When it comes to Mergers and Acquisitions, one major contributor to the valuation process often gets overlooked: company culture.
The Hidden Truth About Company Values
Think back to the last big business decision you had to make—one that put you in a real quandary. You probably labored over that decision, pacing your office. Maybe it kept you up at night. How did you ultimately choose the right path forward?
Next question: What if you weren’t around to make it? Would your leadership team have reached the same conclusion you did? How about the rest of your staff? Or, let’s say, an intern on their first day?
If you’re not sure, you should be nervous—since that’s an indicator that you haven’t established a clear set of guiding principles to drive behavior and decision making. We call these values.
Your Current Values (Probably)
“But wait!” you might be saying, “I do have values. They’re even written on our website!” If so, congratulations! You’re already one step ahead of most. Former Zappos CEO Tony Hseih famously said that if he could start the company over again and do one thing differently, it would be to develop values sooner. So, great job so far.
But if you’re like most companies, then I have a few hunches about your current values:
- They were developed in a silo. Did your HR team write them at an offsite retreat? Or was it you alone with a notepad untold years ago? Maybe it’s been so long that nobody even remembers… which means it’s unlikely that they’re a reflection of your current culture.
- Or, worse, they were developed by consensus. Some companies opt for the opposite—by creating values in an all-hands meeting, or sending out a company-wide survey. There’s nothing wrong with wanting buy-in, but copy by committee can often lead to…
- They are fluffy, bland, or diluted. At one point, more than half of the Fortune 100 listed “Integrity” as a core value. Integrity is a strong-sounding word, but hardly provides a blueprint for employee behavior. How do I “do integrity”? How do I “be integrity”? (Psst: If you're still convinced this is a meaningful value, recall the most famous company with Integrity posters in the break room—Enron.)
- They were written for the wrong reasons. As with anything in life, the “why” here matters even more than the “what.” And when it comes to values, there are some serious, poorly motivated “why”s out there.
The Wrong Reasons to Write Values
To make money
Built to Last made the case that the best and most successful companies had a set of core values—since 80% of the Fortune 100 touted their values publicly. This prompted managers to stampede to offsite meetings to conjure up some values of their own, perhaps operating under the delusion that correlation equaled causation.
But as we know, putting words on the wall do not a culture make. And while profits may be a byproduct of successful values, they can’t be the motivation.
To assure customers
Likewise, some companies use values as a way to relay their commitment to their customer. This is where values like “Quality” or “Service” or “Integrity” start to pop up—as a promise to the world about your honest business dealings. Unfortunately, these types of values start to sound a lot more like table stakes.
After all, how necessary (and believable) is it to tell a customer you plan to be good stewards of their money?
To exert control
It’s true that values should help you communicate what’s important to your organization, but that doesn’t mean values are a way to whip your team into shape. Some companies establish values based on what they currently see as broken or missing (“Employees are constantly wasting time, so I’ll make ‘Efficiency’ one of our values”)—or, worse, use them as policing tools.
Not only should your values already be true (more on that in a moment), they must also be motivating and inspiring. That will hardly be the case if they’re used to bludgeon people into good behavior.
Values Done Right
Fortunately, Kinesis has been writing values for decades—and we’ve learned a few lessons about how to structure them for maximum effectiveness:
- Start with a verb. Values are meant to guide behavior and decision-making. Move away from lofty words like “Integrity” and toward clearer directives like “Do the Right Thing,” “Tell the Truth,” or “Follow Through.” A good rule of thumb is that it should fit easily into a sentence like “We really need to _____ in this situation,” or “I want you to _____ when that happens.”
- Keep them short and sweet. The most successful values are concise, memorable phrases. Whole Foods’ values lose some of their power with winding statements like “We practice win-win partnerships with our suppliers.” Aim for something simple and punchier, like “Create Win-Wins.”
- No more than four. Memorability is the most important quality in a value, and any more than four guarantees they won’t be easily called to mind. Zappos is a great story, to be sure, but even after their revelation they still went on to create a list of ten values. Southwest Airlines has no fewer than 30 listed on their Careers Page. Challenge yourself to prioritize.
And how to know if you’ve done them correctly? We also have a set of litmus tests to ensure your values are set up for success.
- They should be authentic. We like to say that we’re anthropologists, not architects. Your goal with values shouldn’t be to sculpt something new from the clay, but to extract what already exists within your culture. Ask yourself, “Who are we when we’re our best selves?”
- They should balance each other out. Sometimes a set of values might seem at odds with itself, but this isn’t necessarily a bad thing. If you’re a sales-driven, competitive organization, you may want your team to “Play to Win”—but not at the expense of “Helping Each Other.”
- They should support your mission. Try your values on for size by examining them within the context of your mission statement. If everyone fully embodies your values, can you successfully deliver on your mission?
- They should empower autonomy. Think back to that decision you called to mind a moment ago. Done right, your values should help your team reach the same conclusion you did—giving them the autonomy to do their jobs well.
They Should Hurt
When done right, values can be painful. They lead to some uncomfortable conversations. They make it abundantly clear who among your team, clients, or partners doesn’t align anymore. It’s not uncommon to see a sweep of changes follow a values exercise. Buffer let go of a third of their staff after their values were solidified. As their co-founder remarked:
“That’s what culture does. It’s a disinfectant—it hurts a lot, but you end up being a lot stronger.”
Stronger is right. Feeling aligned with a company’s values is one of the top reasons employees love where they work, and the primary reason that consumers feel they have a relationship with brands. If the values written on your website aren’t delivering that, it might be time to disinfect.
Kinesis helps businesses craft effective values that fuel remarkable company culture. Meet some of our happy clients.