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Lead through Vision and Values9
SHELLEY A. KIRKPATRICK
Two key leadership principles are leading through vision and leading through values. Vision statements can inspire followers to attain high levels of performance. For example, Pierre Omidyar founded eBay in order to “[make] the power of the internet available to . . . people.” Another example is FedEx’s vision statement of “[producing] outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high priority goods and documents that require rapid, time-certain delivery.”
Leaders also can motivate others through the values that they define for their organizations. Values define the acceptable means through which the vision should be attained. Grocery-chain Wegman’s, for example, chooses to attain its vision as well as profitability goals through its values, which include caring about and listening to its workers, having high standards in the pursuit of excellence, making a difference in the community, and empowering employees.
In this chapter, proven principles are presented for leading through vision and values. Vision-based leadership is described first, followed by values-based leadership.
A vision is a leader’s statement of a desired, long-term future state for an organization (Burns, 1978; House, 1977). Although a leader may have a vision of what the organization can become over the long run, the vision will have little impact on followers unless it is communicated. The communicated vision is referred to as a vision statement. Most vision statements are not intended to be achieved within a given period of time; instead, they are intended to be pursued or worked toward on a daily basis over a long timeframe.
THE IMPORTANCE OF VISION
A key function of a leader is to inspire, or impel, others to carry out the vision statement. Employees, team members, and other stakeholders can be said to play the role of followers. Considerable evidence demonstrates that well-formed vision statements impact important outcomes, including the organization’s performance, followers’ performance, and followers’ attitudes. Of course, not all vision statements are equally effective - even though the research evidence is supportive of the impact that a vision statement can have, the vision statement must have certain characteristics in order to be most effective (see below).
Over 50 studies have supported the relationships between communicated vision statements and desired outcomes. These studies have been conducted across a variety of samples, including students and managers who served as laboratory study participants, military combat and non-combat leaders, middle- and lower-level managers, entrepreneurs, educational leaders, national leaders, political leaders, and corporate leaders. A variety of research methods were employed in these studies, including case studies, longitudinal studies, field studies, interviews, laboratory experiments, and historical analysis of archival information.
In sum, there is strong evidence that a relationship exists between a communicated vision statement with certain characteristics and follower and organizational outcomes. Below, additional details are presented on the relationship between the vision statement and organizational and individual outcomes, followed by a description of the characteristics that comprise an effective vision statement.
Vision impacts organizational performance
A wide range of outcomes has been examined, including measures of organizational performance - business performance, stakeholder performance, and organizational change - as well as individual performance. The relationship between a communicated vision statement and the organization’s performance has been supported in studies of organizations that are in competitive and entrepreneurial environments (Baum, Locke, and Kirkpatrick, 1998; Oswald, Stanwick, and LaTour, 1997). When top managers and middle managers communicate a vision statement, outcomes such as business performance and organizational stakeholder effectiveness have been positively impacted (Hart and Quinn, 1993; Howell and Avolio, 1993; Howell and Higgins, 1990). The vision statement has also been shown to have a positive impact on group, team, or division performance (Barling, Weber, and Kelloway, 1996; Bass, Avolio, Jung, and Berson, 2003; Schaubroeck, Lam, and Cha, 2007).
Further, the vision statement can play a critical role in facilitating organizational change (Coulson-Thomas, 1992; Doz and Prahalad, 1987; Larwood, Falbe, Kriger, and Meising, 1995; Roberts, 1985; Trice and Beyer, 1986). For example, the vision content examined by Larwood et al. (1995) was related to rapid change in the firms that were studied. By communicating a desired future state, the vision statement prepares the organization for change and provides a mechanism for interpreting changes as they occur. The vision statement provides a context for organizational change by providing a compelling reason for moving toward the vision.
Vision impacts individual, or follower, performance and attitudes
Follower attitudes, such as commitment to the organization and satisfaction, are positively affected by the presence of a vision statement. To isolate the effects of the vision statement on follower performance, laboratory simulations have found that a leader who communicated a vision positively affected follower performance (Howell and Frost, 1989; Kirkpatrick and Locke, 1996; Oswald, Mossholder, and Harris, 1994). Similar results were found in field studies that examined leader vision statement effects (Bono, Jackson, Foldes, Vinson, and Muros, 2007; Colbert, Kristof-Brown, Bradley, and Barrick, 2008; Niehoff, Enz, and Grover, 1990). This research supports the idea that a leader does not have to have a charismatic personality or expressive communication style in order to effectively motivate followers.
The vision statement has a positive effect on followers’ attitudes. Follower attitudes that are impacted include trust in the leader, commitment to the organization, satisfaction with the task, and clarity of the task (Barling et al., 1996; Kirkpatrick and Locke, 1996; Podsakoff, MacKenzie, Moorman, and Fetter, 1990).
Effective vision statements have specific characteristics
A wide range of vision statement characteristics have been included in visionary leadership research. The following characteristics of vision statements are associated with positive outcomes, including organizational and individual performance (Baum et al., 1998):• Brevity. A vision statement should be fairly succinct, which makes it easy for employees to remember as well as for managers and leaders to communicate. In two separate studies of organizational vision statements, when the leader was asked to write down his/her vision for the firm or unit, the average length of the vision statement was about 35 words, or two to three sentences (Baum et al., 1998; Kirkpatrick, Wofford, and Baum, 2002).
