sirota values webinar spring2012 for distribution
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Values Misalignments in the C-Suite and
What’s to be Done About Them
- Spring Leadership Advisory Webinar -
May 16, 2012
Organizational breakthroughs. Bottom line results.
2 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
It’s An Old Story
And Did You Know…
In 2002, Enron shares were valued at 60 cents
• At the same time, copies of the Enron Code of Ethics were selling on eBay for 33 times as much (20 dollars)
3 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Enron (A History Lesson)
Most Innovative: Fortune - 6 straight yrs.
Stated Values
• Respect, Integrity, Communication, Excellence
Overt Deceptions and Illegality Appears
• When market cooled (‘01-’02), so did its stock, leading to margin calls, which led to aggressive moves to prop up perceptions of value
Failed to Reward/Advance the Values
Prime Example of a True Failure of Leadership
• Strategy was suspect, but it was the failures of moral leadership and the abuses of trust that killed them
Culture Belied the Values
• Leadership valued massive growth and entrepreneurism, not a crime
• But culture became risk-seeking, personal gain-seeking, arrogant, etc. while lacking any needed counter-balancing forces (oversight, ethics, disclosure, functioning ombudsman, accountability, etc.)
Board famously suspended their code of ethics when convenient, conflicts of interest and shortcuts abounded, etc.)
A Driver of the Sarbanes-Oxley Regulations
• Many see SOX as putting lipstick on a pig (but still needed)
4 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
While business strategies were suspect for all, culture was the root of their problems. Each had stated Values that bore little resemblance to the day-to-day actions that were rewarded.
Enron Isn’t Alone Unfortunately
5 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Long-term, Successful Companies Have a Clear Sense of Purpose
HDFC Facts
• Founded by H.T. Parekh (a mythic figure and businessman)
• Incorporated in 1977 in Mumbai
India’s first housing finance company
Objective of meeting a social need: promoting home ownership by providing long-term finance to middle and lower-middle class Indians
• HDFC’s main goals are to:
Develop close relationships with individual households,
Maintain its position as the premier housing finance institution in the country,
Transform ideas into viable and creative solutions,
Provide consistently high returns to shareholders, and
To grow through diversification by leveraging off the existing client base
6 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
And Their Leaders Live their Values (the real secret of their success)
Stated Values
• Integrity
e.g., employees encouraged to make decisions they can stand by forever – the company should be transparent in financial reporting
e.g., no bribes (“speed money”) in transactions (standard industry practice at the time). This has been, and is, the biggest no-no at HDFC
• Excellence in Customer Service
e.g., delinquencies are aided rather than scared to meet their obligations
• Civic Responsibility
e.g., contributions for the poorest sector of Indian society
• Teamwork and Employee Commitment
e.g., to foster efficiency and effectiveness
Culture Expresses the Values
• A dominating industry force
Yet encouraged rather than quashed competition
• During disarray in the 90’s, transformed into a retail bank
To fund its operations at rates people could afford
Now second largest lender in India
• In past, rejected formal code of ethics
Norms best transmitted by example
• People treated as adults – intelligent, hardworking, creative, unique
Low turnover, high loyalty, people love their work and environment
• Highly acclaimed company
For governance, accounting practices, customer service and civic mindedness
Continues to win recognition today
7 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
The Right Leader Will Set The Values and Drive the Culture
Jack Welch was Chairman and CEO between 1981 and 2001
• Changed and streamlined GE
• Focused on inefficiency (adopted Six Sigma mid 90’s), execution, performance management, reward, and shareholder value
• Be #1 or #2
• $27 billion to $130 billion in revenue, $14 billion to ~$400 billion market cap
• Lengthy succession planning: Jeffrey Immelt (still CEO 11 yrs later)
• In 1999 he was named "Manager of the Century" by Fortune magazine
Louis V. Gerstner, Jr. was Chairman and CEO from 1993 - 2002 (1st outsider)
• He is credited with saving IBM by refocusing the strategy (IT services, the Internet ) and culture by keeping the company together and addressing both “sacred cows” and an insular environment
• 100,000+ additional employees were laid off from a company that had painfully broken with its security pact
• Samuel J. Palmisano succeeded him (and just recently retired, 10+ yrs later)
• In 2008, received the Legend in Leadership Award from Yale
GE and IBM Remain Excellent Examples of How Values and Culture Enable Strategy Execution
(of course it also helps to have the right strategy)
8 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
In Sum: Culture Must Align with Values (or there will be Problems)
Most companies have an expressed set of Core Values or Enduring Principles that state what the institution stands for (or should)
• Often highlighting one or more of their key deliverables to:
Employees, Customers, Communities, Investors, etc.
• Covering principles that would be pursued regardless of business conditions, industry, etc. – they represent strongly held convictions
Most would attribute leadership and business success to them
As we have seen, some companies have cultures and work environments in conflict with aspects of their Core Beliefs and Values
• And is ultimately the root cause for many corporate ills
Turnover, Customer Dissatisfaction, Inefficiency, Low Productivity, Marketplace failures, etc.
