A profit without honour

The last few weeks have been difficult for believers in the fundamental decency of human nature, and also for those who believe (or at least hope) that actions need not have consequences.

Meanwhile, Vladimir Putin, whose country has nuclear weapons but cannot manufacture a toaster anyone wants to buy, is having to cope with the inconvenient truth that if you attempt assassination (allegedly) on foreign soil, those pesky foreigners and their allies may get very exercised and retaliate in unexpected ways.

In South Africa, Steve Smith, David Warner and Cameron Bancroft, the captain, vice captain and rising star of the Australian cricket team, have destroyed their careers short term, and perhaps for good, courtesy of the most comedically incompetent attempt to cheat in modern sporting history, involving a ball, a piece of sandpaper and a pair of underpants.

Through this sea of ignominy shone one noble act. Darren Lehmann, the Australian coach, though judged blameless for his players’ conduct, chose to resign, saying he was responsible for the team’s culture. In doing so, he highlighted what all good leaders know: values are not optional. Nothing good or lasting can be built without them. And they have to be exemplified at the top.

It all adds up

If morality does not motivate business leaders to build a strong culture, the numbers should. “A coherent and effective culture can generate as much as 30% of difference in corporate performance between a leading company and its ‘culturally unremarkable’ competitors,” according to Harvard Business School’s Professor John Heskett in his book, The Culture Cycle. But creating it can be tough, and the consequences of failure severe: disillusioned staff, angry clients and management lacking credibility.

Take a look at these values: Communication. Respect. Integrity. Excellence. What’s not to like? Perhaps a senior committee in your firm spent much time and effort coming up with something similar. They are the corporate values of Enron, as stated in the company’s 2000 annual report, the year before it collapsed. Its leaders are either dead or still in jail. 

The test of our core values is not whether they are embodied in a series of sugary phrases, but whether they survive the heat of battle. Think about the most difficult situations you have faced. When your firm faced challenges involving conflict, risk or ethics, did your values inform and guide your response, or were they abandoned to expediency? Real values are the opposite of “motherhood and apple pie”. Sticking to them can involve real pain. Individuals may find themselves significantly disadvantaged by them.

In it together?

Are values therefore best agreed through collaboration?

Up to a point. Ultimately, the leadership must lead. Few leaders put fundamental questions of strategy or finance out to firm-wide consultation. There is no point in creating the impression that everyone’s input is equally valuable, when it isn’t. Deciding our firm’s core values is not something that can be outsourced to HR and forgotten about. This is an exercise best done by the chief executive/managing partner and a small group of key people.

A good example often cited is the US pharmaceuticals company MedPointe. There, the CEO wanted to focus
on two core values: a can-do attitude and pursuit of results. For those who could not, or did not want to embrace them, the message was simple: you may be better working somewhere else.

This is not to say successful firms should be run by tyrants, but that to have meaning, core values need to define unambiguously the essence of the kind of organisation a firm is trying to be. MedPointe’s core values would be dangerous if not underpinned by a strong ethical code. Smith, Warner and Bancroft came to grief precisely because their can-do attitude and pursuit of results morphed fatally into “win at all costs”.

Jeremy Corbyn might be horrified at his party being described as a “business”, but Professor Heskett’s lesson applies directly to him. On 2 April, the Times reported that in the last three months 17,000 members of the Labour Party have quit in response to his handling of antisemitism and the Russia crisis. He has now quit his account on Facebook – which in turn has seen £50 billion wiped off its value, following the Cambridge Analytica scandal.

Values: tough to define, tougher to live up to, but life is tougher still when you are perceived not to have them.