© 2018 Strategic Action Group Ltd. All rights reserved.

info@sagltd.com  |  416.650.9786  |  Toronto, Ontario

  • LinkedIn Social Icon
  • David S Cohen

Values Need to be an Inside-Out Activity

In my previous article, I polled readers on a critical question:

  1. Should company values come from outside the organization, in response to customers and the reality of the outside world? 

  2. Are company values internally evolved and highly resistant to change over time, born from the originating leadership and guarded by those who follow?

I know what you’re thinking. When put in such stark terms, Company 1 looks more nimble, innovative and customer-focused than Company 2. It’s easy to picture Company 1 responding with agility to changing customer demands while Company lumbers along, inflexible and slow to adapt to a brand-new world, destined to be sold off for parts.

Fortunately, most of you know better. About 65% of respondents voted for 2 over 1 with 10% equivocating between a combination of 1 and 2. From my perspective the majority is correct, for reasons I’ll explain below. But that doesn’t discount the compelling attraction of Option 1. In fact, some of the biggest names in organizational theory espouse such a view.

One of them is the management consultant and HR guru, Dave Ulrich, author, most recently, of HR from the Outside In. Question one is a direct quote from Ulrich. When Ulrich speaks or writes, people listen. I argue that Ulrich’s assertions makes sense as a foundation for strategy, but do not provide a sustainable, authentic foundation for a values-based corporate culture. When your culture is defined by multiple outside parties, your values and the corresponding behaviors must be elastic and cedes discernment to those outside parties, i.e., your culture must be all things to all customers you value. I’d like to offer a different perspective rooted in decades of hands-on work with organizations. In my experience, people know in their hearts that an organization’s DNA is internally coded. 

But it is easy to be swayed by trendy pronouncements. As Chris Argyris once wrote,

“…  one of the biggest traps managers fall into is embracing the newest “Wow!” advice from brand-name gurus on how to build employee commitment. … when they do they lose credibility with the employees.”

In the spirit, I offer the following.

Values are the DNA of your culture. In my definition, values are: 

  • firmly held beliefs, 

  • which are emotionally charged, 

  • highly resistant to change, and 

  • universally applied. 

The culture of the organization is stable when leadership lives those values through its decisions and action, and when employees are aligned with those values and feel that they are authentic and meaningful. 

Values are so important because they differentiate between right and wrong. They are reflected in the rituals and ceremonies of the company. All of that “stuff” makes up culture, which is reflected in how things get done, how people relate to one another, how they are hired and fired, coached, promoted or reprimanded, and how decisions, big and small, get made. 

What happens when values get determined from the outside in? 

The easiest example is the hiring of a new CEO from outside the organization brought on board to “shake things up.” The new CEO may come from a rival or have some desired acumen, but chances are he or she does not reflect the values of the organization. 

Most outsider CEOs fail. Some fail spectacularly. When Carly Fiorina and Bob Nardelli were brought on to HP and Home Depot respectively, people expected big things. But both those companies had strong cultures with very developed values which the new CEOs abruptly confronted. The results were disastrous. Employees did not understand the new direction and rejected it out of hand. And they were right to do so.

In contrast, when companies shield employees from the force of outside values that contradict inside values, they always win. 

Recall when Starbucks introduced same sex benefits. This was a values-driven decision based on CEO Howard Schultz’s belief in human dignity. Famously, a shareholder vehemently argued that this was not right because it violated his personal values and diminished overall profits. It’s likely that some percentage of the customer base felt the same way. Yet, Starbucks did not bend to those external values but stayed the course. The consistency strengthened the culture and created pride among employees. Those who disagreed, for the most part, continued to patronize Starbucks anyway. 

Where Outside in Counts Most

There is a place for outside-in perspective. That place is in the realm of strategy, innovation, and marketing.

When gurus like Ulrich talk about changing an organization to meet the outside world, they are not actually talking about values, instead, they are talking about the strategic approach. An organization that doesn’t consider the outside world in such areas, as strategy, will soon falter. 

Culture, however, is different than strategy. Culture is the essence of the employee experience which in turn drives customer experience. It has to manifest itself in a set of well-defined and lived and predictable behaviours, at all levels of the company. Strategy is the alignment of activities we need from employees to achieve success in the outside world. 

I am often baffled when people say they are changing the culture to be more innovative, to be more customer focused, to engage in technology, and the like. These are not value driven choices; they are strategies. It is common for organizations to refocus their business strategy because they realize the external world is changing and demanding something new or different. 

Imagine how much more powerful strategy can be when it builds organically from authentic values. By sticking to its values, Starbucks turned an ethical decision into a powerful marketing tool. This made Starbucks stronger in the eyes of customers and a safer, more predictable place to work for employees. If Starbucks had followed the advice of consultants and changed its values when it changed its business strategy to meet the ever-changing needs of the external world, employees would be left in confusion and distress. 

Culture is an internal activity. Strategy is focused on outside needs but never violates the values of the organization. Values (culture) need to be the anchor. Your values must be defined in specific statements of behaviours. Each department needs to understand how those behaviors impact their respective fit to the culture! 

I recall one visit with a CEO of a global consulting firm. Hanging on the wall were a list of 12 values. Six of them were directed at the employees and six were focused on how to relate to the customers/clients. Reading the values, I quickly realized that there were contradictions between the two lists, potentially putting employees in stress. I asked her what values were most important to her for the company to grow and be strong. To my surprise, she mentioned two that were not even on the list, two that by my definition above, are not values. She talked about financial stability and her board’s support. But when I asked her what important employee behaviors were needed to achieve commitment to the execution of the strategy, she balked. When I pointed out the contradiction between the values posted she responded that others have pointed it out but there was no intention to change things. 

Without clarity to define the actions/behaviours that properly define “living the values”, you lack the foundation for a common understanding of what is ethical; what is right and what is wrongEmployees are the backbone to the real and consistent success of the organization; any “values” that are driven solely by shareholder value and the bottom line will end up with disastrous results in the end. Values need to be aligned throughout the company and enable the smooth execution of the strategy. This alignment of behaviours needs to be clearly understood department by department, team by team, so each individual employee has a clear understanding of how to act, in any given circumstance. This is ultimately the best driver for success. 

This is the first part of the answer part two “The Marriage of Purpose and Passion” will be post soon


David has 30 years of experience helping companies to be more values and purpose/vision focused. He has worked with leaders aligning strategy to values. By helping companies focus on desired value behaviours he enables firms to become more talent-driven. David’s book Inside the Box details how companies have risen and fallen based on putting values before profits. You can download, for free, the Introduction and Chapter 1 of the book by following this link.