1. Lack of constancy of purpose
2. Emphasis on short-term profits
3. Emphasis on performance assessments or annual reviews
4. Mobility of top management
5. Running a company on visible figures alone (“counting the money”)
6. Poor customer retention/high customer turnover
7. Excessive legal costs

Here is the full article at the LRI website: Seven Signs of Poor Organizational Effectiveness

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General Electric spent millions on its Carousel of Progress, first displayed at the New York World’s Fair in 1968 and then later at Disneyland, to communicate its core value of innovation. At ED O, a manufacturer of satellite equipment in Deer Park, New York, the lobby contains large illuminated models and photographs of the military satellites ED O has helped design and build over the past 20 years. The message is: “We provide the technologies that are vital to the nation’s defense.” Symbolic acts can establish standards of excellence.

When Dick Cooley took over at Wells Fargo Bank, he ripped out the executive dining room and cut out other executive perks. Symbolically, he was saying: “I’m serious about cost cutting and it begins with us.”

When William Donald Schaefer, the mayor of Baltimore, got fed up with the city’s pothole problem, he initiated an “Adopt a Pothole” program. Not only did it raise money for repairs, it generated national publicity and embarrassed the city’s public works department into making pothole repair a priority.

Symbols play a huge role in advertising campaigns. Yahoo’s name (and cowboy jingle) symbolized the irreverent, Wild West nature of its origins. For a time, Sprint’s televised advertisements showed a slow-motion pin dropping on a table. The symbolic message: Our service is so clear and quiet you can hear a pin drop.

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Here’s an example of a set of “core values” that one management team came up with:

• We work as a team
• We act with integrity and honesty
• We champion and celebrate diversity
• We expect and support exceptional service
• We celebrate our successes
• We encourage creativity and innovation
• We care about our community

This list is incomplete. It’s also not well-organized. Some are legitimate core values, such as acting with integrity. Some are key values, such as celebrating successes. Some obvious core values are missing. It should come as no surprise that this particular set of values had little impact on this organization.

Symptoms of “Hollow” Core Values

People “go it alone”— working at odds with one another.
People aren’t held accountable.
People are confused about how their activities and performance objectives tie into the organization.
People take actions contrary to the organization’s interests.
People are reluctant to ask tough questions or clarify their priorities.

Related Causes

Failure to identify the organization’s core values and communicate them.
Failure to communicate and clarify the core values throughout the organization.
Failure to articulate performance measures tied to core values.
Lack of feedback and performance measurement tied to the core values.
Lack of training tied to the core values.

Here’s another example of what I consider to be hollow values from Jamba Juice, a health-oriented seller of fruit-based shakes and other products. Its values spell out the word “fiber.”

Fun – Have fun. Smile and create a spirit of celebration for your customers.
Integrity – Do what you say. Demonstrate good character and encourage an atmosphere of mutual trust and respect.
Balance – Live a balanced life. Consider the needs of customers, team members, and shareholders alike.
Empowerment – Believe in yourself. Be responsive and innovative. Do whatever it takes to make your customer happy.
Respect – Be respectful. Help each other to grow. Contribute to a vibrant and diverse community.

The sentiment behind these values is heartfelt. But they don’t reflect what’s essential to Jamba Juice. It’s a cute marketing gimmick, not a reflection of what’s truly important to the company. The chart on page 23 shows the symptoms of hollow values.

You need to listen carefully for clues that your organization has failed to engage in a deep examination of the organization’s core values. If you sense this, or inherit a listless organization, resolve to do something about it right away. Nothing is more important if you want to move at light speed.

Leading at Light Speed© describes in detail ten quantum leaps to higher levels of organizational performance for leaders at all levels. For management consulting to help your organization clarify and exemplify its core values, call (916) 325-1190 or email info@leadingresources.com.

Leaders need to recognize the importance of aligning everyone around a single set of core values – the company core values – defined as the behaviors and activities essential to the organization’s success. This is a significant departure from the traditional ways of thinking about core values. It is the leader’s job to discover these core values and make them apparent to all. By doing so, you begin to instill deep feelings of trust, ownership and mutual accountability.

Once you’ve defined your organizational core values, you can reinforce them by incorporating them into your performance appraisals and organizational assessments. In order to do that, you need to identify the specific behaviors associated with each core value. For example, “being flexible and adapting to changes in customers’ needs” might be a core behavior associated with customer service.

You need to articulate a set of behaviors that reinforce the core values. Start by listing your core values and related performance measures. Next brainstorm the associated behaviors. Talk about which behaviors are most important in supporting the core values. Each core value should have 10-15 related behaviors.

Once you’ve got a list, share it with other people in the organization and solicit their feedback. After several iterations, you should have a solid list. Make sure senior management has had a chance to review and refine the list before proceeding further.

Armed with your list of core behaviors, you can incorporate them into your performance appraisals and organizational assessments. An example of such an assessment is included below. Every six months this architectural firm surveys all its employees. After the results are compiled, they ask employees to work in teams and brainstorm ways to improve. The result is an organization whose behaviors are well aligned around its core values.

Leading at Light Speed© describes in detail ten quantum leaps to higher levels of organizational performance for leaders at all levels. For management consulting to help your organization clarify and exemplify its core values, call (916) 325-1190 or email info@leadingresources.com.

Step One: Form a Planning Team

A planning team comprised of the senior-most leaders of the organization should tackle the job of defining the core values. After all, they’re the senior stewards of the enterprise. The CEO or top leader needs to be a part of the planning team. His or her strong participation is crucial, given that the results will define priorities and performance measures for the company. If he or she chooses not to actively take part, it’s a sure sign that it will be an empty exercise.

Step Two: Reflect on the Core Values

Members of the planning team should think about and answer the question: What activities are essential for our organization’s success? List some suggested core values and then detail some of the activities and behaviors that are essential to support it. For example, for the core value of financial sustainability, supporting behaviors might be “we keep our prices competitive” or “we maintain good access to credit.” Generate a list of core values and cluster the supporting behaviors.

Step Three: Identify Areas of Concern

Members of the planning team should discuss their draft versions of core values and flag any areas of potential concern or conflict between the values. Talk about cases where these conflicts have occurred.

For example, a planning team member might say: “We currently don’t measure customer satisfaction in any rigorous, systematic way. To do so will be expensive. We assume it will pay off in increased customers and higher sales per customer. Those assumptions are untested. And it will put pressure on our other core values.”

