How Core Values Drive Performance
by John Treace
June 1, 2012
As a senior sales officer charged with effecting business turnarounds for bankrupt private and pre-IPO companies, I witnessed firsthand the importance of core values. A strong set of core values is crucial to driving corporate performance, and without them, companies suffer.
Core values define company culture, which is a big part of why they're so important to driving performance. We can represent the relationship this way:
core values → company culture → actions/performance
For any sales team, the primary objective is to predictably and consistently produce sales, within budget and in accordance with our forecasts. Core values, and the company culture they support, are the most important ingredient in achieving predictability and consistency in the actions that bring about the results we want.
Defining Core Values
Core values are simple action statements that express the business attributes management upholds and believes will lead the company to success. They are not vague proclamations such as "Do the right thing"—these can be interpreted at the whim of management depending on temporary conditions and motives. Core values should be specific and measurable. First, management should identify the desired attribute it wants to support; then, the core value can be determined from that starting point.
If, for example, management wants to emphasize financial responsibility, it would have core values that address how employees operate in regard to the finances of the company. Here are some examples:
- "Don't run out of cash, no matter what." This core value keeps employees focused on adhering to the expense budget
- "Be careful: a little success can create a lot of overhead." This core value keeps employees focused on not overly expanding their departments in good years when there is excess income, putting the company at risk in slow years. This often results in layoffs, which are to be avoided.
- "Throwing money at a problem doesn't work." This core value forces managers to think carefully through their plans to ensure a positive outcome within expense budget guidelines. It reminds them that throwing money at a problem almost never works, since it usually involves giving more funds to the people who created the problem in the first place.
If management believes that execution is a key to success, its core values would emphasize that the company values high performers. These core values might include the following:
- "Surround yourself with only high performers." This core value keeps managers focused on excellence in hiring and managing employees.
- "Make it a challenge to get on board and difficult to leave." This core value defines the way the company hires and manages people. If management hires only high performers, there will be few openings due to terminations for underperformance. And if we manage them well, they will not want to leave the company. The net result is a dedicated group of high performers.
If management values fairness—something every employee wants—this core value could apply: "Always do the right thing for customers, employees, and shareholders, and don't take a position that favors one over the other." This sends a strong message that one group will not benefit at the expense of another. For example, the company with this core value will not reduce sales commissions to shift dollars to management with higher bonuses or shareholders with higher dividends.
I once worked as a sales representative for a company that was not organized around core values. As a result, management's decisions varied from topic to topic and from year to year. Management always said they "did the right thing," but the right thing mostly seemed to benefit management. For example, late one year commissions were dramatically reduced to the sales force, and company insiders leaked to the sales team that this was done so that senior management could receive full bonuses that year. The sales force's morale plummeted, as did its sales numbers.
Communicating Core Values
Once identified, core values should be published and posted throughout a company. They can be reviewed in state-of-the-business meetings with all employees or in any other suitable venue. When presenting them, it is important to make an emotional connection between each core value and all employees. Simply reading them to the staff or posting them without explanation is not effective. Just reading the core value "Don't run out of cash no matter what" doesn't mean much, as most employees cannot envision the company going bankrupt. Instead, follow the presentation of that core value by asking the team, "Have you ever known someone who didn't receive a paycheck?" You will see hands shoot up all through the audience. "If so," you say, "they worked for a company that didn't have this core value."
Presenting the core value this way makes an emotional connection, and employees will remember it and be able to internalize it. When core values are internalized, employees will understand them at a deep level, which in turn promotes the desired culture.
Companies and departments in companies are guided by mission statements, which should define culture, drive performance, and be supported by the company's core values. The mission statements of departments can be more specific than those of the whole company and can be used as a blueprint for action.
Here is a mission statement I used in one sales department: "Our mission is to consistently and predictably support the corporate sales and profit goals through efficient sales and servicing efforts while providing the highest degree of customer satisfaction." Once we had the mission defined, we looked to identify the actions that would ensure its accomplishment. We identified three guiding principles:
- We will obtain for the customer what they want, and we'll do it better than any other company.
- We will develop and maintain a sales management system that allows our representatives to maximize selling time while spending the least amount of time in front of the customer.
- We will develop and maintain a business environment for all sales department personnel that will enhance pride in the company, confirm the value of long-term relationships, and allow all employees the opportunity to reach their professional goals better with us than they could with any other company.
Taking the guiding principles in reverse order, if we could accomplish item three, we would attract and keep salespeople who were high performers. If we accomplished number two, we would have an efficient sales process. Number one addresses taking great care of the customer. In summary, if we could successfully accomplish these three guiding principles of establishing a team of high performers, maintaining an effective sales process, and taking great care of the customer, then we would achieve our mission statement.
It is important to note that the mission statement and guiding principles were supported by the published core values of this company. In this regard, the published core values defined the culture and actions needed for success. Culture, defined by core values, drove our performance.
There is nothing more important in developing and maintaining powerful businesses than establishing a winning culture base on published core values. People want to work for companies that are governed by established principles and management that supports them. Core values are where powerful businesses begin, and smart management will diligently work to enhance their effectiveness.
John R. Treace has over 30 years experience as a sales executive in the medical products industry. He spent over 10 years specializing in the restructuring of sales departments of companies that were either bankrupt or failing. Investor groups and venture capital firms hired him to manage turnarounds of pre-IPO companies. In 2010, he founded JR Treace & Associates, a sales management consulting business. He is a member of the National Speakers Association and earned a BS in Psychology from the University of Memphis.
Treace is the author of the new book, Nuts & Bolts of Sales Management: How to Build a High-Velocity Sales Organization. He is a columnist at Inc.com, has contributed countless articles to top media outlets and industry publications and has been quoted as an expert by Wall Street Journal's FINS blog, Investor's Business Daily, Financial Post, BNET.com, and The Globe and Mail. For more information, please visit www.treaceconsulting.com.