The Value Gap

I recently attended the launch of a book that had been written by an old high school friend of mine, Gavin Moffat. Gavin’s book, “Swimming with Sharks”, is well written, easy to read and packed with thought provoking content. In short, I would recommend that you get hold of a copy. The launch event for “Swimming with Sharks” took the format of a conversation between the author and a compère, Richard Mulholland. It was during this conversation that I got to thinking about corporate values.

Let’s back up for a moment. Conventionally, corporate values are defined as the operating philosophies or principles that guide an organization's internal conduct as well as its relationship with its customers, partners, and shareholders.

Common corporate values are listed below:

1. Integrity (Ethics, Honesty) 
2. Respect (Trust, Dignity) 
3. Excellence (Quality, Performance) 
4. Responsibility (Accountability, Commitment) 
5. Teamwork (Collaboration, Cooperation) 
6. Innovation (Creativity, Ingenuity) 
7. Achievement (Results, Success) 
8. Fairness (Diversity, Inclusive) 
9. Care (Service, Compassion) 
10. Passion (Enthusiasm, Fun) 
11. Leadership (Influence, Competitive Advantage) 
12. Learning (Continuous Improvement, Knowledge) 
13. Customers (Customer Satisfaction) 
14. People (Employee Engagement) 
15. Safety (Health) 
16. Community (Corporate Citizenship)
    

Selecting the values that fit with an organisation would typically be seen as one of the outcomes of a strategy planning exercise. Let’s assume that Acme Inc’s Management has recently held a strategy planning session and have selected the following values as being core:

1. Caring
2. Loyalty
3. Integrity
4. Knowledge
5. Commitment
6. Innovation

If you look at it carefully, the above values effectively define Acme’s “corporate personality”.

Staff would relate to Acme Inc on the basis of its values, or alternatively, to give Acme a human face, its “personality” would be informed by the values that drive its day to day behaviour. 

Likewise, Acme Inc’s customers would relate to Acme on the basis of its “personality”, which would be informed by what Acme’s customers perceive its values to be. The “personality” or “value set” that the customer ascribes to Acme would be the consequence of Acme’s marketing and communication activity, as well as the moments of reality that occur each time that a customer interacts with them. 

So far, so good. Now let’s inject a dose of reality. 

There’s no doubt that an organisation’s value set needs to be led from the top. If top management actively live Acme’s values, you can bet your bottom dollar that pretty soon the employees will do likewise. 

Remember that, thus far, top management have only identified Acme’s values as the consequence of a “paper” based exercise. There’s no guarantee that there is any similarity between Acme’s “actual” and “stated” values. For the sake of conversation, we are going to call the gap between an organisation’s “actual” and “stated” values, the “value gap”.

Let’s have a hypothetical look at Acme Inc’s top management.

Perhaps Acme’s top management don’t encourage their staff to take chances and are as a consequence not forgiving when it comes to staff making “mistakes”. Hardly the stuff that talks to “Innovation” as a value.

Further, let’s assume that a lot of Acme’s senior management have politicked and schemed their way to the top at the expense of their colleagues. Not the sort of behaviour that speaks to the values of “Integrity” and “Caring”. 

Perhaps Acme regularly shed staff when there is even the slightest hint of an economic downturn and hire fresh staff when things look rosy again. Wouldn’t this make it difficult for staff to buy into Acme’s “Loyalty” and “Commitment” values? 

Finally, the relentless focus on profits means that Acme never actually utilise their training budgets for training. Training budgets remain unspent, because it simply makes the bottom line look better. As a consequence, Acme has “Knowledge” as a value, but never trains staff. Doesn’t gel, does it?

I guess that you get the point.

Acme’s “actual” values are in reality probably closer to the average value set held by its senior management.

One can expect that the “actual” values of a “one-man band” start-up will be those of the entrepreneur. The organisation’s “actual” values tend to shift as the entrepreneur starts employing staff. Logically, one should always employ staff whose personal values are in harmony with the organisation’s “stated” values.

Peter Drucker famously said, “culture eats strategy for breakfast”. A great culture is in part the consequence of an organisation’s ability to really live its values, coupled with a singularity of focus that derives from a strong shared purpose.

All organizations have some degree of “value gap”. It’s the size of the gap that counts. The smaller the gap the better! Great management teams are continually striving to minimise the gap. On the other hand, poor management teams will often be the primary reason for the gap’s existence. 

For values to take root within an organisation, they need to be lived by top management. Always remember that corporate values aren’t a “wish list” or a “future intention”. As soon as you have a big gap between your “stated” values and your “actual” values, you’ve got trouble!