Another planning team member might say: “It is not clear to me that protecting the environment is a core value. It is not entirely within our span of control. There are things we may need to do that would conflict with this value. I want to explore how this would affect our decisions.”

Step Four: Distinguish the Core Values

These are great starting points for lively discussions about what is and what is not a core value. I’ve found that it’s useful to distinguish between “core values” and “key values,” where key values refer to activities that are important, but not as important as the core values. If it comes down to a conflict, core values “trump” key values.

In some cases, for example, investing in innovation may be a key value, not a core value. Or environmental protection may be a key value, not a core value. Ask the team to describe examples of decisions where the tension between these values has surfaced – or will surface in the future. Ask people to tell stories of when these values were compromised. Ask the group to discuss two or three current or future scenarios that might challenge the values, and discuss how they might respond. During this exercise, remind people that the core values are evolving at this stage. Ask how they might refine the core values in light of these discussions.

During these talks, conflicts between personal and organizational values often emerge. Individual members of the team may hold certain personal values very dear – such as community involvement or civic leadership. In each case, remind people to take a stewardship perspective. Ask them: What is the position of the organization? What is essential from the organization’s perspective? Don’t let people off the hook. Make sure they confront this distinction and are willing to accept their responsibility as stewards of the organization.

Step Five: Link Behaviors to the Core Values

Once you’ve identified your core values, it’s important to list all the behaviors that support them in the form of “we statements.” In the example on the next page, you can see how one company translated its core value of customer satisfaction into “we statements.” You can also see how they translated it into an internal survey – with the aim of trying to assess how well they were upholding each “we statement.”

As you go through this process, inevitably someone will ask: “How many ‘we statements’ do we need?” The answer is: “As many as there are behaviors that support the core value.” Typically, there will be at least five and as many as 15 “we statements” for each core value.

One note: You’ll find yourself tempted to use the words “quality” and “excellence” in your “we statements,” as in: “We maintain quality customer service.” There’s a problem with this. Every single core value should be focused on quality or excellence. My suggestion is to find more specific words to describe the behavior, such as: “We maintain a level of customer service that delights our customers each and every time.” And don’t, by any means, create separate core values for “quality” or “excellence.” Those words aren’t specific enough.

Step Six: Define How to Measure the Core Values

By this point, you should have honed your list of core values. Now it’s time to define how you’ll measure them. This is a critical part of building a strong strategic framework. Your core values should be tied to a performance scorecard that contains both metrics (what you’ll measure) and targets (the desired level).

For example, customer satisfaction can be measured by asking customers to rate your products or services. Reliability can be measured by the percentage of defects. Integrity can be measured by asking people (your employees, your customers, your shareholders) what they think.

Once you’ve defined your scorecard, waste no time in starting to implement it. This is the most important thing that leaders can do to align everyone in the organization around the core values. High-performing companies regularly measure their core values and regularly share the results with their employees – and then engage them in discussions about how to improve.

Step Seven: Communicate the Core Values

Once the core values are defined, it’s important to engage managers and employees in understanding them. This will build buy-in. It will also give you an opportunity to communicate what you’re doing and why. People need to hear that you are intent on building a values-based, performance driven organization.

This education process should be conceived as a campaign designed to accomplish three things: 1) engage people, 2) stimulate additional discussion and brainstorming, and 3) communicate how the core values will be measured. This takes time and energy. But it’s well worth it. People should be encouraged to fully discuss and understand the values. Not everyone will get it at first – but that’s okay. The CEO or top leader needs to be fully involved in the education process. His or her leadership in the process is symbolically crucial and the catalyst needed to build ownership of the values at each level.

For example, a financial services company in Los Angeles came up with three core values: Purpose, People and Passion. Each of these was tied to “we statements.” The CEO spent several months communicating these core values, making sure people understood their importance and that they were integrated into everything the company did. Over time, the recruitment of new employees, new employee orientations, performance appraisals, and employee satisfaction surveys all were tied to the core values of Purpose, People and Passion.

As you’re educating people about the core values, make it a big deal. You can translate them into banners, post them in meeting rooms, and incorporate them on your website. In one case, the CEO had a new sign erected in front of the headquarters with the core values emblazoned on it. The day the sign was unveiled, he stood at the entrance, shook every employee’s hand, gave them a matching lapel pin, and said: “These are our values: Wear them with pride.” But that’s not enough.

Through trial and error, I’ve discovered that four conversations are necessary to ensure employees truly feel aligned with – and committed to – their organization’s core values. The first conversation is about how each person interprets the core values. You begin by handing people a copy of the core values and then asking a simple a question: “Would you agree that these are the things most essential to our organization’s success?”

This conversation enables people to discover their common ground – and areas of disagreement. The disagreement is healthy and critical, for it furnishes an opportunity for important dialogue and a chance for people to discover a deeper connection to the value than first appeared. The danger is not that people won’t unite around the core values; it’s that they will unite too quickly, thus avoiding the tough conversations that build understanding and trust.

The second conversation explores the difference between organizational core values and personal core values. This discussion is best handled by asking people to respond to: “What’s most important to you, personally? How does it tie to the organization’s core values?” This conversation enables people to articulate their own values (often for the first time). It gives people a chance to know one another, to appreciate their differences, and to reflect on the fact that their differences are born of deeply held beliefs. For example, an employee of a large retail chain said his greatest passion was painting natural landscapes. He then pointed out that his love of painting shared a surprising connection with excellent customer service. “You have to find hidden delight in each and every encounter,” he said.

The third conversation is about applying the organization’s values to real cases. It’s constructive to look back at times when the organization was not true to its values. Without casting blame, people can ask what happened. Looking forward, they can anticipate scenarios in which the values might again be challenged.

This conversation can begin by asking: “Looking at how we’ve defined the organization’s core values, think of a time when we did not uphold these. What happened? How did we make decisions that led us to that point? What could we do differently in the future in our communication and decision making to forestall it from happening again?”

The final conversation has to do with translating the core values into performance objectives at each level of the organization. People need to discuss the core values scorecard and how they can help make sure the targets are achieved.

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Leading at Light Speed© describes in detail ten quantum leaps to higher levels of organizational performance for leaders at all levels.

To speak with a consultant about how LRI can help clarify organizational core values, call (916) 325-1190 or email info@leadingresources.com..