• Clarity. Because a wide variety of jobs and individuals (each with their own values, interests, personalities, skills, and so forth) exist within most organizations, it is easy for employees to obtain widely varying messages that are incongruent and inaccurate. The challenge is to create a vision statement that applies to the entire organization and its different jobs/employees while at the same time unites the organization and provides a stable, transcendent goal. Clarity often can be obtained by avoiding jargon and buzz-words and by using understandable terminology. Writing concise sentences is another way of obtaining a clear vision statement.
• Abstractness and stability. Vision statements are long term in nature and are meant to provide an abstract, stable picture of the organization’s desired future. Abstractness means that a vision presents a general enough picture of the future that the vision can be reached in practice in many different ways. Abstractness also provides for flexibility by providing guidance to employees when they encounter novel or unforeseen situations. This characteristic is increasingly important in virtual and global work environments in which employees must make decisions. Stability implies that the vision should remain in place over the long run. The vision statement should be timeless, not requiring revision once it is achieved in practice. This is not to say that a vision statement should never be revised or updated. When revision is necessary, it should not be because the vision has been completed but because the organization’s ideal goal has changed.
• Challenge. Effective vision statements should not be too easy or too hard to carry out on a daily basis, but rather should challenge employees to live up to the vision. By describing a desirable future, the vision statement provides a future that is not easily achieved but is attainable.
• Future orientation. Effective vision statements do not describe the current state of the organization. Nor do they describe short-term desired states, such as what the organization intends to achieve this year or the following year. Instead, vision statements are long term. They describe the organization’s desired end-state well into the future. Effective vision statements often describe the ongoing actions in which the organization will engage.
• Desirability or ability to inspire. An effective vision statement portrays a picture of a desirable future and, as such, is ideological in nature. By tapping into the values of the leader and followers, the vision statement should motivate and inspire them to work toward achieving it. The vision statement is a persuasive statement that draws on the values of followers. References to followers’ self-worth and efficacy (“We have what it takes to achieve the vision and deserve to have the opportunity to become the best in our industry”) as well as the organization’s collective identities (“By working together, we can become the pre-eminent firm in our industry”) are techniques that can inspire followers (Shamir, House, and Arthur, 1994).
• Identification of intended products, markets, and strategy. The vision statement should specify the products and services, markets, and strategy that it intends to pursue. It also draws a line between what the organization is willing and not willing to do to succeed (Ireland and Hitt, 1990). Vision statements are more effective when they focus follower attention on the markets to which the organization’s products will be sold. How products and the market are defined will impact new or innovative products - for example, defining the company as a bicycle manufacturer will lead to different products and markets than defining the company as a producer of transportation. The strategy, or how those products will be developed or produced and sold, also may be part of the vision statement. (Nanus, 1992; Scott, Jaffe, and Tobe 1993).
Effective vision statements are unique to the organization
An effective vision statement includes references to the organization’s uniqueness, such as its products/services, organizational history, market(s), customers, or geographic location. An organization that describes how it is unique has the ability to differentiate itself from its competitors and to make employees feel that they are part of something special. This enhances the collective identity among the organization’s employees. Such references are likely to contain specific, vivid images that are easily remembered; leaders often communicate the organization’s unique vision through storytelling of illustrative events and actions. These types of unique statements are unlikely to change significantly over time.
An exception to this principle is when the organization must change in order to survive. Organizations that have experienced crises or significant failures may need to break free from their past and can do so by using a new vision statement to put the organization on a new path. In such a case, the leader may draw comparisons between the prior history and the new future that will be created in order to build commitment to the vision.
Despite broad empirical support for visionary leadership theory, the vision formulation process is regarded as somewhat of an art form. A leader’s intuition and insight into follower values, along with the organization’s unique culture and environment, affect the vision that is developed and its effectiveness. One study found that an effective vision statement for a public-sector service organization may be very different from an effective vision statement for private-sector manufacturing companies (Kirkpatrick et al., 2002). Specifically, the private-sector manufacturing firms were more effective when their vision statement emphasized achievement themes, such as efficiency and excellence. In contrast, the public-sector service organizations, for whom positive stakeholder relationships are required, were more effective when themes of courtesy and customers’ best interest were emphasized in the vision statement.
Note that these research findings do not mean that manufacturing firms should neglect customer service! Rather, the leader could employ a vision statement emphasizing efficiency, translating it into a strategy of serving customers quickly. Similarly, leaders of public-sector organizations that focus on customers may decide to pursue a culture of customer-service excellence, finding new ways to meet customers’ needs with fewer resources.
Almost every organization has a vision statement. However, many vision statements do not reference unique aspects of the organization, and thus are likely to be less effective than vision statements that do. For example, many vision statements take a generic form of “Our vision is to be the best.” This type of vision statement does not distinguish the company from its competitors and is unlikely to have as great an impact as the following vision statement of an architectural woodworking company that references its unique client base:We will be known for the striking beauty of the veneered cabinets that we will sell to the nation’s most famous tenants.
