Creating Value InnovationCreating Value Innovation

Value Based Leadership Value Based Leadership

John J. SarnoJohn J. Sarno

In a recent study of 150 companies in In a recent study of 150 companies in three countries, 95% stated they three countries, 95% stated they believe that living corporate values believe that living corporate values hits the bottom line positively. hits the bottom line positively.

Strong correlation between having a code of conduct and being a highly admired company

There is strong evidence that companies committed to business ethics produce

above average performance

Companies that have a reputation for business

integrity appear more likely to perform better

financially

Landmark research conducted by James Landmark research conducted by James Collins and Jerry Porras suggests that Collins and Jerry Porras suggests that highly profitable firms have a fundamental highly profitable firms have a fundamental reason for existence beyond making reason for existence beyond making money.money.

In In Built to LastBuilt to Last, they write:, they write:““Profit is like oxygen, food, water, and blood Profit is like oxygen, food, water, and blood

for the body; they are not the point of life, for the body; they are not the point of life, but without them, there is no life.”but without them, there is no life.”

Values Matter

Ration of Cumulative Stock Returns to General Market 1926-1990

0

2

4

6

8

10

12

14

16

18

1926 1936 1946 1956 1966 1976 1986 1990

General Market

Value Driven CompaniesComparison Companies

Successful Firms Are More Value-Driven than Profit-Driven.

How Successful?

Publicly-held companies have a Publicly-held companies have a legal obligation to shareholders to legal obligation to shareholders to prevent harm to reputation that prevent harm to reputation that may diminish shareholder value.may diminish shareholder value.

Federal Law requires codes of Federal Law requires codes of conduct, training, complaint conduct, training, complaint

procedures and protection for procedures and protection for whistleblowerswhistleblowers

Good Business Practice Minimize Legal Damages

Mitigate Criminal Liability Good Public Relations

Typical Code of Conduct Typical Code of Conduct declares that the Company will declares that the Company will

comply with all US and comply with all US and International LawsInternational Laws Securities LawsSecurities Laws

Financial ReportingFinancial Reporting AntitrustAntitrust EnvironmentalEnvironmental Labor RegulationsLabor Regulations Equal Employment LawsEqual Employment Laws Occupational Health and Safety LawsOccupational Health and Safety Laws Homeland SecurityHomeland Security Harassment / DiscriminationHarassment / Discrimination

But sometimes, what is “legal” and But sometimes, what is “legal” and what is “ethical” are not the samewhat is “ethical” are not the same

LegalLegalWhat is permitted by lawWhat is permitted by law

Question: What can we get away Question: What can we get away with?with?

EthicalEthicalWhat is right, good and justWhat is right, good and just

Question: What is the right thing to Question: What is the right thing to do?do?

Common Problem AreasCommon Problem Areas Gifts & GratuitiesGifts & Gratuities Personal GainPersonal Gain Conflicts of InterestConflicts of Interest Undue Influence/Abuse of PowerUndue Influence/Abuse of Power Fraud/MisrepresentationFraud/Misrepresentation Excessive FavoritismExcessive Favoritism Invasions of PrivacyInvasions of Privacy DiscriminationDiscrimination HarassmentHarassment

Not Unlawful Unlawful

Ethical Unethical

Gifts

Favors

Disclosing/Withholding

Insider Trading

Antitrust

Copyright Infringement

Undue Influence

Personal Gain

Hard Bargaining

Misrepresentation

Fraud

Software Piracy

Joking Bullying Intimidation

Teasing Abuse Threats

One Measure of Success……. How many people work for me? How much work can I get done today? What is my salary? How big is my office?

Another Measure of SuccessAt this moment, right now, am I doing

what I’m supposed to be doing?

Am I doing it well?

Translating Values Into Translating Values Into PracticePractice

Start with the BasicsStart with the Basics

Managers and Supervisors are LeadersManagers and Supervisors are Leaders

What are your “values” ? What are your “values” ?

What motivates you to do What motivates you to do your best?your best?

A Leadership ProfileA Leadership ProfileHonesty

Integrity

Caring

Fairness

Approachability

Conflicts of Interest

Excessive Favoritism

Invasions of Privacy

Abuse of Authority

Personal Gain“Employees who trust the ethical commitment of their boss are excellent company champions when it comes to customers.”

KPMG (2004)

“ Unethical practices can degrade the working environment and create fear, apprehension and suspicion.”

Aon Consulting (2002)

2012 National Business Ethics 2012 National Business Ethics SurveySurvey

Nearly one-third of respondents say Nearly one-third of respondents say that co-workers condone that co-workers condone questionable ethical practicesquestionable ethical practices

One-third report that questionable One-third report that questionable ethical practices are rewardedethical practices are rewarded

Types of misconduct most Types of misconduct most observedobserved

Abusive or intimidating behavior Abusive or intimidating behavior (21%)(21%)

Misreporting hours worked (20%)Misreporting hours worked (20%) Lying (19%)Lying (19%) Withholding needed information Withholding needed information

(18%)(18%)

Faced with unethical or illegal Faced with unethical or illegal practices, what are your choices?practices, what are your choices?