How can you figure out the core values of your company? What steps should you take? How do you begin the process? Developing core values begins with exploring a question like: “What would someone who was acting in the best interest of this organization do to ensure its success?” This is the essence of John Rawls’ “neutral man” standard, which he articulated in his groundbreaking book A Theory of Justice. This objectivity is at the heart of thinking about core values. To make it easier, I’ve discovered there are a minimum of seven core values that companies need to explore.

Sustainability
Employee Quality
Ethical Integrity
Reliability
Customer Satisfaction
Safety
Environmental Protection

Why these seven? Customer satisfaction and reliability are obvious, since they cut to the heart of attracting and retaining customers, regardless of your product or service. Ethical integrity is essential as well. Given the transparency revolution, companies simply risk too much by not behaving ethically. Attracting and retaining talented people is also essential. attracting them enables an organization to perform at a high level. Retaining them enables an organization to build a culture of excellence (and avoid the inevitable costs when talented people walk out the door). Safety is critical to success in many companies. and environmental protection is now seen by many companies to be a core value, both because it’s the right thing to do, and because ignoring one’s impacts on the environment can lead to customer backlash and financial ruin. and finally, financial sustainability is essential. Without financial resources, the enterprise cannot function.

In short, these core values encompass what is essential to the success of virtually every type of organization. By exploring all of them, you can be sure that you’ve left no stone unturned. this is just the starting point, however. You must develop the details surrounding each core value, including the behaviors (what I refer to as the “we statements”) that support each core value. You also have to peg the core values to a scorecard, so you can measure whether they’re being achieved.

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Core values define what is essential to the success of the organization. Let’s be sure everyone understands what I mean. For example, if I say my house has a lot of “value,” I mean it’s worth a lot of money. But that’s not the same as a core value. If I say: “What I value is my family,” I am stating what is of utmost importance to me. That begins to capture the meaning of “core values.”

There are different systems of values orbiting around us. First, we have our personal values. These are what we value most as an individual: survival, family, personal dignity, and freedom. Beyond these lie other personal work values. Some people value amassing a vast fortune. Others value public service. Some people value creativity, teamwork, or hard physical labor, while others may value intellectual activity. It’s probably safe to assume that Donald Trump holds a different set of personal values than Ralph Nader.

Another layer of values are our community values. These are the things we consider important in our immediate communities. Some value development; some value green space; some value conservative politics; others value progressive politics.

Orbiting around our personal and community values are cultural values. Cultural values vary greatly. Freedom of individual expression is highly valued in the United States. People in Denmark value egalitarianism. Deference to authority is valued in Saudi Arabia. Close-knit families are highly valued in Mexico. Clearly, a culture’s values permeate the people who live within it.

Finally, there are the organization’s core values. When I talk about an organization’s “core values,” I’m referring to the things that are essential to its success, such as product reliability, customer satisfaction, financial success and ethical integrity. These are the values that the organization, if it could speak on its own behalf, would say are essential to its long-term success.

Let’s pause here for a moment. I said that if the organization could speak, the core values are what it would say are essential to its success. But the organization clearly has no voice. No brain. The idea that the organization is an entity may seem somewhat bizarre. But think about it. Most organizations have longevity. Their people come and go. Their leaders are its stewards, the keepers of the organization for a period of time, with a responsibility to turn it over to the next group of leaders in as good if not better shape than when they received it. It follows logically that their leaders must articulate what is essential to the success of the organization.

This notion of corporate stewardship is critical. When the leaders in an organization view themselves as stewards, it enables them to take a longer view – and to articulate the organization’s core values.

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There’s a concept of community in South Africa that’s called “Ubuntu.” It emphasizes the interdependence of each member of the community. It recognizes a person’s status as a human being, entitled to unconditional respect, dignity, value and acceptance. But it also entails the converse. Each person has a corresponding duty to give respect, dignity, value and acceptance to every other member of the community.

The key to leading through others is to orient yourself toward this Ubuntu ideal – toward viewing other people as having needs and concerns equal to your own. When you make this quantum leap, you model respectful communication. You get the right people on the bus. You lead through influence rather than authority. You manage meetings effectively. You develop effective teams.

Theodore Roosevelt said: “The best leader is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.” When you lead through others, you create an environment where trust can grow. Decisions can be decentralized. Everyone begins to act like a leader.

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“The point of resolve” is the moment when an individual or a group summons up the will to make a tough decision. There is risk of loss – and the opportunity for substantial reward. But at some point the door opens, you make the decision, and suddenly it’s behind you. Ahead of you are the consequences. But for the moment, you are at the point of resolve.

When we make tough decisions, hundreds of factors and points of argument come into play. The swirl can confuse us. The process can feel out of control. But at some point, we reach a point of resolve. Once you break through, you’re past the moment of resolve and into implementation mode. There’s no turning back.

To be an effective leader, you need to tell people about these moments of resolve. People need to know you’ve made a tough decision, that you’ve committed to a course of action, and that there’s no turning back. People look for signs of resolve in their leaders – it builds trust to know that their leaders are willing to make tough stands.

Once the decision is made, there’s a critical ground rule that comes into play: Everyone needs to stand united in supporting the decision, even if you opposed it earlier. The ground rule needs to be clear: Once the decision is made, we all support it. Leaders who want to build trust enforce this ground rule and make no exceptions.

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Tom wanted his software development team to create a new product that would dramatically simplify the use of Java tools. Yet Tom worried that the team had grown complacent and risk averse. “We don’t know how to do that,” one of his engineers grumbled when Tom announced the result he wanted. “That’s all right,” said Tom. “You’ll learn.”

Tom set up four teams inside the engineering department with four related tasks, and gave them a deadline. On the wall he put four color-coded charts with milestones and timescales – one for each team.

The process created a frenzy of activity. The teams worked like crazy. On the last day, they asked Tom to come into the conference room. “We’ve got good news and we’ve got bad news,” the engineering VP said.

Tom glanced up. “Tell me the good news first.”

“We’ve got a heck of a product,” said the department chief.

“And the bad news?” asked Tom.

“It doesn’t work,” said the engineer.

Tom smiled. “Sounds great,” he said. “Tell me more.” The engineers described the product and outlined for Tom how it would work – eventually.

“Why couldn’t you make the deadline?” Tom asked.

“Because it was unrealistic,” several people chimed in.

Tom smiled and encouraged them to keep working at it. Four weeks later, the team came in with big grins on their faces. “Guess what?” they said. “It works better than we imagined!”