Another woodworking firm emphasizes achieving quality through customer commitment and a continuous innovation process:To profit by being the respected leader in providing quality architectural woodwork and services to our customers through our commitment to excellence, continuous innovation, and the development of long-term relationships.
In order to impact organizational and follower outcomes, the leader’s vision statement must first have an impact on followers’ motivation. Several ways in which a vision statement can affect outcomes have been researched. These mechanisms, or mediating variables, focus on the impact that the vision statement has on followers’ motivation. A vision statement is more likely to lead to the desired outcomes when it inspires followers.
Mechanisms that have been identified include the following:• Goal alignment. The vision statement serves as a long-term, general goal. Although everyday goals are typically short term and fully achievable, vision statements are long term and timeless. Thus, vision statements rely on similar motivational mechanisms, such as focusing attention, as traditional work-related goals (Locke and Latham, 1990). When individual and group goals are aligned, or consistent, performance is higher than when individual and group goals are not aligned (Crown and Rosse, 1995). Followers are likely to be committed to their goals when a vision statement is present (Piccolo and Colquitt, 2006; Arnold, Turner, Barling, Kelloway, and McKee, 2007).
• Follower self-confidence. The vision statement raises followers’ self-confidence by clarifying the purpose of the organization and inspires them to help achieve the vision. Some vision statements make reference to followers’ capabilities - such as talent, intelligence, or ingenuity - which, in turn, tells followers that they are qualified to achieve the vision. The vision statement can boost followers’ self-confidence by emphasizing to them that they are capable of reaching a meaningful goal that will result in a better future (Shamir, House, and Arthur, 1993).
• Shared meaning. The vision statement provides a common language that followers can use to explain how their actions are effective and desirable (Shamir et al., 1994). Followers’ efforts are further aligned with the vision when followers possess the same understanding as the leader regarding what it is they are to achieve. Having a shared vision that results in the same common meaning among followers can be especially important in situations when followers must make their own decisions, such as a crisis or a non-routine situation.
• Perceived job characteristics. The vision statement can reframe how followers view their jobs. Research supports the notion that followers who report working for a supervisor who displays transformational behaviors - that is, acting in an inspiring and motivational manner by communicating a vision statement, providing idealized influence, and intellectually stimulating followers - are more likely to see their jobs as more challenging and meaningful, than followers who do not report working for a supervisor who displays those behaviors (Piccolo and Colquitt, 2006; Arnold et al., 2007).
An effective vision statement impacts desired outcomes primarily due to its ability to motivate and inspire followers. However, additional mediating factors have not been identified or widely studied.
It is accepted that the situation affects leadership emergence and effectiveness ( Vroom and Jago, 2007), yet little research has focused on specific contingencies that impact the effectiveness of a leader’s vision statement. It is important to be aware of these contingencies because they may provide exceptions to the research findings discussed above. Two contingency factors - organizational environment and national culture - have been identified and are described below.
A vision statement has the unique ability to focus attention, coordinate actions, and provide guidance in novel situations. Traditional management devices, such as plans, procedure manuals, or job descriptions, may not exist in new or rapidly growing organizations, for example. Also, in today’s fast-paced, global marketplace, employees may not be able to follow a traditional chain-of-command to receive guidance in a short timeframe. A highly effective vision is especially important when faced with rapidly changing environments, when specific rules may be dysfunctional due to their narrow focus and lack of adaptability, or in the early stages of the organization’s lifecycle where routines are not yet in place (Yukl, 2005).
Leaders who communicate a vision in multicultural settings, be they in a multinational firm or an organization with a diverse workforce, need to consider that the values contained in the vision statement may not be as appealing or easy to discern to people from a different cultural background. In such instances, the leader must take steps to communicate an inclusive vision and allow followers time to clarify their personal values and realign them with the vision. Followers also must have the capacity to identify and be aware of their own values.
Leaders may not want to reference the organization’s past periods of radical organizational change. References to those stressful periods will likely increase resistance to the vision. Similarly, aligning the vision with societal values that are inconsistent with competitiveness is not recommended. Research has shown that there are societies with a low level of performance orientation, such as some societies in Latin America (House, Hanges, Ruiz-Quintanilla et al., 1999; Javidan, Dorfman, de Luque, and House, 2006). Aligning the organization with this societal norm would hinder the international competitiveness of the organization. The leader must carefully weigh the imbalance between the values underlying the vision statement and societal norms.
The need for a high degree of participation depends on the national culture of the followers, the amount of crisis or stress in the organization, and the ability of the leader to develop a unique vision statement. In collectivistic countries, such as China, the leader’s attempt to take a highly participative approach to vision formulation would be seen as disrespectful (Javidan et al., 2006). Followers in those countries expect authoritative leadership and perceive that taking their opinions into account is a sign of incompetence or weakness. Leaders in collectivistic national cultures may need either to gradually change the organization so that participation is accepted or to find other ways to gain employee buy-in of the vision statement, such as through rewards and role modeling. Similarly, followers who are confronted with an organizational crisis or stressful uncertainty tend to look for a leader to give decisive direction rather than ask for their input. Finally, many effective leaders did not arrive at the vision statement by themselves but through insights that were shared by followers.
