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Published: May 23, 2005

 
 

The Value of Corporate Values

“By making values fundamental to your organization...you can reduce risks in most situations.”

The British mobile telecommunications company Vodafone views its commitment to values as a first line of defense against risk. The company believes in four primary values: “passion for customers,” “passion for our people,” “passion for results,” and “passion for the world around us,” underpinned by acommitment to six primary business principles. More than any set of systems or processes, these rules of behavior can protect a company from harmful incidents that could potentially damage performance or reputation, says Vodafone director Devin Brougham. “By making values fundamental to your organization... you can reduce risks in most situations,” Mr. Brougham says. “If you don’t have a culture of ethical decision making to begin with, all the controls and compliance regulations you care to deploy won’t necessarily prevent ethical misconduct.”

The challenge is to ensure that these values take hold. “Training, senior management advocacy, and values-focused performance evaluation are all part of our approach,” says Mr. Brougham. “And importantly, our employees have a clear understanding of working in this expected framework.”

 

“Values are the key to making money.”

Martin Carver, CEO of Bandag Inc., a retread tire company based in Muscatine, Iowa, says that “values are the key to making money,” but only if a company truly takes values seriously. Not enough do, he adds. “Loads of companies will tell you they have values,” Mr. Carver says. “More than likely they’ve got their values plastered all over the walls. But very few companies clearly see the correlation between success and values, so they never really embrace, define, and then drive them into the organization with any real passion.”

Many companies use Six Sigma techniques to achieve quality, adds Mr. Carver, but “without a foundation of trust, ethics, and genuine statements of and commitment to core values, you just can’t design real quality into your processes. We can point to the our commitment to a clearly defined set of beliefs delivers a positive impact to our business, our employees, our customers, the local community, and the world.”

 

“I see the value of values every day.”

France’s Bongrain, one of the world’s largest cheese companies, doing business in 100 countries, is convinced that the importance of good values to a company’s performance cannot be overestimated. “I see the value of values every day,” says division head Thomas Swartele. “The communication, the innovation, the adaptability, the coherence: Those are the value of values. Because you are approaching markets, problems, and business opportunities from a shared basic belief system, a values-based business approach becomes extremely efficient and powerful.”

This is best illustrated by Bongrain’s relationships with its suppliers. The company sells premium foods, and it requires the highest quality in all of the products that it purchases from local farmers around the world. As a result, the company forms close partnerships with these suppliers, collaborating on such issues as livestock diet and feed and housing conditions. “These are living products, and the slightest variations can have a dramatic impact on quality,” says Mr. Swartele. “Our approach might cost a bit more, but it not only satisfies our values, it helps us to achieve the quality that justifies the higher margins that we want in the business.”

Ultimately, adds Mr. Swartele, “Our success is tied to their success.”

 

Methodology

Booz Allen Hamilton and the Aspen Institute invited approximately 9,500 senior executives from around the world to participate in this global study. The objective of our research was to understand how companies are dealing with the challenges of managing values:

  • What are the dimensions of corporate values?
  • What are the factors that enable and hinder executives in making decisions based on their corporate values?
  • What is the value of corporate values?
  • What are the best practices for applying corporate values?

Phase One of the invitation process involved the mailing of 8,000 English and Japanese invitations and surveys in early July 2004. Phase Two included the mailing of 300 German, 750 Chinese, and 400 supplemental Australian invitations. These findings reflect the 365 completed surveys received (both in print and on the Web), which represent a 3.5 percent response rate (net of undeliverables).

In October and November 2004, we conducted phone interviews with 20 of the individuals who responded to the survey, all C-level executives from major multinational corporations.

Our respondents are predominantly from large companies based in North America, Europe, and the Asia/Pacific region. Half of these respondents (47 percent) are based in North America, 27 percent represent companies based in Europe, and 24 percent represent companies based in the Asia/Pacific region.

One-fourth of the respondents are from companies with annual revenues exceeding US$10 billion. One in six (16 percent) are from companies with annual revenues between US$5 billion and $9.9 billion. One in four (25 percent) are from companies with between US$1 billion and $4.9 billion in revenues, and another 25 percent are from companies with revenues under US$500 million. The remaining 10 percent are from companies with revenues between US$500 million and $999 million.

More than three-quarters of the respondents are top leaders in their companies. CEOs and managing directors make up nearly a fourth of the sample (24 percent), with other C-level executives (CFO, COO, CAO, chief ethics officer, or CHRO) accounting for another 22 percent of the sample. Board members represent an additional 7 percent of the sample. General managers and heads of departments and divisions make up 32 percent of the sample. Risk management and general counsel respondents comprise 5 percent of the sample. Ten percent of respondents classified their job function as “other.”

Respondents represent many industries: financial services and manufacturing lead at 26 percent and 25 percent, respectively, followed by consumer-related companies (including consumer products, media, and retail) and technology (including both technology hardware/ equipment and telecommunications), each at 11 percent. Utilities (7 percent), transportation (7 percent), and energy (5 percent) make up the balance, along with 8 percent in miscellaneous or unclassified industries.

Financial leaders in this report are those companies that categorized themselves as leaders in their industries and whose publicly reported financial results for the past three years were at least 10 percent ahead of those of industry competitors. We compared the survey responses of this group of financial leaders with the responses of other public companies.

 
 
 
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Resources

  1. Mitchell Pacelle, Martin Fackler, and Andrew Morse, “For Citigroup, Scandal in Japan Shows Dangers of Global Sprawl,” Wall Street Journal, Dec. 22, 2004
  2. Anne M. Mulcahy, Keynote Address, Business for Social Responsibility annual conference, New York, N.Y., Nov. 11, 2004
  3. Daniel Yankelovich, “Making Trust a Competitive Asset: Breaking Out of Narrow Frameworks,” a report of the Special Meeting of Senior Executives on The Deeper Crisis of Trust, New York, N.Y., May 15–17, 2003; Click here.
  4. CFO Thought Leaders: Advancing the Frontiers of Finance, edited by Rob Norton (strategy+business Books, 2005)
  5. Lynn Sharp Paine, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (McGraw-Hill, 2003)
 
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