Today, that product is the backbone of the company’s record profits.

People who fail while innovating should be made to feel welcome to try again – not scared to stick their necks out. That’s how you encourage creative flow.

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A sharply focused niche company enjoys several strategic advantages:

1. It can start small and stay small while maintaining an attractive profit margin.

2. Because of its size, it can adapt quickly to changes in the market and offer cutting-edge services and products that a larger competitor cannot.

3. It can be an attractive “roll-up” opportunity for an investor (who wants to combine several niche players), thus providing a handsome financial return for the founder-owners.

But there are downsides to niche companies, too. Personality conflicts can wreak havoc on small companies. The lack of defined business processes can make it expensive to find the right people to sustain the business once the founder leaves. The lack of objective marketing data may leave them vulnerable to shifts in consumer taste. I’m also struck by the fact that if all you’re doing is selling unicycles, you’d better love unicycling.

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In his book How the Mind Works, Steven Pinker shows exactly how our brains are wired to respond to actions that either build trust or corrode it. He shows how trust gives rise to every one of our emotions – from love and devotion, to jealousy and betrayal. Why do we feel love? Because we trust someone and feel trusted in return. Why do we get angry? Because we feel a lack of trust. Why do we feel betrayed? Because we perceive someone isn’t keeping up his or her end of the bargain.

Trust is Based on the Principle of Reciprocity.

It’s an evolutionary strategy, hard-wired into our genes. If you give me a hand, I’ll return the favor – especially if I think there’s a strong likelihood of repeated transactions with you in the future. Pinker shows that our brains are hard-wired to detect whether reciprocity and trust exist – or whether there are gaps between what we expect to receive and what we actually receive. This “cheater meter” is working in every conscious moment. If I think that you’ve treated me fairly, then my cheater meter is in the green. If not, it swings into the red.

People are remarkably attuned to their cheater meters. You know exactly how much you trust your boss, your peers, and anyone else you know. Think about someone you trust. Fundamentally, if you feel trust, you trust him or her to look after your interests, right? That’s reciprocity at work.

Where is Your Cheater Meter Set?

Adding another layer of nuance to this trust business, each of us sets our cheater meter differently. This is particularly evident at the start of a relationship. Look at the table to the right and see if you can tell where your cheater meter is set.

If you said “trust until,” you join roughly 45 percent of the population who feel that way. Another 45 percent say they “distrust until.” The remaining 10 percent occupy the two extremes, again in roughly even percentages. Building trust begins with knowing how it works, and that people have different trust orientations.

Trust and Expectations

Another dimension of trust has to do with expectations. Some people have very high expectations and thus are easily disappointed. Others have low expectations, and don’t feel particularly bothered when their expectations aren’t met. The chart to the right shows how these two dimensions work together.

People respond very differently when they feel trust. Customers will stay loyal to your company. Suppliers will provide you the best products. Employees will make decisions more quickly, put aside conflicts more easily, and accept compromises more swiftly. If you want to operate at light speed, you need to have your hand on the trust throttle 24/7.

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Let’s pause here for a moment. I said that if the organization could speak, the core values are what it would say are essential to its success. But the organization clearly has no voice. No brain. The idea that the organization is an entity may seem somewhat bizarre. But think about it. Most organizations have longevity. Their people come and go. Their leaders are its stewards, the keepers of the organization for a period of time, with a responsibility to turn it over to the next group of leaders in as good if not better shape than when they received it. It follows logically that their leaders must articulate what is essential to the success of the organization.

This notion of stewardship is critical. When the leaders in an organization view themselves as stewards, it enables them to take a longer view – and to articulate the organization’s core values. Google reflects this kind of stewardship. It has gone through the exercise and has articulated its core values in the following way:

Google’s Core Values

1. Creativity and challenge.
2. Unbiased, accurate and free access to information.
3. Independence and focused objectivity.
4. Long-term financial sustainability.
5. Investment in talented employees.

These core values define what is essential for Google to succeed. Underlying these core values are specific statements about what each means. We’ll get to those next time.

Leading at Light Speed© is a new leadership book for anyone and everyone who cares to build organizations that perform at very high levels, as measured by profitability, growth, and customer retention. In a hyper-connected world, change is occurring at accelerating rates of speed. Leading at Light Speed describes in detail ten quantum leaps to higher levels of organizational performance for leaders at all levels.

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What is the problem with organizational mission statements? The problem is that most organizational mission statements try to say too much – and wind up saying nothing.

Consider the following hypothetical example:

“Synsios Inc. supplies technically innovative software and hardware solutions to the OEM computer market that provide long-term benefits to our customers and our investors.”

This is a hodgepodge mixture of purpose and values, making it difficult to know what the organization is all about. Separating and clarifying purpose and core values may take more time. But doing so builds trust and enables companies to make the right plays, inning after inning after inning, because the right plays are ingrained. That’s a hallmark of a light speed organization.

By the way, I like the idea of mission – of having a deep purpose. That’s clearly consistent with the Six Rings Model. I also think mission statements have their place to describe a goal. “Our mission: increase market share 25%,” reads a sign in Volvo’s marketing department. “Our mission is to build home ownership,” reads a sign at Fannie Mae’s home loan division. Putting a man on the moon was NASA’s famous mission in the 1960′s. Mission statements like these work fine if used to communicate specific priorities.

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A clear vision sharpens the focus. It says, “Here’s our direction, here’s where we’re going, here’s how we’re going to change the world.” Vision is the third ring in the Six Rings Model (see below).

Great leaders build trust by defining vision. People want to know that there’s a plan and a direction. Vision has two components. The external vision defines the outcomes that the company wants to achieve. Sony ’s vision in the 1950s was that “fifty years from now, our brand name will be as well known as any on earth.” General Electric’s vision in the 1980s was “to become number one or number two in every market we serve.”

The second component is an internal vision of change. GE said it would “revolutionize the company to have the speed and agility of small enterprise.” Sony said it would “create innovative products that become pervasive around the world.” Vision needs to be linked to a clear understanding of the strengths and assets of the organization along with the opportunities in the marketplace. Often it means a dramatic shift in focus and direction. Occasionally it requires a full-scale revamping of the company’s business model. Typically, it takes months to develop a fully-understood and fully-realized vision.