• Due to systematized behaviors that don’t represent the Core Values
Leader beliefs and behaviors, management policies and practices (including the performance management systems), etc.
Alignment is the process of affirming/reaffirming the Core Values and their omnipresence in the company as THE singular most important driver of decisions and behavior
9 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
What Does Misalignment Look Like?
Core Values (Company XYZ)
% Responding Favorably (n=284 units)
Low 10% of Units
Avg. Unit Score
Hi 10% of Units
Integrity 62 83 100
Openness 40 67 100
Customer Service 32 62 86
Accountability 29 56 81
Teamwork 35 51 72
XYZ Corp.
10 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Misalignment Costs
Openness
Innovation
Favoritism
Fair Policies and Procedures
Clear Priorities
Customer Satisfaction
Improvement of Customer Satisfaction
.6
.5
.3
.3
.3
Sales Turnover $m
Net Operating Income $m
Impact of a 1% Improvement of Customer Satisfaction
$12.3m
$3.6m
Impact of Leadership and Management Practices on Business Results
XYZ Corp.
11 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Requires a 5 Step Process
Archival Analysis
• Of existing values (and any historical material about their construction)
• Of the hard business metrics that drive decision-making (& stresses they create)
• Of the internal assessments of key publics if they exist (current culture & practices)
Interviews
• 1-on-1 meetings w/Key Executives other Internal and External Publics as needed
• How variable are the belief systems? How variable are the aspirations for success?
CEO Check-in
• Top-line review of interview results
• Specific plan presented, and input sought, for Affirmation and Alignment Phase
Affirmation
• Focus on commonly held beliefs regarding enduring principles & business success
• Distinguish between enduring principles and long-standing practices (habits)
• Consensus on what to add, subtract and modify as needed
Alignment
• Develop behavior expectations for each Value (and corresponding metrics)
• Uncover existing Values violations and plan/prioritize the actions to be taken
• Plan for corporate-wide reaffirmation
12 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Won’t Waste Time Wordsmithing!
• Rather than waste time developing perfectly worded values statements, focus on buy-in, animation & operationalization (let others struggle w/words, if they haven’t been established)
• Use a data-driven process that seeks the inputs of a wide-range of key publics beyond the Executive Team (VP’s/Directors, HIPO’s, Customers, and Investors)
• Distinguish between enduring principles and situation-dependent practices (or habits) while emphasizing observable, measurable behaviors
Will be driven by the CEO (and enabled by HR) – not the other way around
Affirmation / Buy-in Operationalization
Writing Statements
13 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Provide Individualized Leader Support (Where Needed)
Senior leaders MUST express the stated values and corporate ideals in both their actions and beliefs in order for them to be seen as credible
Nearly all senior leaders have ingrained beliefs and behaviors in conflict with those stated values and corporate ideals
• Some are motivated to change (whether aware of the conflicts or not)
• Some are not (my #’s are fine, I am successful, why should I change)
Keys to Success:
• Providing a mirror of feedback from a range of constituencies
This isn’t therapy, or career counseling, the feedback is focused on specific violations (and positive expressions) of the values (and the business-related consequences of both)
• Exploring leader’s strongly held management conviction
Challenging the leader to distinguish between career-long habits and strongly held convictions
Pointing out areas of convergence and divergence
• Seeking avenues for compromise (the goal is alignment with Co. Values)
Finding specific policies, practices and personal behaviors to change (often involved BU-based culture change efforts)
14 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Interested in More? Please Sign-Up for Our Upcoming Webinars
Please contact Elizabeth Feola directly at efeola@sirota.com if you are interested in pre-registering
• Why Culture Matters, How to Change It, and the Specific Role of Senior Leadership
• September 12th
Building an Effective
Corporate Culture
• Poison in C-Suite: The Impact of Festering Conflicts and How to Overcome Them
• December 4th
Resolving Conflicts, Building
Partnerships
15 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
About Sirota Leadership Advisory
Our 3-step program uncovers obstacles to execution and performance by focusing on critical misalignments among leaders and between the organization and its values
• Step 1: Identify Opportunities (Assessment)
• Step 2: Build Executive Insight (Acceptance)
• Step 3: Take Action (Results)
Our tools and consultative services align your values, executive team, and strategy with your culture-in-practice in service of growth and performance
• Values Realignment: Clarifying then aligning your values within the C-Suite (and beyond)
• Culture Change: Leading successful change and building an effective culture
• Partnership Building: Resolve team- and individually-based conflicts
We help senior leaders overcome intangible obstacles to business success by building and maintaining highly effective cultures and executive teams
16 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)
Thank You for Listening
Please contact Douglas Klein, our chief leadership advisor, at dklein@sirota.com or call directly at 914-922-2530 with any questions about our service offering
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