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Why your company needs core values

THE very phrase “company values” is enough to make some business owners – and many employees - groan and roll their eyes. For many businesses, corporate value statements are little more than vague motherhood statements that sound nice but bear little relation to way business is done.

But that’s not that case in every business. For a number of Australian companies, such as software outfit Atlassian, online rental portal Rentoid and airline Virgin Blue, corporate value statements have become real business drivers that help their companies stand out in a crowded market. They say values aren’t just window dressing, they attract customers and help retain staff.

Just ask Tony Hsieh, the American entrepreneur who founded the e-tailer Zappos which was sold of Amazon last year for $US1.18 billion ($A1.37 billion) in stock. In a space of just 10 years, Zappos had grown from almost no sales to more than $US1 billion in annual revenue. This was driven primarily by repeat customers and word of mouth.

Zappos has 10 core values:

1. Deliver WOW through service
2. Embrace and drive change
3. Create fun and a little weirdness
4. Be adventurous, creative, and open-minded
5. Pursue growth and learning
6. Build open and honest relationships with communication
7. Build a positive team and family spirit
8. Do more with less
9. Be passionate and determined
10. Be humble

On a recent blog post on the Harvard Business Review, Hsieh says the values were important to keep the company focused as it grew.

“When we moved the company to Vegas, we were hiring a lot of people very quickly due to our rapid growth. It wasn't scalable for us to be involved with every new hire decision, but the problem was that because we had so many new employees, not everyone knew exactly what we were looking for when we said we were looking for a culture fit,” he writes.

“Someone from our legal department suggested that we come up with a list of core values to serve as a guide for managers to make hiring decisions. I thought about all the employees I wanted to clone because they represented the Zappos culture well, and tried to figure out what values they personified. I also thought about all the employees and ex-employees who were not culture fits, and tried to figure out where there was a values disconnect.”

“Even though our core values guide us in everything we do today, we didn't actually have any formal core values for the first six or seven years of the company's history. It's my fault that we didn't do it in the early years, because it was something I'd always thought of as a very "corporate" thing to do. I resisted doing it for as long as possible.

“I'm just glad that an employee finally convinced me that it was necessary to come up with core values — essentially, a formalised definition of our culture — in order for us to continue to scale and grow.”

Why values must be genuine

Many companies claim to have values. The values espoused on BHP Billiton’s web site say the mining behemoth is about safety and the environment, integrity, high performance, win-win relationships, the courage to lead change and respect for each other.  Woolworths says its values are to never take its customers for granted and to earn their trust. Pacific Brands says its values are about unity, commitment, innovation, speed and accountability.

But how strong are these values in the competitive corporate world? Cynics might say values are just meaningless fluff. The sole purpose of any business, they say, is to make money. And when there is a clash between values and profit, they say the decision usually comes down to building profits.

And then, there is the problem of values might look good on paper but become meaningless when the company’s leaders don’t follow them. The departure of David Jones chief executive Mark McInnes for acting inappropriately towards female certainly do not measure up to the values in the David Jones annual report of “teamwork, integrity and performance”. There is no team work or integrity when a high profile corporate leader succumbs to temptation, not once but twice, as he admitted.

But values can be made to work when they are a genuine part of a company’s culture.

The company values of Atlassian, one of Australia's largest software exporters with revenues of $45 million, are bold and in your face. Proclaimed on the company’s web site, Atlassian values are:

    * Open company
    * No bullsh.t
    * Build with heart and balance
    * Don’t f..k the customer
    * Play as a team
    * Be the change you seek

The company’s human resources director Joris Luijke says there are no sales teams at Atlassian. Indeed, all sales for Atlassian come through word of mouth. Atlassian’s values of being a completely open company – in keeping with the no bullsh.t value, all customer complaints are logged on to the system for everyone to see – help pull in more customers.

Liujke says Atlassian formally proclaimed its values three years ago in a unique exercise. While other companies send their management teams off to retreats to work out their values, Atlassian did it the other way around. Management sat down and wrote out a list, and employees wrote down theirs. The two were compared.

“We were surprised by how similar the two lists were,’’ Luijke says. “If you don’t have an alignment, then you have a serious problem.

“But you can’t impose a value on a company, it’s not like a company goal or KPI. It needs to bubble up from below and it needs to be genuinely felt by all the staff.”

To keep the values front and centre, Atlassian highlights examples of behavior that promote them.  Staff members who do that are turned into heroes.

“If there is an example of helping the customer, we make sure we put some spotlights on it,” he says.
He says values can only stay relevant and important if companies set up the right infrastructure.

“If you don’t have the infrastructure set up or if your environment doesn’t encourage this behavior then it’s nice to put on the wall but there is little value,’’ he says.

The value “Be the change you seek” is about turning Atlassian into an ideas factory. So how does the company put that into practice?

Luijke says: “We have set things up allowing people to work 20% of their time on pet projects or concepts of their own. Or they can compete to finish a project within one and a half days. This encourages people to think about what they want to see change, what they want to do to innovate during their working time. It’s about making sure that if you come up with a new idea, you are not slammed down straight away.”

The value “don’t f..k the customer” sounds course, but has been carefully constructed to keep employees focused on their market.