Here are the crucial steps:

Step 1: Pick a Time Horizon

The first step is to decide on a time horizon. For some organizations, vision spans a ten-to-fifteen year period. But in others a shorter horizon – three years – is just fine. At Teradyne, a fast-moving maker of software that monitors web performance, the time horizon was one year. Why? Because the software industry was moving so quickly its CEO didn’t see any value in planning beyond a 12-month time horizon.

Step 2: Map the Strategy

Once you decide on a time horizon, the planning team needs to meet and have initial discussions about vision. Ask people to think about these questions in advance. (For this example, I’m assuming a typical time horizon of three years.)

1. What are our strengths as an organization? What do we do exceedingly well?
2. What are our weaknesses? Where do we consistently fall down?
3. What are our opportunities? What’s new that we could be capitalizing on?
4. What are the challenges? What alternatives to our products and services do our customers have? How are those alternatives changing?
5. Who are our primary customers? Who are the people for whom we are trying to create the most value?
6. What trends are affecting our customers? How might their perceptions of the value of our products and services change over the next three years?
7. Are we focusing on the right customers? What would happen if we shifted our customer focus? What could we do more of (or less of) to create increased value for our customers?
8. What is our current business model? How do we create value for customers? how does that translate into profitability?
9. What might be some essential innovations in our way of doing business that would create added value for our customers? How could we re-define our way of doing business?
10. Based on the above, what should be our external vision? What outcomes are we trying to achieve in three years? What are the rationales for that vision?
11. Based on the above, what is our internal vision – how do we envision our organization changing over the next three years to support the external vision?
12. What do we see as the major priorities for change and investment to realize this vision?

Once everyone has discussed these questions, you can create a map, laying out the components of your emerging vision. Plotting them on paper enables people to visualize the emerging vision (see the example below).

This tool is used to develop a vision statement a clear picture of where the organization wants to be in the future. It helps leaders identify the vision “drivers” of the organization. (2 pages)

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Let’s move to the second ring. Core values define what is essential to the success of the organization. Let’s be sure everyone understands what I mean. For example, if I say my house has a lot of “value,” I mean it’s worth a lot of money. But that’s not the same as a core value. If I say: “What I value is my family,” I am stating what is of utmost importance to me. That begins to capture the meaning of “core values.” There are different systems of values orbiting around us.

First, we have our personal values. These are what we value most as an individual: survival, family, personal dignity, and freedom. Beyond these lie other personal work values. Some people value amassing a vast fortune. Others value public service. Some people value creativity, teamwork, or hard physical labor, while others may value intellectual activity. It’s probably safe to assume that Donald Trump holds a different set of personal values than Ralph Nader.

Another layer of values are our community values. These are the things we consider important in our immediate communities. Some value development; some value green space; some value conservative politics; others value progressive politics.

Orbiting around our personal and community values are cultural values. Cultural values vary greatly. Freedom of individual expression is highly valued in the United States. People in Denmark value egalitarianism. Deference to authority is valued in Saudi Arabia. Close-knit families are highly valued in Mexico. Clearly, a culture’s values permeate the people who live within it.

Finally, there are the organization’s core values. When I talk about an organization’s “core values,” I’m referring to the things that are essential to its success, such as product reliability, customer satisfaction, financial success and ethical integrity. These are the values that the organization, if it could speak on its own behalf, would say are essential to its long-term success.

Here is an example of a balanced scorecard tied to an organization’s core values. (1 page)

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Purpose is the first ring of the Six Rings Model. It communicates why the organization exists. Purpose is fundamental. By clarifying purpose, you sharpen the direction of the entire organization. The test of a purpose is this: Does it tell people why the organization exists and what it fundamentally does? Is it concise and easy to understand? Does it communicate by implication what you don’t do?

A company should know why it exists, right? Yet purpose can be exceedingly elusive to define. Disney and Merck have both struggled to reconcile their shareholders’ demands for quarterly profit growth with the goal of innovation, whether it be artistic excellence (Disney) or basic scientific research (Merck). Their purpose statements have provided them with needed clarity during these clashes.

A purpose statement doesn’t sum up everything that the organization does. It’s just the first ring. But it needs to be very clear. Disney’s purpose is to make people happy. Southwest Airlines’ purpose is to provide low fares. That’s it. Clear and simple.

Leading at Light Speed is a new leadership book for building a high-performing organization. It synthesizes over 20 years of consulting experience into 10 Quantum Leaps. Take this free work survey to assess your organization’s strengths and weaknesses.

Every organization needs a purpose statement. This tool explains what a purpose statement is and provides examples. It includes a four-step process for developing a purpose statement. It also includes a series of questions that need to be answered in order to develop a strong purpose statement. (3 pages)

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In order to align the core values, you need to view them as part of a coherent framework, a way of communicating what the organization is all about and where it is going. “The Six Rings Model” is this framework. The Six Rings Model looks the same whether you are JC Penney or the White House. The beauty of this model is that you start in the first ring and work your way outward. Each ring provides a different perspective – or lens- with which to define your company. When one ring is done you move on to the next. It’s an iterative process: the work on one ring informs the work on the others. Each successively narrows the aperture and defines the specific ways in which the organization creates value for its owners and its customers.

The first three rings together form what I call the “strategic focus,” a nexus around which all activities are coordinated and organized. Will we make this product? Yes, because it’s consistent with our strategic focus. Will we enter this market? No, because it conflicts with one of our core values. In short, when you have a well-defined strategic focus, you can make sound, consistent decisions at all levels. Having the strategic focus is the first quantum leap that leaders make to build a light speed organization.

The strategic framework is discussed in Chapter One of Leading at Light Speed, a groundbreaking leadership book describing 10 Quantum Leaps to build trust, spark innovation, and create a high-performing organization. Take this free work survey to assess how well your company measures up to the 10 Quantum Leaps.

This tool defines the six elements of a strategic plan and shows their relationship and inter-dependence. This is a valuable tool to use in guiding an effective strategic planning process.

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Aligning people around core values is the first thing leaders must do. It is the framework that enables you to start moving at light speed. “We are constantly making sure people are aligned with our values,” says Laura Batten, the CEO of a consumer goods manufacturing company. When people truly understand the core values of their organization, they become aligned. The long-term drivers of the company’s health are widely understood. People start to make decisions based on the core values. The enterprise starts picking up speed.

