Corporations are the shadows of their leaders

JAKARTA (JP): The corporation has become the focal point of many people's lives.

This is because most people spend 40 to 60 hours of every week of their lives working for the corporation. It then becomes the institution that they have the most contact with and the one they are most familiar with.

The above fact is a reminder that the corporation has become a major influence in someone's life.

Nevertheless, while life is a process of competition and selection, a corporation needs to compete for the minds and hearts of those who join them; in this case, the employees. This is where corporate values come into the picture, and it serves as an appeal to employees' hearts and minds.

Corporate values are often defined as "a set of distinctive or fundamental beliefs the corporation stands for" (Quingley, 1994) and serve as guidelines for making decisions within the corporation.

If you find that too conceptual and difficult to grasp, let's take an analogy from our childhood. Think back to what your parents told you during that time: "Say thank you, don't lie and ask before you use someone's things".

These were the guiding principles that our parents tried to indoctrinate in us, because if we followed them, we would never play with abandoned toys, for example, because it went against our values at that time.

Corporate values, similar to those we learned in childhood, are a fundamental element for a company. As a corporation becomes an institution, and thus a society in itself, a set of values becomes a necessity. They help employees to learn and grow within the corporation, just like we experienced during childhood with our parents.

One empirical study done by James C. Collins and Jerry I. Poras (1993) and written in their book Built to Last, showed that most visionary companies, premier institutions in their respective industries, were characterized by having a set of strong and core values they believed deeply in.

Strongly subscribing to this set of ideology, these visionary companies, widely admired by their peers and having a long track record of making a significant impact on the world around them, such as Citicorp, IBM, Nordstrom and Sony, outperformed their rivals, such as Chase, Burroughs, Melville and Kenwood, in terms of cumulative stock returns.

Relationship

Let's take Sony for example. Sony is widely known for its values on innovation. This belief is clearly stated in their prospectus as their management guidelines. An excerpt from it reads: "Purpose of Incorporation: To establish a place of work where engineers can feel the joy of technological innovation, be aware of their mission to society, and work to their heart's content.

"Management Guidelines: We shall welcome technical difficulties and focus on highly sophisticated products that have great usefulness in society, regardless of the quantity involved."

It is a strong message to support the innovation within the corporation; a deep sense of purpose which aims far beyond the profit.

But is that all it takes? I have seen many corporations put these words in their annual report, but it does not reflect the reality.

Here again is a very good point: Keep in mind that people will not embrace words. They will only be strongly influenced by actions -- real actions. This is what sets the visionary companies apart from their competitors.

Moreover, in a case where values become deeply ingrained in each individual within an organization, a cultic environment is created, which makes people who enter the organization feel like they fit in or that they do not belong.

In the case of Nordstorm, a giant retailer in the United States where customer satisfaction is the most sought after value, many employees who were intelligent and technically gifted left the corporation within a short period of time.

This happened because they were unwilling to "...not get irritated when facing an irrational customer, or start their career by being a gift wrapper". They did not leave because they were not any good. Actually, they were among the best graduates in the country. They just did not fit in with the corporation's values. And that is a powerful mechanism in building a strong corporation.

In a nutshell, a company with strong values, such as the visionary companies mentioned, have such clarity about who they are and what they are trying to achieve that they tend to have little room for people unwilling or unsuited to their demanding standards.

Building values

Of course, after all these facts, the next question is: "How can we cultivate and build strong values and eventually culture in our organization?"

Based on Arthur Andersen's experiences making several significant changes within companies in Indonesia or in others around the globe, there is actually no one-size-fits-all approach. Each company is unique, and each one needs a tailored approach that fits in with their current culture.

Values have to be pushed by the top management team as they are the role models for other employees. In a paternalistic culture like in Indonesia, it is commonly cited that organization is the shadow of its leaders.

When leaders demonstrate the required behavior which is appropriate for the values they preach, then people understand the message clearly. The leader is the message.

If leaders are not committed or consistent with the preached values, people quickly come to the conclusion: "It's lip service, it won't change anything!"

One such experience was at a major mining company in Indonesia, which experienced dramatic changes during the early 1990s. To eliminate the culture of being feudalistic in the company, the first step that the new CEO took was demolishing all visible symbols of it.

He traded his official luxury car with the most common vehicle, the Toyota Kijang. He prohibited a person's job title from being printed on their name card or hung on the office door. He refused to wear a safari suit, which was the choice of top state officials at that time, and instructed all employees, from the directors to the miners, to wear the same uniform. And it worked.

The employees got the message that the organization was serious about changing, as was visibly demonstrated by the leaders.

Nothing Soft

Even though values and culture tend to be soft issues, meaning they are intangible in nature and deal more with the heart and less with the head, the interventions for changing culture or building values are nevertheless hard core, based on Peter Senges' Fifth Discipline (1992), a concept of systems thinking that "structure drives behaviors".

For example, to change values and culture we need to reconstruct an organization's structure. The old organizational structure, which tended to support the bureaucratic culture in one of our clients, was reconstructed to become leaner and have matrices.

Consider the case of Wainwright, a U.S. company that successfully transformed itself into a customer-focused organization.

Before beginning the era to promote their customer satisfaction philosophy, the organization had several hard systems in place that supported their philosophy.

These systems included an internal and external customer satisfaction process, continuous improvement program and a performance measurement system. These structures and systems were nonetheless the primary drivers in changing behavior.

Even though most interventions are difficult, efforts to remind and encourage appropriate behavior are still needed as reinforcement.

However, from our experience, this should come after people have seen the changes. Communicating and preaching what is not visible is like hearing a fictional story from an unpopular storyteller.

During the major transformation of the mining company, the leaders never got bored of preaching to employees about the new values and culture. Almost no single corporate meeting, gathering or training session was adjourned without mentioning or discussing the new values and culture.

The company even invested Rp 5 billion in a 120 hectare outdoor-experiential learning activity, as a media to reinforce and indoctrinate the set of new values in each employee.

In the end, nobody can dare say that developing values and changing culture is easy.

Actually, it is extremely difficult.

If you are one of the many who have not done so, start thinking about it! You do not want to be outperformed in the end, do you?

-- Ibnu A. Mulyanto, Arthur Andersen Business Consulting.