Values & Leadership

Value-based leadershipby Robin Ancrum

Values-based leadership is about realising that the pursuit of profit is one of many essentials for sustainable business success. Leadership, however you define it, is fundamentally the exercise of power: one person or group harnesses the actions of a larger group to get something done.

The source of leadership power varies. It may derive from the leader's status in the hierarchy and be based on fear - "Do this or you'll get the sack" - or it may derive from their personal capacity to inspire. In this case, it is based on trust, belief and respect. There is no simple moral equation. Glorious and terrible things have been achieved under both types of leadership.

Organisations spend a lot of time, effort and money determining their values and communicating these to their employees. This may be worthwhile and well intentioned, but there are dangers. Although the directors may determine the values and commit to them, they may communicate these inadequately so that they become irrelevant in practice. If the adoption of values at a senior level is a cynical exercise in political correctness, employees will quickly spot the hypocrisy and distrust the whole culture. Even more commonly, these values may not take account of the real motivators when the pressure's on - usually financial performance.

Corporate values on their own do not guarantee ethical behaviour. The classic example in recent times is Enron, which had the stated corporate values of "communication, respect, integrity and excellence". Businesses and their leaders are judged by their success. Since most of us work in companies that need to generate profits, success is usually measured by the bottom line. But wealth creation is no longer simply a matter of pursuing profit and growth at the cost of everything else.

Profit alone does not guarantee sustainable success. It has to be balanced with other factors - reputation and brand value, corporate social responsibility, the retention of human capital and so on. Values-based leadership combines personal principles and corporate ethics with commercial sustainability. It acknowledges that it's necessary to create wealth, but also that wealth creation isn't the only necessity. And, crucially, it is marked by the leader's courage when he is called on to act according to these principles rather than taking an easier option.

So where do you start with this approach? Companies, businesses and teams first need to develop a clear sense of their distinctive vision, mission and values at all levels. These provide clarity about direction, priorities and behaviour, while the process, if it's correctly handled and well led, builds consensus in the participating groups and makes it more likely that they will stick to agreements. There can only be one vision and one set of values in an organisation, which should not be negotiable.

But wise leaders will ensure that people have the time and support to understand the vision and the mission and will involve them in discussions about how the company's values transform into action at all levels. If values are going to mean anything, they must be touchstones for behaviour and guides to action. You need to review them regularly and build them into your management and reward systems at all levels. If they are going to be this central, you must ensure that they are the right ones.

One way of doing this is to develop a value-creation model for your whole company and, if necessary, departmental teams (see panel). This requires a number of steps, from asking participants to specify what they believe the business must do, to consolidating these into a model that satisfies as many people as possible, to testing the model to ensure that it's precise enough to be meaningful and that the values identified lead to the desired outcomes.

You may find that the process confirms your firm's existing values or that it highlights the fact that they're poorly aligned with the way your business makes money. In that case, they are at best irrelevant and you would do well to burn them publicly and start again. It's more likely that you will find your values are still valid, but need to be phrased differently to make them more effective.

Your company may, for example, have "innovation" as a value when what it really needs to do is deliver every project on time and to budget. That may in fact be truly innovative in your industry at this time. There is, therefore, nothing wrong with the value, but a good leader will seek ways to connect the abstract words with actions on the ground that really count.

How to develop a value-creation model

First, ask all participants in your top team to define the four or five essential things that the company must do consistently well in order to make money. What precious stuff must the business keep close to its heart? Tell them it must be specific to their organisation. If the model applies equally well to the competition, it won't work.

In the second phase, everybody will return to the group with their own individual take on the organisation, so you'll end up with lots of models. Typically, there will be a lot of consensus on broad topics, but disagreement about which ones are going to make the cut. Don't let people extend their lists infinitely. Insist on isolating the essential handful. This sharpens people's thinking.

There will always be differences between the words that people use, but don't dismiss these as semantics. The process of debate forces people to refine their ideas and produces shared insights that are clearer than the ones you started with. Remember that you want to create a model that - to the satisfaction of all concerned - sums up what the business must do and how it must do it. Once the team is satisfied with its value-creation model, it needs to be tested to check that it's robust and complete. This takes time, but it will be time well spent if the result is a model that's owned, shared and committed to by all members of your leadership team.

Start by focusing on what you do that's essential to the company's success and then look at how your business does those things distinctively. As part of that process you will inevitably address values. If you base them on a value-creation model, your values won't be bland generalities. Instead, they will arise in answer to the following key question: what principles of behaviour are non-negotiable if the business is to consistently do the things that we agree create value - and do them in the way it needs to?