When an organization feels united around well-understood core values, performance is no longer about what’s good for you or me, but what’s good for the long-term. Employees trust the company’s direction. Talented people are motivated to join the team. Customers are drawn to its products and services. Think about Apple and its core value of innovation. Or Starbucks and its core value of consistent quality. Those are not empty promises; they are reflections of the values-driven nature of those enterprises. Think about Nordstrom, Southwest Airlines, and 3M Corporation. These are all companies driven by a framework of core values.

There is a clear link between core values and performance. A grocery chain’s revenues rose 24 percent the year after our firm facilitated its shift to core values. A $200 million software company’s profit margins rose 37 percent. There are many other examples I will describe in detail in this chapter. As Larry Johnston, the CEO of Albertson’s supermarket chain puts it: “There are two dimensions to leadership. Performance and values. You can’t have one without the other.”

Focusing on core values attracts and retains talented people. It’s easier to get the right people to join your organization when you can clearly communicate what’s important, and what behaviors you’re looking for. This reduces turnover, thereby cutting the costs associated with recruiting, retaining, and retraining employees. In a service economy with higher intrinsic labor costs and increasing labor mobility, this is an important source of competitive advantage and profit.

Focusing on core values also attracts and retains loyal customers. People are attracted to companies that are value-driven. Smart companies use this to build tight bonds with their customers. Starbucks, Google, Apple, Southwest, Nordstrom, IBM, and Porsche are all examples of companies that have effectively aligned their employees and customers around a set of core values.

The benefits of core values for an organization are reported in Chapter One of Leading at Light Speed, a groundbreaking leadership book describing 10 Quantum Leaps to build trust, spark innovation, and create a high-performing organization.

Once you have defined your organization’s core values, you can reinforce them by incorporating them into your performance appraisals and organizational assessments. In order to do that, you need to identify the specific behaviors associated with each core value. For example, “being flexible and adapting to changes in customers’ needs” might be a core behavior associated with customer service. (3 pages)

One CEO describes his experience leading people through change as follows: “It’s a race where you run the first four laps as fast as you can – and then you gradually increase the speed.” In order to lead at light speed, you have to accelerate the pace of learning inside the organization. It sounds easy, but it’s not. People are naturally resistant to changing their ways. The secret is what I call “learning loops.”

Learning loops are a process of sharing performance information with people and empowering them to make the changes needed to improve performance. They are similar to feedback loops except they are deliberately designed to achieve organizational change at maximum speed. It means giving the right people the right information at the right time – and sparking their creativity and innovation.

Learning loops should encourage change at the cognitive level. Think about what happens when you’re breezing down the freeway at a brisk 90 m.p.h. and you see a police car in your rear-view mirror. Your brain compares the data on your speedometer to the posted speed limit. Your brain sends an immediate message to your foot to slow down. In other words, data related to performance has been shared immediately with the people empowered to improve it. The right people have gotten the right information at the right time – and are motivated to improve! The learning loop has resulted in a change in behavior – and saved you a speeding ticket.

Learning loops depend on communicating information about performance in a way that’s easy for people to understand. How are we doing on customer satisfaction? how about service reliability? What about finance? Assuming you have a balanced scorecard in place, you can tie it to a performance dashboard that visually depicts whether the organization is achieving its performance goals. You can signify with green, amber and red areas of relative strength and weakness. You can provide detailed comparisons of past and present performance. Arming people with data that is reliable, easy to understand, and has sufficient background detail makes it easy for them to see where they need to make adjustments.

Learning loops need to be immediate. People need to know as quickly as possible what’s going on. It’s not good enough to have quarterly or bimonthly performance “updates.” Feedback needs to occur as soon as the information is available, so that people can communicate and adjust their plans in a way that can actually influence outcomes.

Learning loops need to be shared with people who have the authority and responsibility for improving the performance levels. Start with the people who wield the most influence – typically the members of the senior leadership team. As soon as information becomes available, they need to be talking about which targets are being met – and which are not. It’s not enough to email the report or publicize it on a web site. People need to hear the report as a group, think through the implications, discuss options and share ideas. If progress seems too slow, ratchet up the pressure. That’s how learning loops work.

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The Five Types of Decisions

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The easiest type of decision is autocratic: It’s a decision you make yourself. You pick out your shirt in the morning. You decide how to respond to your email. No one else gets involved. I divide autocratic decisions into two sub-types:

• You make the decision by yourself using the information you have available,
• You obtain information from another person (or other people), and then decide by yourself.

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Many decisions are autocratic, but they are also relatively trivial. What you eat for breakfast, where you park your car, the color of the socks you wear – these are decisions you make on your own. If you reflect on all the decisions you make during a day, you can appreciate how much of life is filled with autocratic decisions.

I can only think of three situations in which a leader should make important decisions in this manner: 1) when the decision is straightforward and you have all the information necessary – in which case you still need to communicate what you’ve decided and why; 2) when time pressure forces you to make the decision quickly – in which case you need to explain those circumstances to people who are affected; or 3) when there’s an overarching imperative to maintain secrecy.

Leaders who want to build an organization capable of operating at light speed should not make important decisions autocratically. Instead, they need to use one of the other four processes.

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Let’s look closer at the consensus decision. By definition, a group makes a consensus decision – not an individual. Consensus means that the vast majority of the group agrees with a particular course of action, based on a thorough airing of all the relevant information and viewpoints. It doesn’t mean unanimous agreement. But it does require that the group reach a decision collectively – and that those who disagree are willing to stand aside and support the will of the group.

There are two sub-types:

• You and another individual share the issues, and then you both generate and evaluate alternatives and reach a decision that you mutually agree on.
• A group of people share the issues, and then everyone generates and evaluates alternatives and reaches a decision by group process that you mutually agree on.

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A consensus decision requires extensive attention to process. The group has to meet often enough to hear all the evidence and viewpoints. Someone has to facilitate the process – to organize the meetings, keep the group focused, record the results of each meeting, and summarize the progress made. A team of senior managers may spend several weeks reaching consensus on the strategic direction of the company. The outcome has to be worth it.

Because consensus decisions consume more time and resources than other types of decisions, they should be reserved for occasions when there are enormous stakes on the line – and when the responsibility for making the decision and owning the results must be shared – or when a group of peers is working to reach agreement and no one has final authority.

