Topics
The Strategic Agility Project
This series features the research of MIT Sloan School of Management’s Donald Sull and his team of researchers and data scientists, focusing on how companies can achieve their strategic objectives and build strong organizational cultures.
See All Articles in This Section
When Johnson & Johnson’s CEO codified the company’s principles into a credo in 1943, corporate value statements were a novelty. Today they are ubiquitous among large corporations. In our study of nearly 700 large companies, we found that more than 80% published an official set of corporate values on their website.1 Senior leaders, in particular, love to talk about their company culture. Over the past three decades, more than three-quarters of CEOs interviewed in a major business magazine discussed their company’s culture or core values — even when not specifically asked about it.2
Corporate values statements are nearly universal, but do they matter? Critics dismiss them as cheap talk with no impact on employees’ day-to-day behavior. Recent corporate scandals support the skeptics’ view. Volkswagen, Wells Fargo, and Barclays each included ethics or integrity among their core values in the years before their wrongdoings were discovered, while Boeing hit the trifecta by listing integrity, quality, and safety among its “enduring values.”
Research Updates From MIT SMR
Get weekly updates on how global companies are managing in a changing world.
Please enter a valid email address
Thank you for signing up
It is tempting to dismiss corporate value statements as irrelevant, but ignoring them is a mistake. Even when companies fall short of their aspirations, official statements still cast light on the values leaders consider critical for success. They also spell out the cultural elements that leaders believe distinguish their company in the eyes of employees, customers, and other stakeholders.
Official corporate values only matter to the extent they shape employees’ activities and decisions on a day-to-day basis. This raises a fundamental question: How well does behavior inside a company align with cultural aspirations? In other words, when it comes to their core values, do companies walk the talk?
To measure the gap between aspiration and action, we collected the official corporate values statements for more than 500 large organizations and compared these official values with how employees view their companies on common corporate values based on an analysis of more than 1.2 million Glassdoor reviews.
What Companies Aspire To
Corporate culture means different things to different people. There are more than 50 distinct definitions in the academic literature, including the stories employees tell to interpret events, organizational rituals, and corporate symbols.3 The official culture statements we studied, in contrast, display a striking consistency in how they define corporate culture.
Three-quarters of the culture statements include an introduction explaining the role of corporate culture. The primary function of corporate culture, according to these descriptions, is to guide the actions and decisions of employees throughout the organization.4 Aligning behavior with official culture allows companies to differentiate themselves from competitors, build trust with stakeholders, increase brand equity, and attract great talent.
Nearly all the organizations we studied rely on a set of core values as the guideposts for helping employees align their behavior with corporate culture. Of the companies in our sample, 72% referred to their company’s culture as values or core values, and even employees at companies that use other labels — principles, philosophy, or ideals, for example — cited values as the foundation of their culture. The realities of how companies talk about their culture is consistent with a prominent theory that defines organizational culture as “a set of norms and values that are widely shared and strongly held throughout the organization.”5 We’ll use this definition of corporate culture throughout this paper.
The typical company lists a handful of values — the most common number of reported values is five, and nearly three-quarters of companies in our sample listed between three and seven values. (See “How Many Corporate Values Do Companies Have?”) Companies are not, however, always disciplined in spelling out their core values. Ten percent of organizations listed two or more sets of values under different names (core values and corporate culture, for example) on different parts of their website. Others packed multiple values into a single item. JP Morgan Chase’s business principles, for example, included “a commitment to integrity, fairness, and responsibility,” which we count as three distinct values. When we accounted for nested values, the average company in our sample listed seven distinct values.
One of the most striking findings of our analysis is the sheer number and diversity of values cited. We identified 62 distinct values mentioned by at least 1% of the companies with official values statements. Integrity was the most common, listed by 65% of all companies, followed by collaboration (53%), customer focus (48%), and respect (35%). No other value was cited by more than one-third of companies, and the list contains a long tail of values mentioned by less than 10% of companies. (See “What Companies Say They Value.”)
While some values are more common than others, none are universal. Even integrity, the most frequently cited, is listed by less than two-thirds of all organizations in our sample. The lack of universal values is explained, in part, by variance across industries. All of the companies in the construction and engineering and health care services industries, for example, included integrity among their core values, while less than 20% of internet companies did so. (See “Stated Corporate Values Vary Across Industries.”) Even within the same industry, however, we observed significant variation in the choice of core values.
