Dysfunction #1: A lack of definition and unity about what matters most.

7 Dysfunctions of High-Potential Companies

Success today is defined by the triple bottom line – financials, sustainability, and values. 

Highly successful companies clearly define and develop unity about what matters most, standing for something beyond making a profit.

"I have concentrated all along on building the finest retailing company that we possibly could. Period. Creating a huge personal fortune was never particularly a goal of mine." (Sam Walton, Founder, Walmart)

"We want a culture that makes people stick around for reasons other than money." (Kevin Rollins, CEO, Dell)

"If we don't keep our people values, our dollar values don't matter in the end." (Colleen Barrett, President, Southwest Airlines)

A well-developed set of values defines what’s most important to a company and how it functions, is — or should be — the basis of its purpose, mission, and vision, drives company culture, and triggers employee passion. A well-developed set of values should also be comprehensive, including shareholders, customers, and the community. Highly successful companies give as much emphasis to core values as they do to strategic goals.

• One on-the-way-to-a-$Billion company I consulted with was expert at weaving their values into the fabric of their organization. The first Monday of every month, the company's CEO would recognize, during the all-hands virtual meeting, those employees who, during the previous month, demonstrated the company's values through their work.

Values play another critical role. They determine identity and reputation that are at the heart of branding. And when branding aligns with reality the company has integrity. Building shared values — clear definition and unity — across the enterprise is a powerful competitive advantage.

• "If you lose dollars for the firm by bad decisions, I will be understanding. If you lose reputation for the firm, I will be ruthless." (Warren Buffett, Berkshire Hathaway)

• Eighty percent of customers state that they will never buy from a company after a negative experience. (Chief Executive.net)

• Thirty-six percent of customers seriously consider a company's corporate citizenship when deciding to buy products. (Values Shift)

What's the payoff?

Companies that clearly define and tenaciously live by their values, weaving them into the very fabric of their organization, outperform those that don’t on a variety of strategic success measures — values have both top- and bottom-line impact. 

Values Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance identifies a few of the top- and bottom-line benefits from operating as a values-based company: 

• Superior market performance is possible without making profit a primary value.

• Companies with an enduring set of core values outperform the stock market.

• Profits are higher when personal and organizational values are aligned.

• Values-based leadership increases employee job satisfaction and bottom-line performance.

• Employees are more likely to share knowledge and learn from each other.

Most companies have beliefs but rarely values - they're not the same.

It's trendy to talk about values, and most companies have a list of statements they call values that are often prominently posted on their office walls. These statements are frequently included in their personnel handbook and company year-end shareholder report, and are even mentioned by senior leaders at key events. 

My experience, though, is that, at many companies, rarely do these values significantly impact strategic planning or the day-to-day operation of the business — often lacking clear definition and cross-enterprise unity. The cost in lost reputation, branding, performance, and revenue is huge.

• Another client company I collaborated with was in the midst of several employee initiated lawsuits. The negative impact on reputation and branding made it impossible to win the battle for talent. Their list of values were nicely framed, hanging in the corporate headquarters building lobby but, unfortunately, they rarely made it off the lobby wall.

Although called values, these statements are quite frequently lists of beliefs, principles senior leadership holds to be true, but are rarely values. Beliefs become values only when they are acted upon and lived out by individual employees. 

Here's a quick way to check for values at your company: 

• Randomly ask a few of your personnel — from front-line to the boardroom — to define your company’s values and explain how they implement these values into their day-to-day work. 

• If they can’t, your company may have a set of beliefs, but it doesn’t really have any values. 

Beliefs without action have little strategic benefit.

Postscript

This is the first of the seven dysfunctions. All seven create an incredible drag on a company's performance, with the first six dysfunctions contributing to the seventh which is the most destructive. Please read 'It's time for a reality check.' for an introduction to the series.

David Seregow, Ed. D. is Founder and President of Attaine Performance Corporation, providing strategic guidance, collaboration, and coaching to high-potential companies. www.attaine.com Copyright 2010 David Seregow, Ed. D. All Rights Reserved. Permission granted to post, print, or email this entire posting if full attribution is included and the post is not edited.