Articulating the vision in a dramatic way may lead to aversion in organizations and countries which have experienced charismatic leaders who led their organization or country into a disaster (Javidan et al., 2006). In Germany, for example, a leader who uses dramatic rhetoric is likely to be viewed with suspicion due to the traumatic experience with Adolf Hitler, who communicated his vision in an extremely dramatic manner. Similarly, some national cultures do not value highly expressive behaviors. For example, in Nordic countries, which include Denmark, Sweden, Finland, and Norway, dramatic communication lies outside accepted social norms and thus is likely to lead to rejection of the leader.
Even the most effective vision statement will not impact organizational or individual outcomes if the leader does not actively implement the vision statement. In addition to ensuring that the vision statement is understood, the leader must also continue to clarify it and display behavior that is consistent with it. Below are principles for effectively implementing a vision statement.
1. Build understanding of the vision among the top management team. The leader must consistently and repeatedly communicate the vision statement to the top management team. Ensuring that the vision statement is well understood among the top management team is essential. The leader relies heavily on the top management team to communicate the vision statement to other followers as well as find ways to implement the vision statement within their areas of responsibility. The top management team must possess a detailed understanding of the vision statement and serve as role models who display vision-consistent behaviors.
2. Encourage a high degree of participation in the implementation of the vision statement. Including followers in the vision implementation process ensures that the followers will be committed to the vision and, thus, it will be more likely to be carried out. Followers from all levels and functions in the organization should be included in finding new ways to carry out the vision. This is consistent with organizational image theory, which argues that the degree to which individuals identify with the organization depends on the extent to which the vision allows individuals to enhance their self-concept (Dutton, Dukerich, and Harquail, 1994). However, as noted above, leaders in collectivistic cultures may need to rely on other means to gain follower commitment to the vision.
3. Begin by communicating the vision statement to highly influential and cooperative individuals in the organization. The use of opinion leaders or champions in the organization is another way to gain support for carrying out the vision (Howell and Higgins, 1990). Opinion leaders may reside at all levels of the organizational hierarchy and may include middle managers and supervisors as well as employees at lower levels of the organization; they also may be stakeholders, such as union leaders (Locke, Kirkpatrick, Wheeler, Schneider, Niles, Goldstein, Welsh, and Chah, 1991). These influential individuals will not only help communicate the vision statement to other followers but will also serve as positive role models of the desired behaviors.
4. Motivate, inspire, and teach followers to carry out the vision statement. Motivational techniques that leaders use include setting goals that are consistent with the vision statement, rewarding them for goal achievement and/or performance, and providing individualized coaching (Bass, 1985). Effective leaders express confidence in followers’ ability to achieve the vision. Visionary leaders are confident that followers can work toward the common vision. The leader’s expectation of high performance has been found to result in higher performance than when poor performance is expected (Eden, 1990). Leaders inspire followers by getting them to see the world in new ways. Leaders also provide individualized consideration through teaching, mentoring, coaching, or even supporting followers during difficult times. They also promote the vision statement by removing obstacles that prevent vision attainment - by restructuring the organization, eliminating stifling processes, and adding new processes that give the required capability.
5. Role model behaviors that are consistent with the vision statement. Effective leaders display behaviors that reflect the vision statement. Role modeling helps communicate the vision through action to followers (Bandura, 1986). It demonstrates that the leader is committed to the vision statement and also tells followers the behavior required to implement the vision. Followers are more likely to commit to the vision, be highly motivated, and be confident in their ability to work toward the vision when the leader serves as a role model.
6. Use symbols, metaphors, and images that are consistent with the vision statement. Symbols, metaphors, and images can send powerful messages (Fairhurst and Sarr, 1996). They can instantly communicate the essence of the vision statement and provoke emotional reactions more than written words. They also help anchor the vision deeply in the minds of the followers and ensure that the vision statement is passed on to future members of the organization. Although effective verbal communication skills are beneficial, the use of symbols, metaphors, and images are also powerful techniques for communicating the vision statement. Great verbal communication skills are helpful for communicating the vision, but effective leaders also use concrete examples to convey complex, abstract concepts, draw pictures, or build models to illustrate the vision (Locke et al., 1991).
Another key principle for effective leadership is to lead through values. Although vision statements may include values, they are not primarily value statements. Values, as noted earlier, indicate the proper means for attaining visions. By communicating and acting in accordance with a coherent set of values, the leader can influence followers to abide by the same values. In this manner, the leaders’ and followers’ actions are aligned with a common set of values.
The term values is often misunderstood. Everyone possesses certain values, which are what an individual deems important and works to acquire or retain (Peikoff, 1991). One way to lead is by specifying a set of morals (also called personal values or moral values) that the leader wants followers to abide by. Research shows that individuals can reliably identify their value hierarchies (Rokeach, 1973). That is, they can identify specific values and rank them in order of importance.
A business’s values are the “organization’s precepts about what is important in business and life, how business should be conducted, its view of humanity, its role in society, the way the world works, and what is to be held inviolate” (Collins and Porras, 1991). A business’s values will properly include moral values (e.g., honesty, integrity), but may include other values as well such as innovation, customer service, and quality (Locke, 2004).
