How-core-values-drive-performance

Nov. 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.

By John Treace

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 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 desired results.

Defining core values

Core values are simple action statements that express the business attributes management upholds and believes will lead to company 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 establish 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 reminds employees not to overly expand their departments in good years when there is excess income, which can put 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 their plans through carefully to ensure a positive outcome within expense budget guidelines. It reminds them that throwing money at a problem doesn't usually work, 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 only with high performers." This core value keeps managers focused on excellence in hiring and managing employees.

• "Make it a challenge to get on board and make it 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. This company will not increase prices to benefit shareholders at the expense of customers. No single action should be taken to benefit one group at the expense of another.

I once worked as a sales rep for a company that was not organized around core values. As a result, management's decisions varied from topic to topic and year to year. Management said they always "did the right thing," but the right thing seemed to mostly benefit management. For example, one year commissions were dramatically reduced to the sales force, and company insiders leaked that this was done so that senior management could receive full bonuses. The sales force's morale plummeted, as did its sales numbers. The malaise continued until the company's management was replaced. If this company's management had embraced a value of fairness for all employees in published core values, this situation would not have occurred.

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 another 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" does not 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 throughout 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 internalize it. When core values are internalized, employees understand them at a deep level, which in turn promotes the desired culture. Further, to ensure employee commitment, each employee should understand that violation of a core value will result in disciplinary action.

Driving performance

Companies and their departments are guided by mission statements, which should define culture, drive performance, and be supported by a 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 identified the actions that would ensure its accomplishment. We came up with three guiding principles:

1. We will obtain for the customer what they want, and we'll do it better than any other company.

2. 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.

3. 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.

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. In this publicly traded company we achieved or exceeded the sales plan for 18 straight quarters, which brought initial investors a 10-times return on their original investments within three years of going public.

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 supportive management. Core values are where powerful businesses begin, and smart management will diligently work to enhance their effectiveness.

John R. Treace has more than 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 bankrupt or failing companies. 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 book, Nuts & Bolts of Sales Management: How to Build a High-Velocity Sales Organization. For more information, visit www.treaceconsulting.com.