The other night a waiter (Nathan) recited the following adage to me, first told him by his father:
When you don't stand for something you will get knocked over by nothing.
I wonder how many executives at Mattel are now wishing that they had heeded Nathan's Dad's advice? From a business standpoint, nothing could be more true over the long haul. The principles that underpin the culture and arise out of the strategy act as a skeleton for the organization's structural integrity. And the edifice will stand or crumble depending on their stamina, strength and ubiquity.
When you are lucky enough to be able to purchase Berkshire-Hathaway stock, you will receive an "Owner's Manual". Within it are 15 principles that Warren Buffett and his partner, Charlie Munger, promise to be guided by (and warn that they will be guided by). It's a great example of being Powered by Principle-- and more specifically, of the courage it takes to let those who can't align with those principles fall by the wayside. Buffett suggests in this manual that if the new owner is comfortable with and shares these principles, he will be content as a stockholder; and if he isn't and doesn't he should probably get out.
The full link is:
Berkshire-Hathaway Owner's Manual, Owner-Related Principles 
To purchase the book behind the movement
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In the process of undertaking the PxP process, you will need to develop strategic core values. These are principles that are generated in response to the strategy. Whether or not an organization uses a strategy map (my preference) or any other means of articulating strategic thought, the strategy acts as the guide for final values development.
Another way of thinking about this: Given your differentiator, what core value best expresses it? And, given the behaviors that your differentiator will require (this piece is work worth doing, by the way), what core values best engender those; Or, what core values would be essential to performing those necessary behaviors?
These are, respectively, direct strategy-enablers and indirect strategy-enablers.
Consider the Southwest business model.(read The Southwest Airlines Way by Jody Hoffer Gottell) One key element of their low-cost, non-spoke and wheel-hub system is that they have super-fast turnaround of planes on the ground. In fact, everyone in the organization can be overheard saying "we can't make money on the ground--only in the air" regularly. In order to support the low-cost model, one explicit direct core value is "Deliver the most reliable service at the lowest cost". Most low-cost airlines do that by cutting wages. However, if you cut wages you get less employee retention, morale problems and less teamwork and cooperation--not to mention resentment between tiers of pay grade. Why does this matter?
Well, being able to turn planes quickly requires certain behaviors. Specifically, it takes a high level of cooperation and teamwork, a flexibility amongst workers to do any job that is needed, and a respect between departments so that resentment doesn't impede the flow of work. On that basis, the indirect strategy-enabler is "Good people are essential to success" and "Invest the time to connect with employees and customers". Furthermore, although it isn't stated as a core value per se, the overriding principle that guides Southwest and that endures over time despite shifting conditions and challenges, is that they focus on relationships and have built every aspect of their organization to support that key value.
There are a bunch of studies pointing out that when employee satisfaction is high so is customer retention. It doesn't take a huge logical leap to see, therefore, that it might pay in revenue and reduced marketing costs to make sure that employees are satisfied--and that the right core values might be a big piece of that puzzle. The causal link is straightforward:
The Right Core Value, Driven through the PxP Organization-->Satisfied Employees-->Great Customer Service and CRM--> Customer Retention--> Increased Sales and Less need to Acquire Customers (reduce marketing cost).
While I haven't yet checked it out, I'm told that TARP has studies that indicate this holds true particularly for family-owned businesses, in which the core values are steadfast and honored, and in which the fundamental drive is to create longevity rather than quarter on quarter returns.
One of the greatest challenges for principle-powered organizations is the delivery of a consistent culture throughout acquired organizations. If the strategy of the company is based on acquisition, and they are snapping up other companies at any rate, then it will be vital to find ways to evangelize the Powered-by-Principle model. Doing this requires a specific plan that can be rolled out time and time again.
