cec corporate value statements

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COMMUNICATIONS EXECUTIVE COUNCIL JANUARY 2005

www.cec.executiveboard.com

2005 Corporate Executive Board

CCR12WUFEQ

Corporate Value Statements

This secondary research defines the differences between and the significance of corporate value statements, vision statements,

mission statements, codes of conduct, and codes of ethics. Readily available corporate value statements ensure that keystakeholders understand the goals, aspirations, and principles of the company. Corporate value statements transparency in thepublic domain may help to deflect perceptions of corporate dishonesty; however, without executive buy-in, corporate valuestatements may trigger greater reputational problems. This research provides characteristics and examples of superior corporatevalue statements from Intel, Ford, and Siebel.

TERM DEFINITIONS

Given the differences between corporate value, vision, and mission statements and codes of ethics and conduct, each messageguides key stakeholders in distinct ways.

CORPORATE STATEMENTS AND CODES

Term Defining FeaturesIntendedAudience

Vision Statement

Focuses on company aspirations and short-term goals

Speaks to company principles

Internal and

externalstakeholders

MissionStatement

Provides long-term assessment of corporate goals

Defines the boundaries of the business Identifies products, business market, and growth potential

Internal andexternal

stakeholders

Value Statement

Encompasses vision and mission statements Acts as a guide for corporate decision making

Includes four types of values: core, accidental, aspirational, and permission-to-play

Internal andexternal

stakeholders

Code of Ethics Guides employee actions in regards to fiscal responsibility, accountability and equityInternal

stakeholders

Code of Conduct Reflects the role of the business in society and the desired actions of employees Internal

stakeholders

CORPORATE VALUE,VISION,AND MISSION STATEMENTS

Corporate Vision Statements

Vision statements focus on company aspirations and short-term goals.1 According to the

Operations Management Roundtable, vision statements should accomplish the following:

Speak to company principles Encompass all stakeholders

Address needs of the company and its employees

A vision statement acts as a sign post for companies during periods of corporate evolution,accelerating changes in culture by linking stakeholders to the organizations mission.

2,3

Companies usually write vision statements to appear enduring and to reflect long-term goals;however, companies often revise their vision statements to reflect evolving aspirations duringperiods of change.

(Continued on next page)

KEY FINDING

Corporate vision statementsfocus on company aspirations

and short-term goals whileacting as a guide for

companies during periods ofrapid change.


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COMMUNICATIONS EXECUTIVE COUNCIL PAGE 4



CORPORATE VALUE STATEMENTS PUBLIC PRESENCE

While many companies employ codes of ethics and conduct to mold employee and businessactions, corporate value statements provide external stakeholders with an idea of companygoals and ambitions. Hereafter, this report will focus on the prevalence, potential pitfalls, andsuperior characteristics of value statements .

High Prevalence of Corporate Value Statements

Given the publics perceptions of corporate dishonesty following the corporate scandals of theearly 2000s, companies may try to win back trust by publicizing value statements and becomingbetter corporate citizens.

In 2001 the Conference Board of Canada emphasized the importance of purposeful corporatevalue statements by offering reports detailing measures companies can take to incorporateethical guidelines and monitoring measures into value statements. As of 2002, the majority ofFortune 100 companies made their corporate values readily available to the public, asillustrated below:

19,20

Truthful, Purposeful Statements Provide the Greatest Returns

While corporate value statements enable companies to state the mission and vision for thefuture, empty or generic statements can have the following consequences:

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Empty statements that executives do not live by or that are impossible to fulfill cancreate employee resentment

Common core values (e.g., integrity, customer satisfaction, teamwork) fail todistinguish a company from competitors

Corporate value statements effectiveness depends heavily on executive response. Researchillustrates that without top-down buy-in, value statements become meaningless to keystakeholders . Enron serves as an example of a lack of executive buy-in to corporate valuestatements.

22 Executive behaviors during Enrons financial scandal sharply contrast with the

companys value statement, known as Principles of Human Rights:

As illustrated in the case example above, corporate value statements retain little significanceunless value statements guide executive behavior.

23


EXCERPTS FROM ENRONS

PRINCIPLES OF HUMAN RIGHTS

At Enron, we treat others as we expect to be treated ourselves. We believe inrespect for the rights of all individuals and are committed to promoting an environmentcharacterized by dignity and mutual respect.

Enron employees at all levels are expected to be active proponents of our principlesand are trained to report without retribution anything they discover that indicates ourstandards are not being met.

We (Enron employees) are dedicated to conduct business according to all applicablelocal and international laws and regulations including but not limited to the ForeignCorrupt Practice Act, and with the highest professional and ethical standards.

KEY FINDING

Empty or generic valuestatements can create resentful

employees and fail todistinguish a company from its

competitors.

KEY FINDING

As of 2002, the majority ofFortune 100 companies madetheir value statements readily

available to the public.