Both the vision and the company’s values motivate action, and ideally they will work synergistically - the general goal and the means to achieve it. Both must be communicated in order to be effective.
State the desired values
A leader must identify and then communicate the desired business values to which the organization will adhere. Business values should be viable, balanced, aligned with each other, and authentic (Hultman, 2005). Common and desirable business values include cooperation, honesty, integrity, change, and a more positive future, and confidence in employees’ ability to achieve the vision (Conger and Kanungo, 1987; Locke and Woiceshyn, 1995; Shamir et al., 1993). In fact, these values have been shown to be universally accepted attributes of leaders across a wide range of societies (Javidan et al., 2006).
A leader who identifies and communicates a set of personal values can improve follower commitment to the organization (Den Hartog and Verburg, 1997; Dvir, Kass, and Shamir, 2004; Rowden, 2000). The leader must explain the desired personal values and take steps to gain employee buy-in to those values. For example, UK-based law firm Eversheds embarked on a campaign to identify and communicate a set of shared values, holding “have your say” sessions to discuss and gain commitment from employees. As a result, Eversheds has changed a number of key processes to implement its values of client-centered; straightforward, mutual respect, teamwork; accountability and continuous improvement (Krais and Bloomfield, 2005).
Model the desired values
Perhaps more important than stating the values, the leader must display those values in daily actions. Even in difficult circumstances, it is crucial that followers perceive the leader as acting in accordance with the stated values. A leader who is seen as acting inconsistently with stated or implied values is not likely to be as effective as a leader who “walks the talk.” By role modeling the desired behaviors, the leader motivates followers to behave in the same manner and demonstrates the behaviors that should be displayed.
The leader also must act when followers fail to display the desired values. In some cases, the leader may engage in disciplinary action or even termination, while in other cases the leader may provide individualized attention or consideration to enhance the follower’s understanding on the vision statement.
When a leader fails to act in accordance with stated values, the results can be disastrous. Take, for example, the case of Countrywide Financial, a home loan lender, and its top management team, who came under scrutiny by its shareholders and the financial media for not acting in accordance with its values, especially given its poor financial performance in late 2007 and early 2008. Countrywide espouses a principle-based mission of “helping individuals and families achieve and preserve the dream of home ownership” through a “high-performance and high-integrity culture.” With its stock plummeting to 80% of its 2006 value and many homeowners facing foreclosure, Countrywide planned a ski trip at a Colorado Ritz-Carlton resort for 30 mortgage lenders. After receiving scrutiny that this was not reflective of a high-integrity culture, the trip was canceled, but no doubt made a bad situation even worse for Countrywide and its leadership team (Hagerty, 2008).
Some researchers claim that effective leaders must be self-sacrificial. It is not always clear what they mean by this. Sometimes it refers to the leader not taking bonus money that was earned when the leader’s organization met its goals or not fulfilling his or her commitment to followers. But this would not be a sacrifice if the leader held justice as a moral value. It would be in the leader’s self-interest to be fair to the followers because, if they were treated unfairly, then followers would tend to leave (Locke, 2004). Ultimately, this would hurt the organization and thus undermine the leader’s effectiveness as well as undermine the leader’s self-interest.
Self-sacrifice has also been referred to as the leader taking time away from family in order to help the business succeed. Many working people, including leaders, are often faced with this conflict. Choosing to work additional hours rather than spend that time with family is not a sacrifice if one passionately loves one’s work and career. However, it would be a sacrifice if one disliked one’s job and preferred spending those additional hours at home. Spending extra hours at work can be a sign of commitment to one’s job.
A truly self-sacrificial leader would be a leader who, out of a sense of duty, worked for a company that he did not like, made a product that he did not value, worked with people that he despised and customers that he abhorred, at the expense of leading a company that truly inspired him. No business leader could be effective if motivated in this manner.
In sum, genuine leader self-sacrifice cannot be an effective role-modeling or motivational technique. In an actual business environment - where a long-term commitment and motivation on the part of the leader and followers are required - nothing less than a passionate, personal commitment on everyone’s part will do.
Integrate the values into organizational systems
The desired values can be further implemented by integrating them into the organization’s systems. Human resources systems, for example, should reinforce the stated business values by basing rewards and promotions on results as well as achieving those results by practicing the desired values. Other organizational systems, such as the work processes, organizational structure, and technology, should also be aligned so that they support the desired values.
For example, the Walt Disney Company has core values of imagination and wholesomeness. These values are reflected in its movies and theme parks. Disney theme parks are family oriented, and theme park employees are hired for their ability to interact with “guests.” Disney’s street sweepers, who are responsible for keeping the park clean, are not just hired for their skill with a broom, but also must be able to communicate with guests and work well with other team members. To give another example, Seattle-based department store Nordstrom has relied on the same core values for its entire 100 plus year history. These values include delivering outstanding customer service and striving for high individual productivity. Nordstrom’s values can be observed in its commission-based compensation plan for its store clerks, its customer service policies, and its strategic focus as an up-scale department store.