Furthermore, as the organization and its modules expand, they get further and further away from the CEO and his influence--at least on the culture. That means that a special vigilance has to be developed in order to ensure the enfolding of the new company in the culture. I was speaking to a CEO friend yesterday and he was explaining how his acquisitional company does it. Since his core principles revolve largely around the necessity of teamwork, he has developed his pay structure for hourly workers such that without the team succeeding no one can achieve maximal compensation. It isn't just a stick--it has a carrot side too. When the team reaches its goal, everyone gets compensated for it, even those who only reached 70% of their individual goals (of course, there is a cost for them on them on that side).
I hadn't given much thought to the application of the PxP model in the realm of research and scientific/engineering invention. Then I ran across citations to Herbert Holloman, the inspiration for an ongoing symposium called
"Engineering as Social Enterprise". The challenges that arise in this nexus between the pure quest for knowledge, the marketplace in which technological innovations sell and the impact those goods and services have in the world, is striking. As engineers go about looking for new ways to engage the physical world, they are bound to uncover technologies with negative impact--even those that also have positive sides. The nuclear bomb/energy being the paradigmatic case.
How then, how to direct research, with all of its reliance on grants and underwriting from the corporate world, so that the core values embraced by the engineers, or their governing association, get honored?
Like so many of the issues that arise in the PxP evolution, this requires insight from multiple disciplines: economists, engineers, social scientists, environmentalists, anthropologists and perhaps even futurists must weigh in on the conversation.
In the meantime, the challenge of developing, refining and expressing the core values that would best forward science and the goals of both society and the individual enterprise is left to the competencies available; No doubt some of those are formidable. No doubt, some are less so.
A
Business Week article described a new trend--using the Baghavad Gita and Hindu thought as basis for leadership and management training and thought. The idea is that social responsibility and good-works are the route to leadership satisfaction and management excellence. In the PxP model I've taken the very "bottom-line' perspective that ultimately, everything must be in service of shareholder value. But it begs the question of whether leading for a purpose--or being socially responsible as an end in itself--is reason enough to behave well.
It's difficult to tease out my own personal belief in the basic rightness of simply choosing to do good for its own sake, from my suspicion that business people operate in an amoral context. That is, for many people who go into business, and certainly for the stock market as a non-personal, abstract phenomenon, there must be a material reward that justifies behavior. In order for business leaders and organizational teams to make new choices, that material reward must be at least as big as it would be if one were acting neutrally.
Of course, there isn't any way to really measure this. And probably, there are representatives of every position along the continuum from completely mercenary to utterly altruistic. But is there a critical mass of business leaders willing to view the spritual, social impact and karmic consequence of their actions as primary concerns, rather than their profit margin and stock price?
As I work through the last bits of the book I keep noticing my accidental omission of this very central theme. There is a fundamental difference between governance by laws and by principle. One of the reasons that I think the US is in a cultural crisis is because of the basic lack of guiding principles--at least consistent and shared principles. Instead, we have a law-driven society in which the attempt to delimit bad behavior and some predation is exercised on a virtually case by case basis. In this way we end up with ever more complex and obtusely specific rules--our entire tax code being a case and point, as are those laws governing corporate malfeasance.
Without shared values though, there is very little else to use as guides to behavior. This is a morass. Choose your arena of action and you will find a maze of ever-increasingly technical and specific rules, often with un-like issues wedded together as a result of their tortured and illogical genesis. The problem with this approach should be obvious. It is the reason that a mentally disabled person or an infant, even with good intentions, can't be relied upon to behave appropriately. The lack of an inferential capacity to use guiding principles to decide action leads to a total absence of a behavior compass. But trying to teach appropriateness on a case by case basis is a logical impossibility. The possible cases are always infinite, while the rules can only apply to the ones that have either taken place or which can be conceived.
So it goes in organizations. Teach a principle to ordinary, committed people, and they can make an infinite number of fine distinctions leading to the right choices. Teach rules to a brilliant person and he will naturally try to work back to a guiding principle--whether or not there is one. The rule-guided organization will be full of missteps taken in the assumption of principles that aren't there, and rules that inevitably contradict each other. The Principle-Powered organization will be full of subtle innovations in the application of core values, and an ever-rising level of behavior and performance.