The diversity of values calls into question the usefulness of frameworks that attempt to reduce all corporate cultures to a handful of universal types. One popular model, for example, argues that all corporate cultures can be plotted along two dimensions — internal versus external orientation on one dimension and flexibility versus control on the other.6 The cultures that correspond to the resulting quadrants — clan, ad-hocracy, market, and hierarchy — are presented as archetypes that describe all corporate cultures.
While these dimensions are important elements of corporate culture, the resulting two-by-two matrix cannot easily accommodate crucial values like integrity, diversity, or psychological safety. Other models choose different dimensions and produce other cultural archetypes, but they face the same fundamental challenge.7 No two dimensions can or should be able to capture the richness and diversity of corporate cultures that companies attempt to achieve. Trying to force diverse corporate values onto a cultural Procrustean bed, moreover, strips them of the very elements that make them distinctive.
Do Companies Walk the Talk?
More than 80% of large American corporations publish their official corporate values. But do these professed values make a difference? If a company singles out teamwork as a core value, for example, are employees more likely to collaborate with one another compared with a company in the same industry that does not include collaboration among its core values?
To address whether stated values shape employee behavior, we first measured what companies say they value. The simplest way to quantify corporate culture would be to treat each value as binary — a company either listed it as a core value or did not. When Charles Schwab lists innovation as one of four core values, it is presumably more focused on it than Quicken Loans, which includes innovation among a laundry list of 19 elements of its culture.
To quantify each company’s relative focus on a value, we weighted it by the inverse of the total number of values listed.8 So innovation was weighted at 25% for Charles Schwab and 5% for Quicken Loans. (A company that didn’t list a specific value received a weighting of zero for that value.) To control for differences across sectors, we assigned each company to one of 33 industries.9 We then ranked each company in its industry based on the weighting for each value we measured.
To assess how well companies live up to their stated values, we used data from the 2019 Culture 500, which ranks companies on nine of the most commonly cited values. Every Culture 500 company received a sentiment score that measured how positively employees talked about a specific value in the free text of their Glassdoor reviews.10 If half the employees who discussed integrity in a company spoke about it in positive terms, for example, that company’s sentiment score for integrity would be 50%.
Comparing the rankings from the Culture 500 with official corporate values allowed us to measure the correlation between them.11 The figure below shows the correlation coefficients (with 95% confidence intervals) between official and actual values.12 The analysis reveals that there is no correlation between the cultural values a company emphasizes in its published statements and how well the company lives up to those values in the eyes of employees. All of the correlations between official and actual values were very weak, and four of the nine — collaboration, customer orientation, execution, and diversity — were negatively correlated.
Values Should Be Actionable, Distinctive, and Linked to Results
Our research reveals a gap between official values and the cultural reality on the ground in most organizations, which raises the question of how leaders can close that gap. As a first step, leaders can communicate corporate values more effectively by providing concrete guidance on desired behavior, ensuring their organizational values are distinctive, and linking them to outcomes that matter to employees. Effective communication cannot, of course, guarantee a healthy culture on its own. But it’s a good place to start.
Provide behavioral guidelines. Most employees would agree in principle that integrity, respect, and innovation are worthwhile values. They might have very different notions, however, about what these abstract terms mean in practice. Leaders can provide additional guidance by spelling out a handful of expected behaviors consistent with each value. To the extent these guidelines shape behavior across all parts of the organization, they provide a consistent framework for different functions, business units, and teams to coordinate their activities.
Biotechnology company Biogen, for example, includes pioneering among the elements of its corporate culture. Pioneering is an inspirational value to be sure, but one that employees might struggle to operationalize without further guidance. To clarify what pioneering means in practice, Biogen offers examples, including “We encourage candor to test assumptions and uncover the best ideas” and “We are open about what we do not know and ask questions to understand.” (See “Behavioral Guidelines for Innovation.”) Amazon and Nvidia, two of the highest-ranking companies on innovation in the Culture 500, likewise provide employees with concrete guidelines on how employees can incorporate innovation into their daily activities.
