Managing By Values

Many years ago, I heard John Naisbitt give a speech on his book Reinventing the Corporation and was intrigued by a concept he called “Fortunate 500” companies. We all know about Fortune 500 companies that are ranked on revenue, profits, and market value. But John defined Fortunate 500 companies as organizations measured by the quality of service available to customers and the quality of life accessible to its employees.

Over the next few years, I worked with several people to put a process to this idea. The result was the book I coauthored with Michael O’Connor, Managing By Values. The three elements of the Managing By Values process are:

  1. Identify your core values
  2. Communicate the core values
  3. Align the values to your business practices

The most important part of this process is to decide what is most important to your company. Once you gain that clarity and define your core values, you must constantly communicate them to your employees. Use the values as a guidebook for how you make decisions and operate on a daily basis to show employees that you are completely committed to them. And make sure that your internal business practices are aligned with your values so individuals and teams can function easily and not hit road blocks because an internal process doesn’t support the values.

When you manage by values, you’ll have delighted customers who keep coming back, inspired employees who give their best each day, owners who enjoy profits made in an ethically fair manner, and suppliers, vendors and distributors who thrive on the mutual trust and respect they feel toward your company.

We certainly found this to be true during the economic downturn of 2008-2009. It became clear to us in February 2009 that we would probably fall, at a minimum, 20 percent short of our revenue goals for the year. The first thought of some was that we would need to downsize—get rid of some of our people. While that would be legal, we didn’t think it was consistent with the rank-ordered values we had at the time. Our #1 value was Ethics—doing the right thing, followed by Relationships—gaining mutual trust and respect with our people, customers, and suppliers; followed by Success—running a profitable, well-run organization. To us, downsizing would focus on our #3 value but miss doing the right thing and damage our relationships with our people. As a result, we involved everyone at an all-company meeting and together figured out how to cut costs with a minimum impact on people’s lives.

Fortunate 500 is a clever play on words but it is actually a very powerful concept—and perhaps even more important now than it was when I first heard about it. Today people, especially millennials entering the workforce, want to know that their work is worthwhile and they are contributing to a bigger cause. If employees share the common values of a company, they can achieve extraordinary results that give their organization a competitive edge.

Building a High-Trust Work Environment

Building trusting relationships is one of the most important elements of being an effective leader. The good news is that turning around a low-trust environment isn’t rocket science. It starts with performance evaluation. If you are evaluating your people’s performance with a judgmental mindset, I guarantee you are eroding trust.

But if you partner with your people to set clear goals, and then provide day-to-day coaching to help them reach those goals, you’ll build high levels of trust—and that leads to higher morale, increased productivity, and improved engagement. And, as a leader, the constant communication you have with team members makes the performance evaluation part of your role much easier.

Remember, placing an emphasis on judging performance instead of coaching performance will create a low-trust environment. Setting clear goals and working side by side with your people to help them do their best will not only build trust and create effective teams, but also form the kind of working environment where people flourish.

Do Your People Trust You?

Trust has taken a hit lately in all facets of our lives, but especially in organizations. A dwindling level of trust between workers and leaders is one of the unfortunate consequences of financial mismanagement and economic meltdown within the working sector.

So, how can you tell whether or not your people trust you? Watch what they focus on. Do they pay more attention to their work—or to you? If they seem to be focusing more on what you are doing than on their own tasks, chances are they don’t entirely trust that you are there to help them succeed.

Make it clear to your staff that you are there to help and encourage them, not to judge them or nitpick their efforts. When you help people understand that as their leader, you work for them and will do whatever it takes to support and encourage them, they will be more empowered, innovative, and productive. And that’s a win-win for everyone!

Walk Your Talk

A few weeks ago, my blog focused on leading by values and the importance of communicating your organizational values clearly and constantly. Another critical element for leaders to practice is what I call walking your talk. Leaders must make every effort to become living symbols of their organization’s value system. Walking your talk means that your company values act as a set of guidelines for decision making, problem solving, and general day-to-day business operations.

For this process to work, you need a method of identifying gaps between values and behaviors. One way is to describe what the current situation is and what you want the desired situation to be, and to document action steps for making the change. Let me share an example from our own company.

We used to have a conflict at the end of each month among our sales, accounting, and shipping departments. One day, we brought representatives from each department together to discuss the issue in a fact-finding meeting. What we learned was very interesting.

The cause of the problem was a compensation policy stating that a sale couldn’t be credited to a sales person’s goal until the product had been shipped and billed. Since every sales person received bonuses based on monthly performance, they wanted every order fulfilled by the last day of the month—even the last-minute orders. This put extreme pressure on the shipping and accounting departments. In fact, in some cases people in those departments were working twelve-hour days at month end.

When everybody put the issues and their personal perspectives on the table and began to work on solutions, it actually became quite easy to eliminate the pressure caused by this policy. The group worked together to develop a new solution for dealing with the end-of-the-month workload crunch. And our corporate values provided the framework for the team to work together when solving the issue.

It would have been easy to continue to recognize the revenue at the expense of the people. However, Relationships was a corporate value—and making some people work twelve-hour days wasn’t honoring that value. Our leaders and teams walked their talk and restructured the process to honor both regular working hours and sales goals. The solution recognized the importance of both people and results.

Ignoring this issue would have put corporate values at risk—but using the values to solve the problem fortified their importance.

Think about situations that need to be improved in your organization. Then use your values to drive conversations and do the right thing. Leading by values is a continuous journey—and it is never too late to start walking your talk.

Don’t Just Sit There, Say Something!

Managers typically react to the performance of their direct reports with one of three responses: positive, negative, or no response at all. It isn’t hard to guess which one works best for increasing good performance—the positive response.

A person who does something correctly and receives a positive response will most likely continue to perform using that desired behavior in the future. By the same token, a person who receives a negative response for doing something wrong will most likely not repeat the behavior. So, in effect, even performance that gets a negative response can improve if the manager coaches the person and encourages them to improve.

The most dangerous response a leader can offer is no response at all. Think about it. If someone performs tasks and completes projects correctly and receives no response from their manager, how do you think they will perform in the future? The good performance might continue for awhile, but eventually it will decline. Why? Because no one seems to care.

What about the person who makes mistakes but is never corrected? It seems logical that if a person is left to fail again and again with no support or direction, their performance will get even worse. It is the leader’s responsibility to help everyone succeed. Ignoring bad behavior hurts not only the individual, but also their manager and the organization as a whole. It’s just bad business.

Even though leaders are busier than ever these days, most still notice when their people are doing great or when they need coaching. The big mistake happens when the manager doesn’t say it out loud. I often say “Good thoughts in your head, not delivered, mean squat!”

If you want your people to achieve and maintain high performance, let them know that you notice and care about the things they do right—and that you want to help them when they are off track. Share your thoughts. No one can read your mind.

Be consistent with your communication and you will build a consistently high performing team.