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Why Company Values Matter More Than You Might Think

Johanna Herbst

Oct 11, 2021

“Employees don’t quit companies, they quit managers”. We probably all know someone, maybe even ourselves, who quit a job blaming the direct manager. Does this, however, justify such a generalization or is it too easy to simply put all the blame on the direct manager when an employee leaves an organization?

As a management consultant and executive coach, I had the opportunity to work with many companies across industries on the one hand and with individuals suffering from toxic work environments on the other hand. The correlation between company values and employee satisfaction stood out time again and again and it directly impacts whether employees resign and look for new opportunities.

Values are who we are

To get started, let’s briefly define values. One definition from the Oxford Dictionary of English is that values are “principles or standards of behavior, one's judgment of what’s important in life”. This is also in line with the definition we use in coaching: values describe attitudes and attributes that are core to who we are.

Values are who we are. Not who we would like to be, not who we think we should be but who we are in our lives right now. Examples of values are trust, independence, work-life balance, or self-care. The list is long and the set of core values determines the unique and individual essence, the ultimate and most fulfilling way of expressing and relating.

The magic of values is that once they are being honored, they pave the way to fulfillment. The opposite is true as well. If values are not being honored, they lead to anxiety, loneliness, and depression.

Company values are deeply engrained in the culture and leadership

The value definition also holds for companies: the values of a company are who the company is in that moment. They are deeply engrained in the culture and leadership of a company and come through in every action and behavior within an organization. They play an important role as we will see.

Most companies share their values on their websites. Can you guess the company that is guided by the following ones: be bold, focus on impact, move fast, be open and build social value?[1] Or which company is led by this set of values: be creative and innovative, deliver excellence, cultivate an entrepreneurial spirit, and be committed to positive impact?[2]

The company values serve as a blueprint for decision-making. If a tough decision has to be taken, leaders go back to the company values and are reminded of what matters to the organization and its employees. The values serve as a compass.

As is the case for individuals, the trick is honoring values in a way that they are embedded and reflected in all decision-making, incentive systems, promotions, behavior, and more. If this is achieved, the associated benefits are an increase in creativity, flow, contentment, confidence, and more. The company and its employees know who they are, what they stand for, and what to expect.

Companies pay a significant price for not honoring their values

What happens if those values communicated on the company website turn out to be nothing more than empty words? With individuals, the consequence of not honoring their values is feeling ashamed, alone, and less confident. Does this apply to organizations as well?

Let’s think it through. Imagine a financial institution that has trust as one of its core values. In this company, it’s, however, common practice to badmouth people behind their back and/or in front of an audience. Trust is nowhere to be seen and everybody is fighting against each other being super careful not to give anybody munition to attack them. In this case, individuals are focused on protecting and not exposing themselves while potentially attacking other employees simultaneously. Do you think they enjoy spending time at work? Do they rather focus on driving the business or on “survival“?

Importantly, every company has values. These values might differ from the ones shared on their websites but every organization has values. Instead of trust, it might be “survival of the toughest”. In this example, the actual value is likely linked to negative emotions such as anxiety, stress, and depression. Companies also leave lots of money on the table by not honoring their aspirational values. Why? Because employees that don’t feel safe will start looking for a new job. If they find a new opportunity, the company is estimated to lose about 1.5x the annual compensation behind the lost performance and knowledge, issues in the team, and additional recruiting and training cost. If employees stay with the company, they will play it safe and stop going the extra mile. They won’t feel the psychological safety to share any insights or ideas for improvement or innovation going forward which will result in the company falling behind its competition.

Could this mismatch of values just be an exception to one specific area or department? In other words, as a whole, the company honors its aspirational values but due to its size, there might be some black sheep here and there. Have you ever heard the excuse that XYZ is maybe not the greatest personal fit but is overdelivering on the numbers every quarter and as such becomes irredeemable? In that case, the managers one level up are accepting inappropriate behavior and are sending the message that money trumps (aspirational) values and “maximizing sales no matter what” turns out to be a value. Since every employee has a direct manager this is a company problem and cannot be swept under the table with lame excuses. Honoring values must follow a zero-tolerance policy top-down, otherwise, a company ridicules its values and they become nothing but empty words. With that, I argue that "employees quit companies and managers”.

Companies can work on becoming a value-driven organization

Is everything lost if companies don’t honor their values just yet? Here comes the good news: NO. As we learned, values are a snapshot of who we are at a point in time and they may change over time. This will likely be the secret sauce for the future success of organizations. Accordingly, I highly recommend making honoring values a top priority.

How can leaders go about it? Essentially, the steps are the same as for any other project ranging from assessing the status-quo, defining a clear action plan to launching it to the organization. Importantly, if values truly matter to a company, the values need to be reflected in the incentive system for all employees. Also, the launch is likely to be accompanied by training and workshops to manifest the changes and truly engrain the values in the company culture.

What could this look like going forward? Let’s go back to the example of the financial institution and the value of trust. In the future, badmouthing might not be deemed acceptable behavior and employees will be stopped right at the moment with the explanation that this behavior is not in line with the values. They might be invited to a training session and/or coaching to get accustomed to the company values. If that doesn’t change the behavior, this person is no longer a good fit and the company is better off without this individual.

The upside of honoring company values is enormous. These companies are in their integrity and on purpose and have the best prerequisites to win in the market. That’s why company values matter more than you might think.

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