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.

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)

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

Enron (A History Lesson)

Most Innovative: Fortune - 6 straight yrs. Culture Belied the Values
Stated Values • Leadership valued massive growth
and entrepreneurism, not a crime
• Respect, Integrity, Communication,
Excellence • But culture became risk-seeking,
personal gain-seeking, arrogant, etc.
Overt Deceptions and Illegality Appears
while lacking any needed counter-
• When market cooled (‘01-’02), so did balancing forces (oversight, ethics,
its stock, leading to margin calls, disclosure, functioning ombudsman,
which led to aggressive moves to accountability, etc.)
prop up perceptions of value
- Board famously suspended
Failed to Reward/Advance the Values their code of ethics when
Prime Example of a True Failure of convenient, conflicts of interest
Leadership and shortcuts abounded, etc.)

• Strategy was suspect, but it was the A Driver of the Sarbanes-Oxley Regulations
failures of moral leadership and the • Many see SOX as putting lipstick on
abuses of trust that killed them a pig (but still needed)

Enron Isn’t Alone Unfortunately

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.

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

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

Stated Values Culture Expresses the Values
• Integrity • A dominating industry force
- e.g., employees encouraged to - Yet encouraged rather than
make decisions they can stand by quashed competition
forever – the company should be • During disarray in the 90’s, transformed
transparent in financial reporting into a retail bank
- e.g., no bribes (“speed money”) in - To fund its operations at rates
transactions (standard industry people could afford
practice at the time). This has - Now second largest lender in India
been, and is, the biggest no-no at
• In past, rejected formal code of ethics
HDFC
- Norms best transmitted by example
• Excellence in Customer Service
• People treated as adults – intelligent,
- e.g., delinquencies are aided
hardworking, creative, unique
rather than scared to meet their
obligations - Low turnover, high loyalty, people
love their work and environment
• Civic Responsibility
• Highly acclaimed company
- e.g., contributions for the poorest
sector of Indian society - For governance, accounting
practices, customer service and
• Teamwork and Employee Commitment
civic mindedness
- e.g., to foster efficiency and
- Continues to win recognition today
effectiveness


The Right Leader Will Set The Values and Drive the Culture

GE and IBM Remain Excellent Examples of How
Values and Culture Enable Strategy Execution
(of course it also helps to have the right strategy)

Jack Welch was Chairman and CEO Louis V. Gerstner, Jr. was Chairman and
between 1981 and 2001 CEO from 1993 - 2002 (1st outsider)
• Changed and streamlined GE • He is credited with saving IBM by
• Focused on inefficiency (adopted Six refocusing the strategy (IT services, the
Sigma mid 90’s), execution, Internet ) and culture by keeping the
performance management, reward, company together and addressing
and shareholder value both “sacred cows” and an insular
• Be #1 or #2 environment
• $27 billion to $130 billion in revenue, • 100,000+ additional employees were
$14 billion to ~$400 billion market cap laid off from a company that had
painfully broken with its security pact
• Lengthy succession planning: Jeffrey
Immelt (still CEO 11 yrs later) • Samuel J. Palmisano succeeded him
(and just recently retired, 10+ yrs later)
• In 1999 he was named "Manager of
the Century" by Fortune magazine • In 2008, received the Legend in
Leadership Award from Yale


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?

% Responding Favorably (n=284 units)
Core Values
(Company XYZ) Low 10% of Avg. Unit Hi 10% of
Units Score 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
Impact of Leadership and Management Practices on Business Results

Improvement of Impact of a 1% Improvement
Customer Satisfaction of Customer Satisfaction
Openness
.6

Innovation
Sales Turnover
.5 $12.3m $m

.3 Customer
Favoritism
Satisfaction
$3.6m
.3
Fair Policies and Net Operating
Procedures .3 Income $m

Clear Priorities

XYZ Corp.

Requires a 5 Step Process

• Of existing values (and any historical material about their construction)
• Of the hard business metrics that drive decision-making (& stresses they create)
Archival
Analysis • Of the internal assessments of key publics if they exist (current culture & practices)

• 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?
Interviews

• Top-line review of interview results
CEO • Specific plan presented, and input sought, for Affirmation and Alignment Phase
Check-in

• Focus on commonly held beliefs regarding enduring principles & business success
• Distinguish between enduring principles and long-standing practices (habits)
Affirmation • Consensus on what to add, subtract and modify as needed

• Develop behavior expectations for each Value (and corresponding metrics)
• Uncover existing Values violations and plan/prioritize the actions to be taken
Alignment • Plan for corporate-wide reaffirmation


Won’t Waste Time Wordsmithing!

Writing Statements

Affirmation / Buy-in
Operationalization

• 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

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

Building an • Why Culture Matters, How to Change
Effective It, and the Specific Role of Senior
Corporate Leadership
• September 12th
Culture

Resolving • Poison in C-Suite: The Impact of
Conflicts, Festering Conflicts and How to
Building Overcome Them
• December 4th
Partnerships

Please contact Elizabeth Feola directly at efeola@sirota.com if you are
interested in pre-registering

About Sirota Leadership Advisory

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

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


Thank You for Listening

Please contact Douglas Klein, our chief leadership advisor, at dklein@sirota.com
or call directly at 914-922-2530 with any questions about our service offering


Sirota Values Webinar Spring2012 For Distribution

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Sirota Values Webinar Spring2012 For Distribution