Trustworthy, helpful, inspiring, straightforward, heart. They’re the values that BT cites as its guiding principles. The BBC lists trust, pride, creativity, respect while Legal & General talks of its customer focus, openness and fairness, teamwork and the fact it is results-driven.

 

But any discussion of corporate values invites its fair share of cynicism. Often, values simply aren’t tangible or appear to offer only empty platitudes. Maybe they promise something that isn’t true to that organisation. Or perhaps they are breached by the very leaders who created them. Are companies missing a trick by not establishing and communicating values that bolster the brand?

 

A quick glance at the ‘core values’ of many FTSE100 companies reveals an astonishing lack of differentiation between them. It seems almost every company believes in ‘passion’ and ‘innovation’, while most mission statements promise nothing more than the obvious: maximum value to the shareholders.

 

But the disharmony created by broken or misaligned values may end up affecting the bottom line – ultimately if all leaders do is talk, talent may decide to walk.

 

According to a new report by PwC, most large organisations do have an articulated set of values or principles: only one in 10 respondents said their organisation has none. Based on a survey of some 150 members of PwC’s Fraud Academy, the report, Tone from the Top, aims to encourage leaders to define their culture and take responsibility for the integrity of their organisational business behaviour.

 

The report shows that establishing a set of core values and principles is just one of a wide range of approaches being used to establish the foundations for ethical tone: others include regular communications of ethical values by leadership, and even declining business where it is not aligned with the ethical values of the business. But transforming the words into actions is proving much more challenging.

 

“There appears to be a flurry of activity around short term actions without understanding what is required to embed longer term behavioural change,” says Tracey Groves, director in PwC’s forensic services practice. “Examples include an absence of measurement of ethical risks, low levels of regular and updated training to enhance awareness and application of ethical standards, and only a small number of mechanisms in place to recognise and reward good ethical behaviour.”

 

Nearly half (46%) of respondents reported that leadership do not always act as role models in setting the right tone. So do leaders really understand how doing what they say they’ll do is reflected in the existing culture of their organisation?

 

“The Gulf of Mexico oil spill disaster will have legal teams and PR companies arguing for years over whether or not BP acted ethically”, says Paul Gregory, capability director of board and executive coaching at HR consultancy Penna Plc. “But acting ethically is critically important. Individuals must see their leaders acting responsibly and credibly if they are to act ethically themselves. Leaders who are ethical demonstrate a level of integrity that inspires trust.”

 

In many ways, trust and transparency are becoming more important to corporate reputation than the quality of products and services. According to the 2010 Edelman Trust Barometer, an annual credibility survey conducted by PR giant Edelman, business leaders are struggling to regain the trust of the public: nearly 70% of people believe that companies will try to return to business as normal after the recession.

 

Consider those brands that have taken business decisions that conflict with their values. Google in 2006, for example: attempting to unleash its search engine upon Chinese internet users, it took the decision to allow censorship by the Chinese authorities. This caused outrage among Google devotees who, for the first time, saw the hypocrisy in its ‘don’t be evil’ mantra.

 

Or look at Innocent Drinks, which last year invited Coca-Cola to take a minority stake in its business. Loyal customers witnessed their brand ethically selling out; many felt it was a greed-driven betrayal of their trust and of the brand’s values.

 

 

Meanwhile, Marks and Spencer’s, whose core values are wrapped up in high environmental and social standards, has been dressing its shop windows with posters about its ‘no Plan B’ commitment to, among other things, becoming carbon-neutral by 2012. And yet, last May, when FairPensions — an NGO that campaigns for ethical pension investment — published its latest survey of Britain’s largest pension funds, M&S was found to be largely ignoring environmental criteria in making investments, and had not signed up to the UN’s principles for responsible investments.