Articulate what makes your organization distinctive. A company’s core values should capture its unique identity — the enduring essence of the company that distinguishes it from competitors.13 When employees identify with a distinctive culture, they are more likely to incorporate core values in their daily activities and pursue their organization’s goals.14 A distinctive corporate culture can also differentiate an organization from competitors and provide a source of sustainable competitive advantage.15
Unfortunately, many organizations’ core values are so generic that they could easily serve as fodder for a Dilbert cartoon (there are more than 50 lampooning official culture statements).16 The core values of pharmaceutical supplier McKesson (integrity, customer-first, excellence, respect, and accountability) could apply equally well to an airline, grocery store, or bank.
How can leaders translate common values, like customer-centricity or integrity, into something distinctive? One approach is to translate abstract values into organization-specific behavioral guidelines. Alaska Airlines and McKinsey & Co. both emphasize customer service. The specific behaviors associated with their values, however, are tailored to their respective industries and strategies. Alaska Airlines offers tactics for front-line employees dealing with passengers, such as “engage with kindness” and “offer assistance.” McKinsey’s guidelines, including “use our global network to deliver the best of the firm to all clients” and “build client capabilities to sustain improvement” are appropriate for a professional services company serving global clients.
The McKinsey example illustrates another way to make values distinctive — by elaborating on desired behaviors in language unique to an organization. Within McKinsey, “follow the top management approach” means thinking through an issue for the client organization as a whole, rather than its impact on a single division or function. That phrase, and others like “obligation to dissent,” have been used for decades, have a well-defined meaning within the company, and constitute part of the company’s distinctive legacy.
Another approach is to take common values as a given, but then highlight those elements of corporate culture that differentiate an organization. Netflix, for example, acknowledges that integrity, respect, and collaboration are important, but emphasizes five values that distinguish the company including “encourage independent decision-making by employees” and “share information openly, broadly, and deliberately.”
Clarifying what your values mean in practice and providing insight into what truly differentiates your corporate culture requires hard work. Linguistic gimmicks are no substitute for effort and insight. Appending adjectives like “ferocious,” “unflinching,” or “relentless” will not make values more distinctive or actionable. Leaders also do well to avoid acronyms that force fit values. Would Discover Financial Services, for example, have included “volunteerism” (the “V” in its DISCOVER values) or Hilton Hotels “now” (the “N” in HILTON) if these companies went by different names?
Explain why your values matter. Official statements of culture signal what matters most to an organization, and behavioral cues provide concrete guidance on how to translate values into actions. Leaders can further clarify their organization’s values and what makes them distinctive by spelling out why they matter. Of the companies that publish corporate culture statements, less than one-quarter include any discussion of how those values help the organization succeed. And most of those companies simply assert culture is a competitive advantage without explaining the link between core values and organizational performance.
A handful of companies, in contrast, explicitly spell out the connection between their culture and desired results. A common rationale links corporate culture with a company’s ability to attract, retain, and energize the best employees. HubSpot — the No. 1 company on Glassdoor’s list of best places to work in 2020 — explains its “culture doesn’t just help attract amazing people, it amplifies their abilities and helps them do their best work.” Where companies choose to publish their core values provides a clue as to why they matter. One in five companies publish values on the section of their website targeted at potential employees. Their culture statements often include values, such as respect, diversity, learning, and caring, that are attractive to many job seekers.
Nearly the same percentage of companies (18%) include core values in their code of business conduct, which, unsurprisingly, emphasizes integrity, honesty, fairness, and strict compliance with applicable laws. Deutsche Bank, for example, underscores the importance of integrity in rebuilding trust with key stakeholders: “By living these values and beliefs in daily interactions with our stakeholders, employees have a critical role to play in helping us to restore the trust lost during the financial crisis.”
Companies can also spell out the link between values, behaviors, and performance. Netflix explains that employees are expected to be “extraordinarily candid with one another” because “we will learn faster and be better if we can make giving and receiving feedback less stressful and a more normal part of work life.”17 The company’s value of “avoid rules” is, according to Netflix, critical to maintaining agility in the face of changing market circumstances.
