Principles Reign Supreme Over Values

A company I know has a stated value of innovation that it parades out in front employees on a regular basis, but rarely, if ever, do any staff or managers innovate anything—including staff in research and development!

This company is not alone. I often find companies with well-articulated values stated frequently with little evidence of associated general behaviors. I am not talking about companies with low-bar statements of values like “honesty” and “integrity” that are so banal that they ought to be a priori rather than touted in company literature or put in posters hanging on the walls.

No, I am talking about values that have specific meaning to the business. Yet even these tend to repeat so often around common themes as to have become almost as banal.

What are the common themes? I regularly encounter six.

• Innovation and creativity
• Customer centricity
• Individual initiative and boldness
• Entrepreneurial spirit
• Collaboration
• Excellence

Perhaps you recognize these from among your own company’s values. If you do, don’t be surprised. Can you think of any business at all to which even one of these values isn’t germane? Email me if you can.

The CEO of the Japan subsidiary client company of mine decided that an entire business line of the company no longer made sense, given the company’s new strategic direction. He decided to abandon that part of the business, even though it contributed more than half of the company’s revenues and a sizable amount of its profit—a bold and audacious move.

However, senior staff revolted, catastrophizing about the possible business results, sowing terror in the ranks of staff who feared for their jobs, even though the CEO in the head office in Europe promised to cover any temporary losses. Every senior executive had understood and accepted boldness as a company value—at least in theory—but principles are needed most when theory and practice collide.

Imagine how the senior executives might have reacted if the following principle had also been articulated just as often as the value of boldness.

No business line is so profitable for our company that it cannot be abandoned if it does not take our business in the strategic direction we want to go.

A general manager of a luxury hotel in Tokyo told me of a time when someone from a local company called to ask for a breakfast reservation for ten executives at the hotel’s restaurant. Frontline staff told the caller that the restaurant did not take reservations and that was that, even though the hotel is perfectly capable of hosting a breakfast for ten in a private room as an event.

The general manager talked constantly of guest-centricity as a value, which everyone accepted and understood in theory, but imagine how staff might have treated the caller’s request if the general manager had also articulated the following.

We can fulfill any guest request. It is always only a matter of how fast we can do it, and how much we will charge.

The CEO of a financial industry company had articulated and repeated values of entrepreneurial spirit and courage. Yet he still felt stymied by executive-level managers who were passive, waiting for orders from above before acting on the interests of the businesses they led. The executives viewed any possible risk of failure, no matter how remote or inconsequential, no matter how reasonable a business risk to undertake, as an intolerable risk to their careers. Better to be safe, they reasoned.

The CEO gathered them all in a room, and told them the following.

Lack of failure is not the same as success. I will never fire anyone for taking action on a good idea that turns out not to work. I will however fire any one you without compunction for indecision and inaction.

Sales managers at the Japan subsidiary of a European company were recently found to have been falsifying invoices to customers in order to create slush hidden funds for their own use. When asked why they’d falsify financial documents, the sales managers said they needed the discretionary budget in order to spend lavishly on customer entertainment, which they saw as a necessary tool for closing business. The practice had been going on for years, and the sales managers felt justified in their fraud given that their end was ostensibly in the best interests of the company.

Integrity is an explicit value of the company, but the sales managers might have acted differently if the following were also articulated.

There is no business objective or purpose so important to the company ever to justify fraud of any kind, no matter how insignificant or needed you think that fraud might be.

Values tell you what and why. Principles tell you how and when. Values express abstract concepts. Principles talk about concrete actions and behaviors. Values may be clear, but are theoretical. Principle provide explicit guidance on what to do when. Values tend toward sloganeering, such as “The power of one,” which I recently heard. Principles tend toward action, like the following.

No idea is too small not to be heard by others, no matter what your position. If you have any idea about how to improve the business, you have a moral imperative to share it, so we can all decide together.

Principles make values real. How real are yours?