Sirota Values Webinar Spring2012 For Distribution

Values Misalignments in the C-Suite and

What’s to be Done About Them

- Spring Leadership Advisory Webinar -

May 16, 2012

Organizational breakthroughs. Bottom line results.

2 © 2012 Sirota Consulting LLC (Sirota Leadership Advisory division)

It’s An Old Story

And Did You Know…

In 2002, Enron shares were valued at 60 cents

• At the same time, copies of the Enron Code of Ethics were selling on eBay for 33 times as much (20 dollars)


Enron (A History Lesson)

Most Innovative: Fortune - 6 straight yrs.

Stated Values

• Respect, Integrity, Communication, Excellence

Overt Deceptions and Illegality Appears

• When market cooled (‘01-’02), so did its stock, leading to margin calls, which led to aggressive moves to prop up perceptions of value

Failed to Reward/Advance the Values

Prime Example of a True Failure of Leadership

• Strategy was suspect, but it was the failures of moral leadership and the abuses of trust that killed them

Culture Belied the Values

• Leadership valued massive growth and entrepreneurism, not a crime

• But culture became risk-seeking, personal gain-seeking, arrogant, etc. while lacking any needed counter-balancing forces (oversight, ethics, disclosure, functioning ombudsman, accountability, etc.)

Board famously suspended their code of ethics when convenient, conflicts of interest and shortcuts abounded, etc.)

A Driver of the Sarbanes-Oxley Regulations

• Many see SOX as putting lipstick on a pig (but still needed)


While business strategies were suspect for all, culture was the root of their problems. Each had stated Values that bore little resemblance to the day-to-day actions that were rewarded.

Enron Isn’t Alone Unfortunately

http://en.wikipedia.org/wiki/File:Enron_Logo.svg

http://en.wikipedia.org/wiki/File:Tyco.svg

http://en.wikipedia.org/wiki/File:AdelphiaLogo.png

http://en.wikipedia.org/wiki/File:Peregrine_Systems_logo.svg

http://en.wikipedia.org/wiki/File:Worldcom-logo.png

http://en.wikipedia.org/wiki/File:AIG_wordmark.svg

http://en.wikipedia.org/wiki/File:Lehman_Brothers.svg

http://en.wikipedia.org/wiki/File:Bear_Stearns.svg

http://en.wikipedia.org/wiki/File:News_Corporation.svg


Long-term, Successful Companies Have a Clear Sense of Purpose

HDFC Facts

• Founded by H.T. Parekh (a mythic figure and businessman)

• Incorporated in 1977 in Mumbai

India’s first housing finance company

Objective of meeting a social need: promoting home ownership by providing long-term finance to middle and lower-middle class Indians

• HDFC’s main goals are to:

Develop close relationships with individual households,

Maintain its position as the premier housing finance institution in the country,

Transform ideas into viable and creative solutions,

Provide consistently high returns to shareholders, and

To grow through diversification by leveraging off the existing client base

http://www.hdfc.com/


And Their Leaders Live their Values (the real secret of their success)

Stated Values

• Integrity

e.g., employees encouraged to make decisions they can stand by forever – the company should be transparent in financial reporting

e.g., no bribes (“speed money”) in transactions (standard industry practice at the time). This has been, and is, the biggest no-no at HDFC

• Excellence in Customer Service

e.g., delinquencies are aided rather than scared to meet their obligations

• Civic Responsibility

e.g., contributions for the poorest sector of Indian society

• Teamwork and Employee Commitment

e.g., to foster efficiency and effectiveness

Culture Expresses the Values

• A dominating industry force

Yet encouraged rather than quashed competition

• During disarray in the 90’s, transformed into a retail bank

To fund its operations at rates people could afford

Now second largest lender in India

• In past, rejected formal code of ethics

Norms best transmitted by example

• People treated as adults – intelligent, hardworking, creative, unique

Low turnover, high loyalty, people love their work and environment

• Highly acclaimed company

For governance, accounting practices, customer service and civic mindedness

Continues to win recognition today


The Right Leader Will Set The Values and Drive the Culture

Jack Welch was Chairman and CEO between 1981 and 2001

• Changed and streamlined GE

• Focused on inefficiency (adopted Six Sigma mid 90’s), execution, performance management, reward, and shareholder value