Too often, managers use consensus to make decisions that should be made consultatively. This erodes trust. People want their leaders to assume responsibility. They don’t want to try to reach consensus if someone has the authority to decide. But this is what happens every day, in organizations around the world. I vividly remember the head of information technology for a New York bank trying to facilitate consensus among her group of 200 employees. The issue was the selection of a new suburban location for the bank’s back office. She attempted to engage her employees in a discussion of whether to move to Long Island or New Jersey. Yet the decision had already been made by her boss, and it was clear to her employees that her hands were tied. The “faux” process quickly turned ugly. As a result of her attempt at consensus, there was an open revolt against her leadership.

“Faux consensus” inflicts great harm on the organization by eroding trust. Hypocrisy is rarely forgotten. People perceive their leaders as lacking the integrity and honesty to make sound decisions. The lesson is clear: Assume responsibility for communicating the decision-making process. People respect leaders who do. The clearer you are in managing decisions, the more effective you will be as a leader.

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What are consultative decisions?

A consultative decision means you recognize that you don’t have all the information you need, and you actively engage other people in the process. You literally consult with another person or persons. But you make it clear that the final call is yours. Many important decisions are made consultatively.

There are two sub-types:

• You involve other people individually by sharing the issues and obtaining their ideas, suggestions or recommendations. Then you decide.
• You involve other people as a team or a group by sharing the issues and obtaining their ideas, suggestions or recommendations. Then you decide.

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Who should be consulted in a consultative decision? The ground rule is this: If someone is going to be significantly affected by the decision, or if someone has relevant expertise, then their input is important. Including people in a decision can also help them develop as leaders, so that is an important consideration. These ground rules don’t mean you have to engage everyone – or consult with every expert. But you do need to cast a wide net. The best decisions are made when people hear and offer different points of view, even if you have to stretch farther than you might like.

When the consultative process is managed well, it’s clear who is going to make the decision. “Ultimately the call will be mine,” you’d say. “But we need to hear everyone’s views in order for me to make the best decision.”

There are certain phrases you want to avoid. Don’t say: “We need to agree on this” or “I want to get your buy-in.” This implies a different type of decision – a consensus decision. (More on consensus in a moment.) This lack of clarity chips away at trust and teamwork. People think to themselves: “You misled me into thinking that I have a larger role to play than I actually do. Why should I trust you in the future?” Leaders should avoid this trap at all costs.

Some people think that consultative decisions will offend people. They fear hurting people’s feelings by not empowering them. On the contrary. Consensus decisions take much longer than consultative decisions. You’re actually empowering people by valuing their time. What offends people is a lack of straightforward communication. If you mislead people into thinking they have a larger role than they do, they’ll resent you when they learn the truth.

So in answer to the question, “What’s my role?” the leader of a consultative decision would say: “Because I value your expertise and because you will be affected by this decision, I care about your viewpoint and I want to understand it. In the end, because this is a decision for which I am responsible, I need to make the call. And if I make the wrong decision, I assume full responsibility.”

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It starts with writing down the behaviors that are most important for success in a particular job – not the tasks. Managing a team, motivating people, developing under-performers, starting a line of business, engaging people in change – these all might be behaviors you’re looking for. This list becomes your litmus test for selecting the right people.

The corollary of behavior-based interviewing is open-ended recruiting: When a position comes open, you keep searching until you find the right person, even if it means temporary hardship. Finding the right person is simply too important to warrant settling for less.

The quest to get the right people means you should always be on the lookout for talent. After all, talented people are almost by definition not looking for work. So if you want to build a great company, you’re going to have to employ unusual means to get the right people on board. Good leaders typically spend 25 percent of their time recruiting and developing talent.

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The cost of settling for second best can be huge. First, there’s the cost to ensure someone is trained properly. That’s a cost you would bear in any case. But by settling for second best, you may have to spend more time training them to make sure they don’t make mistakes. Maybe you spend more time checking their work. Maybe you insist on multiple signoffs on their decisions. Maybe you revise a process to make sure his or her work is reviewed by someone you trust. For the sake of filling the position, you add a little bit more bureaucracy to the organization.

Now comes the higher, hidden cost. The talented people in your organization start to resent the new person. They’ve got to deal with his or her blunders. Maybe they have to subject themselves to the same bureaucracy. This irritates them at first – then it starts to grate. Morale suffers. Ultimately, the genuinely talented people decide to move on. The net result is a significant erosion of trust. All because you failed to find the right people in the first place.

Here is an example of a typical interview vs. behavior-based interview.

Typical Interview:

Describe your experience in sales.
Have you ever had to manage large accounts?
Describe your greatest success.
What motivates you?
How do you handle conflicts?

Behavior Based Interview:

This position requires a person to make five sales calls a day while traveling in a territory from Minneapolis to Atlanta. Tell me about your experience managing those kinds of sales logistics.

This position requires people to manage large accounts with three or four contacts inside the organization, all of whom need to say “yes” to consummate a sale. Tell me about your experience making such a sale. How did you get them all to say “yes”?

We expect people to be self-motivated. Describe your own motivations for success. Describe examples where you went an extra mile for a client – and for your company?

Tell us how you handled a situation that made you look bad. What did you do? What did you say? What was the result?

This position requires working with an internal R&D team to help them modify our product for a new launch every twelve months. Describe how you’ve successfully managed internal relationships with R&D teams to maximize the success of upgraded products?
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The CEO of one of our client companies calls it his “$35 million mistake.” That’s the total cost of selecting the wrong person to be CTO. The company had been on a fast track to develop a new web-based version of its software application. But after six months, the software team failed to hit its milestones. The CTO blamed it on a lack of quality programmers. Others blamed the CTO, saying she was not a very good manager.

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Initially, the CEO defended her. Then she alienated a key member of the development team. Another member quit. The CEO started to wonder what was going on. He hired a training firm to conduct an assessment and provide team-building sessions. But the team-building sessions failed to produce any meaningful change in the team’s performance.

Three years after hiring her, the CEO finally fired her. The cost to the company? When he considers the loss of anticipated revenues plus the additional capital needed to sustain the development effort, the CEO conservatively estimates it to be $35 million. “That’s a mistake,” he says ruefully, “I will never forget.”

The next hiring cycle was more successful. During the interview process, the CEO focused on the specific behaviors he was looking for. Within three months of hiring a new CTO, the development team was back on track.
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Aligning people around core values is the first thing leaders must do. It is the framework that enables you to start moving at light speed. “We are constantly making sure people are aligned with our values,” says Laura Batten, the CEO of a consumer goods manufacturing company. When people truly understand the core values of their organization, they become aligned. The long-term drivers of the company’s health are widely understood. People start to make decisions based on the core values. The enterprise starts picking up speed.