Explaining the rationale behind specific values helps employees (and other stakeholders) understand why the organization prizes certain values above others. Illinois Tool Works’ emphasis on decentralization and entrepreneurship is appropriate for a diversified conglomerate, for example, but would not suit a global professional services company that needs to collaborate across offices and practice groups to serve multinational clients. Clarifying the purpose of values also makes it easier to measure whether they are working. HubSpot, for example, could track attrition among employees they want to keep to assess whether their culture is doing its job.
Leaders love to talk about corporate culture. Many companies, however, display a disconnect between what leaders preach and what is practiced throughout the organization. Improving corporate culture is a long journey that demands a holistic approach and sustained effort over time. During the next year, the Culture 500 project will publish a steady stream of content exploring how leaders can build and sustain a healthy corporate culture.
As first steps in improving their culture, leaders can take a hard, evidence-based look at how well their organization is living up to its espoused values. Which elements of your culture are working well? Which are falling short? Where are the pockets of cultural excellence within your organization? Which teams are undermining your culture?
A cultural diagnostic may reveal that your values are too abstract, generic, or divorced from results to shape how employees act on a day-to-day basis. In this case, you may want to refresh your core values to make sure they capture the distinctive essence of your organization, provide concrete behavioral guidelines, and clearly link to outcomes that matter to employees.
References
1. An earlier study of companies included in the S&P 500 index in 2011 found that 85% published corporate values on their website. See L. Guiso, P. Sapienza, and L. Zingales, “The Value of Corporate Culture,” Journal of Financial Economics 117, no. 1 (2015): 60-76.
2. We identified all interviews in Harvard Business Review published between January 1990 and December 2019, and excluded anyone who was not the CEO of a for-profit organization with more than 250 employees at the time of the interview. We searched the text of the remaining interviews for mentions of culture, core values, or other phrases indicating the interviewee was discussing corporate culture.
3. W. Verbeke, M. Volgering, and M. Hessels, “Exploring the Conceptual Expansion Within the Field of Organizational Behavior: Organizational Climate and Organizational Culture,” Journal of Management Studies 35, no. 3 (May 1998): 303-329 identified 54 definitions of organizational culture. For a terrific overview of the current state of corporate culture literature, see J.A. Chatman and C.A. O’Reilly, “Paradigm Lost: Reinvigorating the Study of Organizational Culture,” Research in Organizational Behavior 36 (November 2016): 199-224.
4. More than 80% of the explanations of corporate culture in our sample explicitly discussed the role of corporate values as guides to behavior.
5. C.A. O’Reilly and J.A. Chatman, “Culture as Social Control: Corporations, Cults, and Commitment,” Research in Organizational Behavior 18, eds. B.M. Staw and L.L. Cummings (Greenwich, Connecticut: JAI Press, 1996): 166.
6. K.S. Cameron, R.E. Quinn, J. DeGraff, et al., “Competing Values Leadership: Creating Value in Organizations” (Northampton, Mass: Edward Elgar Publishing, 2006).
7. T.E. Deal and A.A. Kennedy, “Corporate Cultures: The Rites and Rituals of Corporate Life,” (New York: Penguin, 1992); R. Goffee and G. Jones, “What Holds the Modern Company Together?” Harvard Business Review 74, no. 6 (November-December 1996); and B. Groysberg, J. Lee, J. Price, and J. Yo-Jud Cheng, “The Culture Factor,” Harvard Business Review 96, no. 1 (January-February 2018).
8. When weighting each value, we used the number of values we coded for each company (average of seven per company) rather than the number of values reported by the company (five per company on average). This adjustment allowed us to account for companies that incorporated multiple values into a single item in their official values statements and more accurately reflects their level of focus on any value.
9. The list of industries can be found at the Culture 500 website. Companies like Johnson & Johnson, which competes in pharmaceuticals, medical devices, and consumer goods, were assigned to multiple industries.
10. A company’s sentiment score for a value was calculated as the number of reviews that discussed a value in positive terms divided by the total number of reviews that mentioned that value.
11. This analysis applied to companies that were both included in the Culture 500 and that had published official values statements. Of the 531 organizations in the 2019 Culture 500 sample, 444 (84%) had official culture statements. Some of the Culture 500 values included cultural items that we classified as distinct cultural items when coding official value statements. The Culture 500 value of agility, for example, included topics of agility, speed, entrepreneurial, change, and simplicity. In calculating the weighting of official corporate values, we consolidated those values to ensure consistency with the Culture 500 data.