Sister Joan Chittister is a Benedictine nun who writes prolifically and co-heads Tikkun, the spiritual hub with Rabbi Michael Lerner. After listening to her a new notion opened for me of the nature of sacrament and the confusion that may drive our current political orientation.
She points out that it can be extremely difficult to make the distinction that listening and learning from other faiths (if one is, say, Catholic, or any other defined religion) is not obviously right. The idea is that for many devout people, it seems as though any exposure to or interest in the doctrines of other faiths would be an act of infidelity. This made me think about this term: infidelity. In my world it is usually related to the faithfulness one brings to a sexual partnership. But the word "infidel" is also a variation of infidelity--and it could be reasoned that a Catholic who read the Torah or studies the Talmud is an infidel.
Her position is rather more interesting. There are not, she says, Gods. Instead, there is God--and we are all moving toward that possibility. When we learn others' doctrines it can act to deepen our own faith, to illuminate our own hearts. It can be, for us, a sacrament; that is, something which brings forth the sacred.
This is how I see my own immersion and quest for the sacred. It isn't doctrine that I am looking to embrace, and conversion to anything is no option. But the doctrines and their articulations often deepen my experience of grace, and allow me, in my un-religious existence, to witness the sacrament of love. In that way, I am reaching for a divine way of being--and perhaps, that reaching is the ultimate act of fidelity. Contrastingly, when I am lost and in despair, separate from God and from grace, perhaps that is when I lapse into infidelity. I am unfaithful to my own spirit.
There have been several reports and news features of late about companies that are run with religious principles at their foundation. Ironically, several of those cited in a recent Wall Street Journal article were based here, in Tampa. Clearly, there are principles at the core of religions that could be very useful and productive as guides to business behavior. Kindness, tolerance, honesty and humility are but a few of those. But this becomes problematic in a number of ways.
First of all, there also principles in many religions that would drive conflict within the workplace. For example, when matters of doctrine arise, how can that be resolved without a religiously monolithic workforce? Do meetings get opened with prayer? If so, what kind of prayer. Does everyone have to pray? Some of the companies the WSJ explored have Bible study classes and other forms of evangelistic activities. How do non-believers get treated? Can they trust in the meritocracy based on the value of their work, or is there always a lurking suspicion that they have a glass ceiling, one that is grounded in their failure to conform/convert?
There are also, of course, legal issues--like can you legally hire only Christians, Jews, etc in order to create that monolithic workforce? That potentially violates the EEOC regulations. But it is also a deep philosophical and ethical matter. One could argue that a privately held business is entitled to establish any criteria for its job descriptions, including adherence to a certain belief system.
Some of the principles that could be natural areas of tension include other, less obvious issues. Will the company healthcare plan cover abortions if the owner is vehemently pro-life? What if an observant Jew wants to change the work week to accommodate a Friday Saturday weekend? Are there five breaks a day given to everyone for prayer in a Muslim company? Does the pay-for-performance structure embrace or set aside issues of faith and observance?
The most important issue though is the matter of how this variation of a "principle-driven" business diverges much from the Powered by Principle model--or whether it does. The bottom line is, it is NOT the same as the PxP model at all, and it is only a profoundly conflated view of the PxP approach that allows for any confusion. A religiously-driven organization simply fails to create the exact context that PxP aims to generate: An aligned organization that uses its strategic core values to guide ALL behavior and policy. Powered by Principle is not, at its heart, about generating morality or ethics--that is just a bonus. Fundamentally, the PxP model is about business results, and about generating a value system that is both inclusive of the ethical and moral boundaries of the organization, AND of its basic business model, stance toward customers and toward the marketplace.
Posted by Amie Devero at
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