Authenticity is important to all of us, but it’s particularly important to the increasingly pivotal Millennial generation. Your staff, especially your Millennial staff, will pick up on “value gaps” in a heartbeat. If they find a material value gap, they will see the company as being inauthentic, which is the last thing that you need. Customers likewise see value gaps as being a tell-tale sign of inauthenticity and it will undoubtedly reflect on the bottom line.

To explain by way of an anecdotal story, many years ago I worked for a company that had “Recognise and Reward” as a value. Their intentions were no doubt good, “recognise” exemplary performance and “reward” it. 

In reality, they did almost the exact opposite. On closer inspection, you could see that they were actually an “old boys club”. There was no “Recognise and Reward”, unless you were in the club!

Their “Recognise and Reward” value never got beyond “wish list” status. The value gap was more a chasm than it was a gap. I am afraid I saw them, and still see them, as being inauthentic as a result.

Now for another anecdotal story, but this time a consumer centred one. 

Health and insurance group Momentum recently landed itself in hot water when it refused to pay out on a life insurance policy for a customer, Nathan Ganas. Sadly, Ganas died from gunshot wounds as a consequence of attempting to protect his wife who was being hijacked in their driveway. 

Momentum declined to honour the policy because they discovered that Ganas had historically been found to have had abnormally high blood sugar levels, which he had not reported when he took the policy out. They claim that, had they been aware of these elevated blood sugar levels, they would not have offered Ganas cover. To place Momentum’s perspective in context, Ganas was never on chronic medication for high blood sugar and his wife strongly denies that he ever suffered from diabetes. Besides, Ganas died as a consequence of a gunshot wound, not raised blood sugar levels.

The traditional media picked up on the story and generated enough coverage that Momentum could have used it to wallpaper a medium sized meeting room at their head office in Centurion. Social Media exploded!  All hell broke loose. Momentum had a public relations nightmare on its hands, and they didn’t handle it well.

In the court of public opinion, Momentum was found to be guilty of “looking for any excuse not to pay out”, irrespective of how frivolous it was. Momentum’s own press release put it this way:

“It is clear from market reaction over the last two days that under certain circumstances, current industry practice creates the impression that insurers are looking for reasons not to pay a claim.”

Momentum’s PR spin sought to “externalise” their behaviour. They didn’t say “our practices create the impression”, they said “current industry practice creates the impression”. It’s interesting to note that “Accountability” is one of Momentum’s values. Momentum provides the following detail for their “Accountability” value:

“We show accountability in our willingness to take ownership for our roles, responsibility for our actions and outcomes, and by honouring our obligations to all stakeholders.” 

Rather than taking ownership of their behaviour, Momentum tried to side step their accountability by calling on “current industry practice” to take the fall.

To be fair on Momentum, it must be said that the Insurance Ombud has twice ruled in their favour on the Ganas issue. 

Calls to talk radio shows questioned why it was that Momentum had been happy to take monthly payments from Ganas for many years and only bothered to go through his medical records with a fine-tooth comb when they were called upon to make good on the policy. I have no doubt that there wouldn’t have been a public outcry if Ganas had succumbed to a blood sugar related disease. Unfortunately for Momentum, the public felt that Ganas’ unreported high blood sugar levels weren’t in any way connected to the reason for his passing. Momentum were perceived as using the “non-disclosure of high sugar levels” card as a convenient excuse to wriggle out of their obligation to honour the policy.

The consumer doesn’t always know what your values are. They tend to infer what they perceive your values should be. When they feel that a company is behaving inconsistently with these perceived values, the backlash can be severe.

Momentum’s products are essentially intangible. Their customers aren’t really buying a policy, they’re buying “peace of mind”. Ganas was buying “peace of mind” that his family would be looked after should he pass away when he entered into his relationship with Momentum. Interestingly, Momentum also repudiated an education policy that Ganas had taken out. Perhaps part of the reason that there was such a large public outcry was because people no longer felt that the “peace of mind” that they perceived to flow from a policy could be relied upon.  

Due to enormous public pressure, Momentum were eventually forced to make a payment to Ganas’ widow. Momentum have, however, been careful to state that they “do not admit contractual liability for the payment of this death claim based on the material non-disclosure at application stage.” They ascribe the payment to a newly introduced “solution that will pay an amount equal to the death benefit (limited to a maximum of R3 million) in the case of violent crime, regardless of previous medical history.”

Momentum behaved in a manner that was inconsistent with what the consumer perceived as being a reasonable value set. The resultant “value gap” has caused Momentum brand damage that will take many years to recover from.

A quick Google search showed me that Momentum’s values are as listed below:

1. Accountability
2. Diversity
3. Excellence
4. Innovation
5. Integrity
6. Teamwork

We have already touched on Momentum’s “Accountability” value. The verbiage associated with their “Integrity” value states that, “We uphold integrity in living up to what we say, doing the right thing, being honest and treating all people with respect.” 