The organization and its values should not change because of shifting popular opinion, competitive forces, or changes in corporate strategy. Core values should be intrinsic to the organization’s business, reflected throughout the organization, at all levels, in all units, in stated policies as well as actions by leaders, managers, and employees.
BB&T Bank: Living its Values
Founded in 1906, Branch Banking and Trust Company (BB&T ) is currently the USA’s 14th largest financial institution, with $133 billion in assets. BB&T is headquartered in Winston-Salem, North Carolina, and operates bank subsidiaries in 11 states, primarily in the Southeastern USA.
BB&T has pursued an acquisition strategy since the mid-1990s, resulting in slow and steady growth. Despite its cautious approach, BB&T consistently beats its peers in the most important measure of banking efficiency - return on assets. Despite recent downturns in the banking and lending industries, BB&T continues to steadily grow its assets and market share.
BB&T has recorded 26 consecutive years of increasing operating earnings and has demonstrated steadily increasing results for virtually every measure of success in its industry - market share, diversification of its income sources, cost control, productivity, dividend increases, and customer satisfaction and loyalty. Its growth and current market position can be attributed to its present chairman and CEO, John Allison.
Before Allison’s tenure, this rural lender based in North Carolina’s farm country had $5 billion in assets. After acquiring 50 banks and thrifts, 47 insurance agencies, and 14 non-bank financial services firms, as well as experiencing organic growth, BB&T’s stock is up roughly 700% under Allison.
Allison first joined BB&T in 1971 after graduating from college, and he was appointed to his current position in 1994. He often sounds like a typical CEO, citing financial ratios and accounting acronyms when explaining his latest acquisition. One gets the sense the he is not your typical bank CEO when he quotes Aristotle, “We are what we repeatedly do.”
Allison can speak at length about classical philosophy, providing two-and-a-half hour lectures on deductive reasoning and the value of logic in decision making. He takes a week off each year to study philosophy. He requires his senior managers to attend educational retreats and “encourages” them to read a non-banking book monthly.
Allison made philosophy a relevant science to the world of banking. He applies Ayn Rand’s objectivist principles of individualism, marrying it with accountability. This is reflected in the BB&T management structure in which regional presidents are given autonomy, but it seems that every year one of them is relieved of their duties. Specific goals are set; sales reps are expected to make 10 calls daily, two of which must be in person. Branch officers are given commercial lending authority - not a generally accepted industry practice.
BB&T is clearly charting its own course through the values that Allison has identified. Its values are detailed in a 30-page manual entitled The BB&T Philosophy. Although Allison was the driving force behind the philosophy, he obtained support for it from BB&T’s board of directors and senior managers. The philosophy (which also appears at www.bbt.com) consists of four main components:• BB&T Vision, Mission, and Purpose
• BB&T Values
• Concepts that Describe BB&T
• Strategic Objectives
The BB&T Vision is “To create the best financial institution possible and to be the best of the best.” The vision is further elaborated by the Mission, or reason for existence, which is “to make the world a better place to live by (1) helping our Clients achieve economic success and financial security, (2) creating a place where our Employees can learn, grow, and be fulfilled in their work, and (3) making the communities in which we work better places to be; thereby, optimizing the long-term return to our Shareholders, while providing a safe and sound investment.” The bank’s Purpose is summarized as “Our ultimate purpose is to create superior long-term economic rewards for our shareholders” and is explained further in detailed paragraphs explaining the importance and inter-relationships of clients, employees, communities, and shareholders.
BB&T Values form the foundation of the vision; employees are expected to display the values on a daily basis. The 10 values and a brief description of each (paraphrased from The BB&T Philosophy) are:• Reality (fact-based): Actions must be based on the facts.
• Reason (objectivity): Decisions must be based on a logical reasoning process based on facts.
• Independent thinking: Employees are challenged to make rational decisions; creativity can only occur through independent thought.
• Productivity: We turn our thoughts into action to improve economic well-being, including company profitability.
• Honesty: We act consistently with reality; we say what we mean and mean what we say.
• Integrity: We act consistently, in accordance with our logically-developed principles.
• Justice (Fairness): Individuals are evaluated and rewarded objectively, based on their contributions toward accomplishing the mission and adhering to our values.
• Pride: We are proud of our accomplishments that are achieved by living our values.
• Self-esteem (Self-motivation): By acting in their rational self-interest and doing their work well, our employees earn positive self-esteem.
• Teamwork/Mutual supportiveness: Our work requires an integrated effort among outstanding individuals to accomplish important tasks.
Rather than simply listing values and expecting employees to understand how they are relevant to their job, The BB&T Philosophy shows how the values are applied in the company:• A list of Concepts that Describe BB&T - client-driven, quality oriented, efficient, growing both our business and our people, continuous improvement, and objective decision making - is presented.
• Special attention is given to describing the BB&T management style - a participative and team-oriented process provides better information and thus results in better decisions.
• Attributes of an outstanding BB&T employee are described as “they believe that their lives matter and that they can accomplish something meaningful through their work.”