• Be #1 or #2

• $27 billion to $130 billion in revenue, $14 billion to ~$400 billion market cap

• Lengthy succession planning: Jeffrey Immelt (still CEO 11 yrs later)

• In 1999 he was named "Manager of the Century" by Fortune magazine

Louis V. Gerstner, Jr. was Chairman and CEO from 1993 - 2002 (1st outsider)

• He is credited with saving IBM by refocusing the strategy (IT services, the Internet ) and culture by keeping the company together and addressing both “sacred cows” and an insular environment

• 100,000+ additional employees were laid off from a company that had painfully broken with its security pact

• Samuel J. Palmisano succeeded him (and just recently retired, 10+ yrs later)

• In 2008, received the Legend in Leadership Award from Yale

GE and IBM Remain Excellent Examples of How Values and Culture Enable Strategy Execution

(of course it also helps to have the right strategy)

http://images.search.yahoo.com/images/view;_ylt=A0PDoS8YunFP92wAjSmJzbkF;_ylu=X3oDMTBlMTQ4cGxyBHNlYwNzcgRzbGsDaW1n?back=http://images.search.yahoo.com/search/images?p=Jack+Welch&ei=UTF-8&fr=my-myy&tab=organic&ri=2&w=1138&h=1187&imgurl=img.pte.at/photo_db/hi_res/hires33793.jpg&rurl=http://connect.in.com/jack-welch/photos-766-6484993.html&size=769+KB&name=...+Searches:+Jack+Welch+Quotes+,+Jack+Welch+Book+,+Jack+Welch+Wiki&p=Jack+Welch&oid=46e7a31a145cc20910f7a1f03f095b63&fr2=&fr=my-myy&tt=...+Searches:+Jack+Welch+Quotes+,+Jack+Welch+Book+,+Jack+Welch+Wiki&b=0&ni=96&no=2&tab=organic&ts=&sigr=11oo02v6r&sigb=12tp7odc2&sigi=11917qcib&.crumb=u6URXhWOIY6


In Sum: Culture Must Align with Values (or there will be Problems)

Most companies have an expressed set of Core Values or Enduring Principles that state what the institution stands for (or should)

• Often highlighting one or more of their key deliverables to:

Employees, Customers, Communities, Investors, etc.

• Covering principles that would be pursued regardless of business conditions, industry, etc. – they represent strongly held convictions

Most would attribute leadership and business success to them

As we have seen, some companies have cultures and work environments in conflict with aspects of their Core Beliefs and Values

• And is ultimately the root cause for many corporate ills

Turnover, Customer Dissatisfaction, Inefficiency, Low Productivity, Marketplace failures, etc.

• Due to systematized behaviors that don’t represent the Core Values

Leader beliefs and behaviors, management policies and practices (including the performance management systems), etc.

Alignment is the process of affirming/reaffirming the Core Values and their omnipresence in the company as THE singular most important driver of decisions and behavior


What Does Misalignment Look Like?

Core Values (Company XYZ)

% Responding Favorably (n=284 units)

Low 10% of Units

Avg. Unit Score

Hi 10% of Units

Integrity 62 83 100

Openness 40 67 100

Customer Service 32 62 86

Accountability 29 56 81

Teamwork 35 51 72

XYZ Corp.


Misalignment Costs

Openness

Innovation

Favoritism

Fair Policies and Procedures

Clear Priorities

Customer Satisfaction

Improvement of Customer Satisfaction

.6

.5

.3

.3

.3

Sales Turnover $m

Net Operating Income $m

Impact of a 1% Improvement of Customer Satisfaction

$12.3m

$3.6m

Impact of Leadership and Management Practices on Business Results

XYZ Corp.