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When an organization feels united around well-understood core values, performance is no longer about what’s good for you or me, but what’s good for the long-term. Employees trust the company’s direction. Talented people are motivated to join the team. Customers are drawn to its products and services. Think about Apple and its core value of innovation. Or Starbucks and its core value of consistent quality. Those are not empty promises; they are reflections of the values-driven nature of those enterprises. Think about Nordstrom, Southwest Airlines, and 3M Corporation. These are all companies driven by a framework of core values.

There is a clear link between core values and performance. A grocery chain’s revenues rose 24 percent the year after our firm facilitated its shift to core values. A $200 million software company’s profit margins rose 37 percent. There are many other examples I will describe in detail in this chapter. As Larry Johnston, the CEO of Albertson’s supermarket chain puts it: “There are two dimensions to leadership. Performance and values. You can’t have one without the other.”

Focusing on core values attracts and retains talented people. It’s easier to get the right people to join your organization when you can clearly communicate what’s important, and what behaviors you’re looking for. This reduces turnover, thereby cutting the costs associated with recruiting, retaining, and retraining employees. In a service economy with higher intrinsic labor costs and increasing labor mobility, this is an important source of competitive advantage and profit.

Focusing on core values also attracts and retains loyal customers. People are attracted to companies that are value-driven. Smart companies use this to build tight bonds with their customers. Starbucks, Google, Apple, Southwest, Nordstrom, IBM, and Porsche are all examples of companies that have effectively aligned their employees and customers around a set of core values.

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Great leaders build trust by defining vision. People want to know that there’s a plan and a direction. Vision has two components. The external vision defines the outcomes that the company wants to achieve. Sony ’s vision in the 1950s was that “fifty years from now, our brand name will be as well known as any on earth.” General Electric’s vision in the 1980s was “to become number one or number two in every market we serve.”

The second component is an internal vision of change. GE said it would “revolutionize the company to have the speed and agility of small enterprise.” Sony said it would “create innovative products that become pervasive around the world.” Vision needs to be linked to a clear understanding of the strengths and assets of the organization along with the opportunities in the marketplace. Often it means a dramatic shift in focus and direction. Occasionally it requires a full scale revamping of the company’s business model. Typically, it takes months to develop a fully-understood and fully-realized vision.

Here are the crucial steps:

Step 1: Pick a Time Horizon

The first step is to decide on a time horizon. For some organizations, vision spans a ten-to-fifteen year period. But in others a shorter horizon – three years – is just fine. At Teradyne, a fast-moving maker of software that monitors web performance, the time horizon was one year. Why? Because the software industry was moving so quickly its CEO didn’t see any value in planning beyond a 12-month time horizon.

Step 2: Map the Strategy

Once you decide on a time horizon, the planning team needs to meet and have initial discussions about vision. Ask people to think about these questions in advance. (For this example, I’m assuming a typical time horizon of three years.)

1. What are our strengths as an organization? What do we do exceedingly well?
2. What are our weaknesses? Where do we consistently fall down?
3. What are our opportunities? What’s new that we could be capitalizing on?
4. What are the challenges? What alternatives to our products and services do our customers have? How are those alternatives changing?
5. Who are our primary customers? Who are the people for whom we are trying to create the most value?
6. What trends are affecting our customers? How might their perceptions of the value of our products and services change over the next three years?
7. Are we focusing on the right customers? What would happen if we shifted our customer focus? What could we do more of (or less of) to create increased value for our customers?
8. What is our current business model? How do we create value for customers? how does that translate into profitability?
9. What might be some essential innovations in our way of doing business that would create added value for our customers? How could we re-define our way of doing business?
10. Based on the above, what should be our external vision? What outcomes are we trying to achieve in three years? What are the rationales for that vision?
11. Based on the above, what is our internal vision – how do we envision our organization changing over the next three years to support the external vision?
12. What do we see as the major priorities for change and investment to realize this vision?

Once everyone has discussed these questions, you can create a map, laying out the components of your emerging vision. Plotting them on paper enables people to visualize the emerging vision (see the example below).

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First, we have our personal values. These are what we value most as an individual: survival, family, personal dignity, and freedom. Beyond these lie other personal work values. Some people value amassing a vast fortune. Others value public service. Some people value creativity, teamwork, or hard physical labor, while others may value intellectual activity. It’s probably safe to assume that Donald Trump holds a different set of personal values than Ralph Nader.

Another layer of values are our community values. These are the things we consider important in our immediate communities. Some value development; some value green space; some value conservative politics; others value progressive politics.

Orbiting around our personal and community values are cultural values. Cultural values vary greatly. Freedom of individual expression is highly valued in the United States. People in Denmark value egalitarianism. Deference to authority is valued in Saudi Arabia. Close-knit families are highly valued in Mexico. Clearly, a culture’s values permeate the people who live within it.

Finally, there are the organization’s core values. When I talk about an organization’s “core values,” I’m referring to the things that are essential to its success, such as product reliability, customer satisfaction, financial success and ethical integrity. These are the values that the organization, if it could speak on its own behalf, would say are essential to its long-term success.

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The First Ring – Purpose

A company should know why it exists, right? Yet purpose can be exceedingly elusive to define. Disney and Merck have both struggled to reconcile their shareholders’ demands for quarterly profit growth with the goal of innovation, whether it be artistic excellence (Disney) or basic scientific research (Merck). Their purpose statements have provided them with needed clarity during these clashes.

A purpose statement doesn’t sum up everything that the organization does. It’s just the first ring. But it needs to be very clear. Disney’s purpose is to make people happy. Southwest Airlines’ purpose is to provide low fares. That’s it. Clear and simple.

Every person has a set of core values. You have yours, I have mine. Sometimes these are in conflict. To make things more complex, every culture has a set of core values. In an increasingly globalized world, with increasingly diverse workplaces, this means there are more and more opportunities for core values to collide.

The first quantum shift is to recognize the importance of aligning everyone around a single set of core values – the organization’s core values – defined as the behaviors and activities essential to the organization’s success. This is a significant departure from the traditional ways of thinking about core values. It is the leader’s job to discover these core values and make them apparent to all. By doing so, you begin to instill deep feelings of trust, ownership and mutual accountability.

Here are some questions to ask yourself:

Do you communicate clearly and consistently the organization’s core values (what is essential for its success)? Do you make sure there are measures of success tied to the core values?

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