Financial excellence results when a corporation's values and its ethics support its strategy.  Many companies, unbeknownst to their leadership, operate with at least three separate, and usually non-aligned, value systems: the Values that management communicates, both orally and in writing; the Values that employees believe drive management's conduct; and the Values that actually underpin the interpersonal dynamics of the organization.  To gain strategic advantage, these three systems must first be identified, then integrated into one system of values.


Financial excellence results when a corporation's values and its ethics support its strategy. Ethics is a component of strategy because every business secures its future by making a contribution.  The act of making a contribution is fundamentally an ethical activity.  Identifying that contribution and maximizing its value is the field of strategy.  Profit is the value the market attaches to an organization's contribution and the efficiency with which it makes that contribution.

Employees who see their company making a valued contribution (with profits as the outcome), rather than merely generating shareholder wealth, commit to their work with greater passion. This leads to a partnership between employees and corporate leadership that boosts innovation and uplifts performance.  Ethics play a vital role in the preservation of this priceless partnership, which can thrive only in an atmosphere of trust and integrity.  Trust and integrity result from integrating an organization's disparate value systems and aligning them with the organization's strategic objectives.


Values are beliefs about what is good and what is bad, what is right and what is wrong.  Even people of different cultures differ very little about these beliefs.1  Nearly all people would like their children to be honest, fair, courteous, charitable, and so on.  People do, however, differ substantially when it comes to the "price" they are willing to pay for what is right.2  Ethics is the "cost" that a person will pay to uphold his values.  It is the way a person translates his or her beliefs into actions (or abstentions) that entail a cost.  Most people differ in their ethics, rather than in their values.

Thus, adopting a change in values alone will not impact on any aspect of organizational performance.  Rather, the way an organization translates its values into an ethic will impact on its strategic objectives.


Many companies, unbeknownst to their leadership, operate with at least three separate and usually non-aligned value systems.  Measuring the degree of alignment between these value systems and determining what drives each of them highlights the opportunities for change.

The three value systems are:

1. The Espoused Value System - The Values that management communicates both orally and in writing.
2. The Perceived Value System - The Values that employees believe drive management's conduct.
3. The Actual Value System - The values that actually underpin the interpersonal dynamics of the organization. Management may have never previously articulated these values and employees may never have identified them.

To gain strategic advantage, these three systems must be integrated into one system of values.  Furthermore, in order for these values to impact on financial performance, senior management must translate them into an ethic that supports the organization's objectives, that is aligned with its strategy and is understood at all levels of the organization.


An organization's espoused values are either implied or articulated in its published materials.3 But the way employees' honestly perceive management's values are often very different from the values that management espouses.  Qualitative research methodology can probe employee perceptions.  However, exposing the actual values and ethics that drive the organization requires that one analyze the reasons for those perceptions, in light of various management decisions and behaviors.


It is, at times, difficult for an organization's leadership to acknowledge the existence of divergent value systems and to understand the implications of the divergence.  It is even more difficult for leaders to confront the truth of what the values are that really drive their organization.  Yet this confrontation with the truth is a vital step in crafting an integrated value system that can transform an organization and impact its performance.

An integrated value system takes into account the strategic objectives of the organization, the personal values of leadership, and the diversity of its employees.  It aligns employee perceptions with management's espoused values.  A system such as this can translate into the actual ethic that drives management decisions and conduct.  This ethic differentiates the organization in all that it does.


Choosing values is easy.  However, leaders often rethink their organizations' values when they confront the behavioral and organizational changes that those values would compel when translated into a living ethic.  They need to examine how congruent the chosen values are and how they promote or undermine corporate intent and strategic objectives.  Only then can leadership comfortably commit to a new system with all of its defined implications.


We shall describe three cases of organizational values actually or potentially undermining organizational strategy and describe Strategic Business Ethic's approach to resolving the situations.  The first case is in the Health Care Industry, the second in the Banking Industry, and the third is a case of Mergers and Acquisitions.


The people in an organization who develop its strategy are not usually the same people tasked to develop the organization's values.  Even when the same people undertake both of these tasks, they do not often appreciate the intricate relationship between values and strategy, nor do they have the expertise to translate values into ethics.


