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The Conference Board of Canada, as well as many international economic organizations like the International Monetary Fund (IMF), estimate that the global economy will remain fragile for at least five more years, as it continues to absorb the economic and social costs of the financial crisis.
Forecasts for business vary in optimism and pessimism, but most recognize that there are structural changes under way in the economy. Precariousness is the new status quo.
The enduring uncertainty, echoed in the large cash holdings of major multinationals, poses a unique test for leadership. Setting vision remains important, but rather than its sole focus on what the organization aims to achieve, vision increasingly involves honing corporate character and culture.
Values matter more than ever because the greatest productivity gains during periods of uncertainty are made by improvising with responsibility – that means responding to fast-changing circumstances with the integrity that secures and builds trust. Values become the guidelines and framework that guide decision-making.
As an executive educator who teaches ethics and social responsibility to members of boards of directors and corporate governance specialists, I have made a point of studying corporate values and ethics and their application. In the companies I’ve studied, I’ve noticed certain patterns of corporate behaviour.
About 20 per cent of organizations have minimal formal requirements when it comes to value statements, if any. A further 75 per cent articulate their values in the same way as most others do in their sector. And about 5 per cent use their stated ethical principles dynamically and holistically to actually drive performance and shape corporate culture.
However, what is most striking is that even those organizations that do the best job of communicating their commitment to values are using outdated terms and assumptions. The operating reality has changed for many businesses as a result of the 2008 financial crisis and global recession.
How might you gauge whether your firm’s values are no longer relevant The obvious determinant is timing: If company values haven’t changed since 2007, or if newly constructed values are based on what used to be best practices, then the culture being fostered may be for a type of “business as usual” that no longer exists for many.
In essence, they are not judging whether they have the right values properly communicated in their organizations to ensure appropriate decision-making in a fast-moving environment. As an example, many companies have long espoused respect for employees or customers as one of their key values. But many don’t realize the criteria for what constitutes respectfulness has changed dramatically.
A recent report from the Harvard school of public health catalogues the “growing list of physical and mental ills” resulting from stress related to the economy. The report, entitled The Great Recession’s Toll on Mind And Body, shows that “unemployment makes us sick.” While primarily having an impact on those without work and the underemployed, this anxiety from chronic uncertainty has seeped into workplaces, affecting professionals and managers, and “giving rise to a host of unhealthy behaviors.”
If respect pre-2007 was a prerequisite for achieving differentiation for customer service, respect post-2008 requires greater attentiveness to the role companies have in the general well-being and personal dignity of others. Courtesy counts, especially in times of stress or uncertainty. So do the effects of generosity, which we know have a multiplier effect, influencing people up to three degrees removed from the actual encounter or transaction.
Another indicator of the relevance or obsolescence of values relates to societal fairness. Inequality has long been diagnosed as a risk to social cohesion and economic stability, something further emphasized in French economist Thomas Piketty’s recent work.
With their buying power, product offerings, tax obligations, and profits, companies are at the epicentre of many of the interactions that together can make or break equality. If corporate fairness pre-2007 was implicit or optional, fairness post-2008 needs to be explicit, embedded in company culture, and brought to life in management practices, product market strategies, and social responsibility projects.
It is paradoxical that companies often lose their focus on values when the economy gets rough. There is ample evidence in organizational change literature that those qualities that build and renew trust are in fact generators of efficiency, agility, innovation, and fast recovery.
But when it is impossible to be sure about what will happen next, the surest thing that can be relied on is integrity. If values pre-2007 were a strategic choice, values post-2008 are now the wellspring for strategy, and organizations would do well to give them more serious consideration.
John Dalla Costa is the founding director of the Centre for Ethical Orientation and an author of five books. He teaches ethics and social responsibility at the Directors College, a joint venture of the Conference Board of Canada (@ConfBoardofCda) and McMaster University’s DeGroote School of Business, and in the MBA program at the Schulich School of Business. http://www.ceo-ethics.com