Value-based management: a choice or an imperative?

Value-based management: a choice or an imperative?

Last month I was invited by MTC Global to chair a panel discussion on Value-based Management Education. The panel, constituting of distinguished experts from the field of education, did a great job of going upstream to look at the fundamentals of value-based management and bringing up poignant issues for discussion and deliberation, like

–          What after all values are?

–          How do they get formed and imbibed?

–          The need and relevance of value-based management

–          How does one practice value-based management and of course

–          The kind of pedagogy required for developing value-based managers

To me it was the beginning of a conversation, raising a pivotal question to all businesses: is value-based management a choice or an imperative.

I remember when I was in CMC – a pioneer in leading the IT revolution in this country – we used to measure ourselves not just by EBIDT or revenue but value-add. Similarly, I am sure, there are businesses which manage and measure value creation across processes using balanced score cards or other similar tools.

The question raised is not just about indicators and measures of value creation. It’s about the source of value creation – the core human values that an enterprise chooses to proactively practice. It is about making a conscious choice to stay contented with just displaying the core values in lobbies or institutionalizing the same to derive a blueprint for doing business.

In my 30 years of journeying with 50 plus corporation – both as an insider as well as an external enabler – I have hardly come across organizations that by executive intent take human values seriously to form the edifice of their existence. While there are a handful that have come with executive intent to get the values uncovered, articulated and socialized, the initiative in most cases has fallen flat due to the intent not being sustained in terms of institutionalizing these values and take them forward to form a blueprint of conducting businesses. In a few other cases, after the discovery, the shared human values of the organization have been conveniently dismissed as ‘soft’ components for culture building having nothing to do with hard business directions and strategies.

While choice-making is a fundamental right for any entity including the choice to make or mar, grow or die, it is important today that the choices we make for our businesses are conscious choices – choices not just made out of what has been or is the best practice (of ignorance) but made out of a deep understanding of organizational fundamentals and what makes it sustain its growth and performance.

In today’s context, no matter what the business drivers are, here are five principles that not only govern the life and business of an enterprise but also the business environment it operates in:

1)      All enterprise that engages human power as stakeholders to generate value is by nature humanistic.

2)      All humanistic enterprises are inherently living – reaching out, relating, growing and moving out of old habits to adapt to new habitats – following the laws of nature.

3)     Some of these living enterprises carry an intelligent close-loop feedback mechanism to continually sense and respond to the changing habitat and thus evolve. These are conscious enterprises.

4)     All living (conscious or not so conscious) enterprise inherit a set of values of the founders / early members as elements of its essence or memetic DNA, which can be uncovered, articulated and used as building blocks of the nature of business that best suits the enterprise.

5)     The enterprise decisions, directions and drivers are borne out of these values; irrespective of what they set out do as business, they define how the same is done in a manner that aligns to the purpose of the enterprise, draws upon its innate potentials (both being is distinct from that of the collective) and builds / sustains harmony with the business eco-system in which it operates.

Virtuous and viscous enterprise

Virtuous and viscous enterprise

If we look closely into the anatomy of success of some of the iconic names, we can see how their values have a played a pivotal role not only in making them successful but also standout as unique and invincible.  For example, let’s look at the core values of Apple as defined by Tim Cook. These are:

  • We believe that we’re on the face of the Earth to make great products
  • We believe in the simple, not the complex
  • We believe that we need to own and control the primary technologies behind the products we make
  • We participate only in markets where we can make a significant contribution
  • We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us
  • We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot
  • We don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change

While you may want to argue that Apple’s run-away success is attributed to its product development and marketing strategies, you will also see a correspondence between the above values and how Apple has conducted itself – in good times as well as tough times – to enjoy sustained supremacy. You may want, to whet your curiosity, carry similar studies with the likes of GE, IBM, Microsoft and even HP. The empirical evidence of values being the bedrock of building an enterprise that emerges as a numero uno, a one of its kind and doggedly resilient of economic inclemency will be apparent.

Values are not passports of enterprise excellence. They are an assurance for the ability to evolve, thrive and sustain. Like a tree that is well-rooted, a living / conscious enterprise bed-rocked on certain core values, may sway vigorously in time of stormy economy, but will stay rooted for the storm to pass and then re-invent itself. That, itself, the phenomenal staying power, the rootedness, is the cause of its inherent strength which incidentally makes itself manifest in business excellence.

So, is value-based management a choice or an imperative? Is investing in discovery, articulation and institutionalization of the enterprise values a luxury or a mandate? Is being alive and conscious as an enterprise a philosophical or a strategic decision?

Your answer to the above questions will decide how you want your enterprise to be driven: by short terms need / greed or by sustained core values. And based on your decision will you carve out the destiny of your enterprise – as a virtuous one commanding ageless respect and returning economic value on investment year on year or a vicious enterprise showing dramatic growth in a short time only to go bust and be forgotten by the next economic cycle.

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