Published: 06 April 2020
Analyst(s): Dave Aron, Frank Buytendijk, Dale Kutnick, Mary Mesaglio
Principles and values are powerful levers to reduce the gap between enterprise purpose/intent and day-to-day behavior/decision making, especially when business is not as usual. Executive leaders need to adapt and disseminate powerful principles and values to inspire and guide stakeholders.
Values and principles are powerful tools to reduce the gap betweenenterprise purpose and intentions, and day-to-day decisions and actions.
This gap tends to widen in turbulent and uncertain times, often with negative consequences for customers, company and even society.
Values inspire, engage and motivate people and partners around what you stand for as an enterprise.
Principles guide and direct people to make decisions and take actions that are consistent with the enterprise’s purpose, strategy and plans.
Executive leaders in digital business transformation:
Take time in the next few weeks to revisit the enterprise principles and values. Adapt them however necessary to help inspire and guide people during the remainder of the COVID-19 pandemic, its aftermath and other potential upcoming disruptions.
Assess whether the principles and values have been internalized and are proving useful to people and partners; find ways to increase their use.
Review company principles and values quarterly in these turbulent times; revert to an annual rhythm once things have settled down.
Companies create value for their customers through products, services and customer experiences. This generates financial value for their shareholders. There is also a value exchange with workers who realize money and self-actualization through working at the organization, in exchange for their effort and creativity. The way they do it is defined by their strategies and plans, executed in the context of their workplaces and cultures. Public sector organizations are very similar, except the value is mission rather than profit.
Most of these things are clear in the minds of senior executives, and are often written down in documents and presentations, and articulated in speeches. We might call these things the articulated or intended enterprise. But the reality of the enterprise is the sum total of what all the people and partners do and decide on a day-to-day, minute-to-minute basis.
The reality always diverges from those ideals to some extent. Some reasons for this are good or at least acceptable. We mostly don’t want our people to feel like automata. We can’t predict every circumstance, and we hope and require people to act on their initiative. And we must have some experimentation in our organizations so we can learn and improve. But sometimes the reality diverges too much and in the wrong ways from our plans, ideals and intentions — for example, if people act in ways that violate our core values.
Digitalization makes this divergence even more challenging due to the distributed nature of operations and stakeholders, the proliferation of platforms and ecosystems, and the sheer scale and speed of some businesses (think Amazon, Alibaba, Facebook and Tencent).
This divergence will likely become even more pronounced as we adapt to changes made during the current COVID-19 pandemic. We are already witnessing rapid acceleration in remote, virtual medicine, including at-home diagnostics and treatment, and more invasive wellness management. Supply chains will be increasingly shortened and localized (for instance, on-shored with more replicated, automated production), which will be driven by more intelligent operational systems, robotics and 3D printing.
In the aftermath of COVID-19, many enterprises will face existential choices as they try to restructure and further digitalize their services, customer relationships, supply chains, operating models and cost structures. This will drive new realities that could easily engender undesired divergence from their purpose and goals.
Principles and values can be a powerful way to reduce the gap between our corporate intentions and our day-to-day realities.
This is true at all times, but especially true in disrupted, uncertain and changing times. We see organizations that operate in extreme conditions of uncertainty and stress utilizing principles to great effect. For example, the military special forces principles “slow is smooth, and smooth is fast” and“two is one and one is none” remind soldiers to avoid panicking and acting hastily under duress, and to always have backup. Crises are wonderful focusing mechanisms, where people naturally shrink from meaningless corporate speak toward sharper directives and clearer priorities. This is the domain of principles.
Take a moment, at this disrupted time, to reconsider existing principles and values, and explore whether they should be adapted, augmented and/or disseminated more effectively to help get us through current and potential future disruptions.
Principles are useful at all levels of an organization, at all levels of detail and specialization. For example, an enterprise may have principles specific to how to choose outsourcing partners, which type of funding sources to use and so forth. But it is also important to have a high-level set of principles and values that guide the whole organization.
There are many formal definitions of principles and values, and the difference between the two terms. For the purpose of this brief document:
Values are the articulation of what we stand for, driving our behaviors. Values should inspire, excite and motivate people around purpose.
Principles articulate how we should decide and act. Principles should guide and direct people so that they make decisions and take actions that largely follow and support our intended purpose and direction.
As an example, “doing the right thing for the customer” may be a core enterprise value. This may map to numerous high-level and more detailed principles, such as “never create short-term value from a customer relationship that will damage the relationship in the longer term.”
Although enterprises need lots of principles throughout the enterprise, we suggest having a short set of eight to 10 high-level principles and values that apply across the whole enterprise. Amazon famously has 14 leadership principles that have helped drive them to the trillion-dollar scale. Two of them, “bias for action” and “have backbone; disagree and commit” embody their determination to move fast and fearlessly. Google’s “fast is better than slow” and Coca-Cola’s “act with urgency” are in a similar theme.
Great high-level principles and values have three key characteristics:
Purpose-connected. They are connected to who we are, what we stand for and how we succeed. (This is not always necessary for lower-level functional principles.)
Absorbable. They are clear and concise. Most strategy documents remain unread, not remembered, and not internalized by those deciding and acting on behalf of the enterprise. In communication-centric businesses, we sometimes say, “It is better to be really clear and nearly right, than nearly clear and really right.” Recognize the trade-offs between detail and accuracy versus short, memorable statements that are easily carried around and used in moments of decision and action on the other. A short set of clear, concise principles is most effective.
Meaningful. They have valid alternatives. If there is no alternative, arguably they are not worth saying. For example, saying that we win by knowing the customer better than our competitors has valid alternatives, such as winning through lower prices. On the other hand, saying that we want to delight customers may have limited value since we can’t imagine a valid alternative, e.g., we don’t want to delight customers. This is certainly true when we think about the guiding value of a principle, but it may sometimes be helpful to repeat values that have no obvious alternative.
To limit the number of principles and values, leaders should focus on areas that are core to your enterprise’s purpose, how you succeed and areas where there may be confusion or tension in your organization.
Table 1 features real and hypothetical examples of principles and values — grouped into the categories of people and culture, strategy/direction and operations/tactics/behaviors — that are potentially helpful to inspire and guide enterprise teams and partners through these turbulent times.
Consider the enterprise’s existing principles and values, get inspired by those of others and create an optimal set for current and coming circumstances. Make sure that the principles are consistent with the values, and that there is as little tension as possible between them all.
Crafting great principles and values is only the start of the journey. We must continually communicate them, actively role model to support them, test against them in decision-making bodies and moments, and test the team’s understanding, remembering and use of them to ensure they create value. And of course, we must periodically review and change them where necessary.
One powerful mechanism to use here is to set the highest level values and principles, then crowdsource more detailed principles from employees and other stakeholders. Ask “What does this principle mean for how you do your job?” then turn the results into more detailed principles. This has the dual benefit of:
Diversifying the input to the final principles
Increasing the ownership of principles by the broader stakeholder community
Gartner recommends that every enterprise review its principles and values, and create a program for disseminating them and reinforcing their use within the next few weeks.
Because of uncertain times, we recommend reviewing them every quarter until times become more stable.
Guiding Principles on Independence and Objectivity.