12. We tested the association between officially stated values and employees’ assessment of those values in practice using Pearson’s rho. The correlations had a p-value less than 0.01 for agility and innovation, below 0.05 for respect, and was above 0.05 for all other values. Many companies did not list a specific value, which resulted in many tied value rankings within an industry. We used the Kendall rank correlation to calculate correlations in the presence of ties. The correlations coefficients using the two methods were virtually identical.
13. David Whetten defines organizational identity as “the central and enduring attributes of an organization that distinguish it from other organizations, ” D.A. Whetten, “Albert and Whetten Revisited: Strengthening the Concept of Organizational Identity,” Journal of Management Inquiry 15, no. 3 (September 2006): 219-234.
14. J.E. Dutton, J.M. Dukerich, and C.V. Harquail, “Organizational Images and Member Identification,” Administrative Science Quarterly 39, no. 2 (June 1994): 239-263; and M. Riketta, and R. van Dick, “Foci of Attachment in Organizations: A Meta-analytic Comparison of the Strength and Correlates of Workgroup Versus Organizational Identification and Commitment,” Journal of Vocational Behavior 67, no. 3 (December 2005): 490–510.
15. J.B. Barney, “Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?” The Academy of Management Review 11, no. 3 (July 1986): 656-665.
16. A search of Dilbert cartoons produced 44 comic strips for culture and seven for core values, https://dilbert.com, accessed March 15, 2019.
17. “Netflix Culture,” Netflix, accessed March 17, 2020, https://jobs.netflix.com.
i. We searched websites and annual reports between March and July 2018. We classified as corporate value statements any list of two or more items that were labeled as culture, values, principles, philosophy, norms, beliefs, creed, credo, ethos, attitudes, way, tenets, or commandments. We only included lists of items that were clearly separated from the main text of the website or document through, for example, bullet points, separate lines, item titles, etc. This allowed us to avoid subjective assessments of whether text embedded in a paragraph was discussing corporate culture. We excluded mission and vision statements that laid out an organization’s desired future without specifying the values that would guide behavior.
ii. In some cases, we could not code a value based on the value title alone. Aon Hewitt, for example, listed head as one of its core values. In these cases, we read the value description (if available) to identify what the company meant. If the explanation included more than one value, we coded for all of these. In the Aon Hewitt example, head was described as “Integrity and professionalism are the pillars of our business. Our commitment to rigorous standards and innovation assures clients of bespoke valued solutions,” which we coded to four values (integrity, professionalism, innovation, and customer orientation).
iii. Our list is broadly consistent with the Organizational Culture Profile, a compendium of corporate values widely used by management scholars that lists more than 60 distinct values. In the late 1980s, the development of the Organizational Culture Profile (OCP) summarized the most common values found in academic and managerial writing at that time. C.A. O’Reilly, J. Chatman, and D.F. Caldwell, “People and Organizational Culture: A Profile Comparison Approach to Assessing Person-Organization Fit,” Academy of Management Journal 34, no. 3 (September 1991): 487-516. In a later study, they added 10 new value statements that did not appear in the original OCP, mostly dealing with customer orientation (three) and integrity (three). C.A. O’Reilly, D.F. Caldwell, J.A. Chatman, et al., “The Promise and Problems of Organizational Culture: CEO Personality, Culture, and Firm Performance,” Group and Organization Management 39, no. 6 (December 2014): 595-625. Seventy-five percent of the values listed by companies we studied were also included among the superset of OCP values enumerated by O’Reilly and Chatman across their two studies.
iv. According to the Bureau of Labor Statistics, the retail trade sector and accommodation and food services sector together employed over 30 million employees in 2018 versus a total employed population of 161 million.
Reprint #:
61431
"company" - Google News
July 21, 2020 at 08:19PM
https://ift.tt/2CQ0W7g
When It Comes to Culture, Does Your Company Walk the Talk? - MIT Sloan
"company" - Google News
https://ift.tt/33ZInFA
https://ift.tt/3fk35XJ
Bagikan Berita Ini
0 Response to "When It Comes to Culture, Does Your Company Walk the Talk? - MIT Sloan"
Post a Comment