These values served BB&T well during the recent downturn in the lending industry. Guided by its values, BB&T decided that subprime loans were not based on reality or facts but instead were irrational. These types of loans made up only .6% of BB&T’s mortgage loan portfolio.
Because Allison’s personal values played a strong role in formulating and articulating The BB&T Philosophy, there is a high degree of consistency between his personal and company values. Allison and BB&T do not pay lip service to the philosophy. They expect employees to act in accordance with the values. Those that don’t lose their jobs, regardless of their title, level in the organization, or productivity. In fact, the values are reflected in BB&T’s human resources system - including selection, training, performance appraisal, and promotion - as well as its strategic decisions, such as choosing to avoid exotic mortgages that resulted in losses at many of its industry competitors.
Allison firmly believes that incorporating the company’s values into its decision-making process improves its chance of success. Not only are the values in the best interest of BB&T, they are also in the best interest of individual employees as well as the community which are home to BB&T banks. In the forward to the Philosophy, Allison sums up his views nicely, “We believe that competitive advantage is largely in the minds of our employees as represented by their capacity to turn rational ideas into action towards the accomplishment of our mission.”
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MidState Analytics10
MidState Analytics is a small, privately owned firm of 450 employees that provides specialized scientific and technical analysis to government organizations and commercial companies. Headquartered in Chicago, MidState Analytics was founded in 1975 by three graduate school colleagues. The founders are no longer active in the company but remain as major shareholders.
MidState experienced sustained, steady growth over the past decades, in part due to its ability to hire top-notch scientists in a wide range of specialty areas, such as biology, chemistry, systems engineering, physics, mathematics, and economics. A typical consulting engagement involves a cross-disciplinary team of scientists and project managers who often work on-site at client locations. A company vision statement hangs on the wall in the company lobby:MidState Analytics provides sound, impartial scientific analysis and research in order to create safe, effective products and services.
Although no formal statement of values exists, the scientific backgrounds of MidState’s employees provide them with generally accepted common values of research integrity, sharing of methodology and research findings, mentoring of more junior scientists, and treating each other with professionalism.
The company has four divisions - Consumer Products, Health, Information Systems Support, and Engineering. In early 2002, the director of the Consumer Products division, Jim Modell, brought in a new practice manager, Gabe Addison, to develop business in the toiletries and cosmetics industry. Modell and Addison knew each other from brief interactions at professional conferences. Addison’s track record was impressive - author of several patents, a stint as a faculty member at the University of Massachusetts, and publications in top-notch academic journals. In his 10-year career, Addison worked at five different organizations, which, in Modell’s mind, gave Addison a solid base of technical and managerial experience.
During Gabe’s interviews with MidState’s CEO, Gordon Levy, and the rest of the leadership team, Gabe made sure to mention his many high level contacts at potential client companies. Levy remarked, “With Gabe’s high level contacts, we could easily win new clients and quickly grow our revenues.”
Initial success. Levy’s impressions proved true, at first. In his first year, Addison secured four new major clients, allowing him to build a staff of about 50 scientists and technicians. Some team members transferred from within the company, while the majority were new hires. Addison’s days were spent meeting with the clients and supervising the project teams who mainly worked on-site at client locations around the greater Chicago area.
A few months into one project for the NPG Corporation, Addison’s staff grew concerned. After a cursory look at the team’s analysis, Addison singularly authored a final report that contradicted the analysis. Karen McKnight, a senior analyst and team lead, asked Addison to take another look at their analysis. Addison snapped at her, “NPG needs to move quickly. These are the results they want.” When McKnight calmly insisted that Addison take the results home to read, Addison became irate, telling her, “I have more experience than anyone else here. You need to be shown how this business works.”
Downward slide. Over the next few months, McKnight and her team experienced several similar incidents despite the fact that Addison began visiting the NPG team less frequently. When he did show up, he became incensed that the team had pressed forward in his absence. The team became increasingly frustrated and the work pace began to slow down, resulting in further reprimands from Addison for lack of productivity. Scolding McKnight in front of her team, Addison shouted, “Why are you holding team meetings? Stop meeting and get to work.” Yet during his next visit, he admonished, “This project requires teamwork. How can you work together if you don’t hold team meetings?”
After one particularly bad day in which Addison snapped at one of McKnight’s brightest team members for “not knowing anything,” McKnight called MidState colleague and close friend, Bart Thierry, who was heading up Addison’s team at O’Brien Industries. Thierry and McKnight spent several hours comparing stories, only to discover that they were seeing the same behavior from Addison. Soon, all four team leads under Addison began to compare notes.
McKnight was struggling to manage both her team and Addison. Her team took long lunches and frequent sick days. Some told her that they were experiencing physical symptoms, such as headaches and nausea. McKnight knew that clients were also feeling confused, especially when they were getting one answer from Addison and another from the team.
On one occasion, Addison asked McKnight to take three team members and begin analysis for a new type of aftershave, telling her, “If you do well, I will nominate you for the MidState Researcher of the Year Award.” She spent several days researching and planning the effort. When she asked usually calm and cooperative staff member Kim Harbold for assistance locating a journal article on chemical compounds, Harbold was less than helpful. At the next status meeting Harbold’s unusual behavior became clear when Addison announced that he was having Harbold, not McKnight, lead the aftershave project.