“It’s better to write values in a language that people think in, rather than do it in a corporate language,’’ Luijke says.

“If you go to our support team or engineering team and they are thinking about how to resolve an issue, these developers don’t talk in a polite way. They genuinely say ‘don’t f… the customer’. And it sticks.”

Values that speak to customers

At Rentoid, which is trying to build itself into the eBay of renting, has a similar manifesto of values that speak the customer’s language.

Some examples of the company’s value include:

    * We will never have grey or any color cubicles
    * Our people work where they please geographically
    * We trust each other; we don’t confuse people with our language
    * We don’t trick people with terms and conditions
    * We speak like people. We are people
    * We answer our phone calls
    * Too much money creates laziness and reduces creativity. We use our brains first and our wallets second
    * For rentoid, and personally; we don’t work with jerks. Even if it could be financially beneficial
    * Fun at work is more important than all things. It is not a corporate event, a team building exercise or a day out
    * We believe in opposites. The opposite of buying and selling is keeping, recycling, renting.

Rentoid has 10 staff. Five of them are local, the others are overseas, with coders in Russia and administrators in India. Company founder Steve Sanmartino says it’s all part of Rentoid’s value system.

“I don’t care where they are, I just care they get it done,’’ Sanmartino says. “I have never even met these people face to face.  We just talk on Skype and chat. I trust them and they tell me how many hours it took to build a certain part of the website.  I don’t know how many hours but I know it’s done and I trust them and I just pay them for the hours they said they did.

“We have never been an office. Everyone works where they want. I don’t care where they are, I just care they get it done.’’

The values underpin a simple business model: people pay $30 membership a year, or $4 to list an item. Four years after its inception, Rentoid already has 30,000 members. All of them have come through word of mouth. With Rentoid, people can rent anything, from boats and bass flutes. Someone is even offering to rent out his wife for house work, just $500 a week.

Shannon Cooper, who runs the business, says: “Our values are not only relevant to us but to our customers as well. We not only think about the things the company values but what our customers value as well. We use technology as a way of bringing people together.”

“If we have those values and if they are available to our customers, the business by default will be successful.”

He says companies need to ask themselves hard questions when formulating values, but in the end, most of them can do it.

“If you’re a BHP, you think about how BHP customers feel about the company and about the communications. I don’t think it’s as complex as many people like to make out.”

He says the manifesto was a document that was not developed as part of a strategy. It evolved naturally “rather than something we wrote on a weekend away in Byron Bay.”

Cooper acknowledges that keeping the values system going as the company grows and recruits wider will be a challenge but he is confident it can be done if they find people who also believe in the value system.

“It won’t be done like putting an ad on Seek, it will be more like a boyfriend coming around to meet a girlfriend’s parents for the first time,” Cooper says.

How values can affect business decisions


Virgin Blue’s core values of safety, innovation, value, quality, challenge, fun and caring are all aimed to build a deeper connection with customers and helping the company stand out in the market. As Richard Tanner, Virgin Blue’s group executive for people puts it, Virgin Blue with no values would be like any other airline.

“There is only so much you can differentiate around a round piece of metal with 100 or so seats in it,’’ Tanner says.

“Essentially they are all the same but what we try to do is innovate wherever we can.”

The company recruits people who embrace the values and trains them over eight weeks. That includes scripts, role play, teaching trainees how to use their voice, how to wear the uniform and with women, how to put on make-up. Staff members are also encouraged to show their flair. By teaching them how to use their own style to handle situations, it becomes more personal.

Even the uniforms are designed to highlight the values.

“With the others, they don’t tend to have much red in them,’’ Tanner says.

“They are usually not as casual as ours in terms of open neck and short sleeves. That says something about who we are. And at the same time, they are immaculately presented, with not a hair out of place.

“The core differentiator  of Virgin Blue to the other Australian carriers is our crew. They are more connected to the guests, they do look like they enjoy their jobs more, they do help you more, they are more engaging and on balance they are a better presented group of people.

“We recruit as best we can to fit the brand, we train well to ensure the focus is predominantly on customer service.

When it comes to hard business decisions, Virgin Blue claims to have an eye on its values. Last year during the height of the global financial crisis, for example, there was speculation the airline would sack 400 staff. Tanner says that forced Virgin Blue to look at the problem through the prism of its values.

“Because of our values, it was our view it was not acceptable to us to cut 400 heads out of the business. We needed to find a more innovative way.’’

Airline management went to staff members who came back with such ideas as job sharing, more part time work and leave without pay. A crisis was averted.

“As a result, we didn’t have any redundancies because of the GFC and we have been able to bring those people back into work as we have come out of all of that. That is an example of our values in action.”

Values are not window dressing. They can attract customers and quality staff. But as Atlassian, Virgin Blue and Rentoid have shown, it can only happen when the company makes an effort to incorporate it into the operations.

Otherwise, it really is just fluff.

This article first appeared on SmartCompany.com.au, Australia’s premier site for business advice, news, forums and blogs.


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Also see:

    * THE BIG PICTURE: Will the size of Australia’s average household really shrink?
    * Brand alignment
    * Your customers and you: part 2
    * Virgin Blue shares fall 25% on profit warning: Economy Roundup
    * Dodging the rough patches

 


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