Requires a 5 Step Process

Archival Analysis

• Of existing values (and any historical material about their construction)

• Of the hard business metrics that drive decision-making (& stresses they create)

• Of the internal assessments of key publics if they exist (current culture & practices)

Interviews

• 1-on-1 meetings w/Key Executives other Internal and External Publics as needed

• How variable are the belief systems? How variable are the aspirations for success?

CEO Check-in

• Top-line review of interview results

• Specific plan presented, and input sought, for Affirmation and Alignment Phase

Affirmation

• Focus on commonly held beliefs regarding enduring principles & business success

• Distinguish between enduring principles and long-standing practices (habits)

• Consensus on what to add, subtract and modify as needed

Alignment

• Develop behavior expectations for each Value (and corresponding metrics)

• Uncover existing Values violations and plan/prioritize the actions to be taken

• Plan for corporate-wide reaffirmation


Won’t Waste Time Wordsmithing!

• Rather than waste time developing perfectly worded values statements, focus on buy-in, animation & operationalization (let others struggle w/words, if they haven’t been established)

• Use a data-driven process that seeks the inputs of a wide-range of key publics beyond the Executive Team (VP’s/Directors, HIPO’s, Customers, and Investors)

• Distinguish between enduring principles and situation-dependent practices (or habits) while emphasizing observable, measurable behaviors

Will be driven by the CEO (and enabled by HR) – not the other way around

Affirmation / Buy-in Operationalization

Writing Statements


Provide Individualized Leader Support (Where Needed)

Senior leaders MUST express the stated values and corporate ideals in both their actions and beliefs in order for them to be seen as credible

Nearly all senior leaders have ingrained beliefs and behaviors in conflict with those stated values and corporate ideals

• Some are motivated to change (whether aware of the conflicts or not)

• Some are not (my #’s are fine, I am successful, why should I change)

Keys to Success:

• Providing a mirror of feedback from a range of constituencies

This isn’t therapy, or career counseling, the feedback is focused on specific violations (and positive expressions) of the values (and the business-related consequences of both)

• Exploring leader’s strongly held management conviction

Challenging the leader to distinguish between career-long habits and strongly held convictions

Pointing out areas of convergence and divergence

• Seeking avenues for compromise (the goal is alignment with Co. Values)

Finding specific policies, practices and personal behaviors to change (often involved BU-based culture change efforts)


Interested in More? Please Sign-Up for Our Upcoming Webinars

Please contact Elizabeth Feola directly at [email protected] if you are interested in pre-registering

• Why Culture Matters, How to Change It, and the Specific Role of Senior Leadership

• September 12th

Building an Effective

Corporate Culture

• Poison in C-Suite: The Impact of Festering Conflicts and How to Overcome Them

• December 4th

Resolving Conflicts, Building

Partnerships

mailto:[email protected]


About Sirota Leadership Advisory

Our 3-step program uncovers obstacles to execution and performance by focusing on critical misalignments among leaders and between the organization and its values

• Step 1: Identify Opportunities (Assessment)

• Step 2: Build Executive Insight (Acceptance)

• Step 3: Take Action (Results)

Our tools and consultative services align your values, executive team, and strategy with your culture-in-practice in service of growth and performance

• Values Realignment: Clarifying then aligning your values within the C-Suite (and beyond)

• Culture Change: Leading successful change and building an effective culture

• Partnership Building: Resolve team- and individually-based conflicts

We help senior leaders overcome intangible obstacles to business success by building and maintaining highly effective cultures and executive teams


Thank You for Listening

Please contact Douglas Klein, our chief leadership advisor, at [email protected] or call directly at 914-922-2530 with any questions about our service offering

mailto:[email protected]

Sirota Values Webinar Spring2012 For Distribution

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