In the court of public opinion, Momentum were seen to have failed to behave consistently with their “Integrity” value. Joe Public certainly didn’t believe that they had done the “right thing”, let alone “treated people with respect” or acted in an “honest” fashion.

This article has centred on the “value gap” and the importance of making sure that it is as narrow as possible. Of course, there is more at stake than simply minimising the value gap … you also need to have selected the correct value set. In a subsequent article I will discuss how one sets about selecting the correct set of values.

In closing, it must be said that I dealt with Momentum’s press office fairly extensively while writing this article. I was impressed with their openness, honesty and willingness to help. Momentum have stated that the contents of this article are factually correct. They have, however, pointed out that the Momentum / Ganas issue is a complex and multifaceted one, which is a perspective with which I agree. There is no doubt that they are working hard to come to terms with the experience. I wish them well.

For more information on “Swimming with Sharks” by Gavin Moffat, visit www.swimmingwithsharks.co.za

Today’s staff, tomorrow’s customers

According to the McDonald's Corporation website, McDonald's is present in 101 countries, has in excess of 36,000 restaurants and serves some 69 million people daily (January 2018).

What is of even more interest is the fact that the fast-food chain has at one point or another employed 1 in 8 Americans (roughly 13%), according to an estimate in the book "Fast Food Nation." The list of Americans that have been on a McDonald’s payroll includes the likes of Jeff Bezos, Rachel McAdams, Macy Gray, Carl Lewis, Jay Leno and Pink.

Think about this. If 13% of Americans have worked at McDonalds during the course of their working career, McDonald’s America can expect that roughly 13% of their clientele have at some point in time worked on the other side of the counter. 

The implications of this are huge. I don’t know about you, but if I had previously worked for a company and the experience had been a negative one, I would be less inclined to do business with them in the future. I am pretty sure that I am not alone on this view point. For this reason, McDonald’s need to treat their staff as both employees and as future consumers, which is no doubt a significant human resources challenge.

Closer to home, I have often seen staff leave the employ of a company after having received a raw deal, only to turn up a number of years later as a senior employee at a material customer. Well, you can guess what happens next. I have seen some anchor clients leave service providers as a consequence. I recall an event of this nature that resulted in a service provider shedding some 20% of their turnover. As they say in the classics, “be careful of which butt you kick today, as you may have to kiss it tomorrow.”

McDonald’s is acutely aware of the “today’s staff are tomorrow’s customers” phenomenon and their staff relations policies reflect this principle very clearly.

The “today’s staff are tomorrow’s customers” principle is further exacerbated by the impact of word of mouth communication. Negative word of mouth can mean that a single disgruntled ex-employee can do significant damage to a brand. In short, you stand at risk of losing the custom of both your ex-employee and those with whom he has shared is story. Word of mouth that emanates from an ex-employee tends to be seen as highly credible, given that the ex-employee is presumed to have “inside knowledge”, which makes it all the more damaging.

Let’s put the “today’s staff are tomorrow’s customers” principle aside for a moment and focus simply on the labour market brand damage that an ex-employee with an “axe to grind” can have. 

Companies that have a reputation for being “bad employers” will naturally battle to attract skilled staff. The converse also applies. Those that are seen as “good employers” will find it far easier to attract top skills. This is compounded by the fact that people tend to offer their services into a particular industry as they develop industry specific skills and contacts over the course of their careers. I have no doubt that you have heard people say, “This industry is so small!” at conferences and the like. Well there you go, if you are seen as a “bad employer”, word will travel within your industry faster than you can say, “employer of choice”.

A quick word of warning, if you are going to tell your staff that you are the industry’s “employer of choice”, make sure that its true and not an intention or a wish. Nobody detects employer insincerity faster that an employee. 

The long and short of it is that being a good employer makes business sense, so when you look at your staff, think of them as a microcosm of your market and treat them with as much respect and care as you would like them to treat your customers … or, in the words of Richard Branson, “If you look after your staff, they’ll look after your customers. It’s that simple.”

Great strategy execution quotations

Execution is the ability to mesh strategy with reality, align people with goals and achieve the promised results. ~ Larry Bossidy

In real life, strategy is actually very straightforward. You pick a general direction and implement like hell. ~ Jack Welch

Execute! Get your people to execute! ~ Sam Geist

Execution IS strategy. ~ Fred Malek

Success doesn't necessarily come from breakthrough innovation but from flawless execution. A great strategy alone won't win a game or a battle; the win comes from basic blocking and tackling. ~ Naveen Jain

Strategy Execution is the responsibility that makes or breaks executives. ~ Alan Branche & Sam Bodley-Scott