In response to this slight, McKnight built up the confidence to confront Addison, not about the decision - Harbold was more than capable - but about how the decision-making process was handled. When she requested a meeting, Addison replied that he only met with staff after 6:00pm on Fridays. She canceled her usual “girls night out” to meet with Addison. Her fellow team leads expressed even more displeasure than McKnight regarding Addison’s “office hours,” noting their displeasure at the conflict between their family commitments and Addison’s schedule. That Friday, McKnight drove to headquarters, arriving well before 6:00pm to allow time to catch up on paperwork. Finally, the appointed time came and went - Addison never showed up.
A dejected McKnight popped her head into Modell’s office; she and Modell had always gotten along well, so she felt comfortable confiding in him. She explained her confusion and frustration in dealing with Addison, “I worked hard to earn my doctorate, putting myself through graduate school, and I’ve worked hard at MidState for over 10 years with an excellent track record, yet he makes me feel like a child.”
Modell presented a balanced perspective, noting that Addison had landed some really big accounts and thus had considerable sway with the leadership team. However, Modell also told her that he had been hearing the same thing from the other team leads and that he would speak to Addison. Modell said that Addison was probably just tired and stressed. McKnight went home relieved that Modell would take some action.
Rock bottom. That weekend, McKnight met a grad school buddy, Carlos Landy, for dinner. Landy, now a professor at the University of Massachusetts, was not surprised at all to hear what was happening. “Didn’t MidState check Addison’s references?” he stated, adding, “When he was on the U. Mass faculty, he routinely talked down to his graduate students and even promised the authorship on papers which he promptly ‘forgot’ about. One of his students, Matt Light, a really promising researcher, was often the target of Addison’s outbursts. Eventually, Matt had a psychological breakdown and hasn’t returned to campus since, poor guy.”
The following week, McKnight called Modell to find out the result of his meeting with Addison. Modell told her, “I set up a meeting with him on Tuesday but he never showed up. There’s really nothing I can do. We could never fire him because we can’t replace him to keep the contracts going - no one else on our staff has the contacts that he does.”
The initial contracts that Addison brought in were soon coming to an end. Projects were falling behind schedule, giving them little chance of being renewed. In his annual forecasts, Addison promised continued growth, bragging about his high level contacts, but emphasized that his “incompetent staff of inexperienced, junior analysts” made it difficult to do the work. McKnight began noticing a trend - first, one of her team members left, deciding to relocate back to his hometown. Then, Thierry’s head scientist left for his “dream job” at another employer in Chicago. A few more left after that, and then a few more. Some expressed their frustration during their exit interviews, while others made no mention of Addison’s behavior.
McKnight ran into Modell at headquarters one morning. “This turnover is hitting us pretty hard. I’m not sure I can take much more of Addison’s outbursts, let alone handle him ignoring our analysis. Can we talk about some ways of dealing with Addison’s behavior?” Modell simply shook his head, “He’s the one who brought in the clients and you want me to get him to change?”
Ultimate impact. Over the next year, the turnover continued and morale plummeted. Customers did not renew their contracts. Modell and the rest of the leadership team took no steps to resolve the situation. Addison’s client base reduced to a handful of small contracts.
About a year later, Addison resigned after a shouting match with MidState’s director of finance. McKnight took over the few remaining contracts. Over the next six months, she managed to build up the contracts into a profitable niche. She then resigned when Modell told her that she was not eligible for a promotion because Addison originally brought in the customers.
CONCLUSION
In conclusion, discernible behaviors for leading through vision and values have been shown to lead to effective outcomes. By understanding and applying these principles, leadership skills can be enhanced.
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Write a vision statement
Congratulations, you were recently selected as the recipient of the Entrepreneurial Council for High Achievement’s annual grant. You applied for the award almost a year ago, detailing your academic and professional achievements, entrepreneurial experience and aptitude, and undergoing a series of intensive interviews. Your efforts have paid off and this is your opportunity to do what you have always wanted - run your own company.
With the award comes $10 million in venture capital backing to start your own profit-making venture. The investors prefer to stay in the background and let you do what you do best, so you will be given complete autonomy to start any type of for-profit company you want. This initial round of funding could be supplemented with additional financial backing if your company does well in its early stages.
To begin your venture, you must begin by answering a series of questions about the company that you will start. It may help to put some serious thought into creating a company that provides a useful product or service.
Carefully consider these questions and write a response to each one:1. What are you passionate about? What really peaks your interest and gets your blood flowing?
2. What product or service could your company provide that is consistent with your passion and interest?
3. How do you want others to see you and your company? When your employees are hanging out at the water cooler, what will they say about you?
4. Prepare a draft for your company’s vision statement.
5. List at least 10 behaviors that you could carry out each day to live the vision.
Values comparison
The two cases, BB&T Bank and MidState Analytics, present drastically different company value systems.
1. Identify the values displayed by each company.
2. Contrast the values. How are the two companies’ values different from each other?
3. What results (e.g. company performance, customer retention, motivated and committed employees, turnover, morale) have occurred at each company?
4. Which set of values is more effective? Explain why.