In the last few weeks, I have been reminded several times of how an organization needs to be a whole and truly interconnected system, and particularly how leadership relates and integrates through to the rest of an organization.

Firstly, a new report by the Institute for Leadership & Management describes the importance of ethical leadership and how there is a serious disconnect between the stated values of many organizations and on what basis managers believe their company act. The report advises:

“Just 38% of all managers surveyed feel that behaviour and company values in their organisation are ‘very closely’ aligned”

I suspect that for employees, who were not surveyed, there is an even bigger disconnect, and this is just one of several worrying findings. However, the ILM’s interpretation of this finding does not appear to go very far:

“This management disconnect between those at the top and bottom of an organisation reflects how difficult it is to engage lower level managers with values, and also how hard it is for managers to translate their organisation’s values across their teams.”

Perhaps this is the case. But while the report highlights more leadership alignment with stated corporate values, this conclusion assumes that a firm’s values are exactly what leaders say they are i.e. that they are real and not just rhetoric designed more for branding and PR purposes. Previous blogs have highlighted this values disconnect where leadership’s espoused values are not necessarily those publicly communicated. And how reward for leaders often specifically incentivises action that runs counter to stated values, or at least skews behavior towards a value that may be given much more weight e.g. shareholder value or financial return.

This is important. For example, we do know from some recent excellent and groundbreaking research that an organizations’ ability to ‘live’ its values, particularly as a responsible employer, makes a real difference to their people’s engagement with work and their intentions to stay i.e. ‘good’ values, truly embedded should drive employees to perform and create greater value for an organization.[1] Conversely, not living your values can also create your demise or at least seriously damage your organization.

In recently addressing an audience at the Hay Festival, Mark Price (MD for the UK supermarket Waitrose, part of the John Lewis organization), made a great deal about his firm’s values, how they drive true value creation, and how he needs to be connected to all its’ stakeholders – particularly his staff. This cannot be done overnight and John Lewis have had nearly a century to perfect their approach since John Spedan Lewis’ highly radical and bold initiative aimed to create a very different kind of company.

However, one key issue for Price is that his reward must not be out of kilter with that of employees (so called ‘partners’) – otherwise it undermines the firm’s value of fairness and other key aspects of what the organization is really about, which is an overall value motive societal in dimension. At Waitrose, Price cannot be paid more than 75 times the average worker (very low compared to some extraordinary multiples in the US that measure into the 1,000’s).  Jim Sinegal formerly CEO at Costco has made similar statements about his own firm’s values and value generation. These CEO’s both realize that they must be an integral part of the firm’s system(s) – in this particular case, its reward system.

Perhaps Mark Price’s voice won’t be too lonely for much longer. Another recent report, this time from Deloitte advises that:

“Organizations that have a culture of purpose focus on delivering meaningful  impact for all their stakeholders — customers, employees and communities…and companies whose success is perennial…sustain themselves by generating significant, positive impact for everyone their operations touch. “

While this report lacks any hard evidence and is essentially aspirational in content, it nevertheless taps into a growing sense that organizations need to shift their focus away from pure financial motives to create societal value. In fact, Deloitte is now suggesting this is a business imperative and that if you want to be in business over the long term, you have no choice but to become truly purposeful to all your stakeholders and the society in which you exist.

This report adds yet another voice to the new narrative that is emerging; arguing that the nature of organizations must change.  While it does not provide much guidance to organizations on what to aspire to, nor how to get there, organizational maturity with people at its core provides an excellent model with which to fill this gap.