Like everything else in the world, management philosophies are changing, adapting to the realities of the marketplace and increased complexity in every facet of life. This will obviously impact on us as trainers or performance consultants. I do not say that this is a universal change here or elsewhere in the world but it is my view, based on the management and professional literature, conference proceedings and interaction with colleagues, that there is a trend and a need – an imperative to adopt – something that’s being called ‘management by values’. This is so because the new organisation will evolve, and in some cases has already evolved, into a values-based organisation.

Theories of management have been evolving since the start of the 20th century. The prevailing management philosophy in 1900 was management by instruction. This perspective came from the idea that the organisation had top-down control and supervision, where employees were not expected to think and feelings were irrelevant. The products were standardised, and the customer was happy to buy those products and was loyal to the brand. The purpose of the organisation was to maintain production (more or bigger is better), and employees were expected to be loyal and follow instructions in the organisation – a pyramid with many levels.

By the 1960s we had progressed to management by objectives, where the focus was on ‘local’ objectives in order to optimise production. Management by objectives did not take into account the human factor, in the sense that objectives only have a meaning when they are intimately linked to people’s beliefs and values. It measured results, focused on efficiency and the leaders were allocators of resources. It was in this period that the term ‘human resource’ was born.

By the end of the 20th century we had moved to management by values. No more brand loyalty. In the 1990s brand promiscuity was used, to be replaced by acknowledging customers with judgement and freedom of choice. Robotics, process automation and data telecommunication call for increases in the level of professional knowledge and skills, and critically the skills of learning and creativity. Professionalism and creativity both require autonomy, flexibility and freedoms to express and explore that are simply inconsistent with prior styles of management.

Creativity and professionalism also require an atmosphere of trust. It is unlikely that you would openly communicate with (trust) anyone if you believed they couldn’t care less about your values or views.

Fred Wiersema, the researcher and co-author of The Discipline of Market Leaders, points out that fundamentally there are only three business strategies on which all organisations place a varying degree of emphasis. These are product leadership, operational excellence and customer intimacy.¹ Wiersema suggests that for organisations to survive they need a basic proficiency in all three of these elements. However, in order to grow or become a market leader an organisation must choose to prioritise one of these three strategies ahead of the other two, and then develop and manage the quality execution of their chosen strategic mix.

A strong business case for any organisation to work with values can be summed up by research comparing the impact of strategy and culture on performance variability.² His study of more than 100 companies over an eight-year period showed that an organisational strategy accounted for 2 per cent of performance variability while organisational culture accounted for 17 per cent of performance variability. In other words, even the best business strategy in the world will under-perform without a supporting and aligned organisational culture. With your culture accounting for 17 per cent influence on performance variation, the effectiveness of your strategic mix becomes very vulnerable in an unaligned culture. The key ingredient of any culture is values. Often misunderstood, values are simply preferences and priorities that reflect what’s most important. In all organisations, values are at work every day.

If an organisation values profit, productivity and quality it will prefer to operate in a way that prioritises action and behaviour that reflects those values. Another organisation that values innovation, research and learning will prefer to operate in a way that prioritises action and behaviour that reflects those values. For either organisation, if the values that are influencing daily behaviour and actions are not aligned with the strategies, then their performance and results will suffer.

So how can we see alignment between culture and strategy? All values in an organisation culture fall into one of three distinct categories: control, ethical and development. These three categories relate directly to the three strategies identified.

Operational excellence >> Control values
Customer intimacy >> Ethical values
Product leadership >> Development values

Using the AVI (A Values Inventory, developed by Paul Chippendale, co-author of an excellent book explaining values),³ organisations can now map and measure their mix of control, ethical and development values, and determine the degree of alignment between the values driving their culture and their strategic mix as well as the influence the values are having on leadership and the people within the business.⁴

References
1. Michael Treacy and Fred Wiersema, The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market, Perseus Publishing, 1997.
2. Mike West and Malcolm Patterson, ‘The workforce and productivity: people management is the key to closing the productivity gap’, Aston Business School and London School of Economics, which appeared in New Economy, 1999.
3. Paul Chippendale and Clare Collins, New Wisdom II, Acorn Publications, 1995.
4. Michael Henderson and Paul Chippendale, ‘A business case for working with values’. To view, visit Minessense Group website at http://www.minessence.net/PDFs/A%20Business%20case%20for%20values%20_3_.pdf

John Loty is president of the International Society for Performance Improvement (ISPI), Sydney chapter (www.ispisydney.org.au). He is also a member of the NSW Council of the Australian Institute of Training and Development (AITD) (www.aitd.com.au/) and director of International Asia Pacific Pty Ltd (www.scilnet.com.au). John can be contacted at Learning@scilnet.com.au

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