The first quantum shift for leaders to make in their thinking is to recognize the importance of aligning everyone around the company’s core values. These are the behaviors and activities essential to the organization’s success. It is the leader’s job to discover these fundamental core values and make them apparent to all. By doing so, you begin to instill deep feelings of trust, ownership, and mutual accountability.
In 1986, Ken Iverson took over as CEO of Nucor, a maker of steel products based in Kansas City. He inherited a stodgy corporate culture characterized by hostile relationships between management and rank and file. Until Iverson, Nucor appeared destined for oblivion.
Iverson turned the culture around by doing three things:
- He did away with titles.
- He did away with hierarchies.
- He did away with all executive perks. (Until that point, executive importance was determined by club memberships and access to the company’s executive dining room.)
His goal was clear—he sought to eliminate the “we” versus “them” mentality that cripples organizations. Under Iverson, Nucor negotiated a highly successful profit-sharing arrangement with its trade unions. He also embraced—rather than feared—foreign competition.
With Iverson at the helm, Nucor changed its organizational core values, structure, and culture—and that, in turn, enabled it to achieve an extraordinary level of success. In fact, when you compare Nucor’s performance to that of one of its chief competitors, Bethlehem Steel, what you see over a fifteen-year period is nothing short of amazing. Nucor increased its share value to more than twenty times that of Bethlehem Steel.
Tony Hsieh, the CEO of Zappos, the shoe and clothing company, has built a phenomenally successful company by aligning employees around ten core values. Employees are hired and fired based on the ten core values. The core values are prominently displayed on Zappos’ website. In fact, each box of shoes is inscribed with one of the core values. How successful is Zappos? Consider this: Starting in 1999, when Hsieh joined the company, it had virtually no sales. Ten years later, it had grown to over $1 billion in gross sales annually.
Zappos’ ten core values are:
- Deliver WOW Through Service
- Embrace and Drive Change
- Create Fun and a Little Weirdness
- Be Adventurous, Creative, and Open-Minded
- Pursue Growth and Learning
- Build Open and Honest Relationships With Communication
- Build a Positive Team and Family Spirit
- Do More With Less
- Be Passionate and Determined
- Be Humble
So how have these ten core values created a leadership culture? Here are three interesting innovations that the core values have sparked:
- The company provides free shipping both ways.
- Zappos has a 365-day return policy.
- Sales staffers don’t have scripts.
“If you get the culture right, then most of the other stuff, like great customer service or building a brand will just happen naturally,” Hsieh says.
Building a leadership culture that gives employees freedom and space is the essence of what Hsieh has done to make Zappos so successful.
These two examples show what is possible when leaders engage in a deep exploration of their companies’ core values and shift the culture from one that is personality driven to one that is values driven. In the process of aligning core values, underlying conflicts are forced to the surface. Tough discussions occur about what is truly essential to the enterprise. As people become aligned, they can take on more authority and responsibility. As they feel more empowered, morale and productivity increase. It’s a virtuous cycle!
The Benefits of Core Values
“We are constantly making sure people are aligned with our values,” says Laura Batten, the CEO of a consumer goods manufacturing company. “It is the secret to our strong performance year after year.”
Her recipe includes annual surveys of all employees to assess where the organization is adhering to its core values—and where it’s falling short. She follows up by facilitating employee forums to share the survey results and brainstorm ideas for improving in those areas that score low. For example, when “maintaining work-life balance” scored low, she made a public commitment to reducing overtime and backed it up with initiatives to distribute workload more evenly.
Defining the organization’s core values—and applying them—is the first step in developing a leadership culture. Aligning your people around a framework of core values brings multiple benefits.
It frees managers from the suffocating constraint of having to second-guess every decision and micromanage every detail.
In a values-driven organization, managers can delegate decisions and ask people to think for themselves. When people act on the basis of clearly understood values—linked to performance measures—they are naturally engaged in making the right decisions consistently over time.
Alignment also attracts other talented people.
It’s easier to get the right people to join your organization when you can clearly communicate what’s important, and what behaviors you’re looking for. This reduces turnover, thereby cutting the costs associated with recruiting, retaining, and retraining employees. In a service economy with higher intrinsic labor costs and increasing labor mobility, this is an important source of competitive advantage and profit.
Focusing on core values and vision also attracts and retains loyal customers.
People are attracted to companies they trust—that are value driven. Smart companies use this to build tight bonds with their customers. Zappos, Starbucks, Google, Apple, Southwest, Nordstrom, IBM, and Porsche are all examples of companies that have effectively aligned their employees and customers around a set of core values.
It always surprises me to learn that a company pays only lip service to its core values, since operating from a well-understood framework of core values can have such a positive impact. I’ve come to believe that many people don’t really understand what core values mean—or how to identify them successfully. So the purpose of Chapter 1 is to make sure you learn all the techniques needed to align people around your company’s core values.
Effective leaders who want to generate lasting, sustained success in their organizations spend a considerable amount of time and energy clarifying and communicating the strategic focus of the organization. They understand that it is the first step in building the levels of trust needed to get people to do their best.
Good leaders devote considerable energy and time to a deep examination of the organization’s core values. By doing so, they get to the heart of what is essential for the customers and shareholders— and thus essential for success. This is true whether you’re a small company or a large one, a nonprofit, or a public entity. Communicating the core values creates powerful alignment across departments and divisions. This yields clarity of focus and enables people to make better decisions, consistently, across long spans of time.
Core values are not mysterious. Typical core values include things like ethical integrity, customer service, product excellence, and environmental stewardship. The hard work is in communicating them consistently, day after day, so that a culture of respect is built around them. Creating this kind of culture is crucial for building trust.
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Next post: Practice #2: Sharpen the Focus