Wednesday, 5 November 2014

Billy’s Thirty-Forth Law: Values Matter!

The superior man understands what is right; the inferior man understands what will sell.

When we engage companies in strategic planning exercises, we address three areas of corporate philosophy.  They are mission, vision and values.  I define mission as what you do…vision as where you are going…and values the underlying principals defining your path.  This week, I want to talk about values.

All organizations are ‘values driven’.  Strong organizations, including enterprises, have clear and agreed upon values.  Different companies have different values.  Some are conservative, others innovative.  Some companies are smart and others arrogant. Understanding the underlying yet unstated values of a company is often the most difficult part of the planning process.  Companies have difficulty acting against their core values…even when they ought to.

Consider the following scenario – which illustrates different business values.

A business has just received a report from a consultant advising them that the company could raise their prices 1% without any effect on their unit sales volume.  That one- percent would drop right to their bottom line!  Three executives of the company were discussing what strategy they should employ in order to move forward. 

The first executive said, “We can’t raise our prices – that just wouldn’t be fair to our customers.  We are only where we are because of our loyal customer base.

The second executive said, “I think that we should raise the price and pass that revenue directly to our employees.  One percent of sales would represent a 10% wage increase!   Our employees made us what we are today and they deserve this.

The third executive said, “I think that we should increase the price and then declare a dividend to the shareholders.  They took the risk to invest in the company and they are the ones who should finally benefit from their faith in this company!

Each executive is displaying different values.  They are neither good, nor bad they are just different.  That is the thing about values; they must be right for you and for your business. They tell what you should do, and what you should not do.

Wal-Mart has values.  They believe that low costs = low prices.  This value drives their behavior with their suppliers and their customers. IBM values education and they recruit and develop their highly educated workforce.  This drives their recruiting policies.  Some companies foster a ‘work hard play hard’ culture.  You may or may not agree with the morality of the values, but that's the difference between values and value judgement.

Values are hard to quantify.  They define what we do and importantly what we don’t do.  Contrary to popular belief, profit is rarely the sole business value. Many companies value revenue and market share over profit.  Profit is actually a rather weak value.  Even publicly traded firms only value profit for its influence on the ultimate share price…but that is another story.
Understanding your own values is the foundation on which you build your business.  Communicating and living those values drives cohesiveness in your internal and external messages.  Missions change…visions evolve…but true values remain an important part of your enterprise story.

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