18 October is World Values Day. This is an opportunity for organisations to think about what’s important to them and how they act on this. It’s also time well spent ahead of The Financial Reporting Council (FRC) revised UK Corporate Governance Code, which comes into effect in January 2019. This new guidance advises that organisations should have a purpose and values. But the value of values extends far beyond these two dates in the corporate calendar. Here’s why:
Values provide a guiding compass in our choices and our actions; they give us belief, direction, consistency in our decisions and confidence that we are doing the right thing. They help give us a clear sense of purpose, help us work together and perform better. Without them, we risk making poor choices or losing our sense of direction.
As John Kay states, in his book, Obliquity: Why our goals are best achieved indirectly, “The most profitable businesses are not the most profit-oriented.” In the end, the difference for the people working for, investing in, or trading with a company is knowing who they’re doing business with. At its simplest level, shared values create shared value.
- For customers, values help to differentiate what’s on offer and to assure that they’re making the right choice with their purchase.
- For suppliers, values explain the standards expected of them, the extent to which they’ll be scrutinised and form the basis for a long-term supportive relationship.
- For investors, values offer reassurance about the kind of business they’re investing in and how it makes decisions.
Communications from FTSE 250 companies have traditionally focused on financial performance. And the effect has been to obscure personality, ethos and a sense of what guides their decisions and actions. Remove the visual identity from these communications and trying to pick a company from the line up would be near impossible without a clear purpose or values informing the personality and tone,
Deloitte recently analysed 100 FTSE company reports to find that nearly a third are considering non-financial matters in line with the new Corporate Governance Code. But only a slim majority of these explain the values, behaviours and culture they seek to uphold.
The FRC’s new guidelines state that the culture of the company should align with its strategy and values and the board should be mindful of their role in leading by example and promoting the company's culture. Workforce policies and practices should reflect the company's values. Inside an organisation, they are a powerful tool for helping to:
- Attract and retain the right talent, through values-based recruitment and performance management
- Engage your people, by describing what they share and guiding how they pull together
- Make consistent decisions: that are beyond pure commercials
- Manage change, providing an anchor point when you need to respond to changing circumstances (e.g. market volatility) and take a different approach
- Defend your reputation: answering the ‘so what?’ of critics and fans alike
Values ultimately help provide an answer to questions like:
How do you do it? Why? What’s the end result? and Why should I believe you?
They help make a company easier to understand, trust and therefore do business with. When not only The FRC, but the world is expecting you to have them, their absence implies you can’t be trusted.
Put simply, values instill trust.