Freeman is best known for his work on stakeholder theory and business ethics, in which he suggests that businesses build their strategy around their relationships with key stakeholders. His expertise also extends to areas such as leadership, corporate responsibility and business strategy. Since writing the award-winning book Strategic Management: A... Learn More

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