2012 Gallop Poll said 2012 Gallop Poll said 15% of US employees 15% of US employees

feel victimizedfeel victimized Survey of 1,250 workers Survey of 1,250 workers

nationwidenationwide Sponsored by Kaiser Sponsored by Kaiser

Permanente, SHRM, and UPSPermanente, SHRM, and UPS Results show sizeable Results show sizeable

numbers of workers believe numbers of workers believe they are victims of workplace they are victims of workplace biasbias

EANJ EEOC Charge SurveyEANJ EEOC Charge Survey

Employer SurveyEmployer SurveyEEOC ChargesEEOC Charges

16% of employers16% of employers 5 in 10 charges arise out of 5 in 10 charges arise out of

allegations of race discriminationallegations of race discrimination Remaining charges based on sex, Remaining charges based on sex,

age and disability discriminationage and disability discrimination

2222

High Risk Members (Experienced High Risk Members (Experienced EEOC charge within previous 5 EEOC charge within previous 5

years)years)Low Risk Members (No charges Low Risk Members (No charges

within previous 5 years)within previous 5 years)High Risk Members are 3 times more High Risk Members are 3 times more

likely to have an EEOC chargelikely to have an EEOC charge

High RiskHigh Risk Low RiskLow Risk

Training for Training for SupervisorsSupervisors

XX XX

Conflict Conflict Resolution Resolution StrategiesStrategies

XX XX

Few Differences in HR Few Differences in HR PhilosophyPhilosophy

Both High and Low Risk members reported an Both High and Low Risk members reported an employee-centered culture evidenced byemployee-centered culture evidenced by

investing substantially in employee traininginvesting substantially in employee training

commitment to growth and well-being of commitment to growth and well-being of employeeemployee

consistent treatment of employees without consistent treatment of employees without favoritismfavoritism

Significant Environmental Significant Environmental DifferencesDifferences

High risk members are more likely to High risk members are more likely to

be engaged in manufacturingbe engaged in manufacturing

have a labor unionhave a labor union

have multi-racial, multi-ethnic have multi-racial, multi-ethnic workforcesworkforces

Whether Manufacturers or Service, Whether Manufacturers or Service, low risk members appear to be low risk members appear to be

Knowledge-DrivenKnowledge-Driven Knowledge is a business asset.Knowledge is a business asset. Most knowledge resides in people.Most knowledge resides in people. Knowledge workers tend to be Knowledge workers tend to be

treated as assets worth treated as assets worth preserving and nurturing.preserving and nurturing.

Low Risk Members are More Low Risk Members are More Likely to Report that EmployeesLikely to Report that Employees

Create customer valueCreate customer value Directly affect customer’s Directly affect customer’s

satisfactionsatisfaction Provide exceptional customer Provide exceptional customer

serviceservice Directly affect firm’s efficiency Directly affect firm’s efficiency

and productivityand productivity

Tentative ConclusionTentative ConclusionLow risk firms appear to have aligned Low risk firms appear to have aligned

VALUES with VALUEVALUES with VALUE

What is the value of a What is the value of a corporation?corporation?

33% - Physical assets, cash and cash 33% - Physical assets, cash and cash equivalentsequivalents

66% - Patents, databases, know-how, 66% - Patents, databases, know-how, brand imagebrand image

Creating, Nurturing and Using Creating, Nurturing and Using KnowledgeKnowledge

is the Key to Sustaining Value.is the Key to Sustaining Value.

Today, most jobs Today, most jobs require knowledge to require knowledge to

perform.perform.

1970 1980 1990 2000 2010

Knowledge intensive work has changed the Knowledge intensive work has changed the nature of organizations and how work gets nature of organizations and how work gets

done.done.

Supervising “knowledge workers” requires Supervising “knowledge workers” requires advanced social and interpersonal skillsadvanced social and interpersonal skills

Peer-to-peer collaborationPeer-to-peer collaboration TeamworkTeamwork Intrinsic motivationIntrinsic motivation Communication skillsCommunication skills Flexibility/Networks/ProjectsFlexibility/Networks/Projects CreativityCreativity Integration of TechnologyIntegration of Technology

A Dirty Little Secret:A Dirty Little Secret:Many employers believe that Many employers believe that

collaboration, sharing and innovation collaboration, sharing and innovation are incompatible with meeting are incompatible with meeting production quotas.production quotas.

Efficiency Zero Defects Efficiency Zero Defects Elimination of WasteElimination of Waste

Get it done Get it done because I said because I said

so.”so.”

““Get it done because Get it done because you want to.”you want to.”

While virtue may be its own reward, it also contributes to the bottom line.

Corporate-Wide TrainingCorporate-Wide Training Policies and ProceduresPolicies and Procedures Values-based LeadershipValues-based Leadership Communication SkillsCommunication Skills Conflict ResolutionConflict Resolution Diversity and related issuesDiversity and related issues

QuestionsQuestions

Thank YouThank You