80%

20%

Available

Not Available

Publicly Available Corporate Value Statements

Enron executives awarded themselveslarge bonuses while the scandal fallout

left employees without jobs

Enron executives encouragedemployees to remain silent about the

accounting fraud through threats

Enron executives misstatedprofits and participated in

corrupt accounting practices


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COMMUNICATIONS EXECUTIVE COUNCIL PAGE5



HIGHLY REGARDED VALUE STATEMENT CHARACTERISTICS

Superior value statements often incorporate the following characteristics :24

Prove clear and easy to apply Reflect employee contributions at all levels

Provide guidelines, not rules, for employee thinking

Address the differences between the corporate philosophy and day-to-daydecision making

Distinguish the company from competitors25

Examples of corporate value statements that successfully include the above characteristicsinclude Intel, Ford, and Siebel Systems, as illustrated below:

26, 27

Intels mission and value statements , plainly reflecting the companys goals, incorporate the aboveguidelines. For example:

Intels Mission Statement28

The mission statement enables stakeholders to determine if they want to associate with the companythrough the following characteristics:

Intel clearly defines the companys primary stakeholders

The statement defines Intels corporate philosophy by which employees can basedecisions, as employees can expect that all decisions help to move Intel toward thegoal of being the preeminent building block supplier to the worldwide digitaleconomy

Intels list of values provides another example:29

Intels Core ValuesCustom er Orientat ion

Results Orientat ionRisk Taking

Great Place to Wor k

Quality Discipl ine

Risk taking, one of the companys core values, specifically distinguishes Intel from competitors.The companys senior executives encourage the r isk-taking value on a daily basis through thefollowing activities:

30

Employee orientation sessions teach employees to constructively confront31

colleagues without resulting hard feelings, a trait reinforced by Intels founder

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Intels founder regularly challenges senior executives thinking during meetings


Do a great job for our custo mers, employees, and stoc khold ers by being the

preeminent bu i ld ing b lock s upp l ie r to the wor ldwide d ig i ta l economy

Intel

If this isnt going to

get any moreinteresting, you

might want to stopright there and comeback next week with

a better story.31

Intelfounder,Andy Grove, to a

direct report

Corporations with highlyregarded value statements

often involve employeesfrom all staff levels in thecreation of the statement.

This involvement empowers

employees and encouragesinternal buy-in.25


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HIGHLY REGARDED VALUE STATEMENT CHARACTERISTICS (CONTINUED)

Fords value statement reflects superior characteristics:

Fords Value Statement33

Ford employees make everyday decisions based on the companys corporate value that thecustomer is Job 1. This value statement contains lexicon completely original to the automotiveindustry and only Ford uses the phrase as a core value. Fords value statement contains thefollowing characteristics:

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Its local: According to Thomas Stewart of Fortune, Job 1 signifies the first car of a newmodel coming off the assembly line.

35 Only employees in the automotive industry would

use this phrase, leading to a sense of pride by Ford employees in their product and values.

Marketable:In the past, Ford has used Job 1 for advertisement purposes . Ford equates

great quality with meeting customer needs, ensuring that the customer is Job 1 by makingquality Job 1. By using the companys corporate value statement to advertise its products,Ford reinforces company values each time an employee sees an advertisement.

Decision Tool:The customer and quality is Job 1 guideline helps employees prioritizetheir daily activities. If employees face a choice, such as approving an automotive design orsigning for parts, Customer/Quality Is Job #1 should be the criteria for employees todecide.

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Siebels corporate value statement also illustrates superior characteristics:37

Siebels Core Values

In the late 1990s, Siebel distinguished itself from competitors with its Professional Excellence value.

Siebel set itself apart at that time from the relaxed office environment of many Silicon Valleycompanies with its tough professionalism policies, such as rules that ban employees from eating a tdesks and decorating cubicles.38

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The companys values also clearly articulate company philosophies (e.g., Teamwork) while guidingday-to-day decision making (e.g., Open and Honest Communication) and employee thinking (e.g.,Innovation and Bias for Informed Action).

The customer is Job 1. We do the r ight thing for our cust omers, our people,our env i ronment and our soc ie ty . By improv ing every th ing we do, we

provid e super ior returns to our shareholders

Customer value:The key measure of our success is our customers success.Commitment to Employees:We value each employee as in individual and provide anenvironment where you can do your best work.Professional excellence:We achieve through excel lence, exhibiting the highest levels of

professionalism, competency, and ethics.Teamwork : We work together as teams to realize our vision.Innovation and Bias for Informed Action:When taking action, we consider relevantinformation and look for creative solutions.Open and Honest Communications: We recognize the importance of open, honest, and

respectful communications to achieve our business goals.

Siebels employeesare barred from eating

at their desks ordecorating their wallswith more than one or

two photographs.[This] distinguishes

Siebel fromcompetitors and gives

prospective andcurrent employees aclear understandingthat to succeed, they

must act professionally

at all times.38

Patrick Lencioni,Founder and

President,

The Table Group


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