The Vice-President of Human Resources of a large Health Care Organization was energetically imparting the value of caring in the organization.  All of the staff espoused this value, and the Chief Executive supported it.  However, the Vice-President of Operations was driving a relentless strategy of cost reduction to ensure the survival of the organization in a tumultuous phase of the Health Care industry's evolution.  Both leaders are people of impressive intellectual and moral stature, and both drove their campaigns hard.  Both initiatives were vital for the organization.  Their two departments enjoyed excellent relations.  Yet the value of caring undermined the efficiency strategy.  Staff could not align the need to reduce patient/nurse ratios with the value of caring.  They could not relate to the downsizing of certain departments in an organization that claimed to care not only for its patients, but also for its staff.  Not only did the organization fail to achieve its cost-cutting goals, but it was also experiencing reductions in standards of caring.  More serious, however, was employees' loss of respect for leadership's integrity.  The values initiative lost credibility, and employees saw the cost focus as the only thing that really counted.  Patients were not the only ones who suffered from this deterioration.  Everyone suffered, including the organization's capacity to sustain its dominant competitive position.


We changed cost-consciousness from a survival tactic to a value that integrated with patient caring.  Nursing staff began to seek their own ways to cut costs as part of their patient caring, realizing that doing so would extend quality medical care to more people.  Staff reductions initiated by the nursing staff themselves, did not cause resentment and did not impact negatively on the quality of patient caring.  We translated these and other supporting values (beliefs) into an ethic (conduct) that management began to live by.  Even senior personnel, responsible for large amounts of revenue, were counseled when they transgressed organizational values.  No longer was rainmaking seen to be more important than quality in interpersonal conduct.  Very soon, this work began to impact, achieving astonishing results in employee commitment to both cost efficiency and excellence of care.



Throughout its long history, a prominent banking institution entrenched the values of fairness and loyalty among its managers and employees.  When globalization and technology transformed the Financial Services industry, these values began to inhibit the Bank's drive for efficiency and excellence.  The Bank downsized and started to reward peoples' performances, rather than their loyalties.  Employees felt alienated from the organizations' traditional ethics and began to passively sabotage the company's objectives.


We redefined the implications of loyalty and explained it as 100% mutual commitment during an employee's career at the Bank, but not lifetime employment.  We taught the reasons why lifetime employment was neither strategically nor ethically appropriate.  We explained fairness as treating all people according to the same value system, rather than as treating all people the same.  The value system dictated that greater contributors be treated more favorably than smaller contributors.  This was not unfair.  The impact on morale and employee retention during the changes was remarkable.  It enabled management to focus on the Bank's pressing strategic needs, rather than pacifying disgruntle but key employees.



The pressure to "close the deal" in mergers and acquisitions should never undermine the greatest imperative - delivering shareholder value.  Often the most critical cause of failure is the clash of cultures and incompatible strategic thinking.  Successful merging requires synchronizing the diverse skills of all employees into a vision for a new company that is greater than the sum of its parts.  Architects of successful mergers and acquisitions should always diagnose the ethical dynamics of both companies and qualitatively evaluate the strategic thinking of each of them.  This forewarns them of the potential pitfalls of the merger and assists them to design a merger strategy that extends beyond structure; a strategy to build an integrated ethic for the new corporate entity.  When employees see this process of incorporating ethics into strategy, they gain faith in the direction of the new entity, the integrity of its leadership, and the brilliance of its future.


In a recent merger, two successful banks were struggling to convince each other of the merits of their respective strategies in an attempt to truly merge rather than merely "take over."  Our ethical and strategic diagnosis clarified to the combined management team why each strategy served the cultures of each bank in the past, but neither could serve the culture of the new entity.  After understanding the value system of the new entity, we designed a strategy different from either of the original two, but tailored to the new organization.  In harsh conditions, this accelerated revenue generation beyond expectation.


Organizations optimize their productivity when employees view their work as much more than the mere trading of skills for money.  To achieve this heightened commitment, organizations should integrate their values, translate them into an ethic, and align that ethic with their strategies.  When an organization achieves this, its employees see their work as vehicles with which to fulfill their own higher spiritual quests to make rare and needed contributions.  The money they earn reflects the value of their contribution and provides them with both economic security and emotional self-esteem.  This leads employees to invest their intellects and their passion in the work they do, driving their organizations' thinking to the very edge of competitiveness, and their performance… beyond that.