 

Tony Watson, professor of Organisational Behaviour at Nottingham University Business School, suggests mission statements are at best irrelevant, at worst counterproductive. “People believe in money first, meaning later; we all know productivity is key, so it is often an insult to our intelligence to suggest otherwise,” says Watson. “Managers who use pseudo-religious language of ‘vision’, ‘passion’ and ‘mission’ when trying to motivate and engage their teams are doomed to failure. Much good will can be spoilt by the dreaded mission statement.”

 

Where employees have become jaded with corporate ‘motivational’ training language, Tony believes that ‘passion’ might be better demonstrated, than talked about. “Ask the factory worker at Rolls Royce, for example, to describe the company’s mission and values are and you’d probably be turned away with a wry smile,” he says. “But get them talking naturally about the business and their role within it and the values would quickly become apparent. The ‘values’ of dedication and passion are ingrained.”

 

Tony cites the John Lewis Partnership as an example of an organisation that has deep-seated values that are demonstrated rather than described. Unlike many companies that talk of ‘customers being the driving force behind everything we do’, JLP puts the happiness of Partners (employees) at the centre of everything it does: sharing the profits with its Partners is something real and material for them to buy-in to and helps to root belief in the values of the business. John Spedan Lewis’ ultimate purpose for the Partnership, which was to balance the happiness of Partners with a successful business, remains as true now as it did in 1929.

 

Commitments of ‘responsibility’, ‘relationships’ and ‘influence’ seek to highlight how relationships between all Partners and the Partnership are a two-way deal: JLP has local, divisional and Partnership wide forums where management reports are challenged and issues are raised and addressed.

 

The PwC survey finds that 80% of those surveyed realise consistent and frequent communication of values is an important driver, and that 63% think this is done well by management. Although this isn’t a bad result for managers, it shows there may still be potential disconnect between intention and delivery. Why?

 

“There is a big difference between having ‘values’ and having values that actually mean something for people,” says Richard Isley, a founder of management consultancy Synogis. “Most large corporations will have a set of defined values or principles; far fewer have senior managers who live by them. An interesting question is to ask a manager to state the corporation’s values and then to demonstrate how they have impacted his or her actions. Similarly asking the staff what the corporation’s values are is interesting as is asking the staff to rate how closely they believe the corporation actually lives up to its values.”

 

Often, corporate values can be a little like an appendix, sitting within a corporate body until something aggravates them. And because they are commonly born in the HR department to guide behaviours, they don’t necessarily take account of the external audience. How do they set the company apart from the competition? There will be disconnect if employees don’t understand how to use the values to communicate outside the organisation.

 

“There might be different sets of values for internal and external audiences,” says Terry Tyrell, worldwide chairman for global branding and design agency, The Brand Union, “but how do values like ‘honesty’ and ‘integrity’ translate into a set of attributes that distinguish the company in the marketplace? Often the subject of values creates tensions and, ultimately, loggerheads between important stakeholder groups.”

 

Take Credit Suisse. Terry worked with the bank to create a set of attributes that all parts of the business could buy into. There were three parts to consider: the fast moving and innovative investment arm; the private bank, which formed much of its Swiss heritage in the accounts of the Swiss people; and the fund/asset management arm.

 

“The overarching ‘tradition to innovate’ mission statement created a tension between the fast moving and the legacy,” says Terry. “It was the result of distilling the principles of each part of the business down to a central idea, so the bank could talk about itself in a differentiated way. It also slotted alongside then-CEO Oswald Gruebel’s ‘one bank’ strategy, finding common ground between different parts of the business, then formulating a central organising principle based around a compelling truth.”

 

Done properly, corporate values can elegantly describe what a company stands for, how its employees behave and can provide a framework for giving the business a purpose beyond profit. They can help an organisation effectively square financial performance with CSR and, ultimately, breed loyalty, trust and improved relationships among all stakeholders. Problems arise when those at the top set values that are vague, not aligned to strategic goals and not reflected in their own daily behaviour. That’s when those at the bottom of the workforce start to get cynical.